The Rachel Maddow Show | March 05, 2013
>> and thanks to you at home for joining us on a news day in which it does not seem possible that all of these things happened on the same day. today is the day that the dow set an all-time record high, all-time. it's also the day that hugo chavez died. today the united states government said we might conceivably use drone strikes to kill people inside the united states . they also said today the last drone strikes in pakistan were not done by us. who were they done by then? today arkansas teetered on the edge of doing something outrageously unconstitutional. today an msnbc host's book came out. today jeb bush 's new book also came out, although the msnbc host is not disavowing her book already the way jeb bush is disavowing his book the day it first went on sale. north korea threatened to restart the korean war today, the one from the 1950s . the anti-gun trafficking bill got introduced in the senate today. a second giant sinkhole, a second one, opened up in tampa today. this is a nutso day in the news, just in terms of the sheer amount of news that happened today. and we'll get to as much of it as possible this hour. but we need to start tonight with the aforementioned record.
>> this is an nbc news special report .
>> good day from new york , and let's go downtown, lower manhattan , where moments ago on the floor of the new york stock exchange , the dow jones industrial average closed at an all-time high. there is the number. remember, there is some fluctuation as the day draws on. sue herera is on the floor of the exchange. sue, this has been a long road since '07.
>> it has certainly been a long road, brian, but it was a very, very strong day today, and it is a day for the record books.
>> the dow jones today hit its all-time record high. it hit its highest number ever during the course of the day, and then it closed at its highest number ever. in the 116-year history of that index existing. the dow , of course, is not a generic indicator of the health of the economy. it's not even a generic indicator of the health of the markets, broadly speaking. it is just a snapshot of 30 blue chip stock . but it is the thing that honestly we think of generically as the market. and it is a real indicator of how we're doing in some ways, and it is important enough to us that when it hits a record, nbc news breaks into local programing across the country to alert the nation in this special report that there has been a new record high. and if you are someone who sees national news mostly in terms of national politics, it can be incon grewuous, to see all the champagne corks popping on wall street . while washington continues to punch itself in the face with this sequester thing, which follows us punching ourselves in the tase with the fiscal cliff thing, and which proceeds us punching ourselves in the face with the government shutdown looming in the month. another debt ceiling fight. when it comes to politics about money, washington has never been more even quixotically self-defeating and dumb right now. and i say that as a term of art, dumb. because we have just enacted a voluntary new fiscal policy that both sides call dumb. and even disastrous. and it was voluntary, and we did it anyway. but wall street is psyched anyway. apparently they have reason to be if you read from their holy stript cher, which of course is corporate properties. corporate profits are and have been a very happy story during our current supposedly socialistic administration. president obama takes over, right, during the great recession. so this is the valley of corporate despair. but since then, corporate profits have just gone up and up and up. for a hot minute last summer, the financial press warned us that the fun was over, that record corporate profits would not last, but after that, hey, look, they lasted, and then some. by the december report, we hit a new new record. corporate profits at a new all-time high. by the latest quarter for which we've got the data. america's corporations showed in that quarter the largest after- tax profit in the history of our nation. right? the problem with that is that success is not necessarily redounding to the humans who make up our nation. here is a really big issue for our country. here is what corporate profits have been doing over time , four decades, basically over my lifeline. that's the red line there. and the blue line there is how working american humans have done at the same time. this is their slice of the pie. one is going up, and that is not helping the other one go up. this are those who would argue that corporations are people, my friend, and corporations doing well helps people. and there are a certain number of people who benefit from corporations doing particularly awesome in the way they are now. people who are for example directors of corporations or shareholders. they of course are happy to see their share prices and the value of the company go up. people who are executives at those corporations. for them, these really have been great times. but for everybody else , no. and so we are faced with really big, bold-faced, bright easy-to-remember headlines about who we are as a country on days like this. but the headlines fit together in a way that feels off. on the other hand we've got the dow hitting an all-time record high today. wall street at an all-time record high. corporate profits at an all-time record high, and that success is not helping the average american . all of that success is essentially being captured