USA Workers, Big Business, Government and the Economy

Over the last decade, the share of U.S. national income taken home by workers has plummeted to a record low.  The decline began with the brief recession that followed 9/11 in 2001.

Workers' share of the USA economy

The decline in real spending power and worker income continued even as the economy picked up again in 2009.  It became worse once the Great Recession generated by the Bush Administration hit hardest those least capable of self-sustainment: the poor, elderly, infirmed, and chronically unemployed / underemployed.

Job losses relative to employment peak months

In the weak recovery since then, workers’ share of income just kept on falling.  The 2001 recession took longer to bring employment back to pre-crisis levels and became more entrenched with the Bush Tax Cuts for the upper-one-percent (the wealthiest; Read more: http://www.dailymail.co.uk/news/article-1336078/Post-recession-unemployment-scariest-job-chart-worst-WW2.html#ixzz1PRGx5n2v) with a decline in the bargaining power of labor, and increased competition from foreign workers who would work for pennies through Asia minor and in Latin America. 

Effect of GW Bush tax cuts and what would happen if they were eliminated

Over the last year or so, U.S. companies have made record profits, while unemployment has stayed high and wages have barely risen. Neither the Obama administration nor Congress plan to do much about this growing inequality; the Obama administration found its hands tied and ineffective when the Tea Party within the GOP demanded further cuts for the rich that allowed ExxonMobil and General Electric (companies that made the greatest profits; for ExxonMobil that made $19 billion in profits in 2009 and in 2010 it recorded $45.2 billion in profit, read: http://www.forbes.com/2010/04/01/ge-exxon-walmart-business-washington-corporate-taxes_2.html, which is similar to other big oil companies including Chevron and ConocoPhillips—the reason that ExxonMobil does not pay taxes is because Exxon limits its tax pain with the help of 20 wholly owned subsidiaries domiciled in the Bahamas, Bermuda and the Cayman Islands that (legally) shelter the cash flow from operations in the likes of Angola, Azerbaijan and Abu Dhabi.; for an opposing argument on the 2009 nonpayment of taxes because of a carryover loss from 2008, read the report at http://www.politifact.com/truth-o-meter/statements/2010/dec/10/bernie-s/bernie-sanders-filibuster-exxon-mobil/;  for General Electric, read: http://abcnews.go.com/Politics/general-electric-paid-federal-taxes-2010/story?id=13224558; GE’s success at avoiding taxes is nothing short of extraordinary. The company, led by Jeffrey Immelt (who advises President Obama and GOP contenders), earned $14.2 billion in profits in 2010, but it paid not a penny in taxes because the bulk of those profits, some $9 billion, were offshore. In fact, GE got a $3.2 billion tax benefit) to pay no taxes.  In 2008, the Government Accountability Office found that “two out of every three [emphasis added] United States corporations paid no federal income taxes from 1998 through 2005” (Source: The New York Times  http://www.nytimes.com/2008/08/13/business/13tax.html?_r=1; companies that do pay taxes pay an average of 35% on their net profits).  The 2001 recession took longer to bring employment back to pre-crisis levels.

Unemployment claimants

If Tim Pawlenty would win the GOP nomination and the electrion for the USA presidency in 2012, the former governor of Minnesota would increase tax cuts for the very wealthy in the USA.  Specifically, in 2013 the Pawlenty plan would give people in the top one-tenth of 1 percent on the income scale (i.e., people with incomes above $2.7 million) an average annual tax cut of $1.8 million — which is more than four times what they got last year from the Bush tax cuts (http://www.taxpolicycenter.org/numbers/displayatab.cfm?Docid=3051&DocTypeID=2).  This would result in greater unemployment, cutting of basic minimum wage (iof not doing away with minimum wage), lead to a lessening of social services and severe cutbacks for national health and education as the middle class would all but disappear and the ranks of the poor escalate rapidly and overwhelmingly.

