Class War in America: the Book |
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This work is licensed under a Creative Commons Attribution-Noncommercial-Share Alike 3.0 License. Feel free to download this material for personal, not-for-profit, use. If you duplicate it for others, attribute it to Charles M. Kelly, and with a link to this site. Print copies are still available at Amazon and Barnes & Noble, and used copies are widely available on the internet. 4. Economic
Growth: The
Conservatives’ Catch-22 For
sheer hypocrisy, nothing can match the Republicans who claim that we
should reduce taxes on rich people because that would result in more jobs
and higher wages for workers. Their
propaganda spin goes like
this: §
The
U.S. should reduce inheritance taxes, capital gains taxes and income taxes
on rich people so they can have more money to
invest. §
Greater
investment means greater growth in the economy. §
Greater
growth in the economy creates more jobs and a greater demand for
workers. §
Greater
demand for workers gives workers more power to nego-tiate for higher
wages. And presto, §
Workers’
incomes go up and they get a bigger share of the wealth that they actually
produced. Undoubtedly,
some politicians who make this decrepit argument actually believe it. It’s
been repeated so often and so loudly that those who don’t read our best
conservative financial publications assume that what they’ve heard on
their corporate-owned TV stations is true. You’ll have to decide yourself
after you read the following pages, which politicians are deliberately
dishonest, and which ones are simply stupid. There
is a Catch-22 to promises that economic growth will create higher wages.
True, in the past, the best climate for wage growth has been when the
economy was growing. The Catch-22: modern conservatives have learned how
to allow the economy to grow to the extent that it increases profits, but,
also, how to slow growth when it starts to cause higher wages. Readers
of our premier financial publications know that, as soon as growth reaches
a point at which workers begin to benefit, Wall Street will scream bloody
murder and demand that their congressional stooges in Washington do
something to cool off the economy. Economic
growth does not determine wages—power determines wages. Since Republicans and
conservative Democrats got control of our federal government, corporations
and investors have all the power and workers have
none. Conservative
politicians know damn well that if they really wanted to stimulate
economic growth in the United States, they would protect workers’
abilities to earn higher incomes! In fact, as the excerpts throughout this
entire book demonstrate, higher wages always result in a greater demand
for products, a growing economy and, mostly because of corporate greed,
inflation. When this is unintentionally allowed to happen,
conservatives call it “excessive growth.” On
the other hand, when the wealthy make more income, either through tax
breaks or increased profits, they will invest it in whatever part of the
world most brutalizes workers. That’s usually not the U.S. Note
how Barron’s described
growth—to the point where wages might increase—as “something wicked this
way comes.” Under the head, “Investors Beware: It Seems Inevitable That
Greenspan & Co. Will Pull the Trigger on Rates,” it warned investors
…to
dust off their copies of Shakespeare’s Macbeth, because something wicked
this way comes: tighter Fed policy.… In recent months,
Fed officials have made it clear that they have been placing their bets on
slower growth in the second half. But the economy continues to grow faster
than the Fed would like, a predicament that may fan smoldering fears that
inflation will rise later this year.1
When
does the Fed’s trigger finger start to itch? Easy. When the rate of growth
starts to increase the wages of working Americans! It’s
automatic: §
Whenever
wages (“something wicked”)
start to go up (“this way comes”), the Fed must satisfy the corporate
financial supporters of Republican and conservative Democrat
politicians—and raise the prime. §
You
see, the economy wasn’t following the script. Despite the 1993 tax
increases on the wealthy, the U.S. had a robust, growing economy for the
rest of the decade. §
Unemployment
was still going down, which means that working Americans might actually
start to benefit—as conservatives had always promised—from increasing
economic growth. §
As
usual, good news for workers about the “health of the labor market” is bad news for
investors. §
And
