The Dow Jones Average is above 11,000!Corporate profits are up! Wall Street has paid back its bailout money! Executive pay is soaring! Bonus money is flowing! Productivity is increasing! Job creation is on the rise! The Great Recession is over–America’s economy is whizzing once again!
Yeah, whizzing on you and me. Forget the Dow Jones Average –whatabout the Doug Jones Average? How are Doug and Deb doing? They measure their economic condition not by what’s in their stock portfolio, but by what’s in their stockpot. It’s not the fluctuation in the price of T-bills that keeps the Joneses awake at night, but the inflation in their electric bills, the stagnation in their wages, and the deflation in the value of their house.
It’s a myth that practically every American is personally attached to the Dow Jones rocket. In fact, half of us own no stocks at all, even through a mutual fund. And the majority of those who do own stocks have only miniscule holdings and pay no attention at all to the variations of the daily Dow. Indeed, the richest 1% of Americans own 90% of all stocks and bonds in our country.
Broad ownership of corporations is just one of the many “facts” we’re fed in our economic diet that are myths, half-truths, deceits…or outright lies. To help read between the lies of the current economic “news” you’re getting, this issue of the Lowdown probes into a few of the statistics and assumptions that are being spewed out by pundits, politicos, and other Powers That Be.
162,000 new jobs!
A New York Times headline on April 9 asked, “Why So Glum? Numbers Point To a Recovery.” So pour yourself a glass of numbers, Bucko, and celebrate the good news from most economists that the Great Recession, which they say began in December 2007, ended sometime last year.
Okay, admit the number crunchers, it has been a “jobless recovery” (an antiseptic phrase that is both oxymoronic and plain old moronic). But wait, exclaim the ecstatic stat crunchers, March was a breakout month for employment. For the first time in two years, the economy didn’t lose jobs, instead adding 162,000. “The clouds have parted,” exulted the Times, and President Obama declared, “We are beginning to turn the corner.”
True? Let’s look at the always-reliable Hightower Saloon Index. For a real-life measure of whether the economy has really turned the corner, check out your corner pub or tavern. For example, an April report in the Connecticut Post gives us a regional indicator. A customer in the Ash Creek Saloon notes that a clear sign of renewed prosperity “is when the bartenders tip jar is full.” It wasn’t. The reason, said this fellow, is that “the only jobs out there pay $8.50 an hour.” Meanwhile, the bartender down at the Stratford Ale House pointed out another sign of a down economy: “There are people who come in during the day who normally would be working.”
Unfortunately, the widely ballyhooed March surge of 162,000 new jobs is less than it might seem. Start with this: It takes 125,000 new jobs each month just to absorb the people who are entering the labor market for the first time, so the March number offers practically no new opportunities for the millions of Americans who’ve been knocked down by downsizings, offshorings, bankruptcies, mergers, and cutbacks.
Second, nearly a third of the March jobs (48,000 of them) came from government hiring of temporary census takers–jobs that will end this summer. Another third were also temporary jobs, mostly in the lowpaying service sector. Digging deeper into official Labor Department numbers, here’s the present reality faced by America’s workaday folks:
- 15 million people (about 10% of the workforce) are out of work.
- Unemployment is heavily skewed by class. Among the wealthiest 10% of American families (incomes above $150,000), only 3% are unemployed–a jobless rate that rises as you go down the income scale. Among the bottom 10%, more than 30% are out of work.
- The average length of unemployment is now 31 weeks (nearly 8 months), the longest period since 1948, when the government began keeping records. In March, another 414,000 Americans crossed the threshold of being out for work for more than six months–a group that has now grown to 6.5 million (nearly 2/3 of these folks have been job-less for more than a year).
- An average of 5.5 people are applying for every job opening in the country–and most job seekers and employers report that the real ratio is more like 20 to 1. Before the recession started, there were 1.7 applicants per opening.
- 9.1 million Americans are underemployed, meaning they’re working in part-time jobs when they want and need full-time employment.
- Another 2.3 million people are so discouraged by their fruitless search for jobs that they’ve given up looking (economists have a lovely phrase for them–“marginally-attached workers”).
- The combined total of unemployed, underemployed, and marginally-attached Americans is 26.4 million (almost 20% of the workforce).
Happy days ahead!
The “jobless recovery” clique routinely puts little happy-face stickers on these dismal numbers to calm the distressed masses. Nearly all economists, the establishment media, and most politicians publicly brim with economic optimism and tell working families, “Your time is coming. Just wait. You’re our top priority. Happy days are ahead. Be patient.”
It’s a myth that, as if by some natural law, a recession is inevitably followed by a broad and joyous recovery. Look no further than the bust of 2001. It was far shallower than the deep plunge we’ve taken in the past two years, yet the subsequent recovery never reached the majority–job creation under Bush was pathetic, failing to replace the number of jobs lost in the 2001 bust. The Bush years were alost decade for those in America’s middle class, who saw their incomes go down.
Today, our situation is more dire. The U.S. has lost 8.2 million jobs since the recession hit in 2007, and nearly 3 million new workers have entered the workforce since then. That has put us in a hole more than 11 million jobs deep.
