Jeb Says to Work Harder

It should come as no surprise that Jeb Bush, after saying he would not run, and was not interested in being President, has decided that he is going to run, because he is interested after all. Sure Jeb, you really had me fooled.

This post is only about his most recent foot-in-mouth moment, though he has had a number of missteps from the very beginning: Not good for the brother who was supposed to be the smart one. You can get the gist of it from the picture below.

Here is the interview with New Hampshire's The Union Leader, complete with a video, in which he said the following:

“My aspiration for the country and I believe we can achieve it, is 4 percent growth as far as the eye can see. Which means we have to be a lot more productive, workforce participation has to rise from its all-time modern lows. It means that people need to work longer hours” and, through their productivity, gain more income for their families. That's the only way we're going to get out of this rut that we're in.”

Most critics jumped on the "need to work longer hours" aspect, and with good reason. We, Americans, already work the longest hours in the industrialized world.

Bush claimed what he meant was that too many workers juggle part-time jobs, when they would prefer a single full-time job. That much is true; part-time work takes an even greater toll because of the additional logistic challenges, a point I have touched on before.

Jeb did not clarify how he would rectify that, nor, for that matter, was there a hint of recognition as to why Americans are forced to work such long hours at so many jobs just to get by. Republicans won't mention that the US has among the lowest minimum wage, the fewest paid vacations, relatively few national holidays, inadequate pensions, low job protection, and no paid maternity leave. But Jeb Bush thinks we just need to work harder.
                               
But note also that Jeb said we need to raise productivity, and then maybe people will earn more. It is this observation that reveals how misinformed he is. Does he not realize the US is already among the most productive countries in the world, if not the most? A search taking all of 20 seconds showed the US as the most productive G7 member (2013 data). By all means, see the charts. The productivity has been there for decades, but the gains have been entirely garnered by those at the top. This is a fundamental reality of modern America.

JB just cannot bring himself to accept that growing inequality and rising hardships in this country are the result of policies and legislation promoted by his Party. They are the ones that have wanted cheap labor, the ability to outsource jobs, low minimum wages, weak unions, low employee benefits, low marginal tax rates, numerous tax advantages for the wealthy, massive defense spending, and generous subsidies to profitable companies.

America's overclass has created a blatantly rigged system, but Jeb thinks the solution is for the rest of us to work harder. And he is the smart one?

Cheaper Still

Low wages are the prime reason the US economy continues to be sluggish for most of us. Suppressed income, of course, is not to be found on Wall Street, Corporate America, and the rentier class, but it has come to define much of the middle class even as the number of working poor continues to rise.

The US economy depends on consumer spending as the core of economic activity: if there is enough spending, it spurs GDP growth, if not, growth stagnates or even declines. We are, for better or worse, a consumption-driven economy. All economies are, to one extent or another, but the US is especially dependent on it.

For most of the post-war period, Japan, to give one comparison, has depended far less on consumer spending to fuel its own GDP growth. The difference was that Japan emphasized capital investment over consumption. Citizens there consumed less and saved more. All that capital investment created massive over production. That's where exports, disproportionately to America, came in. We consume, Japan saves and exports excess capacity. China and Korea have adopted this model.

Accordingly, some economists argue against policies that encourage savings. A dollar saved means a dollar not spent. While the argument is still made that Americans should save more, the counter argument says that doing so will only slow down the economy: Corporate America, small companies, and the employees that work for them all want everyone to buy their products and services. No customers means no sales, so no profits. It also means no employee paychecks and no tax revenues either.

All of which brings us to low wages; not jobs, not investment, not savings, not manufacturing capacity, but the wages Corporate America pays to the millions of jobs that already exist--it is those low wages are the at the heart of our national decay. Low wages are killing the American dream for many. Wages not only have not kept up with productivity for literally decades, but for many of us, wage declines are accelerating.

As compelling as it is, the specifics of America's evolution into a low-wage nation, complete with an overclass and mandated inequality, seem of little concern to many of us, even as we sense we have been victimized by a rigged system. It has taken years, decades actually, but the cumulative effects of neo-liberal, trickle-down policies, and their southern variation, what I call Dixification, have come home to roost.

Our Low-Wage Recovery

There has been lots of talk in the air about what this country needs. Republican presidential candidates have been almost unanimous about the value of cutting taxes, by which they mean the top tax rate, the one that affects the wealthy. And we must get the corporate tax rate down as well; it tops out at 35% and that must surely be why American corporations are having trouble competing, except that they aren't. The premise for lowering the top corporate tax rate is that corporations actually pay the current rate. They don't. What they do pay are the most obscene compensation packages in the world.

