Economic Update with Richard D. Wolff

Episode Title: False Econ Recovery, True Journalism
Date: May 16, 2016

Overview

This episode of Economic Update explores the myths of economic recovery in the United States and the vital, often-overlooked role of true investigative journalism. Host Richard D. Wolff delves into recent news about economic policy, wealth inequality, public subsidies for private gain, deceptive corporate practices, and shifting burdens in the financial system, before turning to an in-depth interview with award-winning investigative journalist Bob Henley. Together, they reveal a stark disconnect between celebratory national economic narratives and the daily realities in most American communities.

Key Discussion Points & Insights

1. Carried Interest: A Decades-Old Tax Loophole for the Rich

• Explanation of Carried Interest (01:15–08:00):
  • Carried interest is income earned by hedge fund and private equity managers, primarily for handling wealthy clients’ investments.
  • The standard compensation: “2 and 20”—2% of assets managed annually, plus 20% of any gains.
  • In 1993, a law allowed firms to pay regular income tax on the 2% fee but a much lower capital gains rate on the 20% performance fee, granting a massive tax break to the wealthiest.
  • “It is an outrage, and nothing other than being outraged is a way to deal with this problem.” — Richard D. Wolff (09:31)
• Continued Inaction:
  • Presidents and major politicians (Clinton, Trump, Sanders, Obama) have campaigned against it, but nothing changes.
  • Over 25 years, this loophole cost the US government around a trillion dollars—money that could have fulfilled other social needs.

2. The Myth of Government as a Burden & Real Subsidies for Business

• Stadium Case Study – Miami Marlins Park (10:29–19:12):
  • Public funds ($500 million in city bonds, $2.4 billion total with interest) built a privately profitable sports stadium.
  • Weighing public costs vs. private profits: “The subsidy was enormous, but the payoff was very poor... Forbes magazine referred to it as, quote, baseball’s most expensive stadium disaster.” — Wolff (15:47)
  • Real estate values benefited speculators, while taxpayers bore the risk and debt.
  • This pattern—private profit through public subsidy—is widespread across US industry, belying claims that government is merely a regulatory or taxing burden.

3. Corporate Patriotic Branding and the Budweiser “America” Rebrand

• Budweiser’s Rebranding to ‘America’ (19:28–22:14):
  • Originally American-owned Budweiser, now owned by Belgium's InBev, was temporarily renamed “America,” using patriotic symbols and language.
  • “You are to think of this beer as American, precisely because it isn’t.” — Wolff (21:59)
• Critique: Wolff lampoons this as cynical marketing, emblematic of corporate detachment from genuine national interests.

4. Financial Risks: Bail-ins & Negative Interest Rates

• Bail-in Mechanism Explained (22:30–26:53):
  • Unlike a bailout (government saves failing banks), a bail-in seizes depositors’ own funds to recapitalize a failed bank.
  • Legalized in the US (and internationally, as seen in Cyprus), many depositors remain unaware of the risk: “If you ever needed a sign of the power of banks in our culture, you have it in the phenomena of bail-ins.” — Wolff (25:56)
• Negative Interest Rates (26:54–28:45):
  • Negative rates mean depositors (even banks) pay for the privilege of keeping money on deposit, an extreme step indicating failed conventional stimulus measures.

Featured Interview: Bob Henley on The Real State of Economic Recovery and Journalism

5. The False Narrative of Recovery

• Aggregate Numbers vs. Real Lives (31:26–33:30):
  • Media highlights national aggregates, but “nobody lives in the aggregate.” True economic health must be checked at the county and family level.
  • “Out of 3,069 counties, only 7%... have experienced a recovery.”—Bob Henley (33:16)
  • Other data: 30% of counties saw poverty increase from 2009–2014, only 4% saw poverty fall; the rest remained stagnant.

6. Why Elites Miss the Reality

• Disconnect Between Ruling Class and Public (34:42–38:11):
  • Media and political leadership have grown isolated, focusing on analytics and targeted selling rather than investigative reporting.
  • “There’s a death of civic space... You’re disconnected from the polity.” — Henley (36:13)
  • Historical parallels to the decline of previous empires, stemming from leadership blindness.

7. Hidden Economic Struggles: Asset-Limited, Income-Constrained 'ALICE' Households

• ALICE Explained (38:11–40:12):
  • Many families, not classified as “poor,” are nonetheless just two paychecks away from poverty.
  • In New Jersey: 37% face near-poverty; similar or higher numbers in California and Florida.

