Friday, September 03, 2010

Something's Wrong With This Picture

Robert Reich, Secretary of Labor in the Clinton administration, has an interesting op-ed piece in the New Times this morning. The whole article is worth the read because he offers what I think are some sensible and realistic moves to get the economy back on the right track.

What struck me most was his reiteration of one of most basic facts of the current stall we seem to be stuck in:

Where have all the economic gains gone? Mostly to the top. The economists Emmanuel Saez and Thomas Piketty examined tax returns from 1913 to 2008. They discovered an interesting pattern. In the late 1970s, the richest 1 percent of American families took in about 9 percent of the nation’s total income; by 2007, the top 1 percent took in 23.5 percent of total income.

If workers can't afford to buy the products our economy can produce, then production won't be pushed. Workers will get laid off, thereby deepening the spiral. Henry Ford knew that this kind of income disparity would work against his venture to manufacture and sell automobiles, so he made sure his workers made a decent wage.

That's a concept today's captains of industry don't seem to grasp. The focus is not on the general economy but rather on their own personal economy, as this article featured in McClatchy DC makes clear.

The nation's biggest job-cutting companies paid their top executives an average of $12 million last year, according to a report released today.

The 50 U.S. chief executives who laid off the most employees between November 2008 and April 2010 eliminated a total of 531,363 jobs, according to the Institute for Policy Studies, a research group that works for social justice and against wealth concentration. ...

The top 50 layoff firms reported a 44 percent average profit increase for 2009, the report said.

"These numbers all reflect a broader trend in Great Recession-era Corporate America: the relentless squeezing of worker jobs, pay and benefits to boost corporate earnings and maintain corporate executive paychecks at their recent bloated levels," the authors wrote.
[Emphasis added]

Reich's article does a good job tracing out what this kind of behavior leads to. At this point it's a Great Recession, but sooner or later this bubble is going to burst, and the resulting meltdown will be far worse, even for the wealthy. Stashing jobs and wealth in Asia isn't going to prevent the implosion, it will simply hasten it.

The fact that the current administration doesn't seem to get this simple proposition is every bit as appalling as the behavior of them that's got and who are out for it all. But, hey! A big three day weekend is coming up. It is, after all Labor Day.

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Anonymous TooMuchEditor said...

The most staggering of our contemporary inequality numbers:

In 2007, the latest year with IRS stats available, America's 400 highest-earning taxpayers collected an average $344.8 million each in income. They paid 16.6 percent of that, after exploiting all the loopholes they could find, in federal income taxes.

In 1955, the top 400 collected on average, in 2007 inflation-adjusted dollars, just $12.8 million. They paid, after exploiting all available loopholes, 51.2 percent of that in taxes.

4:41 PM  

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