Where’s the plan to lift America out of this? Nothing proposed by Obama and the Democrats will create anywhere near 11 million new jobs (which, after all, would only bring us back to 2007 levels, not creating the extra job growth to move America forward). More despicable are Republicans, who petulantly oppose all job-growth programs. Instead, to appease their core constituencies of corporate funders and ideological goofballs, they simply ask us to have faith in the tinkle-downpromises of The Great Laissez-Faire Fairy.
The truth that the establishment wants to keep from us is that raw corporate power has been unleashed in the last few years to remake and rule over America’s economic landscape. With the complicity of their puppets in Washington, top corporate and financial executives have established a new normalcy of widespread joblessness and lowwage work. Here are some of the major features of our altered terrain:
- Corporations no longer exist to make anything, much less to employ or sustain a middle class. They are now owned by global speculators, equity-fund bandits, and huge institutional investors –all of whom demand giant, short-term profits, usually achieved by slashing jobs and wages.
- Thirty years of ruthless union busting and relentless undermining of fair labor laws now permit corporate bosses to fire on whim, turning once-good jobs into outsourced, contract, temporary, and part-time work.
- Millions of jobs in manufacturing, computer programming, banking and insurance, and practically every other category have been moved by corporate chieftains to low-wage countries. Not only has this massive, self-serving shift eroded America’s middle-class job base, but it’s also been used by executives to sledgehammer the wages of jobs that remain here.
- Since 2000, some 5.6 million manufacturing jobs have been replaced by computers and other machinery–jobs that had served as a ticket into the middle class for the 70% of people without a college diploma.
- Small businesses and new ventures are America’s major producers of jobs. Yet, despite the public’s massive bailout of Wall Street, the big lenders have cut off the flow of essential financing to these grassroots enterprises, so this job-creation machine is stalled. Wall Street’s banksters, who can grab far more money by investing in hocus-pocus schemes that produce nothing except more riches for the rich, have no intention of returning to the real economy–and Washington is doing nothing to make them return or to create alternative financing.
The bottom line from all of the above? Adios, middle class. As one top Wall Street consultant bluntly puts it, “American business is about maximizing shareholder value. You basically don’t want workers.”
What bosses earn
One of the most ridiculous deceits in our economy is the routine labeling of outlandish executive pay as “earnings.” Take the compensation of David Tepper, for example. Honcho of a Wall Street hedge fund named Appaloosa Management, this guy raked in more personal pay than any other CEO last year. As reported in various news stories, Tepper “earned” $4 billion in 2009.
Excuse me, but…no, he didn’t. He might have grabbed, snatched, looted, absconded with, and otherwise hauled off $4 billion-but no one can “earn” that much, for earning implies a reward commensurate with some achievement. America’s teacher of the year, for example, certainly earns his or her $40,000 paycheck. Some beneficial works might merit pay of $400,000 a year, and I can imagine that a few extraordinary accomplishments might warrant personal payouts as high as $4 million.
But four billion bucks? That’s roughly $2 million an hour! A good auto mechanic, maybe–but a hedge-fund hustler? Get outta here! By the way, Tepper’s windfall did not come from building anything, but from a Wall Street casino scheme that let him bet successfully that we taxpayers would end up bailing out the big banks. We paid, he collected. But he did not earn.
Meanwhile, the moneyed elites and the media (sometimes the same people) are perpetrating another myth, which is that top executives responded to the 2009 recession by taking big salary cuts, showing their solidarity with working stiffs. While they did take cuts in stock payments, they actually hiked their salaries, bonuses, and other cash compensation by an average of 8.3%. Thus, while regular Americans are still barely scraping by–suffering job losses, wage cuts, home foreclosures, and bankruptcies–a Bloomberg News survey of 81 top executives found them averaging pay of $9.8 million last year. Solidarity forever!
Check out John Stumpf, CEO of Wells Fargo. We peasants put $25 billion in bailout funds into his bank in 2008. But, doggone it, bailout rules limited his pay that year. No sweat, though–once the bank repaid its direct-bailout funds in 2009, Stumpf’s base salary was raised by 537%, letting him “earn” a sweet $21.3 million. It was necessary, says Wells Fargo, to “reward him appropriately.”
Wells Fargo is among the Wall Street crowd presently lobbying furiously in Washington to kill proposals that would limit executive pay. It increased its lobbying expenditures by 27% last year, and the bank now has 17 hired guns lobbying for it. There are about six times more banking lobbyists in Washington today than there are members of Congress.
Little attention has been paid recently to America’s lowest-income workers. This is because Washington, after a shameful 10year lapse, finally provided a substantial hike in the minimum wage in 2007. Thus, the conventional wisdom goes, that issue has been dealt with, so let’s hear no more grumbling from those folks.
True, the increase gradually elevated America’s wage floor from 2007’s appallinglow of $5.15 an hour to today’s $7.25. Hallelujah! But before we get all warm and fuzzy about the progressivity of this $2.10 boost, let’s acknowledge the new minimum for what it is: a poverty wage. Seven and a quarter works out to an annual paycheck of $14,500 gross (in both meanings of that term) –for full-time work. Rewarding people’s labor with poverty speaks volumes about how much respect America’s economic and political establishment actually has for our nation’s vaunted work ethic.
