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Archive for Tuesday, November 15, 2011

Expert blames economic crisis on erosion of U.S. middle class

November 15, 2011

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Robert Kaplan

Robert Kaplan

If there is a Kansas University alumnus out there who knows how to fix what ails Wall Street, it may be Robert Kaplan, the former vice chairman of the Wall Street powerhouse Goldman Sachs.

But there’s one problem: Kaplan isn’t sure that fixing Wall Street is where America should be spending most of its time.

“This crisis didn’t start with Wall Street,” said Kaplan, who left his job of overseeing investment banking operations for Goldman in 2005. “They made it worse, but this crisis really is about the erosion of the middle class of the United States.”

Kaplan, now a professor at the Harvard Business School, will be the featured speaker at an event at 7:30 p.m. Thursday at the Dole Institute of Politics, 2350 Petefish Drive.

Kaplan — who is promoting a new book he has written on leadership — said the financial crisis that has resulted from the bursting of the housing bubble is in large part because “a family of four can’t make ends meet if they are making $45,000 or $50,000 a year.”

“The middle class is eroding, and we will continue to have volatility as long as that is the case,” Kaplan said.

But Kaplan isn’t giving Wall Street an entirely free pass on the role it played in the financial crisis. Kaplan — who grew up in Kansas City and received an undergraduate degree from KU in 1979 — said he had become uncomfortable at Goldman Sachs prior to leaving in 2005. He said that Wall Street had become dominated by the “zero sum game” of trading financial instruments — everything from simple bonds to complicated derivatives.

“It is a casino,” Kaplan said of the trading environment. “It is about too much trading and not enough client focus. Wall Street has to again become focused on clients.

“I think it is incumbent that Wall Street firms prove that they can make a positive difference in the world. I know most of the Wall Street CEOs, and I tell them that they need to prove it. Talk won’t matter anymore.”

Kaplan said he would like to see the government make a larger investment in infrastructure, which he believes will help foster growth that will benefit the middle class. He also supports an extension of the federal payroll tax holiday, and would like the government to create more certainty in the regulatory environment regarding small businesses.

“There is a lot of uncertainty right now, and it is undermining our growth potential,” Kaplan said.

On other issues, Kaplan:

• Is a founding member of the No Labels movement, which advocates for less partisanship in politics, and particularly believes the variety of pledges lawmakers are pressured to sign is detrimental to governing.

“Almost 60 percent of the members of Congress have taken some sort of pledge to not take some sort of action,” Kaplan said. “Our view is the only pledge they should be taking is the oath of office.”

• Believes Congressional leaders still have a chance to reach a significant agreement on reducing the deficit, but will “have to make everybody mad” by reforming entitlement programs and raising taxes.

• Thinks Europe’s current debt crisis should serve as a warning to the United States.

“We’re not as different from Europe as we would like to think,” Kaplan said. “The main difference between us and them is that we can print money and they can’t. Frankly, what we’re seeing in Europe is what can happen, if we let this go too long.”

Thursday’s event is open to the public. After Kaplan speaks, he will sign copies of his book, “What to Ask the Person in the Mirror: Critical Questions for Becoming a More Effective Leader and Reaching Your Potential.”

Comments

rockchalk1977 2 years, 5 months ago

Unbelievable.

January 2013, the end of an error.

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FalseHopeNoChange 2 years, 5 months ago

Which came first? Middle class eroding or economic crises?

I'm not an 'Expert' but I bet it was the Middle class erosion that started the econmic crises.

Just look at the 'spontaneous, refreshing youth' of Madame Pelosi and Big Daddy. Would anyone with any sense hire them to do anything at all?

Erosion therefore crises.

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tbaker 2 years, 5 months ago

Americans don't demand large, sweeping change unless enough of them are suffering some injury real or perceived. Things aren't bad enough yet. Compared to the rest of the world, we are doing quite well. Sure there are some very serious problems on the horizon, but most people don't pay attention to them until they start to feel the pain. The question is will the motivation the pain provides come soon enough to avert disaster? Part of that answer comes in 355 days. The next government we elect will be at the wheel when we run out of road and reach the cliff. Stay tuned.

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Lawrence Morgan 2 years, 5 months ago

1southernjayhawk and theironmouse may be right on. I, too, think that when the global economy really took hold, that is when the middle class went down in income and hopes.

But - I know no one ever says this, but - what about tariff elimination? There is no way that Americans can expect jobs at the wages people are making in the developing countries. Perhaps we should have tariffs again, so that jobs can come back to the United States?

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Flap Doodle 2 years, 5 months ago

The way the current regime is paying off donors with billions of dollars of tax money isn't helping the millions of Americans who don't have the proper connections. http://minx.cc/?post=323805

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atiopatioo 2 years, 5 months ago

I bought Iphone 4S and moved up a class.

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budwhysir 2 years, 5 months ago

thats what I like to see,,,, more political scare tactics aimed at increasing the national debt and focusing on what the average American is doing wrong...but a I will agree one thing, a family of 4 CANT make it on 45 to 50,000 per year if they are carrying enough debt to be supporting a family of 12.