And let's not forget to cut spending, lots of it. Please tell me you find it odd --in a simple math that doesn't add up kind of odd-- that proponents of spending cuts, meaning nearly every conservative member of congress, simultaneously insist on budget-destroying tax cuts for the wealthy, those who have already enjoyed a generation of such largess, even as they yelp about the deficits those tax cuts created. The national debt is so horrible that we must gut spending on society's most vulnerable to save the republic, but apparently not so horrible that we can't give more tax breaks for our most privileged.

So why has our recession lasted so long? It isn't because taxes are too high, or because we have a large budget deficit.

The reason is that we are turning into a low-wage country. Look at chart below. It shows the share of employees in low-wage work. Hey, we are number one. Yes, I know, having a crappy job is better than no job at all. But this is a long ways from the can-do spirit that this country once had, back when it was an unambiguous economic superpower, back when its tax rates were much higher and wages grew along with productivity. I've discussed the wage-productivity divergence here and here.  



As Tavis Smiley and Cornel West have shown, many of the newly created jobs are "...in the restaurant, retail, temporary service, social assistance and hospitality sectors. In other words, low-wage jobs, most without health benefits or paid sick leave."  Additional analysis of the significance of the chart above, including America's growing wage polarization, is at "Economist's View."

In other words, low wages means marginalized families with low consumption. Not only can they not save, provide for their children's education, and pay for health care simultaneously, they simply cannot buy much of the products that both corporations and merchants need them to buy. The inability to consume more, regardless of how one feels about materialism, prolongs the weak recovery because everything is predicated on sales, not low taxes. Businesses, especially the smaller ones on Main Street America that do not have foreign sales, do not want lower taxes or cheaper workers. They want more customers.

“It is to the real advantage of every producer, every manufacturer and every merchant to cooperate in the improvement of working conditions, because the best customer of American industry is the well-paid worker.” FDR

American Tax Dodgers

On January 12, I posted some comments about Les Leopold's recent article on tricks the corporate use to hoard wealth. I referred to economic productivity and how the gains are no longer being shared with the middle class.

He also highlighted how large corporations, despite the endless bleating about high corporate taxes, often pay little or no taxes. Specifically he noted how low state and local corporate taxes have become. As Leopold says:

Large corporations pay next to nothing in state and local taxes. As a result of the Wall Street-created crash, state and local governments are struggling to make up for lost revenues and rising costs to care for the jobless and the destitute. In a fair society we would be asking Wall Street to pay for the damage it created. Instead, Wall Street has used its enormous lobbying muscle to make sure politicians are asking states to cut back public services of all kinds. Meanwhile, large corporations use every trick in the book to avoid paying state and local taxes. A recent joint report by the Institute on Taxation and Economic Policy and Citizens for Tax Justice reveals that 265 large corporations avoided $42.7 billion in taxes from 2008 to 2010. That’s enough money to hire more than one million teachers! Instead, we are firing teachers in the name of fiscal austerity.

 The full report to which Leopold refers is at The Institute for Taxation and Economic Policy.  The reports should make clear that whatever other problems ail the US, overtaxed corporations isn't one of them. Citizens for Tax Justice also offers a compendium of how America's most profitable companies pay taxes dramatically lower than the advertised rate; for many, the US tax code has become a profit center, one more way to privatize benefits and socialize costs.


The idea, which every Republican presidential candidate has made at one time or another, that America's high corporate tax rate of 35% is killing the economy should be put to rest by a simple observation at the next debate followed up by a blunt question: 

"You do realize that corporate profits have grown enormously, along with executive compensation?" 


"Are you so naive that you actually believe corporations pay a 35% tax rate?" 

It really is no different at the state level. They game the system at the federal level and at the state level. A more detailed analysis of how corporations avoid taxes while they capture subsidies and other benefits paid by taxpayers, in particular how they play one state or municipality off against another, can be found in Greg LeRoy's well-researched book: The Great American Job Scam: Corporate Tax Dodging and the Myth of Job Creation.

Redistributing Wealth

Les Leopold recently posted an article at Alternet called How Can the World's Richest Country Let Children Go Hungry? 6 Tricks Corporate Elites Use to Hoard All the Wealth. Not only is he spot on in his analysis, the evidence supporting his contentions is massive and unmistakable. I want to examine just one of them in this post. The others I will return to in time.