Worse, $7.25 is actually a mirage for current minimum-wage employees. Three years of Inflation have steadily eroded the apparent gains. In terms of real buying power, today’s wage floor is worth 17% less than at any time since 1968.
Well, so what, snap defenders of the minimalist minimum. No one really depends on it, they say, asserting that minimum-wage workers are mostly teenagers and college students who take short-term, temporary jobs to pull in a little extra spending money.
Let’s splash some reality on this insidious myth:
- 4.5 million Americans benefit from a rise in the wage floor.
- 76% of them are adults.
- Almost half work full time, and another third work more than half time (20-34 hours per week).
- Women, including single parents, are the biggest group of beneficiaries.
>2.2 million children are in homes that count on the minimum wage.
- A rise in the minimum translates directly into more consumer spending on basic family needs by the recipients, benefiting local economies (the increase to $7.25, for example, boosted spending in the past year by an estimated $5.5 billion).
- Minimum-wage employers also gain, not only through the increased spending power of their employees, but also through a decrease in employee turnover and absenteeism and an increase in morale and productivity.
The great divide
Many of those mad-as-hellers waving tea bags at protest rallies funded by corporations (oh, the irony!) have shouted themselves red-faced at the demon Obama, assailing him as a Socialist-Marxist-Fascist-Nazi who is using health care, stimulus spending, unemployment comp, tax increases, green jobs, and other government policies to redistribute wealth in our country. “Un-American!” they shout, insisting that in our Land of Equality, government has no business helping one group advance at the expense of another.
Too late. Apparently, the tea-bag mythologists missed the last thirty years, during which Reagan-Bush-Clinton-Bush beat Obama to the redistribution punch and were so effective that they make him look like a redistributionist piker. They used everything from skewed tax cuts to rigged global-trade deals to shove our nation’s wealth upwards into the coffers of corporate and financial elites, leaving the rest of us behind.
Investigative reporter David Cay Johnston notes that the size of America’s economy more than doubled between 1980 and 2005, an expansion of national wealth that all of us helped produce. Yet, in that period, the bottom 90% of Americans saw their incomes fall by an average of about $4,000 (as measured by the dollar’s value in 2005). At the tippy top of the wealth pyramid, however, the richest 0.01% saw their incomes jump by 384%.
As regressive redistribution policies took hold and steadily spread throughout the government during the past three decades, the divide between the rich and the rest of us became a chasm. The eight years of the Bush administration saw the first economic expansion in all of U.S. history in which poverty increased and the typical family lost income:
- Even though our economy was generating more wealth than ever before, America’s poverty rolls increased from 31.6 million people in 2001 to nearly 40 million in 2008.
- In 2007, the last year of the Bush expansion, middle-class family income was lower than it had been when George W took office. This has not happened since the government began keeping such records, after World War II–in every other expansion, the buying power of middle-class families grew as the economy did.
- From 2002-2007, the wealthiest 1% of U.S. families (those with incomes averaging more than $400,000 a year) hauled in 2/3 of America’s total income gains–their largest share since the 1920s.
- By 2007, the top 1% owned 34% of all American wealth (cash, stocks, bonds, real estate, cars, toys, etc.), and the next richest 9% owned 38%–i.e., a total of 72% of our nation’s wealth was concentrated in the hands of the richest one-tenth of us. The entire bottom half of America’s population (people who are middle or low income) owned only 2.5% of the nation’s wealth.
- In 2007, the richest 400 American families had an average income of $345 million each, more than double their take in 2001; in this time span, their income-tax rate was slashed from an average of 29.4% to 16.6%, allowing them to pay only half the rate paid by their chauffeurs and gardeners.
Spread the word
The truest, most fundamental measure of our economy’s performance is how well the system is working for the workaday majority of people. Throughout his life, my ol’ Daddy (who was without the edifying benefit of an economics degree) was clear on this concept –“Everybody does better,” he used to say, “when everybody does better.” Unfortunately, a dense fog of myth and a blinding blizzard of misinformation are keeping the great majority of Americansfrom doing better. If we can’t even see the economic reality of our country, we won’t join together to demand and create the fundamental structural fixes that are necessary for true recovery and widely dispersed prosperity.
On jobs, wage policies, the green economy, grassroots-business loans, corporate offshoring and downsizing, Wall Street greed, fair labor laws, equitable taxation, poverty, high-speed rail, and other huge national needs, Washington is tiptoeing lightly between the hell-no obstructionism of Republicans and the timorous reforms of Democrats. Neither party’s leadership has the stuff to offend the moneyed interests, much less to restructure the status quo so that ordinary Americans can get to the front of the line.
What this means is that we have much more democracy building to do. Let’s do more to link our grassroots efforts to those political mavericks who are willing to side with us, and let’s ramp up our outreach efforts to enlist more people, especially the young, in this evolving and growing populist movement. One essential ingredient is to know and spread the truth about America’s skewed economy.