GOP's Trickle-Down Promise Is A Myth - Money Flows Upward

The following is part of a post by Ali Velshi at MSNBC:

For more than 40 years, we’ve been sold a myth: that America’s rich and powerful were under siege — over-taxed, over-regulated and carrying the weight of the economy on their shoulders.

We were told that if you ease up regulations on the rich, they will prosper and the benefits will trickle down to the rest of the population. But the reality is that economic policy has only succeeded in rewarding the rich — and it’s done so at the direct expense of the middle class, the working class and the working poor.

Let me explain the root of the problem: According to the Economic Policy Institute, largely due to new technology, U.S. worker productivity grew 59.7% from 1979 to 2019, meaning workers have become almost 60% more productive at their jobs in the past four decades.

However, a worker’s reward for all that extra output over the same period has only been a 13.7% wage increase.That’s a gap of 46% between what workers are being underpaid relative to their output. In more practical terms, that’s about $9 an hour in lost potential earnings for the typical worker.

Let’s focus on just the middle class for a moment: From 1979 to 2019, middle-income workers saw just 13.7% growth in wages, adjusted for inflation. America’s lowest-paid workers fared worse, gaining just 3%. But the already high earners, the top 1%, their income grew by 160% over the same period. For the top 0.1%, their income grew by a staggering 345%.

Consider all the income earned by households in the U.S. in a given year. The share of that total U.S. household income going to the middle class was 62% in 1970. By 2022, it had dropped to 43%. The upper-income share did the opposite: It was 29% in 1970 and rose to 48% in 2022, according to the Pew Research Center. . . .

If we want to reverse this, we have to make deliberate, systemic choices, like universal health care, which would end the tie between jobs and health insurance. Countries with universal systems spend 30–50% less per person than we do and get better outcomes. This reduces the economic insecurity that forces workers to cling to bad jobs for the sake of benefits.

We could also implement universal and subsidized child care. Affordable child care would free millions, especially women, to fully participate in the workforce. Quebec’s subsidized child care modelincreased female labor force participation and paid for itself in new tax revenues from mothers joining the workforce. . . .

For decades, we’ve been told that prosperity trickles down. But it hasn’t, it’s been sucked upward. While the top 1% have thrived, everyone else has been told to work harder, retrain, move somewhere with better opportunities, and wait their turn.

An economy that works for everyone isn’t a fantasy; it’s a choice. We’ve just been making the wrong one. These policies aren’t radical; they’re a return to the basic American deal: If you work hard, you should share fairly in the prosperity you help create.

U.S. Workers More Productive But They Work More Hours

The following is from economist Paul Krugman in The New York Times:

Christmas will be on a Sunday this year. Will American workers miss out on one of the few paid holidays most of them get?

I haven’t managed to find data on how many workers get to take the next day off when a major holiday falls on a Sunday. What we do know is that Christmas is one of only five paid holidaysavailable to a majority of U.S. workers. And it’s not as if Americans have many other opportunities to spend time with their families. Compared with many other wealthy countries, we stand out as the no-vacation nation.

Partly this is a matter of law. We’re unique among high-income nations in having no legal requirements that employers offer paid leave and paid vacations; most European countries require that jobs come with at least a month of paid vacation. Japan offers somewhat less — but on the other hand it has an unusual number of required paid holidays, so the Japanese still get quite a lot of mandatory time off.

You might imagine that U.S. employers, even if they aren’t legally required to provide paid leave, would try to attract workers by voluntarily offering time off. But many don’t, or offer very little. Overall, Americans work far more hours per year than their counterparts in other rich countries.

You may be surprised to see that Germans work fewer hours than anyone else. Who thinks of Germany as being big on taking time off? The answer is, anyone who has traveled around Europe in the summer. Visit, say, Florence, Italy, these days, and it’s clear that in the long run the Ghibbelines (who supported the medieval Holy Roman Empire, centered in Germany, over the Guelphs, who supported the pope) emerged as victors.

But back to our own workaholic nation: What’s odd about our lack of time off is that it marks a break with historic trends that have continued in other countries. Until the 20th century, U.S. workers took back a share of the gain from growing prosperity in the form of increased leisure time. The normal work week fell from around 60 hours in the late 19th century to today’s 40-hour norm, and the number of vacation days grew, so average hours worked over the course of a year fell:

One implication of this somewhat strange divergence is that you need to be a bit careful when making international comparisons of economic performance. I fairly often see assertions to the effect that the U.S. economy is more successful than the economies of Western Europe, because we have higher gross domestic product per capita.

