READING FOR THE WEEKEND (2-28-14)

Looks like a cabin, but it's actually an RV (ViralNova).

Little girl from Norway plays with 14 German shepherds (Episproduction).

Sure, but what methods did they use? According to Italian researchers women who regularly drink wine have better sex lives (Marbella+)

This has to be one of the lamest "10 Ways You Know ..." lists, ever (Womanitely).


THEY'RE NO LONGER PROTECTING OUR RIGHTS ... THE CREEPY SECURITY STATE
In Your Computer: Luke Harding, the author of  "The Snowden Files: The Inside Story of the World's Most Wanted Man", talks about being trailed and how his work mysteriously began to self-delete while he wrote about the NSA (The Guardian).

In Your Bedroom: According the latest Snowden revelations, Britain's surveillance agency - with the assistance of the NSA - collected webcam images of well over a million people. Included are a large number of sexually explicit images of people not accused of wrongdoing (The Guardian).

In Your Head: Four Darknesses: The internet is being manipulated and deceived by Western intel internet trolls (Truthdig).


DRUGS, MAN
After "El Chapo" Guzman's capture this is the man next in line to be Mexico's drug kingpin (Newsweek).

Julio Scherer's 2010 interview with "Chapo" Guzman's  #2 guy, Ismael "El Mayo" Zambada Garcia (Proceso / it's in Spanish).

Counting the costs of the war on drugs (Count the Costs).

32 reasons why we need to end the war on drugs (Business Insider).


COLLEGE STUFF
What a college education costs around the world (Business Insider).

The college you should attend is ... (BuzzFeed).

University of Mississippi (Ole Miss) fraternity suspended for hanging a noose on the statue of civil rights hero James Meredith (Newsone).

THE FAR-RIGHT
Some things never change ... the far-right in Dallas in November 1963 (Daily Kos).

Former Reagan speech writer Peggy Noonan writes the most ironic and un-self-aware column in the history of Western civilization (Philly.com).

High school biology teacher caught using creationist propaganda to teach science class (ATTP).

Bordering on insurrection: The dangerous rhetoric of the right (Daily Kos).

Six signs of psychosis from GOP fringe this week (Alternet).


THE YING-YANG OF WEALTH
Five lame excuses offered by the super rich to justify wealth inequality (Alternet).

Meet the five gazillionaires who want to close the wealth gap (Syracuse).


MEANWHILE, IN CRAZY LAND ...
Virginia Republican says a pregnant women is just a "host," though "some refer to them as Mothers" (Huffington Post).

Pat Buchanan says conservative Christians are true victims in Arizona (PoliticsUSA).

GOP Congressman: America must support Israel to keep being blessed by God (BuzzFeed).

Texas Tea Party candidate says farmers should be able to shoot "wetbacks" on site, then defends the use of the term wetback claiming that in South Texas it's "as normal as breathing air" (Huffington Post).

Pat Buchanan (again) says "whites are the only group you can discriminate against legally in America now" (PoliticsUSA).


MISCELLANEOUS
One man dancing. He's actually pretty good (Episproduction) ... but not as good as this guy when he practiced in his home studio (Wimp).

The tragedy of Venezuela (The Atlantic).

American Aqueduct: The great California Water Saga (The Atlantic).

How Morgan Stanley has raked in billions by manipulating the prices of everyday commodities (Alternet).

- Mark

TRUE

- Mark

THE WAR ON THE POOR & THE WORKING CLASS

Former Secretary of Labor Robert Reich illustrates the 7 ways that the Republican Party have been waging war on the poor and America's working families ...

In case you missed it, here are the seven issues that the GOP are ignoring or dismissing out of hand: (1) Extending unemployment benefits, (2) Raising the minimum wage, (3) Extending Medicaid benefits, (4) Maintaining food stamp funding levels, (5) Investing in education and job training, (6) Rebuilding America's infrastructure (or any jobs program), and (7) Respecting the right of workers to organize and form unions.