His first, and now mine, addresses increased economic productivity and how the benefits have become poorly distributed. His contention is thus:

Productivity continues to rise but the 99 percent doesn’t share in the benefits. The key to the material wealth of any nation is productivity – how much we produce per worker hour. Productivity is a crude measure of our overall level of knowledge, technique, organization, skill and cooperative work practices that produce the sum total of our goods and services. Lo and behold, there’s nothing at all wrong with productivity in America. It continues to rise and rise just like it did during our post-WWII boom years. What’s changed is that the average American wage has stalled since the mid-1970s -- which is precisely the time that we started to deregulate Wall Street and cut taxes on the rich. During the 1950s and '60s boom years, almost all Americans shared in the fruits of productivity leading to rising real wages (after inflation). But now the productivity lines and wage lines have pulled apart. The gap between the two lines represents trillions of dollars that once went to the average American but are now going almost entirely to the super-rich.

Here's what Leopold is saying, in graphic form:

As should be apparent, throughout most of the post-war period, labor productivity steadily increased, and workers' compensation largely kept up. This was close to ideal and helps explain why the US economy was the envy of the world. The trend came to an end, rather abruptly, in roughly 1980.

It isn't getting any better. A recent study from Northwestern University reveals that 88 percent of income growth since 2009 was in the form of corporate profits, and only one percent went to wages. A recent investor report from JP Morgan notes approvingly that corporate profit margins increased by about 1.3 percent from 2000 to 2007, adding not only that profit margins are now at levels "not seen in decades," but that the primary reason for the fattened margins is a reduction in wages and benefits.

This is sick.  I remind the reader that reducing taxes on the wealthy and on corporations is at the heart of the Republican platform. And increasing wages and benefits for middle America is not.

Conservatives Get Their Way

At the heart of America's often shallow debate about political economy, policy, and the direction this country should take, is the cluster of variables surrounding taxes, regulation, economic policy, and the proper role of government. The basic conservative argument is that taxes are too high, regulation is too onerous and counterproductive, and business is too hobbled by misguided bureaucrats. 

The Republican prescription has been simple, persuasive for some, and amazingly consistent for a generation: cut taxes and everything good will happen. It is the elixir, the panacea, the cure-all for all that ails you. And if tax cuts are not enough (they are always a prerequisite), then just cut back on all that wasteful spending, which for conservatives means the welfare state and other transfers that go from deserving producers to the undeserving takers. 

To hear Republicans tell it, America is near comatose because of high taxes, radical unions ("big labor," as they say with a straight face), and more recently, government spending, not on defense of course, but on character-destroying entitlements such as social security, medicare, welfare, public education, and infrastructure boondoggles. 

Millions of Americans believe this argument; teabaggers in particular have been convinced that they are "taxed enough already" and that Democrats are transferring massive amounts of money "we don't have" to undeserving liberals who vote Democrat for that precise reason. Joshua Holland has an excellent article the title of which precisely captures what has become a real problem for the reality-based community: Thanks to Decades of Conservative Spin, Americans Are Hopelessly Confused About Taxes, Spending and the Deficit. 

As Holland states:

A good number of Americans are hopelessly confused about taxes, deficits and the debt. And it's no mystery why – conservatives have spent 30 years divorcing the taxes we pay from the services they finance. They've bent themselves into intellectual pretzels arguing that cutting taxes – on the wealthy – leads to more revenues in the coffers. They've invented narratives about taxes driving “producers” to sunnier climes, killing jobs by the bushel, and relentlessly spun the wholly false notion that we're facing “runaway spending” and are “taxed to death.”

Holland implicates the mainstream media for its failure to critically assess and challenge what has been Republican class warfare disguised as common sense. It is a narrative that has proved persuasive to people who do not often hear, and don't want to hear, analyses that challenge that narrative.

My immediate purpose is not to resolve ideological differences or to prove the efficacy of certain policy preferences. In this occasional series; let's call it "Conservatives Get Their Way," I want to show that regardless of how else you or I might feel about it, the inescapable conclusion is that on economic policy and legislation, including taxation, conservatives, the right-wing, the Republican party, and most assuredly, corporate America, have gotten most of what they have wanted on the policies, legislation, and legal opinions that overwhelmingly benefit them.

It is not a matter of conservatives wanting to move away from what they consider to be harmful, liberal policies. The reality is that Republicans, with the help of some Democrats, have undercut what they hate, and have already turned over power to wealthy oligarchs. The conservative charge that liberals, socialists, Democrats, dirty fucking hippies, a black President, "teh gays," and all the rest are destroying America, is demonstrably false. We do not have "Big Labor", high taxes, or profit-killing regulations, a large and expensive public sector, high social spending, or job-killing environmental regulations. In fact, we lag other industrialized nations on each of these points; our taxes are among the lowest, as is union membership and pubic sector spending.