8. The Politics of Blame & Isolation

• Internalized Failure (40:12–41:17):
  • False personal blame, rather than systemic criticism, fosters political docility.
  • “You blame yourself rather than realizing it’s a system that isn’t working.”—Wolff (40:12)

9. The Degradation of Journalism

• Wages, Structure, and Punishment (41:17–44:54):
  • Investigative journalism is squeezed out by aggregation, poor pay, and the gigification of media.
  • “You don’t have the resources to go out and do reporting... So to some degree, the act of journalism itself becomes a political act, because you’re doing it because it’s what’s required, not what you’re compensated for.” — Henley (42:57)

10. New Jersey as a Microcosm: Persistent Crisis (45:28–49:35)

• Atlantic City & Mortgage Crisis:
  • High foreclosures, underwater mortgages (especially for Black homeowners), and banks’ continued predatory practices.
  • “The rape of the American household economy is continuing today.” — Henley (46:28)
  • Declining property values and shrinking tax base exacerbate fiscal crises for local governments.

11. Broader Implications: Tax Policy, Pensions, and Systemic Erosion

• National Parallels (49:35–50:49):
  • US and territories like Puerto Rico show the risks of deliberate tax-base erosion and pension underfunding, while corporate loopholes like carried interest persist.

12. The Prison System: The New Exception to Slavery

• Historical Irony (53:03–54:36):
  • Discussion of the Thirteenth Amendment’s prison labor exception and Michelle Alexander’s analysis of systemic racial injustice; critique of political and media trivialization of mass incarceration’s impact.

13. Where Is This Headed? Grassroots and Social Movements (55:18–56:50)

• Emergent Solutions:
  • Local, grassroots efforts (like community-supported agriculture) provide hope and power through engagement and collective problem-solving.
  • “You cannot solve a social problem with an individual action. A social problem needs a social movement.” — Wolff (56:28)

Memorable Quotes (with Timestamps)

• "It is an outrage, and nothing other than being outraged is a way to deal with this problem." — Wolff on carried interest (09:31)
• "The subsidy was enormous, but the payoff was very poor... Forbes magazine referred to it as, quote, baseball’s most expensive stadium disaster." — Wolff on Miami Marlins Park (15:47)
• "You are to think of this beer as American, precisely because it isn’t." — Wolff on Budweiser's “America” rebranding (21:59)
• "If you ever needed a sign of the power of banks in our culture, you have it in the phenomena of bail-ins." — Wolff (25:56)
• "Out of 3,069 counties, only 7%... have experienced a recovery." — Henley (33:16)
• "There's a death of civic space... You're disconnected from the polity." — Henley (36:13)
• "The rape of the American household economy is continuing today." — Henley, on the persistent mortgage crisis (46:28)
• "You cannot solve a social problem with an individual action. A social problem needs a social movement." — Wolff (56:28)
• "The act of journalism itself becomes a political act, because you're doing it because it's what's required, not what you're compensated for." — Henley (42:57)

Notable Moments & Timestamps

• Carried Interest Loophole Explanation: 01:15–09:30
• Marlins Stadium—Public Subsidy, Private Profit Debunked: 10:29–19:12
• Budweiser ‘America’ Rebranding Satire: 19:28–22:14
• Bail-ins & Bank Power: 22:30–26:53
• Negative Interest Rates: 26:54–28:45
• Bob Henley Interview Begins: 30:02
• County-by-County Reality of Recovery: 32:00–34:42
• Civic Media's Collapse & Political Blindness: 34:42–38:11
• ALICE: Families on the Edge: 38:11–40:12
• New Jersey’s Crisis as National Microcosm: 45:28–49:35
• Closing: The Need for Social Movements: 55:18–56:50

Tone and Language

Richard D. Wolff employs a direct, critical, and often satirical tone, aiming to empower listeners through clear explanations of complex economic topics. Bob Henley offers matter-of-fact, on-the-ground observations, blending personal anecdote with institutional critique, and sharing a sense of urgency about investigative journalism’s social responsibility.

Summary Takeaway

This episode of Economic Update lays bare the vast gap between political/economic rhetoric and the reality experienced by most Americans. Economic "recovery" is a myth for the vast majority, perpetuated by policy, mass media, and corporate interests—while critical journalism that could expose these truths is itself under siege. The solution, both Wolff and Henley argue, can only come from renewed collective action and social movements grounded in authentic engagement and mutual aid.