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Credit: Washington Post

With the rise of the Occupy movement and confirmation from the nonpartisan CBO that the U.S. income gap is at its highest level since 1929, defensive conservatives by necessity spawned a thriving if laughable cottage industry in income inequality denialism. Now with word from the New York Times that the share of income for the top 1 percent dropped from 23 to 17 percent between 2007 and 2009, you can expect more cries of "so get a time machine, Occupy Wall Street!"

But the right-wing echo chamber need not worry about the plight of the tragically rich. While working Americans continue to struggle as the economy slowly recovers from the Bush recession, the rebound of Wall Street has ensured that the upper crust has already recouped its losses. As the data show, millionaires are not only making a rapid comeback. For the gilded class, the economic downturn is already over.

Seizing on federal tax data showing that the average income for the top 1 percent fell to $957,000 in 2009 from $1.4 million in 2007, conservatives have complained that income inequality is so over:

Analysts say the drop largely reflects the stock market plunge, and most think top incomes recovered somewhat in 2010, as Wall Street rebounded and corporate profits grew. Still, the drop alters a figure often emphasized by inequality critics, and it has gone largely unnoticed outside the blogosphere.

By focusing on the top 1 percent, the Occupy Wall Street movement has made economic fairness a subject of street protest and political debate.

"It's very interesting that this has become such a big topic now when the numbers are back to where they were in the 1990s," said Steven Kaplan, an economist at the University of Chicago's business school. "People didn't seem to be complaining about it then."

That might have been because during the 8-year Clinton boom that generated 23 million new jobs, the rising tide for once did lift all (or at least most) boats. But after the Bush recession that started in December 2007, many Americans' dinghies were capsized by yachts once again cruising at full speed. As it turns out, the recession that has proved so devastating for most Americans for the wealthy has been merely a hiccup.

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Credit: ThinkProgress

When President Obama on Tuesday declared that decades of Republican trickle-down economics "never worked," conservatives were predictably apoplectic.

But for all of their protests of "class warfare", "socialism" and worse, Obama was being kind to the Republican ideologues. After all, as the historical record shows, from economic growth and job creation to stock market performance and just about every other indicator of the health of American capitalism, the modern U.S. economy has almost always done better under Democratic presidents. Despite GOP mythology to the contrary, America generally gained more jobs and grew faster when taxes were higher (even much higher) and income inequality lower. And while the U.S. recovery from the Bush recession remains painfully slow, most economists - including the nonpartisan CBO and some of John McCain's own 2008 advisers - believe President Obama saved it from the abyss.

(Click a link below for the details on each.)

• Job Creation and Economic Growth
• The Stock Market
• Income Inequality
• National Debt
• The Bush Recession and the Obama Recovery

Job Creation and Economic Growth

To be sure, George W. Bush provided the perfect bookend to era of modern Republican economic management ushered by Herbert Hoover. The verdict on President Bush's reign of ruin was pronounced even before Barack Obama took the oath of office. Just days after the Washington Post documented that George W. Bush presided over the worst eight-year economic performance in the modern American presidency, the New York Times on January 24, 2009 featured an analysis ("Economic Setbacks That Define the Bush Years") comparing presidential performance going back to Eisenhower. As the Times showed, George W. Bush, the first MBA president, was a historic failure when it came to expanding GDP, producing jobs and fueling stock market growth.

On January 9, 2009, the Republican-friendly Wall Street Journal summed it up with an article titled simply, "Bush on Jobs: the Worst Track Record on Record." (The Journal's interactive table quantifies his staggering failure relative to every post-World War II president.) The meager one million jobs created under President Bush didn't merely pale in comparison to the 23 million produced during Bill Clinton's tenure. In September 2009, the Congressional Joint Economic Committee charted Bush's job creation disaster, the worst since Hoover:

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First, there's this technical definition that says there's a recovery. Why? Because some rich people are getting richer? If the economy doesn't serve the broadest group of citizens and there aren't jobs for people who want them, what kind of recovery is that? Perhaps this is why economists are so often confused.

Maybe, as Atrios says, somebody should do something?

A slowdown in American manufacturing and weak employment data sent stocks lower on Thursday as investors continued to absorb news of a weak economic recovery.

The separate reports from the Federal Reserve and the Labor Department were a fresh reminder of the slow pace of the recovery. Manufacturing, in particular, had shown tentative signs of a rebound in recent months.

The reports were enough to reverse the upward trend of the previous two days, when the market rose 1.1 percent.

“You had a one-two punch in one day,” said Doug Roberts, chief investment strategist for the Channel Capital Research Institute.

The result was a broad sell-off. The Dow Jones industrial average fell 144.33 points, or 1.39 percent, to 10,271.21. The broader Standard & Poor’s 500-stock index declined 18.53 points, or 1.69 percent, to 1,075.63, and the Nasdaq composite index fell 36.75 points, or 1.66 percent, to 2,178.95.

Financial, materials and industrial stocks all fell more than 2 percent.

(video h/t Oliver Willis)

Jim Cramer can hardly contain himself as the market falls nearly 1000 points in the span of a few minutes, and uses Procter & Gamble as an exemplar of how investors can turn a downturn to their advantage.

If ever there was a video that highlights the deficiencies in our 24/7 all-speculation-all-the-time cable punditry corps, this is it. As it turns out, the market drop was hastened, magnified and traders brought to their knees over this:

The selling was exacerbated by a huge drop in Dow component Procter & Gamble (PG, Fortune 500). There may have been technical glitches which caused it to plunge 37% in minutes. P&G's slump was responsible for 172 points of the 992.60 the Dow initially lost.

I have some real problems with this so-called glitch. Let's start with Jim Cramer using it as an object lesson for what to do with a steep market drop. If there was really a "glitch", it would have triggered sharp program trades and hedge fund transactions. Aren't we all glad we're taking Investments 101 this year so we know what those terms mean? As Cramer points out in the video, the price drop makes P&G a "completely different stock" with a completely different set of decision points around buying it.

Now add that reality to programmed trades. Those are trades set up far in advance by investors, executed by computers, and usually in large quantities. It turns into a cascade: The price triggers a programmed trade, which triggers a hedge fund trader's response, which triggers panic on the floor of the Dow, which triggers Cramer sitting at his desk speculating about how to profit from others' ruin.

There are some very real reasons for volatility in the market. A weak Euro, Greece's shaky economy, tightening credit in other European countries and the UK Elections have everyone on edge in a global market setting.

Still, a pricing "error" should not cause a 1000 point plunge in market indices in such a short period of time. I can't help thinking there are speculators out there who made a great deal of money on this.

Newshoggers: The source of the insanity.

Gin and Tacos: The spurious and the unspurious – Glenn Reynolds and the Dow-Jones.

Emptywheel: John Brennan gives Gonzales-like answer on illegal surveillance program.

No Comment: Rove’s Mississippi Mud.

skippy the bush kangaroo: 20 largest cases of companies bilking the government.

The Poor Man: Clap if you believe in war.

Cleek: There’s a wingnut on the road.

Guest post by Batocchio. Mike is back tomorrow. Thanks to him and the rest of the C&L crew.

The New York Times stated the obvious this morning:

It is also painfully clear that more of the same black-hole bailouts are failing to restore stability or confidence. Stock markets worldwide tanked on Monday. A growing chorus of economists and commentators — including this page — are urging the Obama administration to adopt a more comprehensive solution: a government-run restructuring, or nationalization.

The government would not only take an ownership stake in firms that require extensive and ongoing bailouts — as it has done with A.I.G. and Citigroup — but also direct control of the weakest ones. It would get a realistic assessment of the assets crippling them and revamp their finances before returning them to the private sector, where they would be smaller and healthier and could start lending again.

We know that many Americans are uncomfortable with the word nationalization — politicians even more so. But each new bailout of old losers only feeds mistrust of the government and weakens public support for the even tougher decisions to come.

Exactly right. As long as the administration postpones the day of reckoning for the banks, using all these pointless stalling tactics to put off the need for the government to simply take over, the market won't bounce back. Everyone knows some (maybe most) of the major banks are already insolvent, and the "bad bank" idea is little more than a joke at this point:

Fears that the world’s economies are even weaker than had been thought ricocheted around the globe on Monday as investors from Hong Kong to London to New York bailed out of stocks.

Losses cascaded from one market to the next as concern spread that government efforts had not been enough to stabilize troubled financial institutions or broader economies. Only by Tuesday morning did markets show signs of stabilizing, with key indexes in Asia showing more modest declines.

But Monday’s losses were bad everywhere, and particularly severe in Europe, where an emergency meeting over the weekend ended in bickering and the rejection of a bailout plea from Hungary.

[...] “It’s pretty despondent everywhere,” said Dwyfor Evans, a strategist at State Street Global Markets in Hong Kong. “O.K., there are signs that some of the leading indicators have stabilized to some extent, but it’s at a very, very low level, and we’re not seeing corporate investment picking up, or consumers starting to spend again — in other words, the traditional mechanisms by which economies come out of a recession are absent at this time.”

Market analysts - at least of the cable TV variety - seem to tiptoe around the obvious: if you don't cull the herd of insolvent banks and let the market bottom out, you won't be able to start the climb back up.

NEW YORK, Feb. 20 -- With the Dow Jones industrial average plunging past its lowest point since the financial crisis began, panicked investors are asking: How much uglier can it get?