by corporations themselves and by the very richest people in the country who continue to do exceedingly well. and we sense that the fact that that might be working out for them and not for everybody else might be a big defining problem for us as a country. at least we kind of sense it. if you poll on this issue, you get something interesting. if you ask americans how they think the wealth of this country ought to be distributed, if you asked americans how they think we ought to divide everything up in this country, how wealth ought to be divided, you get an answer that looks like this. the bright yellow on the left, those are the richest people in the country. they do have the largest share. orange is the second richest, red is the middle. the gray block on the right is the poorest americans . this is how we think capitalism ought to divide wealth in our country. yeah, the rich are going to be richer than everybody else . but this is how everybody else will share in the spoils of our american capitalist output. that's the american consensus, what it ought to be. and we know that this is not exactly true. if you ask americans , well, how do you see life actually as being? americans will tell you, well, the country doesn't look the way i want it to look. what i think the country looks like is this. we think that the rich, the yellow one on the left there, they have more than their share, but we think it's not exactly the way we want it to be. but this is how we imagine it to be. now if you want to look at what the chart actually is, if you want to look at how wealth actually is divided in the country, this is the truth. this is the truth of how unequal we are as a country. this is the way that wealth is divided. again, the top 20% there is on yellow. you can't even see the little gray bar, it's been squeezed off the right. the richest folks in right yellow in real life take up more than half the chart. the blue is shoved off to the side. and the poorest folks, the gray block, they almost do not register. it's not how we think should it be or how we imagine it to be, this is how it is. so on this day when this is true, right, when we just hit the all-time record high in the dow , why is this huge and worsening inequality problem that we've got happening? is this happening because we did something wrong as a country? could we fix this problem if we wanted to? and do we even want to fix it? joining us now are two guests whose expertise on the politics of this and on the economics of this issue are rather unsurpassed. joseph stiglitz is a nobel prize winning economist. he is author of "the price of
equality: how today's society endangers our future." and frank rich , looks at republican rebranding efforts and the future of that party. gentlemen, thank you both for being here. i very rarely talk to two people at once, but i really wanted to with you. professor stiglitz, why is why is this happening. why do we have such pronounced inequality in the face of what looks like some bottom line economic success?
>> well, what is going on in the stock market right now is very simple. the economy is not doing very well. that's why the fed is keeping interest rates very low and looks like it's going to keep interest rates very low. so that means the cost of capital to firms is very low. unemployment is high. that drives down wages. the two of those together means high corporate profits, as your chart showed. so in a way, what we're seeing here as the interest rate is low, stock market goes up, bonds are not doing very well, people, older people, for instance, who depend on interest from t-bills, doing terribly. so all of this is a picture actually not of success, but a picture of an economy not doing very well. and when you look at those corporate -- the profits of american, you know, the blue chip that constitute the dow , many of those, most of those have a large fraction of profits overseas. and china, emerging markets , they're doing relatively well, much better than the united states . and so they can be doing well by creating jobs abroad, but meanwhile, the american economy is not doing well.
>> frank, whether or not anybody tried to make these divergent outcomes happen, is the outcome that we've got with high corporate profits and american people by and large not sharing in it at all, is this a predictable outcome of the kind of policies that we have pursued?
>> yes, it absolutely is. and it seems to worsen by the day. we have a government, both parties i might add that sort of stack towards corporate welfare , breaks for corporations. republicans take a looser line than the democrats. but just in today's "new york times" on the front page , the investigative piece showed state and local governments in blue states and red state are floating tax-exempt bonds not to underwrite public works . i mean some of them do underwrite public works . but goldman sachs and bank of america office towers, the chevron corporation , which had a profit of well over $20 billion last year, one of the most successful companies as measured by the bottom line in the world, we have governments -- our governments, local and state and federal just marching in lockstep with this corporate america and sweeten the breaks for them every step of the way.
>> and they are described as job creators. we're not just talking to wealthy people. even corporations as job creators, they need to get so much policy preference because that does redound by helping the average american .
>> it's not works.
>> there is no connection.