Indeed we do — but a large part of that difference reflects the fact that we work longer hours, rather than higher productivity when we do work. That is, it’s not so much an indicator of superior U.S. economic prowess as it is a result of different choices.

Which raises the question: Who is making the better choice? Would Europeans be better off if they worked as hard as Americans, or would Americans be better off if they took European-style vacations?

A free-market fundamentalist might argue — and some do — that America’s no-vacation economy must be superior because it’s the result of voluntary decisions by workers and employers, whereas Europeans are effectively forced to take vacations by government policy. But there are good reasons to question this fundamentalist position.

The economists Alberto Alesina, Edward Glaeser and Bruce Sacerdote argued some years ago that there is a “social multiplier” to vacations — that vacation time is more enjoyable if many of your friends and family members also get paid vacations, so you can spend quality time together. In that case, governments may be doing everyone a favor by preventing them from working too much.

I’d add that in at least some jobs — the kinds of jobs held by many people I know — there’s a major signaling problem with taking time off. Employers are all too likely to question the motivation and commitment of workers who ask for more vacation (or even take full advantage of the vacation they’re entitled to), even if they’re just trying to improve their work-life balance. Again, rules that force workers to take some time off may be good for everyone.

On the whole, I do think that Americans work too many hours and that we’d be happier as a society if we moved at least part of the way toward European-style requirements for time off. Unfortunately, I don’t see much possibility of significant movement in that direction any time soon. 

U.S. Has The Worst Drop In Worker Productivity Since 1947

 The following is from The Washington Post:

In the first half of 2022, productivity — the measure of how much output in goods and services an employee can produce in an hour — plunged by the sharpest rate on record going back to 1947, according to data from the Bureau of Labor Statistics.

The productivity plunge is perplexing, because productivity took off to levels not seen in decades when the coronavirus forced an overnight switch to remote work, leading some economists to suggest that the pandemic might spark longer-term growth. It also raises new questions about the shift to hybrid schedules and remote work, as employees have made the case that flexibility helped them work more efficiently. And it comes at a time when “quiet quitting” — doing only what’s expected and no more — is resonating, especially with younger workers.

Productivity is strong in manufacturing, but it’s down elsewhere in the private sector, according to Diego Comin, professor of economics at Dartmouth College. He noted that productivity is particularly tricky to gauge for knowledge workers, whose contributions aren’t as easy to measure. . . .

Critical to a well-oiled economy, productivity is also the ultimate driver of standards of living: Higher productivity eventually translates to more goods and services available at a lower cost, and increased wages for workers, meaning higher productivity also combats inflation.

When productivity slows, economic growth dwindles. The drop-off is particularly concerning to economists and employers as the U.S.economy flirts with recession. It’s unfolding as employers struggle to find workers, amid a national tug-of-war over the future of offices. Burnout is high. Engagement is low. People are working more hours, but they’re doing less with them.

“No one knows or will know” what is causing the drop-off in productivity for some time, said economist Lawrence H. Summers, president emeritus of Harvard University and former treasury secretary. But it could have something to do with the fact that many employees “were working unsustainably hard” in 2020 and 2021, Summers said. . . .

This year’s productivity decline comes after a strong 2021. In the first quarter of last year, worker productivity grew 4.3 percent, one of the highest rates in years, according to the Labor Department. That growth rate slowed the following quarter to 2.3 percent, which was still nearly double the feeble productivity rate increases the nation experienced in the decade after the 2007-2008 financial crisis.

Huge Income/Wealth Gap Is Our Nation's Biggest Problem

 

Prior to the 1980's, the rich did very well, but so did other Americans. That's because the rising productivity was shared among all groups. The rich got their share, workers got their share through rising wages, and the poor benefitted through government programs.

But when the Republicans gained enough power around 1980, they changed economic policy to the benefit of the rich and the detriment of everyone else. Their economic theory (commonly called the "trickle-down theory) stated that by giving more to the rich, everyone would benefit.

That did not happen. The rich gobbled up most of the rising productiviy, giving them enormous profits, while workers wages were virtually stagnant, and the poor suffered through program cuts. This policy created a huge (and growing) gap in income and wealth between the rich and everyone else -- a gap larger than it's been in about a century. 