when those investors realize the “predicament” they are in (wages going
up) and the economy is growing
faster than the Fed would like,
it’s time to “pull the trigger.” Under
the head, “This Slowdown May Be Short-Lived,” Business Week warned its readers
that they “had better take a closer look,” at the seemingly favorable
economic growth figures (slower) and favorable unemployment figures
(higher). Although the economy seemed to be slowing at the time, “cheers
could quickly turn into boos” if it didn’t slow enough to stop workers’ incomes
from going up: The
markets had better take a closer look. First of all, while nonfarm
employment growth slacked off last quarter, other key labor-market
statistics give no indication that slower economic growth will continue
into the fourth quarter…. Even if the slowdown were lasting, it would take
time for worker shortages to ease and the upward pressure on wages to
abate…. The
economy is slowing and so is inflation. But if the emerging trends in
wages and labor costs continue, those cheers could quickly turn into
boos.2 The
tone of the previous articles is as important as their substance. Feel how these financial
conservatives are talking about the lives of working Americans: Their
incomes, their standard of living, and their ability to make it through
this decade of the conservative revolution. Wall Street likes it when the
economy slows enough to force working Americans into
unemployment: §
They
“applauded” the news that nonfarm payrolls went down by 40,000 live human
beings—fellow citizens of this country. §
But,
“take a closer look” investors, a warning is in order. Even if the bad news for workers
is real, it would take time for the “upward pressures on wages to
abate.” §
Still,
Business Week cited other good
news: Fifty-seven thousand workers got fired the month before. A mixed
blessing though, be-cause the factory workweek rose, and overtime remained
high. §
So,
contentment for Wall Street is: stagnant wages, record profits, a
skyrocketing stock market, growing income disparity—and Republicans and
conservative Democrats in control of the politi-cal process. What a great
new world conservatives have created. §
But,
again, the warning: if workers, despite all the power aligned against
them, start getting better incomes, then “the cheers be-come
boos.” Joining
this hysterical anti-too-much-growth frenzy, The Wall Street Journal made the
crucial distinction between a merely “sizzling” economy and an
“overheating” economy. Under the head “Economy Warms, but Isn’t
Overheating,” it reported that The
economy continued to sizzle
last month, but cast off few sparks indicating
overheating. And
with Mr. Greenspan having told Congress earlier in the week that he
continues to remain vigilant for any warning signs that might force him to
boost interest rates later this month, the markets were examining the
tiniest details of Friday’s releases for any glimpse of
inflation.… [Indications that “raises
aren’t escalating and are quite possibly decelerating”]…isn’t enough to
pacify anti-inflation hawks. They look for advance signs that wage
increases will begin. Mr. Greenspan, for one, scrutinizes worker
insecurity. He has said in recent remarks that he believes a pervasive
fear of unemployment has kept wage demands modest, but he is worried that
the robust labor market would soon embolden workers to demand
more.3
The
economy “sizzles” when investors get wealthier. But the economy
“overheats” when workers start to participate in its
benefits. A
General Truth versus a Deliberate Lie It
is important to distinguish between a general truth and a deliberate lie.
When Republicans and conservative Democrats say that most economists agree
that a growing economy will bring about higher wages for working
Americans—they’re telling what should be a general
truth. However,
that general truth becomes a deliberate lie when those same politicians
know full well that they will use their power to prevent the general truth
from functioning—if economic growth should actually start to improve
wages. In
fact, wages don’t even have to begin affecting inflation. All they
have to do is to give warning signs that provide, as the Journal put it, a “glimpse of
inflation.” Most Republicans and conservative Democrats could rest assured
at this point in 1997, however. Because, despite the booming
economy: §
It
looked as if wages were “quite possibly
decelerating.” §
Still,
that’s not enough for “anti-inflation hawks” who don’t want increases in
wages to even begin, let alone catch up with
inflation. §
Horrors!