Pawlenty's proposed tax cut for the rich

The number of claimants seeking unemployment compensation went down when their time to find work ran out and their plight was no longer recorded in the statistics of American workers without jobs. This was heralded as a transmogrified sign that the economy was picking up while in fact it was getting worse; the praises for the Bush Tax Cuts being sung by the Koch Brothers and their bought-and-paid-for Governors: Scott Walker (a Tea Party Favorite) of Wisconsin, Chris Christi of New Jersey, Terry Branstadt of Iowa, John Kasich of Ohio, and Mitch Daniels of Indiana who claims that the reason for job losses in his state is because of “militant atheism” causing his god to turn his back on the state.  Daniels is among the least educated in reality, claiming that Adolf Hitler was an atheist and compared the champion of Christianity in Germany (1939-1945) to Stalin and Mao (http://www.centerforinquiry.net/blogs/entry/indiana_governor_mitch_daniels_bashes_atheists/ and http://scienceblogs.com/pharyngula/2009/12/im_so_sorry_for_you_indiana.php).

Corporate profits

Corporate profits hit a record $1.67 trillion in the third quarter of 2010:  up 28% from a year ago.  This is not the result of USA workers buying USA products—they are not: they are buying goods manufactured and/or produced in China.  The reason for the jump in USA corporate profits is because one reason companies are doing well is because of stronger demand from emerging markets like China, India and Brazil.  

The emerging foreign demands for USA produced goods—and goods sold by the USA companies that are made by outsourced labor further weakens the dollar and confidence in USA ingenuity and craftsmanship.  In the past such an increase in profits would correspond with an increase in hiring so as expand profits further. That is not happening, and unemployment inched up to 9.8% in November 2010.  The post-recession unemployment is at its worst since World War Two, with the rich getting richer and the poor sinking deeper into poverty: 

Income groups average gain-loss per year

The US economy will not pick up any time soon, as businesses are seeking greater profits while laying-off labor to gut the unions and fair-wage bargaining.  Unemployment will not even start to come down until businesses decide to invest in workers, and not just software as seen here:  

Tax rate on millionaires from 1913 to 2010

Despite the fact that non-financial U.S. companies held $1.93 trillion in cash and other liquid assets at the end of September 2010, few are investing in any real growth issues. 7.4% percent of companies’ total assets were cash — the highest share since 1959.  Since the presidential days of George W. Bush, those most capable of paying taxes and investing in the general economy for the wellbeing of all Americans are paying increasingly less in taxes, as seen in the above chart.

Businesses will not do that until they feel confident of increasing profits and declining labor demands, increased production without increasing quality of goods or protection of consumers. With this idea entrenched in corporate thinking, the average American worker is becoming increasingly nervous about the economy and will not spend money on most things, for fear of losing his or her job and thereby being unable to pay for what is purchased on time. 

Worker confidence in economy that works against the American worker

Unemployment and hunger in the USA

The fact that about 9.5% of people are out of work has a knowledgeable effect on people who are employed: the current workers are afraid more and more of losing their job and their homes (cf. http://www.omaha.com/article/20100927/MONEY/709279956/103128 and http://www.gseta.org/2010/09/over-50-jobless-workers-fear-theyre-permanently-unemployable.html).

Average income in the USA

The poorest 90% of Americans make an average of $31,244 a year, while the top 1% makes over $1.1 million. The average CEO makes 185 to 365% (the latter figure is for Fortune 500 CEOs, read http://www.ourfuture.org/fast-fact/ceo-vs-worker-pay and CNN news report on the ever-widening gap by Jeanne Sahadi, CNNMoney.com senior writer at http://money.cnn.com/2007/08/28/news/economy/ceo_pay_workers/index.htm it was 262% in 2006; from there, with acquiescence of George W. Bush, rose steadily, read: http://www.epi.org/economic_snapshots/entry/webfeatures_snapshots_20060621/) more than the average worker (the CEO Michael Duke at Wal-Mart makes more in one hour ($16,826.92, he makes $35 million a year) than a Wal-Mart employee makes in a year: http://abcnews.go.com/Business/walmart-ceo-pay-hour-workers-year/story?id=11067470.  The average CEO spends less than two hours a week at work signing papers; the average worker spend 40 hours a week working a manual labor (cp. The difference in salary compensation, and work hours—the average CEO works less than one hour for every 13  hours worked by an employee or manual laborer—is at http://www.cab.latech.edu/~mkroll/510_papers/fall_05/Group6.pdf, see especially page 8). 