The last time the gap was this big, it resulted in the Great Depression. Unless we fix this by instituting a fairer economic policy, we will likely experience that same economic devastation.

Here is what former Labor Secretary Robert Reich has to say about this growing problem on his own website:

Policymakers and the media are paying too much attention to how quickly the U.S. economy will emerge from the pandemic-induced recession, and not nearly enough to the nation’s deeper structural problem – the increasing imbalance of wealth that could enfeeble the economy for years. 

Seventy percent of the US economy depends on consumer spending. But wealthy people, who now own more of the economy than at any time since the 1920s, spend only a small percentage of their incomes. Lower-income people, who were in trouble even before the pandemic, spend whatever they have – which has become very little.  

In a very practical sense, the U.S. economy depends on the spending of most Americans who don’t have much to spend. That spells trouble ahead. 

It’s not simply a matter of an adequate “stimulus.” The $2,000 checks contained in the American Rescue Plan have already been distributed and extra unemployment benefits will soon expire. Consumer spending will be propped up as employers add to their payrolls. Biden’s spending plans, if enacted, will also help keep consumers afloat for a time. 

But the underlying imbalance will remain. Most peoples’ wages will still be too low and too much of the economy’s gains will continue to accumulate at the top, for total consumer demand to be adequate.  

Years ago, Marriner Eccles, chairman of the Federal Reserve from 1934 to 1948, explained that the Great Depression occurred because the buying power of Americans fell far short of what the economy could produce. He blamed the increasing concentration of wealth at the top. In his words:

“A giant suction pump had by 1929-1930 drawn into a few hands an increasing portion of currently produced wealth. As in a poker game where the chips were concentrated in fewer and fewer hands, the other fellows could stay in the game only by borrowing. When their credit ran out, the game stopped.” 

The wealthy of the 1920s didn’t know what to do with all their money, while most Americans could maintain their standard of living only by going into debt. When that debt bubble burst, the economy sunk. 

History is repeating itself. The typical Americans’ wages have hardly increased for decades, adjusted for inflation. Most economic gains have gone to the top, just as Eccles’s “giant suction pump” drew an increasing portion of the nation’s wealth into a few hands before the Great Depression. 

The result has been consumer spending financed by borrowing, creating chronic fragility. After the housing and financial bubbles burst in 2008, we avoided another Great Depression only because the government pumped enough money into the system to maintain demand, and the Fed kept interest rates near zero. Then came the pandemic. 

The wealth imbalance is now more extreme than it’s been in over a century. There’s so much wealth at the top that the prices of luxury items of all kinds are soaring; so-called “non-fungible tokens,” ranging from art and music to tacos and toilet paper, are selling like 17th-century exotic Dutch tulips; cryptocurrencies have taken off; and stock market values have continued to rise even through the pandemic.  

Corporations don’t know what to do with all their cash. Trillions of dollars are sitting idle on their balance sheets. The biggest firms have been feasting off the Fed’s corporate welfare, as the central bank obligingly holds corporate bonds that the firms issued before the recession in order finance stock buybacks.

But most people have few if any assets. Even by 2018, when the economy appeared strong, 40% of Americans had negative net incomes and were borrowing money to pay for basic household needs.

The heart of the imbalance is America’s wealthy and the corporations they own have huge bargaining power – both market power in the form of monopolies, and political power in the form of lobbyists and campaign contributions. 

Most workers have little or no bargaining power – neither inside their firms because of the near-disappearance of labor unions, nor in politics because political parties have devolved from giant membership organizations to fundraising machines.

Biden’s “stimulus” programs are fine but temporary. The most important economic reform would be to correct this structural imbalance by reducing monopoly power, strengthening unions, and getting big money out of politics. 

Until the structural imbalance is remedied, the American economy will remain perilously fragile. It will also be vulnerable to the next demagogue wielding anger and resentment as substitutes for real reform.

Trump's "Great" Economy Is Not So Great For Many Workers

Donald Trump loves to brag about the "Great" economy. And to prove his point, he likes to point to the stock market and the unemployment numbers. A cursory look at both would make it seem he is right, but it's an illusion.

The truth is that while the top 10% (and especially the top 1%) are doing well, the rest of America is not. The bottom 50% is struggling to make ends meet, and the next 40% are seeing their wages stagnant (and actually falling behind thanks to inflation).