Workers may become emboldened enough to ask to share in our country’s
growing prosperity. It’s
not a debatable issue: Through their economic policies, conservatives
force huge financial sacrifices onto working Americans. And The Wall Street Journal clearly
described who benefits from those forced sacrifices. Under the head “The
Great Divide,” it reported that CEO
pay keeps soaring—leaving everybody else further and further behind. The
earnings gap between executives at the very top of corporate America and middle managers and workers
has stretched into a vast chasm. Last year, the heads of about 30 major
companies received compensation that was 212 times higher than the pay of the
average American employee…. That’s nearly a fivefold increase since 1965,
when the multiple was 44.… Meanwhile, U.S. wages and benefits climbed just
2.9% last year. That was the smallest advance in 14
years.4 Under
the head “Executive Pay,” Business
Week also presented a clear picture of the growing income gap between
working Americans—and wealthy investors and the executives who work for
them: Few
doubt 1996 was a stellar year. The Standard & Poor’s 500-stock index
rose a stunning 23%. Corporate profits rose, too—an impressive
11%.… For 1996, CEO pay gains far
outstripped the roaring economy or shareholder returns. CEOs’ average
total compensation rose an astounding 54% last year, to $5,781,300…. That
largess came on top of a 30% rise in total pay in 1995—yet it was hardly
spread down the line. The average compensation of
the top dog was 209 times that of a factory employee, who garnered a tiny
3% raise in 1996.5 All
these articles appeared in roughly the same time period, 1996-1997, thus
removing any doubt that those in power knew exactly what they were doing.
People who read these publications know these things all go together:
“just-right economic growth,” stagnant wages, record corporate profits,
soaring executive incomes, and a skyrocketing stock market. These articles
also are typical of the entire two decades of the 1980s and 1990s, and
continued to be published in late-1999. At
the time of the last draft of this book, conservatives were still debating about whether
economic growth was merely sizzling or “dangerously” overheating. In
“Which Mask Will Greenspan Wear Next?” (November, 1999) The Wall Street Journal reported
that For
three years now, Alan Greenspan has morphed back and forth between the New
Economy’s most powerful advocate and its most menacing skeptic. With the
recent revival of the on-again/off-again debate about whether the U.S. is
growing too fast for its own good, the Federal Reserve chairman once again
is forced to make a choice: Does he want to play Santa Claus this year, or
Scrooge?6 As
usual, in the very same Journal
issue, there was the almost daily celebration of a skyrocketing stock
market. Under the head, “Stock Market Regains High Spirits After Shaking
Off October Demons,” it observed that Stocks
are skyrocketing. Amid signs that inflation is weakening and that interest
rates could stop rising, the Nasdaq Composite Index, heavy in technology
stocks, already has soared back [after an October sell-off] into record
territory…. Coming right after
labor-cost and economic-growth data that suggested strong growth and low
inflation, the comments [by Greenspan] fueled hopes that the Fed would
step aside and let the stock market surge again.7 Two
days after the previous two articles came out, November 3, 1999, the
Nasdaq composite stock index closed for the day above 3000 for the first
time in history and was up 113% from 13 months before. In other words, in
13 months, passive investors more than doubled their wealth without doing
a lick of real work. These are the people who panic if workers—who made it
all happen—see their incomes start to rise at a rate of just 3% per year. Record
stock market; wages, adjusted for inflation, still below the 1973 level.
Getting monotonous, isn’t it? But it’s not surprising and it’s no
accident. Very simply: Conservative politicians always appoint Federal
chairmen who will control the labor markets and fine-tune the growth of
the economy—not too hot, which would allow workers to benefit—but not so
cold that corporate profits would be hurt. These actions over the past 20 years have allowed CEOs, investors, and the established wealthy to get much richer. They are the same people who §
lecture
American citizens about why workers must make wage sacrifices—so our
corporations can remain competitive with for-eign
corporations, §
blame
any price increases, that they
implement, on labor costs—the old “wage-price
spiral,” §
sit
in on each others’ companies’ boards of directors and vote themselves huge
income increases, and promote anti-worker managers to positions of
power, §
support
politicians who promise to do all they can to destroy labor unions,
§
blame
complaints about poor working conditions on the lack of a “work ethic”
among working Americans, §
support
politicians who will allow them to do whatever they wish with the
environment or to the American public, and §
promise
voters that they should continue to put Republicans and conservative
Democrats into Congress,
because they are the ones who gave us this fantastic
economy. Now
it’s time to look at how these paragons of virtue, via their personal political
representatives, were able to create this kind of an economy. Without a
doubt, the biggest weapon in the conservative class warfare arsenal is the
myth of unmanaged “free” trade. Now go to:
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