- Mark

CALIFORNIA LAKES ... BEFORE AND AFTER PICTURES

Things are not looking good in California ...

Folsom Lake, just north of Sacramento, California (#13 on map below).

Lake Don Pedro ... drought reveals a previously submerged mine at Don Pedro reservoir (#10 on map).

Lake Shasta before and after the drought (#24 on map below) ...

For those of you unfamiliar with California (it is a big state) here's a map listing the bigger lakes of northern California ...

- Mark

UPDATE, III: Here's a FB video clip illustrating the same drought events ...

UPDATE, II: Two more pictures, via NBC News ...

The Enterprise Bridge over Oroville Lake, July 2011 (#21 on the map).

The Enterprise Bridge over Oroville Lake in 2014.

UPDATE: I removed an earlier reference to "Lompico Lake" in the Santa Cruz Mountains. The picture was supposed be of "Loch Lomond" (same region, similar drought conditions). Kudos to the reader who saw the mixed - and incorrect - reference. 

TEA PARTY REALITY

- Mark 

IT'S ALMOST AS IF 2008 NEVER HAPPENED

After 1933 this is how our banking system was designed to work ... 

In our post-1929 world we learned that one of the reasons that the stock market collapsed was because commercial banks tried to do what investment banks did. The problem was that America's commercial banks were bundling up the deposits of their regular customers to make big market bets (which I wrote about here). 

As long as the market kept rising through the 1920s the commercial bankers saw handsome returns, which they famously did not share with the customers whose accounts they used to backstop their market bets.

Then the market crashed in 1929. Panic hit and almost 5,000 banks would be forced to shut their doors. 

To deal with this problem the U.S. government decided to forbid commercial banks from doing what investment banks do. The federal government also provided federal deposit insurance (FDIC) for commercial banks.The laws were pretty clear, and commercial banking became boring across America.  

Specifically, investment banks could only seek out and take money from well-heeled investors. Their job was to match this money with high risk but potentially high-yield investment opportunities. If the investment banks didn't do their homework their investors would lose their money and the investment bank would not be in business long if they continued giving out bad investment advice (or at least that's how the market is supposed to work). 

For their part commercial banks were supposed to take deposits from regular people like you and me. They, in turn, were supposed to lend this money to locals who wanted to, say, build a home, start a tow truck business or open a restaurant. If banks were run incompetently, or got reckless, the federal government would step in to reimburse the money of small depositors. 

As a reminder, we created this banking model for a reason. If given an opportunity people will do greedy and stupid things. We learned this in 1929. So we regulated and made banking boring after FDR became president in 1933.

But there was an upside to boring. For the better part of 50 years America's banking system was stable. Words like "depression" and "meltdown" were effectively eliminated from our economic language.

Then the spirit of deregulation hit in the late 1970s and really hit its stride in the 1980s. It was then that America's banking system would stagger from one financial crisis to another. Bailouts became the norm in the American economy. The Savings & Loan debacle in the 1980s was particularly brutal. Then, in 2008, the Mother of All Banking Meltdowns happened. 

You would have thought that we would have learned a lesson after 2008 (and 1929). Not so fast. 

Apart from watering down proposed legislation after 2008 the U.S. Congress decided to leave some pretty big loopholes in America's post-2008 banking code. Specifically, as Matt Taibbi points out, there is a "bank holding" loophole that's turned America's financial institutions into multi-headed financial vampires. This enabled our Too Big To Fail (TBTF) financial institutions to gobble up some of the American economy's most important commodities and industries. 

How does this loophole-filled banking code work, you ask? In layman terms America's TBTF commercial banking institutions are treated like commercial banks but they get to act like investment banks.

America's post-2008 banking environment - as Matt Taibbi points out - allows our TBTF financial institutions to:

(1) Access cheap Federal Reserve funds (the banking side).

(2) Hoard and trade commodities through complex commodity schemes which allow them to "make [set] prices" (the investment side). 