Why is this? Traditional economic theory says when unemployment is low (currently 3.5%) and jobs are being produced, then workers should be doing well and enjoying higher wages. That is not happening though.

It turns out that while jobs are being created, they are not the good jobs of the past. They are low-wage jobs with few hours and fewer benefits. The chart above (from Forbes.com) shows the private sector's job quality index. That index measures how good the jobs being created are. Here's how Forbes describes the index:

The US Private Sector Job Quality Index (JQI) measures the ratio of what the researchers call “high-quality” versus “low-quality” jobs. The JQI is the weighted ratio of the “high quality” jobs that pay more than the average weekly wage and tend to have more hours per week, and the “low quality” ones that pay less and offer fewer hours. The index is averaged over the previous three months to cut out the noise and adjusted to ensure inter-sectoral comparability. 

Right now the JQI is just shy of 81, which implies that there are 81 high-quality jobs for every 100 low-quality ones. While that’s a slight improvement from early 2012—the JQI’s 30-year nadir—it’s still way down from 2006, the eve of the housing market crash, when the economy regularly supported about 90 good jobs per 100 lousy ones.

In effect, the US labor market has not fully recovered from the Great Recession. Worse, the long-term trend in the balance of jobs is even more ominous.

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And here is how Steve Denning of Forbes describes what is happening in the U.S. economy:

1.     If Unemployment Is So Low, Why Don’t Wages Go Up?

Economists have long wondered: if unemployment is so low, why aren’t we seeing more rapid wage increases?  In fact, median salaries have been mostly stagnant in the U.S. for the past several decades. The strong relationship between unemployment and inflation was based on data first observed by New Zealand economist, William Phillips in 1958 and the resulting ‘Phillips Curve,’ and is still part of the standard policy doctrine of most central banks.

Yet over the last decade, there has been an apparent disconnect between low unemployment and wage inflation. This has been attributed to lower participation rates among prime and younger workers. But that’s not the whole story.

“A far more substantial factor severing the earlier connections between unemployment and inflation, however, is the changed composition of the employment base itself,” states the JQI White Paper. “The channel through which this occurs is fairly simple: If a greater proportion of jobs produce incomes below the mean of all jobs (i.e. a reduction in the level of the JQI), than they did in the past, then an increase in the proportion of people working will have a lesser impact on household incomes—and therefore aggregate demand—than in the past… Despite central banks in the U.S., the Eurozone, Japan, and the U.K. having pumped more than $10 trillion into their collective economies over the past decade, aggregate demand remains tepid.””

2.     Why Is Participation In The Workforce So Low?

Another perennial debate among economists is: why is participation in the workforce so low? Tens of millions of working-aged Americans are still not formally employed and have no apparent interest in sending out a resume. If the job market is so hot, why are so many people sitting on the sidelines? One frequently cited explanation is the growing proportion of older generation workers. Now we have another more important element. Workers don’t re-enter the workforce because many of the the jobs themselves are rotten. 

3.     Weren’t Manufacturing Jobs Replaced By Other Jobs?

The U.S. manufacturing workforce has declined dramatically in the past three decades from 23% of total US civilian employment in 1970 to just 8% in May 2019. Since overall unemployment is now so low, the lost manufacturing jobs must have been replaced by other jobs. But were they better or worse jobs? Now the JQI White Paper has the answer. “Lost manufacturing jobs were chiefly replaced by lower-wage/lower-hours service jobs.” 

The decline in U.S. job quality over the past three decades is closely associated with the decline in manufacturing jobs. As the 1990s progressed, U.S. firms enthusiastically embraced the outsourcing of manufacturing to Asia, while the so-called Asian Tiger economies— Singapore, Hong Kong, Taiwan, and South Korea (all following the Japanese export model)—accelerated manufacturing at an enormous speed during the 90s. The U.S. manufacturing jobs were eventually replaced, but with low-value-low quality jobs.

4.     Why Didn’t High Tech Didn’t Save the U.S. Economy?

Many looked to the category of jobs known as Professional and Technical Services as a path for the economy to “move to higher ground.” Professional and Technical Services were supposed to offer high pay, growth in employee numbers, and an opportunity to increase productivity. In fact, the JQI does report that employment is up 41% in this sector and the average weekly pay for non-managerial workers of $1,575 exceeds the pay of many other industries. 