>> no. and one of the things, you talked about who owns all those shares that are doing very well.
>> one of the striking things is in the last third of a century, 97% of the increase in capital income went to the top 5%. 97% went to the top 5%.
>> you know, that chart that you showed how it's concentrated, if you look at the capital income, it's much more concentrated. let me give you another number that shows how bad things are. in the three years, 2007 - 2010 , the median wealth, the wealth of those in the middle in the united states declined by almost 40%. so while the shareholders and these companies are doing very well, most americans are seeing their wealth diminish.
>> could this be fixed by policy? could this -- frank, i'll ask you. are policies that fix this being debated? and professor stiglitz, do you see the u.s. government as having policies within its reach that could make a significant difference?
>> i don't see any policies except around the fringes that are being debated. it seems to me completely status quo. and in a way, what you talked about at the top of the show about the dysfunction in washington , it's such a sideshow, not only is it dysfunctional, incompetent and beside the point. everyone is punching themselves in the face, but it's almost like a circus to distract people from actually discussing and debating policies that really neither party wants to put on the table because essentially they have the same corporate backers. the smartest corporations in american politics are those that give to both parties. and so, yes, we have a little bit of wall street reform. we have talk about tax reform , but we're not really debating tax reform . we're just in gridlock.
>> if we had the political wherewithal to get there, are there policies that could make a difference?
>> absolutely. in the last chapter of my book, i describe 21 policies that would really make a very big difference. let me just give you one interesting one. switzerland fought to be controlled by, you know, wealthy people. just had a referendum, and that reflects very much the views that you gave in that chart. they voted to cap bonuses. they said bonuses have gotten out of control. we know that we are a place where people go with wealth. but we think it's gotten out of control even in our country.
>> and then all the corporate executives fled switzerland in terror, right? now none of them live there anymore?
>> we could change corporate governance rule, say and pay, the corporate leaders are taking increasingly large share of the corporate pie for themselves, leaving less for workers. financial sector . all those abuses that went on in the financial sector , it was moving money from poor and average americans up to financial executives. monopolies, you know, they don't -- monopolies make money by contracting output, not by making the size of our national pie bigger. education, you know, if most americans are going to do well, it's going to be through increasing productivity. but we're underinvesting in education. so you look at the tax laws in the united states , we tax speculators at less than half the rate we tax people who work for a living. when you do that, what do you do? you encourage gambling and calls for speculation. you don't lead to a stronger economy.
>> frank, as we pivot sort of from policy toward both sides already looking at 2014 , this president has a record of overseeing spectacular gains in corporate profits and no gains on the inequality issues that he talks about so much. is there an opening for a republican populist here that the democrats should be worried about from the right, or should they only worry about their left flank on this?
>> i wish there were competition in the political marketplace, and they could be worried from the right. yes, there would be an opening for a teddy roosevelt , that kind of republican populist. but look at that party. i mean, they don't even know how to find the key to the men's room at this point. so they're not going to muster a strong challenge. so it's interesting. a few conservative pundits are talking about policies that might benefit the middle class , serious tax reform . but as they themselves admit that.
>> don't have any champion in the political arena to fight for these.
>> but one of the problems of the gridlock in the united states is the tea party movement. and one of the reasons for the tea party is anger, i think, over the problems of inequality where they say the government is helping the bankers and look what is happening to our wages. it's understandable.
>> i've long felt that the tea party and the occupy movement, even though they hated each other, were two sides of the same coin, and both reflected that anger. and neither party has addressed that anger.
>> exactly. and they're both exploiting an opening both parties to try to make progress on those issues. nobel prize winning economist joseph stiglitz , "new york " magazine writer at large mark rich . professor, will you come back and talk about the book again when it officially comes out?
>> all right.
>>> venezuela's president hugo chavez has died. the united states is a step closer to having a new cia director . and republicans in washington and across the country have finally eschewed conservative social caws to focus on job truth. two of those are true. the third one i made up a fact. please stay tuned. [ voice of dennis ] allstate. with accident forgiveness, they guarantee your rates won't go up just because of an accident.