(3) Create complex derivative products that allow them to bet on the entire process (the futures side).

The entire process is akin to giving a recovering alcoholic a drink and then pretending that things are going to be OK because they promise to go to their AA meetings ... you know, right after they hit the bars first.

Today firms like Goldman Sachs - who were granted commercial banking status in 2008 so they could be eligible for bail out funds, and other government programs - are in the position to deliberately create warehouse delays (on their investment side). They can do this by shipping products - like aluminum - from warehouse to warehouse, which they happen to own. This allows Goldman Sachs to charge a "premium" for getting their goods out of their artificially created shipping "merry-go-round" and into the market.

In layman's terms, Goldman Sachs is effectively "jacking up" the shipping and handling price of the goods they control.

Similar market cornering developments are occurring in nickel, zinc, and copper markets. This helps explain why market prices in these raw materials are so high in spite of the fact that several of these markets are over supplied. 

Simply put, our markets are being manipulated.

Then we have the "front running" schemes being used by our TBTF institutions. Then there are the "repo" borrowing scams that allow financial institutions to use your accounts to make money. And let's not forget the toothless "lemon laws" that allow Wall Street to manipulate and defraud clients, and then laugh all the way to the bank after they get their wrists slapped with weak settlements and fines. 

So, yeah, our bailed out banks are controlling and manipulating market outcomes, again. It's almost as if 2008 never happened. Sigh ...

- Mark 

UPDATE (2-28-14): Here's the story of Goldman Sachs' involvement in another commodity, the raw uranium market, also called yellowcake. Recently Goldman Sachs decided they want out of the uranium market. Their decision, however, has nothing to do with doing the right thing. Nor are they concerned that yellowcake is a potentially lethal substance that was used as an excuse (i.e. a bogus excuse) to go to war in Iraq. Nor are they concerned about the potentially bad PR (Goldman+yellowcake=great story for conspiracy theorists). Goldman got cold feet because demand for yellowcake collapsed after the Fukushima disaster in Japan. And the beat goes on. 

MINIMUM WAGE THOUGHTS

- Mark

THE FIRST STEP TO SOLVING THE DEBT PROBLEM

For the record, this mind-set is not found simply among Fox News viewers. There are Harvard economists smoking the supply-side crack too, which you can learn about here.

- Mark

WHAT'S WRONG WITH AMERICA'S ECONOMY? WE CAN START HERE . . .

The comic strip Pearls Before Swine pretty much nails it when it comes to understanding what's happening to our nation and our economy because of our bailed out and unrepentant financial sector ...

- Mark

COMMENT (on the Comment): I don't usually do this but after reading the remarks from "anonymous" I just had to set the record straight, again. Mr. Anonymous writes that the U.S. government is essentially to blame for the market collapse of 2008. Let's be clear here. This is the same Fox News tripe that political trolls from the right have been echoing and posting for years now. Not only did former Federal Reserve Chair Ben Bernanke make it clear that government programs (like the CRA) had nothing to do with the market meltdown, but so did the magazine Inside Mortgage Finance (the publication that "the mortgage market reads").

In fact, the Republican members on the Financial Crisis Inquiry Commission (FCIC) were so concerned that the facts would get out once the official 662-page FCIC report was released that they issued their own nine-page "primer" report on the causes behind the market meltdown weeks before the official FCIC was released. The Republicans biased report was a joke from the beginning. Apart from containing just 9 pages it deliberately omitted the words "Wall Street", "deregulation", "shadow banking", and "interconnection" from their review (Can you imagine writing report on welfare fraud and omitting the words "welfare" and "fraud" from the report?) I discuss all of this in an op-ed I wrote for our local paper - the Bakersfield Californian - which you can find by clicking here.

Finally, the fact that I have to explain any of this contributes to the larger picture of what's wrong with America's economy. The right-wing trolls out there are economic illiterates who would rather believe in Economic Unicorns than try to understand the world as it is.