But that’s not enough to rescue what the economy lost in manufacturing. “The sector—with its 7.5 million non-managerial employees (7% of all private sector non-managerial jobs) is simply not large enough to weigh heavily in the national totals and the welfare of the labor force at large. Therefore, the ‘moving to higher ground’ hypothesis is far too slender a reed on which to build a national economic growth strategy for a nation of 327 million people.”

The idea of the ‘higher ground’ proponents was that the U.S. economy would take the high value work and become the idea and design base for the world’s great companies, while Asian economies would be left with the low-value  ‘workshop,’ building the products. 

“This theory has been proven to be incorrect,” says the JQI White Paper. “South Korea began that way in the 1960s, deferentially approaching leading US and European companies to learn about the latest manufacturing techniques. As time went on, it learned that designing the products and owning the brand names was far more lucrative. Today, South Korea is the world’s leading manufacturer of cellphones, televisions, and other consumer products. China, now the world’s manufacturing behemoth, hasn’t missed this fact… With other countries targeting what they see as high-value industries, the U.S. is not just in danger of, but actually has been, forced into greater reliance on low-value, low-growth industries, offering lower-wage, lower-hours jobs.”

5.     Why Has U.S. Productivity Stalled? 

Another standard economic puzzle has been the failure of productivity to increase over the past decade. Not really a surprise, says the JQI White Paper. “As more highly productive goods-producing jobs have declined over the past three decades, in favor of more, generally less productive categories of service jobs, it should be axiomatic that labor productivity gains would stall. And, comparing the trend of non-financial labor productivity growth from 1947 through 2009 to that from 2010 to date, then near-flatlining of productivity growth has been historic in its degree and duration.”

6.     What Do The New Jobs Actually Look Like? 

What do the new jobs actually look like? The JQI White Paperpaints a grim picture. “The success of superstar companies like Google or Apple or Pfizer should not blind us to the fact that today Leisure & Hospitality is our largest sector with 14,7 million non-management employees. It’s a sector that pays such workers $16.58 an hour and the average worker works just 25.8 hours a week – resulting in average weekly income of $428. (Benefits like health insurance in the sector are small to nonexistent.)” 

What were policy makers thinking while all th0se high-quality manufacturing jobs were being shipped to other countries? A clue comes from the remark attributed to Michael Boskin Chairman of President George H. W. Bush’s Council of Economic Advisors: “It doesn’t make any difference whether a country makes computer chips or potato chips!”

His flippant remark has proven tragically incorrect. “When all that a country has left is the domestic manufacture of processed foodstuffs,” concludes the JQI White Paper, “you end up with a lot of unhealthy and unwealthy workers who are in dire shortage of security, much less dignity. A republic that offers no better than this cannot long endure.”

The Republicans War On Unions Is A Class War

The Republican Party has never liked labor unions, and they have fought against them for decades. While the Democrats controlled Congress, the GOP war on unions wasn't successful. But about 1980, with the election of Ronald Reagan, the Republicans gained enough power to start chipping away at union power in the country. That, and a very effective propaganda campaign by them against unions (which had started years earlier), allowed them to reduce both the power of unions and the membership in those unions. That was disastrous for the American middle class.

The chart above (from the Economic Policy Institute) shows the effect unions had on the sharing of rising productivity (in the form of rising wages), and the effect of the decline of unions. Note that as union power grew, rising productivity was shared between companies (i.e., the top 10% who owned those companies) and workers. Both groups benefitted, and it helped to create a vibrant and growing middle class in this country.

But as the Republicans chipped away at the power of unions and the right of workers to unionize, the share of rising production that went to the top 10% grew and the share that workers got decreased. It has gotten to the point that the share of income going to the top 10% has reached levels not seen since the 1920's. And the share going to workers has stagnated.

This has resulted in the largest gap in income between the rich and the rest of America since the 1920's, and it's still growing. The recent Republican tax plan (which gives huge cuts to the rich and not much to workers) will stimulate the growth of that income gap even faster.

The Republican attacks on unions (and their massively unfair tax plan) are nothing less than a class war -- undertaken on behalf of the rich and against the working and middle classes. And it is resulting in a huge redistribution of income -- from most Americans to the richest Americans.