So where does the US lead? Corporate profits and executive compensation. And of course, we do spend a pantload on defense, precisely what most conservatives and nearly all Republican politicians demand. 

The evidence more clearly shows that corporate America, the Republican party, and the conservative policies and legislation they say we need, but have already enacted, are undermining America's economic strength, its political institutions, and its social fabric. In other words, America's right wing not only has got its arguments mostly backwards, it is precisely the conservative policies they claim we need that have created the current mess, one that has been in the making for 35 plus years.

Conservatives get their way and they have the results one would expect; massive inequality, an unending gravy train for our bloated defense industry, executive compensation that has reached obscene levels, is largely detached from job performance (golden parachutes anyone?), and is loaded with money-saving perks denied to the rest of us. 

They succeeded in largely gutting private pension systems for workers, outsourced much of our manufacturing base to cheap labor countries, hobbled unions, have enjoyed significant productivity increases but have not shared those increases with their employees, and have beat back nearly all efforts to hold them accountable on the environment, tax loopholes, and regulations.

Much of this is vividly on display on Wall Street, where the perpetrators of massive fraud and malfeasance have managed to beat back essentially all efforts to hold them accountable and to rein in their ridiculously irresponsible behavior. 

Any no, it is not because Congress can't do anything; progressive Dems favor and vote for legislation that would return us to more stable and equitable times, legislation that we once had in place, such as Glass-Steagal.

It is because nearly all Republicans, joined by a few Blue Dog Democrats, have voted for the legislation that is so overwhelming favorable to the overclass.

It isn't Congress; it is Republicans in Congress.

What Have Unions Done For Us?

I don't imagine that many have seen this video, but it should at least give pause for thought about this country's ridiculous and staggeringly ill-informed assault on American labor. It started with Republicans, of course; they have hated working Americans for generations. But the real problem is that too few Democrats seem prepared to fight for what made this country great.

Nor can we depend on our feckless media to remind us of what we once had and why we had it. Without a more vigorous media, voters remain confused, uninterested, and susceptable to manipulative framing that has reached absurd levels. 

Ignorant shits who can't tell you what GDP stands for, or how many Senators are in their state have convinced themselves they know what this country needs. They have lapped up right wing crap about how "big labor" is strangling the economy. They don't hear, and don't bother to read about, how high union membership coincided and contributed to middle class stability, at a time when we had a much greater manufacturing sector as well as a trade surplus.

All of this happened while the US was a creditor nation, consumers had far less debt, did not rely on two or more jobs to make ends meet, and were able to save far more. Nor did our government depend on our trading partners' dollar surpluses to buy our debt. And it all happened when marginal tax rates were far higher than today.



Now look at the graphs below. You can see that most of America has not done well economically in the last 30+ years, not considering overall growth. This is why we have a stagnant economy; wages are too low, which has led to weak demand. Does it look like the tax burden, regulations, or labor unions have held back the rich? Does it look like they need more tax breaks?

FDR's New Deal created the middle class. Son, if you don't know that, you need to set about reading some American economic history. You do know what FDR stands for, yes?

Wage Suppression Revisited

On March 23, 2011 I posted an article on the results of wage suppression. In it I reviewed academic studies demonstrating the growing gap between productivity growth, which has been substantial, and wage growth, which has been nil. This gap is recent, the direct result of conservative policies favoring corporations. I followed up on April 20, 2011 with another article on why the rich vote Republican. Again, we see clear evidence of a middle class becoming undone by conservative policies.

Below is another depressing snippet of data. It may be hard to see, but it shows an index of labor's share of income (2005=100). There is a fairly steady drift downward starting around 1980, a short-lived upward trend in Clinton's second term, and a significant deterioration throughout Bush the Lesser's eight years. The trend continues in the Obama years. Some discussion and a bigger example of the chart can be found here.

To put this data in very stark terms, go have a look at Overworked America, 12 charts that will make your blood boil.There is a lot there, but one fact underscores what I have been trying to say about wage suppression in the US: wages generally followed productivity increases for most of the 20th century, at least after the New Deal. As productivity increased, so did wages. That is no longer the case, as I show above. If labor had received commensurate wages, average income would not be around $50,000, but $92,000.

Think about that for a moment. Our recession began and continues because our economy heavily depends on consumer spending. If you ever wonder why spending is flat, it is because wages are too.  Where have the productivity gains gone? The 42 grand per worker? To corporate America and the investor class.

Despite this, Republicans never miss a chance to make you think unions are to blame for America's economic illness. It takes a lot of gall to make such demonstrably false statements.

Yet millions of Americans believe them.  And that takes a lot of ignorance.