- Mark

JUST FOR FUN ... DANCING TO "RUN AROUND SUE"

This is great. It reminds me of my Grandmother who told me and my brother that she could rap - way before the commercials and movies started featuring rapping grannies - and then showed us ...

- Mark 

READING FOR THE WEEKEND (2-22-14)

I guess God wanted him dead ... religious Kentucky snake handler, featured on "Snake Handler", dies from snake bite after refusing treatment (The Tennessean).

The real goal of science ... How to explain "color" to an 11-year-old (Slate).

In Kentucky, they sign up for Obamacare but still hate the president (The Grio).

Can you pass the citizenship test?  Here's the 100 questions that the U.S. Citizenship and Immigration Services draws from (U.S. Citizenship and Immigration Services).


OUR DYSFUNCTIONAL MARKET SYSTEM
Jamie Dimon's raise proves U.S. regulatory strategy is a joke (Rolling Stone / Matt Taibbi).

The "bank holding" scam that turned our nation's financial institutions into multi headed financial vampires that can act like investment banks but be treated like traditional commercial banks (Rolling Stone / Matt Taibbi).

CBO's report on raising the minimum wage ... nothing new really (Demos).

This is just wrong ... Capital One's new contract says it can show up at your doorstep or place of work, any time (LA Times).

UAW may challenge Volkswagen vote results at Chattanooga  plant (The Tennessean).


INTERESTING / ENTERTAINING
Entrepreneur of the year? Genius Girl Scout sells cookies outside pot club and needs to restock after 45 minutes. So, yeah, location, location, location ... (SF Gate).

Men multi-tasking (YouTube).

The basic science question that 26% of Americans get wrong, still (SF Gate).

Plan to split California into 6 states closer to a vote, via the proposition (SF Gate).


MEXICO
NAFTA, 20 years later ... Chinese exports, U.S. economic cycles, and lagging development in Mexico make NAFTA's promises seem rather quaint (Americas Quarterly).

2013, Mexico's Year of Reforms: President Enrique Pena Nieto promotes six major changes in Mexico during his first year in office, which includes allowing federal and state officials to be reelected (Latin Times).

Lawmakers in Mexico City introduce a bill to legalize personal possession of marijuana, up to 5 grams (Latin Times).

Univision is preparing a new TV series about Chapo Guzman, the world's drug kingpin, "El Varon de la Droga" ... or "The Drug Baron" (Latin Times).

After 97 years - and with 573 changes since 1917 (Article 73 has been changed 69 times) - it may be time for Mexico to develop a new constitution (ADN Politico, in Spanish).


THINGS THAT MAKE YOU GRIN ... OR SMIRK
George Zimmerman is homeless, and says that he suffers from PTSD (The Grio).

U.S. airman uses "stand your ground" as his defense in Florida but gets 25 years in the pokey anyways. Can you guess the difference in this case? (The Grio).

Reagan's forgotten tax history ... The definitive piece on Reagan's tax hikes and budget record in California and Washington (Bruce Bartlett).

The 10 things conservatives don't want you to know about Ronald Reagan (Think Progress).


MEANWHILE, IN CRAZY LAND ...
Tom DeLay: People keep forgetting that God 'wrote the Constitution' (Raw Story).

Fox's Erickson: Businesses that serve gay couples are "aiding and abetting" sin (Media Matters).

Fox guest warns that U.S. could become Ukraine without social security cuts (Media Matters).

Varney and Santorum help promote "stimulus didn't work" lie (News Hounds).

O'Reilly agrees that Obama has an "innate repulsion to the projection of American force abroad" (Media Matters).

Hannity blames Obama for violence in Ukraine, Venezuela, and Syria (News Hounds).

- Mark 

BREAKFAST GENIUS

If you're looking for a way to kill two birds with one stone over the weekend ...

- Mark 

ENERGY REALITIES

In the "so you know" department, there are some kinks to work out when it comes to mass solar sites, which you can read about here.

