The Rich Get Richer

In past blogs, I have noted how upward mobility has all but vaporized from the American dream and how increasing percentages on income and wealth are focused on an ever-contracting sliver of billionaires at the top of our food chain. We are now far and away the most economically polarized developed nation on earth as federal policies continue to push an even greater share of income and wealth to the top and most definitely away from the middle and bottom part of our economic ladder. The top one tenth of one percent of our population controls more wealth than the bottom 90% combined!

Even as the Trump administration pretends to have reduced taxes for the middle class – unless you happen to live in a high state income tax blue state where taxes went up – between the contraction of federal support and control of healthcare and a trade war that is causing prices from durables to farm goods to skyrocket, the net economic position for most of us remains “the same or worse” than it was before these touted Trumpian reforms.  Well over 90% of the economic benefits of the Trump tax cuts and virtually all of the major reductions in consumer/ financial/environmental regulations have gone solely to the top earners in the land, creating very few well-paying jobs along the way.

OK, joblessness is down but so is the number of jobs that provide even entry-level middle class pay. They certainly haven’t shown up in that vast blue-collar Trump constituency. And while average pay is wiggling upward, it seems that this phenomenon is due primarily to massive pay increases at the top… not so much for the middle and below. I did say “average,” so if we have nine people making $10,000 a year, and one person making $1 million a year, the “average” among that ten-person group is $109,000/year per person. Get it? The average looks great even if most folks don’t get anywhere near that number.

OK, so let me address this earnings picture from an entirely different perspective to make the same point. All of these governmental incentives – from deregulation to tax cuts – have created clear economic growth in basic gross domestic product numbers.

Over the years, there has been a federal governmental record of the ratio of wages/salaries as a percentage of the overall economy. So as profits soar and the economy hits high notes, workers participate in that upside in a very measurable way. But since the Great Recession, the percentage of our economy accorded to workers has continued to drop, particularly after the “recovery” and even more after Trump’s reforms. Those invested in capital are increasingly making more money than workers, living in a world of accelerating prices, who are making less. The Federal Reserve is concerned.

“The fall in the percentage of economic growth flowing to workers is ‘very troubling,’ a worrisome sign in an otherwise bright American economy, Federal Reserve chief Jerome Powell told a Senate panel Tuesday [7/17]… Testifying before the Senate Banking Committee, Powell expressed concern that the share of profits going to American labor had fallen ‘precipitously’ for more than a decade and was not reversing course.

“In 2000, wages and salaries for American workers accounted for about 66% of the overall economy. That rate has fallen to about 62%, although the decline has leveled off since the end of the Great Recession, according to statistics compiled by the Brookings Institution and cited at Tuesday’s hearing by Sen. Jack Reed (D-R.I.).

“‘We want an economy that works for everyone,’ said Powell, who was appointed by President Trump last fall to oversee the nation’s central bank. ‘In the last five years or so, labor share of profits has been sideways. This is very much akin to the flattening out of median incomes over the last few decades.’

“The strength of the overall economy has been widely expected to eventually translate into higher wages for workers, but pay increases so far have been disappointing. Job growth, at more than 215,000 jobs every month, remains healthy, with the overall unemployment rate continuing to tick down, and the U.S. economy is growing at a healthy clip, powered in part by strong consumer spending and business investment, Powell said… But average hourly wages for most American workers have stalled — and, by at least one measure, fallen when accounting for inflation.” Los Angeles Times, July 18^th.

When such a narrow rich segment at the top of society is so vested in their wealth and obviously in control of the political systems that enable them to generate and keep their wealth, we have a technical name for that system: plutocracy. 70% of working Americans today are literally at the same effective, inflation-correct level (or worse) of discretionary spending ability. It’s pretty clear that the Trump/GOP cabal is the tip of that plutocratic spear. Want a bit more detail on how they play with statistics to make “stagnant” and “bad” appear “positive,” see my July 6^th 3.8% Unemployment – Why Not Me? blog.

What is especially galling is this “loss or stagnation” of lifestyle, the decline a good-paying blue-collar and light white collar jobs, is exactly what gave rise to the populism that got Donald Trump – champion of the mega-rich – elected in the first place. As a master spinner, social media maven and marketing whiz, Donald Trump has managed to put lipstick on a pig and sell porcine beauty to his base! And they buy into this myth every day, blaming foreigners, liberals and immigrants when Donald simply does not deliver (and he lies and tells them he is delivering).

I’m Peter Dekom, and as we ignore upgrading education and infrastructure while cutting research, as we shovel money out of the middle class into the pockets of richest in the land, we are beginning to unravel those essential bonds that hold the United States of America together.