On Saturday 5th March Michael Moore gave a speech to the crowds in Madison Wisconsin. In it he claimed that ‘just 400 Americans have the same wealth as half of all Americans combined’. Moore repeated the point for the sake of emphasis:
Let me say that again. 400 obscenely rich people, most of whom benefited in some way from the multi-trillion dollar taxpayer “bailout” of 2008, now have as much loot, stock and property as the assets of 155 million Americans combined. If you can’t bring yourself to call that a financial coup d’état, then you are simply not being honest about what you know in your heart to be true.
On Monday 7th Robert Frank’s Wealth Report on the Wall Street Journal blog responded to Moore’s claims. Frank started by saying that ‘hyper-left-leaning’ Moore was ‘prone to hyperbole’. Then he told his readers that there was ‘an interesting fact buried in his message’ – but maybe not the one Moore intended. Moore, he wrote, was ‘almost right when he said the Forbes listers have as much wealth as the bottom 50% of the population’. Almost right. Then after a bit of toing and froing Frank decides that, yes, Moore’s claim was ‘fair enough’. So Moore was exactly, not almost, right.
But it seems this isn’t the ‘interesting fact’, as far as Frank is concerned; ‘The part that begs clarification is the idea that this intense wealth concentration is new or somehow linked to the bailout’. Note that Moore doesn’t actually say that intense wealth concentration is a new phenomenon, only that most of the very rich have benefited from the bailout.
Now Frank can stick a bayonet in the straw man he’s just created:
The Forbes listers and the bottom have each held around 3% of the nation’s wealth for the past 20 years … (The Forbesers, of course, pay far more taxes, but that is another argument.) … The stats are undeniably troubling. But the fact remains that the wealth shares of the rich haven’t diverged from the bottom since the early 1980s …
Stories of sudden wealth gaps funded by tax bailouts, of Wall Street heists and financial “coup d’etats” make for rousing speeches. But unfortunately, it is nothing new.
The tax bailouts have nothing to do with the wealth gap, says Frank. ‘Wall Street heists and financial “coups d’etats”‘ are the stuff of hyper-leftist hyperbole, they don’t explain anything important. This, I guess, is the ‘interesting fact’ that Frank has found buried in Moore’s speech.
And yet, and yet …
The rich did benefit disproportionately from both financial deregulation and from the taxpayer funded rescue of the banking sector that inevitably followed. There was something like a coup d’etat in the late seventies and early eighties as financial institutions shook off the restraints on predatory lending and speculative activity. It led to the Savings and Loan scandals of the early nineties, to the dot.com bubble, and the banking collapse of 2007-08. The decision of the Bush and Obama administrations to rescue the financial system delivered disproportionate benefits to those who owned this reckless and vastly profitable system. Even Frank acknowledges that the stock market rally has restored the wealth of the top 400. Widespread corporate failure would have permanently reduced their absolute wealth. Instead the approach taken by government saved financiers from their witless lending. It also saved the owners of stocks and corporate debt from being wiped out by bankruptcies.
Moore didn’t say that the bailouts created the vast wealth gap. He noted that the rich benefited vastly from them. He is right about that. He isn’t almost right. He is right.
The bailouts helped maintain wealth inequality in the United States.
The Wall Street Journal can’t acknowledge this out loud, and instead does everything possible to dismiss what Moore is saying as left-wing hyperbole or old news. And that is the ‘interesting fact’ buried in Frank’s piece.