For some strange reason wall street is not having a large impact on my daily living. Maybe that is because I am not entrusting these morons with my life savings and or my retirement. I am putting myself in charge of being what I want to be. Investors that work wall street are looking to do what many others have done, make money the easy way by investing your money on a gamble, and then if things pan out, they get a cut and then let you have some. Let these guys work a few days in the real world and make money to invest. I aint given them my money.

middle class is just a placement society puts on a group of people so the upper class feels better when the economy takes a dip. Who cares about classifications of lower, middle, and upper class living?

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its_just_math 2 years, 5 months ago

How can we expect our Desperado in Chief to have ever been worth a damn if he thinks we have 57 states and that Hawaii is part of Asia. What we have is a man raised low-class who now thinks he is high-class and thinks he knows how to shrink the middle class. Joke if there ever was one. So far, all he has done is increase the low class, his most favoritist group of people and overall support group, alienated the high-class and left the middle-class scratching their heads.

(not from a source)

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Richard Heckler 2 years, 5 months ago

Other large nails in the coffin of the middle class:

The RINO party has a long history of economic destruction and crime to include Iran-Contra and Watergate. Like or not a consistent and disturbing pattern has developed by their choosing.

STOP electing RINO’s ! My My father in law left the RINO party because he is a fiscal conservative republican with at least 50 years under his belt. Evermore stunning he is working with the democrat party in Pennsylvania.

After spending so so many decades in Washington D.C on tax dollar payrolls RINO’s are sure they learned all they needed to know about taking YOUR money and establishing reckless economies by way of Facism.

Introducing the RINO Economic Destruction Platform Written In Stone:

  1. TABOR is Coming by Grover Norquist and Koch Bros sells out state governments, public schools,SRS services etc etc to private industry = Grab Your Wallets! http://www.dollarsandsense.org/archives/2005/0705rebne.html

  2. The Reagan/Bush Savings and Loan Heist aka home loan scandal sent the economy out the window costing taxpayers many many $$ trillions (Cost taxpayers $1.4 trillion), Plus millions of jobs, loss of retirement plans and loss of medical insurance. http://rationalrevolution0.tripod.com/war/bush_family_and_the_s.htm

  3. Bush/Cheney Home Loan Wall Street Bank Fraud cost consumers $ trillions, millions of jobs, loss of retirement plans and loss of medical insurance. Exactly like the Reagan/Bush home loan scam. Déjà vu can we say. Yep seems to be a pattern. http://www.dollarsandsense.org/archives/2009/0709macewan.html

  4. Bush/Cheney implied more than ONLY 3 financial institutions instead of several were at risk so why $700 billion in bail out money? One of the biggest lies perpetrated to American citizens. Where did this money go? Why were some banks forced to take bail out money? http://www.democracynow.org/2009/9/10/good_billions_after_bad_one_year

  5. Tax cuts the ENTITLEMENT program for the wealthy which do nothing to make an economy strong or produce jobs. Tax cuts are a tax increase to others in order to make up the loss in revenue = duped again.

Still A Bad Idea – Bush Tax Cuts - The ENTITLEMENT program for the wealthy at the expense of the middle class = duped one more time. http://www.dollarsandsense.org/archives/2001/0301miller.html

In the end big debt and super duper bailouts were the results which does not seem to bother Republicans, as long as they are in power.

In fact, by the time the second Bush left office, the national debt had grown to $12.1 trillion:

  • Over half of that amount had been created by Bush’s tax cuts for the very wealthy.

  • Another 30% of the national debt had been created by the tax cuts for the wealthy under Presidents Reagan and George H.W. Bush.

• Fully 81% of the national debt was created by just these three Republican Presidents. http://www.dollarsandsense.org/archives/2010/0111orr.html

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Richard Heckler 2 years, 5 months ago

The Erosion of the middle class can be associated with all of the following. What has been left out is the one big Reaganomic factor that began eliminating the middle class.

Does anyone remember the reckless period of leveraged buyouts,hostile takeovers and questionable mergers? And how this recklessness was financed? This brought on huge numbers of layoff's by USA industry who soon opened up in China and other slave labor markets. What replaced all of this? "Shop Till YOU Drop with credit cards.

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its_just_math 2 years, 5 months ago

The Lost Balloonist

   A woman in a hot air balloon realized she was lost. She lowered her
   altitude and spotted a man in a boat below. She shouted to him,

   "Excuse me, can you help me? I promised a friend I would meet him an
  hour ago, but I don't know where I am."

   The man consulted his portable GPS and replied, "You're in a hot air
  balloon, approximately 30 feet above ground elevation of 2,346 feet
  above sea level. You are at 31 degrees, 14.97 minutes north latitude
  and 100 degrees, 49.09 minutes west longitude.

   She rolled her eyes and said, "You must be a Republican.
   "I am," replied the man. "How did you know?"

   "Well," answered the balloonist, "everything you told me is
  technically correct. But I have no idea what to do with your
  information, and I'm still lost. Frankly, you've not been much help
  to me."

   The man smiled and responded, "You must be an Obama-Democrat."
   "I am," replied the balloonist. "How did you know?"