The plight of older workers

The greatest fear in 2011, is among the older workers who were let go before reaching retirement age, or were placed in a “reduction program” so that younger people could take their place or their place left vacant.  This retrenchment policy, frequently in place in big business and the USADODGOV instrumentalities (such as AAFES: Army and Air Force Exchange Service) is intended to reduce expenditures of employee wages, while maintaining an energetic building program, expansion of facilities and goods to PXs and BXs, and slick magazine publications) and few of the older individuals who were let go were ever recalled.  This is equally true in megacorporations that seek out younger people who can be hired at lower wages, given modest tasks or assigned the tasks of more experienced and knowledgeable older workers who had become “pricy” because of their experience and years of service.  Today, it is a common ploy to end the careers of better trained and more educated teachers in academe since Full Professors command greater wages than does the new instructor, or the older teacher in a private or public school compared with that of a new graduate who has completed basic studies but has no further educational background and is inexperienced in the conduct of inquiry, will seldom research and only (if required) publish or submit papers for peer review.

Who controls America's wealth

Most income groups have barely grown richer since 1979. But the top 1 percent has seen its income nearly quadruple.  This is not an Obama-created recession, but one that began over thirty years ago, with the floodgates of recession, depression, and job loss (along with union bashing) initiated by Ronald Reagan and carried forward by George H.W. Bush and his son George W. Bush (the only respite was during the eight year presidency of Bill Clinton {1992-2000} and that despite a reluctant GOP controlled Congress that regularly demanded greater tax breaks for the rich and to raise taxes on the middle class and poor, cut subsidy programs, and end safety nets for the elderly, chronically ill, and those least capable of sustaining life or having basic necessities of comfort, such as heating oil that was ultimately supplied by the Venezuelan government of Hugo Chavez without charge to the poor in the USA); on George W. Bush complicity with the seedier side of USA corporate wealth, read: http://www.realchange.org/bushjr.htm).  

Distribution of wealth in the USA

Average salaries of employees and CEOs in Fortune 500 companies

Spending will not rebound strongly enough to make companies consider major headcount expansions.  At the same time senior corporate executives salaries are rising astronomically, and Congress is continuing to give tax breaks to the rich and super-rich while requiring the dwindling middle class to make up the shortfall. One thing, however, is certain: Profit growth is going to be a lot faster than Gross Domestic Product (GDP) growth for a long time and the worker will continue to lose: his job, home, self-respect, savings, and more, while upper-management and corporate investors waltz over the rights of labor with abandonment.  Obama must do more than talk.  Obama must invest in the infrastructure of the USA to create jobs as did Franklin Delano Roosevelt when faced with Hebert Hoover’s bungling of the USA economy that led to a worldwide depression  (http://www.nytimes.com/2009/01/05/opinion/05krugman.html), and better for the economy end the wasteful and unnecessary practice of lowering

Patriotic millionaires letter to Obama

tax rates on the super-rich and have them pay their fair share–a reality that has been endorsed by some of the biggest millionaires in the USA, known as the Patriotic Millionaires for Fiscal Strength made up on 80 wealthy individuals, including musician Moby, Men’s Warehouse CEO George Zimmer, Princeton Review founder John Katzman, and Ben Cohen of Ben & Jerry’s ice cream and even Bill Gates of Microsoft. Their argument was that they had made money and continue to make at least $1 million a year in income.  The recognize their responsibility as being a good citizen and working to see the USA struggle out of a debt put into place by George W. Bush who initiated an unhealthy tax cut for the super-rich that bankrupted the USA.  In a video the group released Tuesday 7 June 2011 (http://www.npr.org/2011/06/08/137057970/patriotic-millionaires-ask-obama-congress-to-raise-their-taxes), members say they “shouldn’t be wallowing in … riches while everybody else is suffering.” They say the tax cuts President Bush signed into law 10 years ago were a mistake that needs to be fixed. “My country — our country — means more than my money,” members say in the video.

Dennis Mehiel

Dennis Mehiel, chairman of cardboard-box company U.S. Corrugated, is one of the 200 millionaires who signed the letter. He tells Tell Me Morehost Michel Martin that increasing the marginal tax rate on high earners is absolutely essential to balancing America’s fiscal policies.  He said: “You’ve got to go where the money is”. 