We must change this before we see a replay of the Great Depression. And the only way to do that is to kick the GOP out of power. We must flip Congress to control by the Democrats in November of 2018 -- and then hold Democratic feet to the fire to change economic and tax policy to be fairer to all Americans.

Inequality Created By GOP's "Trickle-Down" Economics

I have posted charts similar to this before, but it cannot be repeated too much. It shows the consequences of the failed Republican "Trickle-Down" economic policies. Note that from 1947 through 1979, the rise in productivity was pretty much matched by a rise in wages and compensation for American workers. That changed in 1980, when the Republicans gained enough political power to change the economic policies of the federal government.

They imposed a system that tilted the economic playing field to favor the rich (and the corporations). They told Americans that giving more to the rich would benefit everyone, because much of that extra money going to the rich would trickle down to everyone else in the country. But that didn't happen. They rich got richer, and everyone else got poorer (thanks to stagnant wages and rising inflation).

Note that since the GOP policy was instituted in 1980, productivity has continued to rise but wages and compensation have not. That's because the policy encouraged companies to keep most of the rising productivity instead of sharing it with workers (as had been the case before 1980).

The policy has been tragic for workers, and has created the largest gap in wealth and income (between the rich and the rest of us) since the 1920's. And that gap continues to grow larger with each passing year -- because the Republicans have had the power to block any Democratic attempts to return to economic rules that are fair for all Americans.

This is a powerful reason to vote the Republicans out of power in 2016.

NOTE -- The chart above is from currydemocrats.org.

Hillary Clinton's Stand On Labor Issues

(Photo of Hillary Clinton is by Kat Kane at hillaryclinton.com.)

From hillaryclinton.com:

“If we want to get serious about raising incomes, we have to get serious about supporting union workers.”

HILLARY, SEPTEMBER 7, 2015

Labor unions helped build America’s middle class, and organized labor remains critical to fulfilling America’s basic bargain: If you work hard and do your part, you should be able to get ahead and stay ahead. Hillary believes we need to protect and strengthen America’s workforce by: 

• Raising incomes for hardworking Americans. Raising incomes so that hardworking Americans can afford to live a middle-class life is the defining economic challenge of our time. Hillary believes that our success as a nation should be measured by whether American families get ahead. She has proposed an economic plan to get it done.
• Restoring union collective bargaining rights. Hillary was an original co-sponsor of the Employee Free Choice Act. Hillary will fight to strengthen the labor movement and to protect worker bargaining power. She will continue to stand up against attacks on collective bargaining and work to strengthen workers’ voices.
• Raising the minimum wage and strengthening overtime rules. Hillary believes we are long overdue in raising the minimum wage. She has supported raising the federal minimum wage to $12, and believes that we should go further than the federal minimum through state and local efforts, and workers organizing and bargaining for higher wages, such as the Fight for 15 and recent efforts in Los Angeles and New York to raise their minimum wage to $15. She also supports the Obama Administration’s expansion of overtime rules to millions more workers.
• Investments that create good jobs and build up workers’ skills. Hillary supports expanding investments in our infrastructure to create good jobs and union jobs. And she has proposed rewarding high-quality training and apprenticeships—which unions have established for decades—and are proven to raise wages for workers.
• Protecting workers from exploitation. Hillary believes we need to protect workers against employer misclassification, wage theft, and other forms of exploitation.
• Supporting working families. Equal pay, paid family leave, earned sick days, fair schedules, and quality affordable child care aren’t luxuries—they’re necessities for families. Hillary will fight for workplace policies that will help more Americans enter the workforce and succeed there.
• Protecting retirement security. After working hard for years, Americans deserve a secure and comfortable retirement. Hillary will fight to protect retirement security, enhance—not privatize—Social Security, and push back against any effort to undermine retirement benefits.

Jeb Bush Is Out Of Touch With American Workers

(This caricature of Jeb Bush is by DonkeyHotey.)

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.

Those are the words of Republican presidential candidate Jeb Bush. I can understand why he would like to believe that -- because he father continued Reagan's "trickle-down" economic theory, and his brother doubled down on that theory. He would have to admit they were wrong, and he's not about to do that -- not to mention the fact that he still supports that failed policy himself.