- Mark

BAN ASSAULT WEAPONS? REAGAN & SCALIA SAY "YES"

- Mark 

REAGAN'S TAX HISTORY IN WASHINGTON, D.C. AND IN CALIFORNIA ... MORE MYTH THAN REALITY

Governor Reagan and President Nixon, 1970

Here's something most conservatives don't want to acknowledge. President Ronald Reagan raised taxes 11 times while in the White House. According to Bruce Bartlett - who served as a top domestic policy advisor to President Reagan, and as a Treasury official for George H.W. Bush - this added up to $132.7 billion in tax hikes for the Gipper (about $350 billion today). 

Legislation	Billions of Dollars
Tax Equity and Fiscal Responsibility Act	57.3
Highway Revenue Act of 1982	4.9
Social Security Amendments of 1983	24.6
Railroad Retirement Revenue Act of 1983	1.2
Deficit Reduction Act of 1984	25.4
Consolidated Omnibus Budget Reconciliation Act of 1985	2.9
Omnibus Budget Reconciliation Act of 1986	2.4
Superfund Amendments and Reauthorization Act of 1986	0.6
Continuing Resolution for 1987	2.8
Omnibus Budget Reconciliation Act of 1987	8.6
Continuing Resolution for 1988	2.0
TOTAL TAX INCREASE	132.7

When you take the $132.7 in tax hikes away from $275.1 billion in tax cuts that President Reagan implemented it becomes clear that the man who has become St. Reagan for the GOP could taketh as much as he giveth.

Then we have Reagan's tax history while he was governor of California.  

Governor Reagan initiated a series of tax hikes that equaled (or exceeded) $1 billion per year through the early 1970s. This means that:

... Governor Reagan presided over an astonishing expansion of taxes in California. According to the California Department of Finance, state revenues tripled from $2.9 billion in the 1966/67 fiscal year to $8.6 billion in the 1974/75 fiscal year, Reagan’s last.

On the positive side, Governor Reagan did leave small budget surpluses for his successor, Gov. Jerry Brown (1974-1982), who would grow those surpluses to about $5 billion by 1978.

Governor Reagan and Governor-elect Brown, 1974

However, these surpluses would disappear after the tax gutting Proposition 13 was put on the ballot (as an initiative) and passed in 1978. Governor Brown was forced to use state funds (and the surpluses) to help financially crippled local governments make ends meet throughout the state.

The story line here is real simple. Ronald Reagan's tax history as governor and as president is more myth than reality.

- Mark 

FYI: The Sacramento Bee has additional historical data on California's finances, which can be found here.

TENNESSEE REPUBLICANS ... "SCREW YOU FREE MARKET"

In the field of economics the primary factors of production in a free market economy are land, labor, and capital.*  This is Economics 101. Any time one of these factors is manipulated or prohibited from finding its level price in the market you don't have a functioning market society. It's that simple.

 Tennessee Republicans made it clear that they are not concerned with having a functioning market system this past week.

Last week a Republican governor, a Republican U.S. senator, and an influential Republican leader of the House of Representatives threatened to withhold tax incentives - commonly known as a corporate subsidy -  from Volkswagen if their workers voted in favor of union representation. In effect they scared workers into believing that a union in their Chattanooga Volkswagen plant would threaten job creation in Tennessee.

These same GOP politicians said nothing about industry trade associations, industry lobbying groups, or even business folk getting together to form a chamber of commerce at the local, regional, or state level. They just don't want working men and women getting together to form a union.

Think of the irony. A private company that belongs to numerous trade associations and commercial groups was threatened with having their taxpayer funded subsidies removed if workers exercised their their 1st amendment right (to assemble) and voted to organize and form a union.

Ultimately, the real goal was to prevent unions from making a come back in the south, which is part of a larger Republican goal to crush the bargaining power of labor.

Think about this the next time some one tries to tell you that we have a functioning free market system.