Mehiel disagrees with House Budget Committee Chairman Paul Ryan of Wisconsin “plan for balancing the budget” (whom Noble-prize winning economist called “The Ryan plan is a fraud that makes no useful contribution to the debate over America’s fiscal future” at http://www.expressmilwaukee.com/blog-5678-krugman-calls-paul-ryanrss-roadmap-lda-fraudrd.html), is deep in the pay of the Koch Brothers.  Ryan, who is considered an “intellectual” by other Republicans, like Darrel Issa of California who works daily against his own constituents, insist that the only way to reduce the budget deficit is to cut spending.  The reason that Ryan wants to protect millionaires is that eighteen of the new class of incoming freshman in Congress are millionaires.  Paul Ryan, himself a millionaire, has dubious distinctions in trading and investments; the 41-year-old is worth at least $1 million, much of it from his wife’s family holdings in an Oklahoma mining company and an Oklahoma gravel company. Ryan’s own investments include holdings in Apple (at least $1,000), Berkshire Hathaway ($1,000), Google ($1,000), McDonald’s ($1,000) and Phillip Morris ($1,000), as well as at least $150,000 in school savings plans.  House Speaker John A. Boehner (R-Ohio) and House Majority Eric I. Cantor (R-Va.) , the GOP leaders who rode to power on the grassroots wave of tea-party activists, are multi-millionaires with financial investments in some of the nation’s largest corporations (http://www.washingtonpost.com/politics/boehner-cantor-continue-millionaires-reign-over-house/2011/06/15/AG796KWH_story.html?wpisrc=nl_pmpolitics).  The others have similar ties and most are in the pay of the Koch Brothers and fighting for Koch Industries.

Rejecting this argument, Mehiel noted:  “What they’re really saying is that the sacrifices that need to be made to move toward more balance in our fiscal policies … have to be made by the people who essentially have the least”.

Rep. Paul Ryan (R-WI)

Tea Party Republican Ryan argues the issue is not political but an economic theory: Keeping taxes as low as possible is what stimulates economic growth. Opponents, including the millionaires in the Patriotic Millionaires for Fiscal Strength, say the issue is political; it is class warfare, pitting the wealthy and successful against the less successful.  Mehiel argues that there is increasing income disparity in the U.S.:  “Not to be overly partisan, but the Republicans and Mr. Ryan (he has a B.A. in economics and political science, but without significant distinction, from Miami University at Oxford, Ohio, taken in 1992, but is better remembered for his role at the social fraternity Delta Tau Delta and the quantity of beer he consumed) say that it’s absolutely wrong to ask anybody — irrespective of how great their resources are — to chip-in in what everyone agrees is a very, very significant challenge for our country, [and that] makes no sense to me,” he says. “So I think they are pitting the classes against each other by framing the bait on that basis.”  Ryan’s “fiscal conservatism” is unique: he voted for bailouts for Wall Street, GM, and Chrysler.  The Citizens for Responsible Ethics in Washington (CREW) filed a February 10, 2011 complaint with the Office of Congressional Ethics (OCE) against Ryan and 32 other Members of the U.S. Congress who are reportedly residing within the U.S. Capitol building offices at taxpayer expense.  Ryan voted to abolish the State Children’s Health Insurance Program in 2010, lower the top tax rate to 25%, introduced an 8.5% value-added consumption tax, and privatize Social Security even if the privatization led to the failure or bankruptcy of the program as it would be held as a stock subject to public whim.  Ryan’s plan would replace these health programs, such as Medicare, with a system of vouchers whose value would decrease over time (Klein, Ezra (2010-02-01). “Rep. Paul Ryan’s daring budget proposal”. The Washington Post on-line at: http://voices.washingtonpost.com/ezra-klein/2010/02/rep_paul_ryans_daring_budget_p.html#more).

Discretionary Budget USA 2010

It is time that Obama stops being a rhetorician.  It is time that Obama becomes a politician, and work with those who will help advance the USA: ending child hunger, unemployment, the wrongful wars in Afghanistan and elsewhere that take the greatest share out of the national budget, and reward good teachers, improve education, and be the president he promised on the campaign trail in 2009.

USA military bases in Middle East

The USA can no longer afford to police the world.  The USA must create jobs for people in the USA:  jobs that produce, not destroy. 

2 comments to USA Workers, Big Business, Government and the Economy

  • Bobbie  says:

    This is very informative and eye-opening. Thank you, Dr. Ide.

  • Swan Thompson  says:

    “In 2008, the Government Accountability Office found that “two out of every three [emphasis added] United States corporations paid no federal income taxes from 1998 through 2005”

    Why, corporations have no intention of ever paying income taxes! They need all their money for vitally important things like paying obscene bonuses to their CEOs and buying Congressmen. Their plan must be working, too, because every bit of legislation (pushed through by our Republican overlords) favors corporations, at the expense of American citizens.

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