But the truth doesn't support him. As the charts below (from Mother Jones) shows, Americans are already working more hours than ever. And yet their wages remain depressed, too many people are still out of work, jobs continue to be off-shored to other countries (where workers can be abused), and productivity is not being shared with workers. Continuing the Reagan and Bush-family economic policy would just put workers in an even worse position and benefit only the rich -- making the income gap even worse (and it's already worse than the gap was before the Great Depression).

Bush is right about one thing though. The economy is sluggish and in a rut. He just has no clue on how to fix it. There is a much better way to stimulate the economy -- creating more jobs and good profits for businesses. And here's a few things we could do to accomplish that:

1. Raise the minimum wage to a livable level (and tie it to the rate of inflation).
2. Strengthen labor unions, so they can bargain more effectively for workers (getting them a fair share of rising productivity).
3. Stop giving tax breaks to companies that off-shore American jobs.

These measures would put more money in the hands of workers, and stimulate the economy when that money is spent -- which would increase business profits and spur job creation by increasing the demand for goods/services.

This is not rocket-science, but sadly, it does seem to be beyond the capabilities of Bush and all the other GOP candidates. They can only see ways to make the rich much richer -- still convinced that someday the rich will share all that money with everyone else. How much failure will they have to experience before they realize the truth?

Our Economy Favors The Rich - To The Detriment Of Others

The top chart here (from the Bureau of Labor Statistics) shows that since the recession, productivity in the United States has risen (by about 9.3% through 2013, and is still rising). In the past, that productivity would have been shared by owners, management, and workers -- and all quintiles of income (except maybe the poor, the bottom quintile) would have seen a rise in income. But that didn't happen.

The second chart (made from U.S. Census data) shows what actually happened. The top 20% of Americans have seen some nice income growth due to that productivity, and the top 5% has seen even more significant income growth. Meanwhile, the incomes of the bottom 80% of Americans has remained flat -- it has been stagnant, showing no growth since the recession.

How has this happened? It started about 1980, when the Republicans began to impose their "trickle-down" economic theory on our economy -- by weakening unions, deregulating Wall Street and the financial sector, giving huge subsidies and tax loopholes to corporations, cutting taxes for the rich, creating a special lower Capital gains tax for investors, and helping corporations to ship jobs to low-wage countries (even to the point of giving corporations a tax break to help in off-shoring those jobs).

This has created the largest gap in income and wealth between the rich and the rest of America since before the Great Depression -- and that gap continues to grow. Taking advantage of the GOP policies, the rich have hogged about 95% of all new income created by increased productivity since the recession (and most of the other 5% has stayed in the top 20%) -- leaving virtually nothing for the bottom 80% of Americans.

But it gets even worse. The bottom 80% didn't just suffer stagnant wage growth, they have actually seen their income drop when inflation is considered. As the bottom chart shows, inflation has climbed by about 11.8% from the end of the recession through 2013 (and will rise again in 2014 by a small amount). This means the bottom 80% of Americans have lost more than 11.8% of their buying power since the recession (meaning their salaries will only buy about 88% of what they could buy pre-recession).

In the last 40 years, the Republicans have been able to tilt the economic advantage in this country toward the rich -- and to the detriment of all other Americans. And they are not through yet. Now that they have taken control of both houses of Congress, they are talking about more tax cuts and breaks for the rich and corporations -- and they want to do it on the backs of hurting Americans (by cutting food stamps and other government programs, by cutting Social Security benefits and eliminating Medicare, by refusing to raise the minimum wage or even abolishing it, by cutting education funding, etc.).

If they are allowed to continue their ridiculous (and already failed) economic policies, this country's economy will not just continue to falter but could easily slide into another (and deeper) recession. Unfortunately, there is little that can be done to stop this. The best we can hope for is that Senate Democrats (through the filibuster) and President Obama (through the veto) can stop the worst of the Republican plans. But there's just no way around one fact -- it's going to be a very tough couple of years for most Americans.

Congress Escapes "Least Productive" Label - Just Barely

The chart above is made from information gathered by the Pew Research Center. It shows the number of laws passed by each of the last eight Congresses (the 106th Congress through the 113th Congress).

The top line represents the total number of laws passed (both ceremonial and substantive). The bottom line represents the number of ceremonial laws (such as the naming of a building, or the recognition of an individual or group). The middle line is the most important, because it represents the number of substantive laws passed by Congress (laws that could affect the lives of many, if not all Americans).

