by Randolph T. Holhut
American Reporter Correspondent
July 7, 2011
TRICKLE-DOWN ECONOMICS FAILS THE FED-UPON
DUMMERSTON, Vt. -- Most Americans suspect that the so-called recovery after the economic collapse of 2007-09 has been uneven at best.
The reality is even worse, according to "The 'Jobless and Wageless Recovery' From the Great Recession of 2007-2009," a recently released study done by a team of economists at Northeastern University in Boston.
The authors of the study, Andrew Sum, Ishwar Khatiwada, Joseph McLaughlin and Sheila Palma, tracked the nation's income since the official end of the recession in June 2009. They found that between the second quarter of 2009, when the recovery began, and the fourth quarter of 2010, national income rose by $528 billion, with $464 billion of that growth going to pretax corporate profits, while just $7 billion went to aggregate wages and salaries, after accounting for inflation.
In other words, corporate profits accounted for 88 percent of the growth in real national income during that time period, while aggregate wages and salaries accounted for just over 1 percent of that growth.
According to the study, "The only major beneficiaries of the recovery have been corporate profits and the stock market and its shareholders."
The study called that $27 billion loss in aggregate wages and salaries during the seven quarters after the recovery began "the first ever such decline in any post-World War II recovery," and that it "unprecedented" for American workers to receive such a tiny share of national income growth during a recovery.
But these numbers represent the culmination of three decades of stagnant wage growth for workers, and huge increases in corporate profits.
Don't look to Washington to change this state of affairs.
The ongoing obsession with the deficit is taking priority over the 25 million Americans that are either unemployed, underemployed or given up looking for work.
Part of the reason why this number is so high is because business refuse to hire more workers. It is far more profitable to squeeze more work out of your remaining employees, or to just send the jobs overseas.
This accounts for much of the obscenely high corporate profits chronicled in Northeastern University's study.
The other part of the equation is that government and public policy makers have failed to do their jobs, and put way too much faith in the "free market" theory that low taxation and deregulation would lead to prosperity for all.
They forget that our nation created a relatively affluent middle class only through intervention by the government by building a strong infrastructure for economic growth -- highways, airports, schools, research programs, a safe banking system.
This was done with a progressive tax structure that helped pay for these priorities, and also discouraged the accumulation of massive wealth. During the 1950s, the top income-earners paid a tax rate of 91 percent, compared with 35 percent today.
It was government policy developed in the years after the Great Depression and World War II that created and maintain a degree of egalitarianism within the U.S. political-economic system that had not existed before. And while the system was not perfect, and not every American shared in the postwar prosperity, our nation created a middle class that was the envy of the world.
Despite this progressive tax structure, businesses were profitable because the average American could now afford to buy consumer goods, own homes and enjoy some pleasures of life that once had been reserved only for the rich.
But those days are just a pleasant memory for many Americans. Those of us who still have jobs work longer hours for less pay and fewer benefits. The glories of the free market meant corporations were free to ship jobs to nations with cheap labor and low regulation.
Three decades of demonizing government have resulted in brainwashing millions of Americans into thinking that government is the enemy and that only a totally unfettered economic system with low taxes and no regulation can create economic growth.
Since adoption of this nonsensical economic approach during the Reagan years, we have seen that the only people who have made out are the already wealthy, and the corporations.
The chances of seeing a re-energized and democratized federal government fighting for average citizens against the greed of the wealthy elites are almost nil. In Washington today, few speak of the need for economic stimulus or the return of progressive taxation. Instead, all we hear is of the need to cut government spending while reducing taxes for the wealthy even further.
Austerity for working American and, more money for the elites is the message we're seeing and hearing in the news. Few question the utter failure of the theories of Ayn Rand and Milton Friedman to deliver a broadly shared prosperity for Americans.
All this comes down to the failure of Democrats and progressives to make a political issue of how the right has consciously and successfully gutted the policies that created the shared prosperity of the 1950s and 1960s in favor of policies that redistributed wealth upward.
In the coming weeks, this message has to get out. A country where nearly all the income growth goes to a favored few cannot survive. A country with elected officials willing to cut health care, education, food assistance and retirement benefits so that the haves can have even more cannot survive. A country that refuses to put the common good ahead of private gain cannot endure.
Quite simply, the future of our nation rests upon a return to a very simple principle. In the words of populist Jim Hightower, "Everybody does better when everybody does better."
AR Chief of Correspondents Randolph T. Holhut has been a journalist in New England for more than 30 years. He edited "The George Seldes Reader" (Barricade Books). He can be reached at email@example.com.