Prophets Touts Profits

With U.S. math skills plummeting as our commitment to public primary and secondary education erodes with every budget cut and fiscal impasse, it is no wonder that people are talking about how well our “recovery” is going. Their inferior math skills have lured them into a universe where they actually believe slanted statistics and ignore what is really going on. As the Sequester slams into our realities and imminent budget battles signal how dysfunctional our governance has become, it is time to face facts.

Let’s start with this little quote from my The Lost Decade blog (January 30^th): “From 2000 to 2011, a period of disappointing overall wage growth, wages actually fell among every entry-level group regardless of education. Wage losses occurred for each group of entry-level workers between 2000 and 2007, as well as during the recessionary years between 2007 and 2011. This stands in sharp contrast to the extremely strong wage growth for each of these groups from 1995 to 2000.” Economic Policy Institute report, March 7^th. Yup, even for those who have jobs, they are increasingly losing buying power.

For those seeking a higher education in a world of rising student tuition and falling student aid, the Federal reserve’s statement that student borrowing has tripled in the last eight years (with default climbing as these students cannot find work) comes as terrible news. We’re paying more to get paid less! The jobs replacing those we lost simply pay less. Lower pay negatively impacts consumption and housing pricing. But cheaper workers do benefit one particular segment of our economy and give rise to our political leadership’s claim of “recovery.”

Indeed if you do not look at the quality (and pay levels) of the newly created jobs – looking simply at the numbers of people working and even ignoring those who have completely given up the job search – and then drill down into the stock market, we are flying high! Even as those who make their livings and build their net worth from that market are significantly populated by the one percenters. The rest of us make our living from wages and salaries, which are suffering just as the stock market soars. Taxes for those generating their income and upside from the market get a nice and vastly reduced capital gains tax rate; the rest of us pay through the nose. And U.S. corporations who have made pools of profits overseas (and keep those monies offshore) avoid taxes like the plague.

“With millions still out of work, companies face little pressure to raise salaries, while productivity gains allow them to increase sales without adding workers… ‘So far in this recovery, corporations have captured an unusually high share of the income gains,’ said Ethan Harris, co-head of global economics at Bank of America Merrill Lynch. ‘The U.S. corporate sector is in a lot better health than the overall economy. And until we get a full recovery in the labor market, this will persist.’ … The result has been a golden age for corporate profits, especially among multinational giants that are also benefiting from faster growth in emerging economies like China and India…

“As a percentage of national income, corporate profits stood at 14.2 percent in the third quarter of 2012, the largest share at any time since 1950, while the portion of income that went to employees was 61.7 percent, near its lowest point since 1966. In recent years, the shift has accelerated during the slow recovery that followed the financial crisis and ensuing recession of 2008 and 2009, said Dean Maki, chief United States economist at Barclays.

“Corporate earnings have risen at an annualized rate of 20.1 percent since the end of 2008, he said, but disposable income inched ahead by 1.4 percent annually over the same period, after adjusting for inflation.” New York Times, March 3^rd. We’re really good at lying to ourselves. Slogans and mythology have replaced understanding and knowledge. Politicians running for office tell us what we want to hear, but our lives continue to deteriorate, fed only by misplaced hope based on misstated statistics. And with lower levels of education, it is just too easy to lie to our masses in direct contravention of clearly ascertainable facts.

I’m Peter Dekom, and our system of government is designed to favor those with assets and wealth as opposed to those who work for a living.