Sunday, September 29, 2013

On the Robert Reich Film: 'Inequality For All"

Economist Robert Reich is out with a film, Inequality for All. By the end of the film, it will be clear that Reich is quite comfortable with his shortness. In fact, before the end of the film, you will want him to stop with his short jokes.

If you are at all familiar with economics, you will want the entire film to stop, probably by the 15 minute mark. I have heard more sophisticated lefty arguments in San Francisco bars then the ones made in this film.

Reich does nothing but throw up a bunch of charts on the screen without full context, beyond that he promotes through out the film the Keynesian notion that it is consumption that drives the economy and states that higher taxes on the rich will help the economy grow (because the rich save instead of consume).

His favorite chart shows wealth inequality peaking in 1928 and 2007, but he never mentions the connection between those years and peak Federal Reserve money pumping. In fact, in a movie about the economy, he doesn't mention the Fed at all, not once. He does point out that the most recent explosion in CEO salaries started in the 1990s, but fails to mention that this was when government stepped in to protect establishment CEOs against upstarts that were trying to end the establishment gravy train.

Michael Milken was indicted for racketeering and securities fraud in 1989 by US Attorney Rudy Giuliani, who had big time political ambitions and took marching orders from the establishment. Milken was funding takeovers by raiders of establishment firms, The raiders were putting an end to the super high CEO salaries and over the top perks. Once Milken was in jail and it was clear to Wall Street that anyone who attempted to mess with establishment CEO perks faced ending up in the slammer, the era of the hostile takeovers stopped cold. There was not a word about this in the film. Instead, Reich mentions the absurd leftist claim that it was the lifting of regulations that caused the expanding difference in wages of the 1% and the middle class. In fact, it was the stretching of regulations by Giuliani that put fear into raiders that allowed CEO salary abuses to skyrocket.


  1. "Once Milken was in jail and it was clear to Wall Street that anyone who attempted to mess with establishment CEO perks faced ending up in the slammer, the era of the hostile takeovers stopped cold. There was not a word about this in the film. "

    What utter garbage.

    William Black: Theoclassical Law and Economics Makes the Law an Ass

    By William K. Black, Associate Professor of Economics and Law at the University of Missouri-Kansas City and author of The Best Way to Rob a Bank is to Own One

    Michael Milken was the original high priest of the extreme leverage
    dogma and the claim that it signaled honesty (Fischel was his
    acolyte). Milken was, of course, an expert at signaling honesty while
    practicing control fraud. His time in prison only increased his hate
    for U.S. government “interference” in “free markets.” The Milken
    Institute, therefore, now commissions articles about the ongoing
    crisis that emphasize (in huge fonts):

    From Main Street to Wall Street, one common thread runs through
    all facets of this story: excessive leverage. (p. 9)

    The fact that, empirically, accounting control fraud is a severe
    problem is no barrier to theoclassical law and economics ignoring
    control fraud. I invite readers who have taken law and economics and
    corporate law classes to inform me whether their textbooks discussed
    Akerlof and Romer’s article: Looting: The Economic Underworld of
    Bankruptcy for Profit.

    I don't agree with everything Black says on economics but he knows fraud when he sees it.

  2. I don't think I could bring myself to even watching this drivel for 5minutes. Years ago I was on his website and posted that based on what he was stating that he was clueless about the old '53 tax code and taxation before the Reagan tax acts (there were 3). Most people are clueless about the old code and what the wealthy paid. While I am not an economist I was a tax professional in a large tax consultancy firm during the 70s and 80s. Contrary to the popular left wing myth that Reagan cut taxes on the 'rich", he actually cut them for some on the lower end and raised them substantially on the other end. And boy did he piss a lot of our super wealthy clients off. So much so that our firm did everything we could to block TRA-86. Our wealthy clients were effectively paying roughly 12 to 17% under the old high marginal tax rate code. After TRA-86 some of our clients saw their effective tax rates shoot up to as high as 26%. Anyhow, I argued several points very respectfully with people on the site and eventually my account was deleted and the posts erased.

    BTW, you don't have to take my word for it, check out the CBO stats for the effective tax rate on the 1% in 1979 before any tax reduction and you will see the effective rate was roughly 21%. This was when the crazy high marginal tax rates were in effect that good ol' Reich things brought about prosperity (btw weren't we on the gold standard too during those sol called good years. Argument for another day. LOL). After the big tax act that reduced the top marginal rate to 28%, the effective rate of the top 1% was statistically the same. Some saw huge tax increases, like our clients which were the super wealthy, and others like professionals and business owners saw big tax cuts, but in the end it was a wash -- which was the intention of the TRA. But stuff like this does not concern intellectually dishonest people like Reich and the people he will profit from that watch his film.

    1. You should probably watch the film before you comment..

  3. The claim that there was massive money printing during the 1920s contradicts a claim made by Ron Paul on Charlie Rose that the recovery from the 1921 recession was strong because govt cut spending and got out of the way. Funny how Austrian economists make both arguments that 1921 recession fixed itself and 1928 meltdown was due to money printing.

    There was a leveraged buy out boom in the 00s. Private equity got stronger after Milken's conviction. It did not dry up.

    1. Its not contradictory at all, you simply don't understand the arguments. The money printing did not pick up until the LATE 20s (~1926). You're also conflating "government spending" with the federal reserve money printing.

    2. Private equity are not hostile deals, it is a totally different game.

  4. Gotta love some of the comments on the films premises on Amazons user reviews: