At the Oscars on Sunday evening, Inside Job, the film about the origins of the financial crisis, won for Best Documentary. Although I have not seen the other films in the category, I am sure that regardless of their quality, the Academy chose Inside Job to make a statement. And just in case the message was going to get lost on the Oscar TV viewers (as it is most likely that hardly anyone watching the Oscars knew, let alone saw, the movie), the winning filmmaker Charles Ferguson came on stage (with collaborator Audrey Marrs) to accept the Award but skipped the usual "thank you mom" platitudes. Instead he used his acceptance speech to deliver the following comment: "Three years after a horrific financial crisis caused by massive fraud, not a single financial executive has gone to jail and that's wrong."
I wrote about the topic recently in Why Aren't There any Bankers in Jail? I also wrote about the movie Inside Job twice in the Fall in A Wall Street Government and in The Seeds of Economic Sedition as I believe it contains valuable insights as to what went wrong and how we could have avoided this mess. Neverthleless, if you are like me, an endorsment from the Academy and a side comment from a filmmaker about his own work are not very credible statements.
"It's a question that puzzles most liberals and bothers some conservatives. Why are so many modest-income white voters rejecting the Obama Democrats' policies of economic redistribution and embracing the small-government policies of the Tea Party movement?
"It's not supposed to work out that way, say the political scientists and New Deal historians. Politics is supposed to be about who gets how much when, and people with modest incomes should be eager to take as much from the rich as they can get.
"Moreover, as liberal economists and columnists point out, income levels for middle-class Americans remained stagnant for most of a decade during the Bush presidency and then plunged in the recession. Housing values fell even more.
"The conservative writer David Frum has made the same point and has said that Republicans must come up with policies that will raise ordinary people's incomes if they hope to win.
"But the fact is that Republicans did pretty well among whites who did not graduate from college -- the exit poll's best proxy for the white working class -- even in the otherwise dismal year of 2008. John McCain carried non-college whites by a 58 to 41 percent margin, more than his 51 to 47 percent margin among college whites.
"Barack Obama won because he carried all other voters 79 to 21 percent. But he carried non-college whites in only 14 states and the District of Columbia with 127 electoral votes.
"Liberals are puzzled by this. Thomas Frank's book "What's the Matter with Kansas?" argued that modest-income whites were bamboozled by the moneyed elite to vote on cultural issues rather than in their direct economic interest.
"But that's no more plausible than the notion that rich liberals from Park Avenue to Beverly Hills have been bamboozled to vote the opposite way on similar issues rather than for those who would extend the Bush tax cuts. People are entitled to base their vote on the things they think important. They don't always vote just to maximize their short-term income.
"In any case the cultural issues seemed to be eclipsed by economic issues in 2010, when Republicans carried non-college whites 63 to 33 percent in House elections. That was almost as large a percentage margin as the Democrats 74 to 24 percent among the smaller number of nonwhites.
"My own assumption is that economic statistics have been painting an unduly bleak picture of modest-income America. When we measure real incomes we use inflation indexes, which over time inevitably overstate inflation, because they're based on static market baskets of goods.
"The problem is if one item spikes in price, we quit buying it. In addition, inflation indexes cannot account for product innovation and quality increases.
"Liberal writers look back to 1973 as a year when real wages supposedly peaked -- just before a nasty bout of inflation. But back then a pocket calculator cost $110. The smartphone you can buy today for $200 has a calculator and hundreds of other devices.
"If you get out beyond the Beltway to middle America, you find supermarkets with wonderful produce and big box stores with amazing variety, all at prices that are astonishingly low. You can eat well and dress stylishly at prices far below what elites in places like Washington and New York are accustomed to pay. In many ways people with modest incomes have a significantly better standard of living than they did four decades ago.
"The recoil in 2010 against the Obama Democrats' vast expansion of the size and scope of government seems to have a cultural or a moral dimension as well. It was a vote, as my Washington Examiner colleague Timothy P. Carney wrote last week, expressing "anger at those unfairly getting rich -- at the taxpayer's expense."
"Those include well-connected Wall Street firms like Goldman Sachs that got bailed out and giant corporations like General Electric that shape legislation so they can profit. They include the public employee unions who have bribed politicians to grant them pensions and benefits unavailable to most Americans.
"A government intertwined with the private sector inevitably picks winners and losers. It allows well-positioned insiders to game the system for private gain. It bails out the improvident and sticks those who made prudent decisions with the bill.
"Modest-income Americans think this is wrong. They want it fixed more than they want a few more bucks in their paychecks."