   "Well," said the man, "you don't know where the hell you are -- or
  where the hell you are going. You've risen to where you are, due to a
  large quantity of hot air. You made a promise you have no idea how to
  keep, and you expect me to solve your problem.
   You're in exactly the same position you were in before we met, but
  somehow, now it's my fault."

(from a source)

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tange 2 years, 5 months ago

Alas, if only the Middle Class were the chrome and teflon which are the Uppity.

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its_just_math 2 years, 5 months ago

The biggest enemy of the middle class---is the middle class. Ever heard the old saying, "Keeping up with the Jones"? Well, it's caught up to the middle class who have demonstrated spectacular irresponsibility with their finances. Personal debt is at an all time high and Obama and leftist zealots want you to believe that's the wealthiest 1% fault.

Our Blamer in Chief needs to foment the idea though, in order to have a prayer in hell of ever being re-elected.

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Liberty_One 2 years, 5 months ago

tomatogrower has the gall to accuse me of never criticizing Bush. I doubt I've ever said a kind word about the man in my life.

When you have no reply, lie, lie, lie.

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1southernjayhawk 2 years, 5 months ago

I really think that the beginning of the decline in the middle class, both in numbers and in income, started with the beginning of a global economy. We have also been the beneficiaries of this global economy in terms of products that are available to us and the prices for which they are available. How do we compete in this global economy? Better education in science, math, engineering, and reading. Many, many good jobs have been shipped overseas.

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rockchalk1977 2 years, 5 months ago

The "erosion of U.S. middle class" is the result of basic union greed. Unions demand double-digit wage hikes, no cost health insurance, lucrative retirement plans, and outrageous paid time off. And the whining union members wonder why their jobs move off-shore. Wow! Stop whining and decertify.

http://www.unionfacts.com/union-member-resources/how-to-decertify-your-union

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75x55 2 years, 5 months ago

Geez people - he's a guy pimping a book.

He will present himself and his book as all-things-to-all-people, to maximize sales. The living definition of a 'centrist' - no real convictions other than self-interest.

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verity 2 years, 5 months ago

". . . this crisis really is about the erosion of the middle class of the United States.”

Duh! Talk about stating the obvious.

“This crisis didn’t start with Wall Street, . . .” They certainly helped in a big way with the erosion of the middle and working classes.

He does have some good ideas, but looks to me like he's talking a good talk while coming in the back door with more ways to hurt the middle and working class.

And one more self-help book for people to spend money on, hoping for a magic bullet, which no doubt says virtually the same thing as the thousands of other self-help books--but it will certainly help his bottom line.

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Kendall Simmons 2 years, 5 months ago

Simple? What on earth are you talking about???

Never mind that a President doesn't have anywhere near as much power you apparently want to give Obama credit for. Never mind that US worker productivity has gone up...so hard workers are actually working harder, not being the quitters you seem to think they are. They aren't cutting off their noses to spite their faces by not trying to better themselves because maybe perhaps possibly sometime in the future their taxes might maybe possibly would go up.

The fact of the matter is that, contrary to your apparently firmly-held belief, federal taxes have actually gone DOWN under Obama. Yup. For all the fear-mongering, Obama has not increased taxes...on anyone!!! Not even on the rich. Certainly not on "hard workers".

Indeed, federal taxes have gone down for over 90% of Americans...and stayed the same for the rest. Please, oh, please, oh please tell us how that translates to increased taxes in your mind??? Translates to taking money from hard workers and giving it to "idle bums"...which, like it or not, includes those hard workers whose jobs were offshored so that the wealth amassers could amass even more wealth...and to heck with the American hard workers who got them where they are in the first place.

Like it or not, you believe in a myth. And you obviously like that myth so much that you apparently aren't interested in actually checking out the reality. You'd obviously rather believe in conspiracy theories. ("illegally enthroned", indeed.)

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jayhawklawrence 2 years, 5 months ago

Yes, the middle class is eroding and like global warming, there may be a point of no return.

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jayhawklawrence 2 years, 5 months ago

It is always hopeful when a member of the American "aristocracy" makes an honest and common sense statement.

It is not genius. It is just common sense.

How do we get rid of the political ideologues that are hurting our country? These people are like a plague.

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lawrenceguy40 2 years, 5 months ago

There is one reason for the economic mess - it begins and ends with barry o. The fear that he may be elected began it and now he has been illegally enthroned as President it continues to get worse. His policy is to steal money from hard working folks and give it to idle bums. Hard working folks see that there is no point in trying to better themselves, so the economy shrinks.

It is so simple I am surprised simple liberals cannot understand it. But they don't, they just dream up new ways to tax the wealth creators and give to the idle.

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jafs 2 years, 5 months ago

Having read the article, I can't see any evidence that cato's comment is correct.

This guy's comments are a mix of liberal (government investment in infrastructure) and conservative (more certainty in the regulatory environment) ideas.

He says that reforming entitlement programs is necessary (conservative) and also raising taxes (liberal).

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cato_the_elder 2 years, 5 months ago

No, the guy is a doctrinaire liberal.

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bobberboy 2 years, 5 months ago

Raise taxes on the RICH !!!!!!!!!!!!!!!!!!!!

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