- Mark

* For those asking about "entrepreneurship", which is often discussed in business schools as the 4th factor of production stop asking. Bill Gates and Steven Jobs would not have been who they are today if we had not gotten land, labor and capital right. How did we get it right? Check this out (and this and this too).

MEET THE CANDIDATES IN THE 21st DISTRICT

If you live in Kern County or the 21st congressional district you should attend this ...

- Mark

READING FOR THE WEEK (2-18-14)

Images of earth from one of NASA's most powerful satellites (Business Insider).

How many school children will learn that 1 in 4 U.S. presidents trafficked and enslaved people for profit? (Alternet)

While we get unprecedented obstructionism from our GOP-led House of Representatives the White House has acted (White House).

The number of those without health insurance drops to five year low (Gallup).

BY THE NUMBERS
Does the unemployment rate matter anymore? Not if you look at it this way (Washington Post).

House GOP members deliberately twisted CBO facts about Obamacare (Public Integrity).

Congressional Republicans who received stimulus dollars slam the stimulus on its fifth anniversary (Think Progress).


CALIFORNIA NEWS
Numbers on the worst California-West Coast drought in history (NCAR).

Focusing on California's drought, Newsweek profiles a small town in the Santa Cruz mountains - Lompico - where I used to hang out (Newsweek).

New California data shows drop in overall school suspensions, expulsions (Public Integrity).


THINGS THAT SHOULDN'T HAPPEN
The story of a Houston senior who just wanted to get a voter ID card (Houston Chronicle).

Grab and Run: Kyrgystan's bride kidnappings (Newsweek).

Texas Village Idiot, Sen. Ted Cruz, threatens to filibuster clean debt limit hike (TPM).

Poverty stories from around the world (Global Truth).


MEANWHILE, IN CRAZY LAND

Convicted wife-beater and prospective challenger for Susan Collins' U.S. Senate seat in Maine, Erick Bennett, says denying wife-beating conviction proves he has 'guts and integrity' (Huffington Post).

Conservative billionaires says that the votes of the rich should count more than those who have less money (Think Progress).

Fashion CEO says the poor in America shouldn't complain because they would be rich in most other countries (Think Progress).

Rep. Louie Gohmert (R-TX): Raise taxes on the poor - which they can pay with government aid  - because it will give them a stake in the system (The Raw Story).

A Wisconsin state senator wants to undo a state law that requires employers to give employees at least one day a week off because it interferes with their "freedom" to work (Huffington Post).


MISCELLANEOUS
Federal bankruptcy judge rules that Detroit is trying to give banks too much money (Think Progress).

Check out this house that's selling at a discounted price of $68.8 million (Business Insider).

University professors need to step it up (NY Times).

News from Latin America (Americas Society).

- Mark 

STATE INCOME TAX RATES IN ONE MAP

Via the Washington Post we get a map that shows which states have the highest and lowest marginal income tax rates in the nation. California has the highest marginal income tax rate (13.3%), while Alaska, Florida, Nevada, South Dakota, Texas and Washington have no income tax.

For the record, the marginal tax rate is what you're supposed to pay. The effective tax rate is what you actually pay after the lawyers, accountants, and write-offs are factored into the equation.

- Mark 

WEALTH INEQUALITY IN AMERICA ... THIS ISN'T WHAT THE FOUNDING FATHERS HAD IN MIND

Apart from revolution, what do George Washington, John Adams, Thomas Jefferson, Alexander Hamilton and many other Founding Fathers have in common? They were all opposed to great concentrations of wealth. This is why they championed policies that would build America's middle-class while moderating excessive wealth accumulation that threatened the democratic spirit. The goal - in the words of James Madison - was to "reduce extreme wealth towards a state of mediocrity, and raise indigents towards a state of comfort."

To build America's middle-class they had to make sure that if people worked hard the fruits of their labor would not be gobbled up by some new kind of aristocratic or feudal lord. A strong middle-class was viewed as essential for a strong democracy, which meant that public schools, public libraries, public roads, and public land would be made available to those who were simply looking for a chance.

