The Daily Ticker was on location Thursday covering The Economist's Annual Buttonwood Gathering. We caught up with former Treasury Secretary Larry Summers, Blackrock's head of fixed income Peter Fisher and former car czar and investment banking rainmaker Steven Rattner.
In the accompanying clip, Aaron Task talks to Rattner about the growing income inequality problem in America and the subsequent Occupy Wall Street protests. Earlier this week the Congressional Budget Office released a report that showed the top 1% of Americans saw their income grow 275% from 1979-2007 while the rest of the population's income grew by no more than 40%.
Rattner says the growing wealth gap is in part due to globalization. As more companies move jobs where the cost of labor is cheaper that's undoubtedly resulted in fewer middle class jobs. And the ones that remain are paying less.
But, there is a way to reverse the trend.
"How do you create jobs for the long-term?," Rattner asks. "You need to increase the number of well-educated workers in our workforce, because that's where the money is. Those are the people who've been getting the higher paying jobs and that's where we can compete globally."
To his point, the unemployment rate among the college educated in America is below 5%, while it's well above the national average for those with only a high school education.
Rattner faults the government for the inequality. First, he says taxes are too low and unfair. He calls for a return to the tax rates of the 90's. Second, he says the government is spending an increasing amount on entitlements which is squeezing the amount of money that can be spent on infrastructure and other investments.
As for the Occupy Wall Street demonstrations, Rattner says the protesters do have "legitimate concerns." Whether Wall Street recognizes it or not is another question. However, Rattner is a big supporter of Wall Street and the financial services industry as a whole. "Financial services is one of the great success stories of American business," he says, pointing out the number of jobs the industry employs. Of course, that number was once much higher before the financial crisis. Plus, many unemployed Americans feel the reason they are jobless is because of the foolish risks made by those on Wall Street.
- Treasury Secretary Larry Summers
- Wall Street