Many market analysts and technicians armed with reams of historical data say that even though the Dow has given back all its gains -- and more -- from the five-year bull market that ended in 2007, it is unlikely the market has hit bottom.

Mark Arbeter, chief technical strategist at Standard & Poor's Equity Research, said the current market environment is showing few of the signs that have characterized previous lows -- high price volatility, high volumes of trading and even higher levels of fear.

"Bear market bottoms tend to be violent affairs," he said. "You sell hard, you rally hard, you go down hard and then you're off to the races. And that's not what were seeing right now. Until this week, the market was really drifting sideways."

And for all the jitteriness out there, Arbeter added, the options market, where investors trade contracts that bet on the future direction of the stock market, is not showing the fear that signals that true capitulation has arrived. Many market participants think capitulation -- when investors take their losses and get out of the market altogether -- must precede a major market recovery.

"We have not reached high enough levels of fear in the options market to suggest that this test of the lows is going to be successful," Arbeter said.

Obama's got a long road ahead of him. Despite today's market gains, stabilizing this economy will be a Herculean task:

President Barack Obama yesterday told Americans that his inauguration symbolized "hope over fear," but on Wall Street, investors stuck with fear.

The Dow Jones industrial average plunged 332.13 points yesterday to close below 8,000 for the first time since the end of November as the largest US banks continue to bleed cash and the Congressional Budget Office casts doubt on the effectiveness of an $825 billion proposal to spend the nation out of recession.

The Dow, which ended at 7,949.09, lost 4 percent of its value, the worst Inauguration Day loss in the 113-year history of the index.

Other indexes suffered steeper losses. The technology-heavy Nasdaq Composite shed nearly 6 percent, or 88.47, to close at 1,440.86. The Standard and Poor's 500 lost more than 5 percent, or 44.90, to end at 805.22.

The sell-off in stock markets, the worst so far this year, began before Obama took the oath of office at about noon. The rout underscored the depth of a recession that many economists expect to be the worst since the Great Depression, and the challenges inherited by Obama.

In the nearly three months between his election and the inauguration, the economy shed more than 1 million jobs and the number of unemployed surpassed 11 million. And despite the injection of $350 billion by the Bush administration to shore up the nation's banks and encourage more lending, the US financial system continues to teeter.

Today held much better news, although probably not for the long haul:

Stocks mounted an impressive comeback on Wednesday, one day after a deep selloff in the financial sector pulled the broader market downward.

As was the case in the market's move down on Tuesday, bank stocks led the way on Wednesday. Driven by double-digit percentage gains for Citigroup, Bank of America and J.P. Morgan Chase, the Dow Jones Industrial Average rose 279.01 points, or 3.5%, to 8228.10. Stocks strengthened as the session wore on, with the rally spreading beyond financials into several other sectors.

The blue-chip measure was also helped by an 11% gain for International Business Machines, which forecast full-year earnings that topped Wall Street's expectations and a 12% rise in fourth-quarter profit.

The S&P 500 gained 35.02 points, or 4.4%, to 840.25. Energy stocks in particular were strong amid a jump in crude-oil prices. Meanwhile, the Nasdaq Composite gained 66.21 points, or 4.6%, to 1507.07. Intel shares gained 3%.

Despite Wednesday's bank-led gains, the sector remains on a more than two-month long decline. Large financial firms are still susceptible to continued weakening of economic conditions and many still have bad assets left to write-down. Should banks fail to at least stabilize, investors say there is little way the market in general, can improve.

Via The Huffington Post:

If the Gray Lady didn't have enough problems battling industrywide woes, now she has Rupert Murdoch to worry about.

The media billionaire has made no secret of his desire to take aim at the New York Times once his News Corp. acquires Dow Jones & Co. and its flagship Wall Street Journal in a $5-billion deal expected to close this fall.

Murdoch said during an earnings conference call last week that he wanted the financial newspaper to have "more coverage of national, international and nonbusiness news . . . all to better compete with the New York Times and other national newspapers."

In private, Murdoch has been more blunt. Read more...

The Agonist:

All that high-minded self-congratulations we heard from the Bancroft family the last couple of weeks about protecting the integrity of the Wall Street Journal and Dow Jones from the likes of Rupert Murdoch means nothing. Apparently they, like everyone else these days, have their price. Murdoch very well might have met it. Look, the editorial pages have been an atrocity for years, but the news section? Business in America would be a great deal less healthy were it not for the vibrant, ethical and sharp coverage of the news section.

According to the WSJ themselves, it looks like the younger Bancroft family members are the most in favor of reducing their paper to presumably nothing more than the same dumbed-down, factually questionable, tabloid journalism that Murdoch loves elsewhere.