The stagnant but noble airs of aristocracy in Europe would be replaced with the dynamic and aggressive environment inspired by opportunity for all in America (to be sure, slaves and women would have to wait, but that's another story).

How would the Founding Fathers go about creating opportunity for all in their new society? They and their successors would make land available, create a progressive tax systems (especially taxing unproductive and stagnant wealth), and set the framework for public policies that would build a strong middle class.

PUBLIC POLICIES GUIDE THE INVISIBLE HAND: The specter of European feudalism haunted the Founding Fathers so much they enacted Land Ordinance laws that made land available in smaller tracts and on favorable terms. The idea was that if the people who worked the land could own it that American democracy would be strengthened by those who had a stake in the system. As Hernan de Soto wrote in The Mystery of Capital, instead of using land to preserve an old economic order the Founding Fathers would use land policies "as a tool for creating a new one." 

PROGRESSIVE TAXES: The Founding Fathers understood that the great inequalities that existed in Europe were the result of inherited wealth, hereditary political power, aristocratic land transfers, and the unequal treatment of market players who were forced to operate in an abusive mercantile economic system. Feudal land rights and the lives of protected leisure were viewed as corrosive to the larger goals of America. Because concentrated power was seen as incompatible with the new ideals of the American experience the Founding Fathers pushed for a progressive tax system that would discourage stagnant and unproductive wealth. 

HOW TO TAX THE RICH: Adam Smith, the intellectual godfather of modern capitalism, believed that extra tolls should be charged on luxury carriages using roads or crossing bridges. Why? Smith believed "the indolence and vanity" of the rich should be made to pay larger societal goals. As well, as I pointed out in my book, James Madison saw a problem with moneyed interests dividing society and advocated the "regulation of these various and interfering interests." Regulating divisive commercial interests, rather than a free hand to do as they pleased, was viewed as the key to maintaining balance and opportunities in America.

Put another way, invisible hands and market players alone did not build America.

Indeed, an interventionist state is what helped give America its first vibrant middle-class, the yeoman farmer. The blue-collar working class built around state supported industrialization, and a service class built around social wage earners in the post-war era, were the next two great middle-classes of America.

And none of this was an accident.

As David Cay Johnston tells us the Founding Fathers were adamant about making sure that the moral justification of capitalism (if you work hard you will have the chance to get ahead) would be built around removing obstacles and creating opportunities for those on the lower rungs of society. Perhaps more importantly, the Founding Fathers were clear that if the state was going to make great wealth creation possible (and it has) that the state had a right to tax and redistribute that wealth so others could also have a shot at the American Dream.

Specifically, David Cay Johnston reminds us that George Washington wrote that those who were frugal and industrious would find opportunities in America. But he was equally convinced that America would:

"not be less advantageous to the happiness of the lowest class of people, because of the equal distribution of property."

The second president, John Adams feared both monopoly and a business class born out of inequality. He believed this would create a system of subordination where "the rich and the proud" would wield political and economic power that would:

"destroy all the equality and liberty, with the consent and acclamations of the people themselves."

James Madison, the primary author of the Constitution saw inequality as an evil too, and believed that government should work to prevent:

"an immoderate, and especially unmerited, accumulation of riches." 

Madison would later write that the goal of government was not to help the rich and powerful (a sentiment embraced by Adam Smith, who loathed the idea of the state helping those with resources). Writing later in life, when he was pessimistic about America's ability to survive, Madison wrote that government should work "for the greatest happiness of the greatest number."

The Founding Fathers understood that democracy would become lifeless if economic inequality grew to the point that strong moneyed interests could strangle the life out of political equality. They believed that the job of the state was to remove the obstacles that had stifled opportunity in the old world. This is what inspired U.S. presidents from Abraham Lincoln through FDR.

Put another way, what we're seeing today in America - especially with growing inequality and excessive favorable legislation for Wall Street - is not what the Founding Fathers had in mind.

- Mark