As you can see, the 113th Congress barely missed the label of least productive Congress ever. They just eclipsed the abysmal record of the 112th Congress by passing a few laws in the closing days of the session. But that is nothing to be proud of. The 112th and 113th Congresses were very much the same -- with the Republicans controlling the House, and the Senate Republicans abusing the filibuster to obstruct almost everything.

The American people have been angry with the failure of both the 112th and 113th Congresses to get anything done -- especially to compromise to get the economy moving again and to create enough new jobs. And they have shown that by giving those two Congresses a terrible approval rating (in the very low single and double-digits). And judging by the numbers above (and the current economy), those low approval ratings are justified.

Some think the 114th Congress will be able to do better, and I don't doubt that with Republicans controlling both Houses the GOP will try to pass a lot of new laws. Unfortunately, most of them will be bad for both the country and the economy -- and hopefully, Democratic Senate filibusters and presidential vetoes will kill a lot of them.

I expect the next Congress to be just as unproductive as the last two, because too many politicians are still more interested in playing political games instead of compromising for the good of the country.

Capitalists Are Hogging The Gains From Rising Productivity

The chart above (from the Global Wage Report 2014/2015) shows a stark reality of what is happening to worker wages -- not just in the United States, but in the developed world as a whole. The productivity of American workers continues to rise, but the benefits and gains from that rising productivity are no longer being shared with American workers -- which contributes greatly to the stagnation of worker wages (and actual reduction of wages once inflation is taken into account).

Here is how Professor Richard D. Wolff puts it in an article for Truthout:

In the developed countries, while real wages stagnated throughout the crisis since 2007, the productivity of workers continued to rise. That explains the deepening inequalities of income and wealth in those countries.

Productivity measures the quantity of goods and services that workers' labor provides to their bosses. The chart shows how labor productivity has kept rising (because of computers, more equipment, better training, speed-up of work etc.). The chart also shows how much less wages have risen. Wages are what capitalists pay workers for their labor.

There is thus a growing gap between what workers give capitalists (productivity) and what capitalists give workers (wages). That gap measures profits. They have grown the fastest of all. Major capitalist corporations gather those exploding profits into their hands. They pay their top executives huge salaries and bonuses, pay rich dividends and deliver huge capital gains to their shareholders. Those top executives and major shareholders are most of the super-rich who have taken so much of the nation's wealth.

There is much more in Professor Wolff's article, including at look at how the export of jobs from developed countries to undeveloped countries is seriously hurting worker wages. I urge you to read the entire article.

NOTE -- Richard D. Wolff is Professor of Economics Emeritus, University of Massachusetts, Amherst where he taught economics from 1973 to 2008. He is currently a Visiting Professor in the Graduate Program in International Affairs of the New School University, New York City. He also teaches classes regularly at the Brecht Forum in Manhattan.

Capital Can't Create Wealth Without Labor

The phrase on the shirt above (picture from Wisconsin AFL-CIO) contains a basic truth about capitalism -- a truth that the corporations and right-wing politicians refuse to acknowledge, and would rather you didn't know. They have been promoting the idea for decades now that wealth is created by capital, and since the Reagan administration they have been able to convince far too many Americans of that.

But that is a lie -- or at least only half of the truth. Capital is only half of what is needed to create more wealth. The equation for increasing wealth is capital + labor. Without labor (the workers who develop, make, market, and sell the products capital is funding), the capital is useless (because money alone will not do the work required to get a product to the consumer).

The opposite is also true -- that labor alone cannot produce a product, but needs capital to fund the research, production, and distribution. So, neither capital nor labor is the total answer to creating new wealth -- but both are needed before anything can be accomplished. Because of this, one might assume that the new wealth created would be shared by owners (who provide the capital) and workers (who provide the labor) -- and as productivity rises (creating more profit), that rise in profits would be shared between the owners and workers.

Unfortunately that is not the case in the United States. Since the recession, productivity has risen in this country -- but about 95% of that rise in productivity has been hogged by owners (and top corporate executives), while the tiny increase given workers does not even cover the rise in inflation (which means worker income has actually fallen).

The corporations, and their Republican representatives in Congress, will tell you that they deserve all of the rise in productivity (new profits) because it was their money that was risked to produce the product. They completely ignore the role that labor played in that rising productivity. They refuse to share the rising productivity, and in fact, would like to pay workers even less than they currently make (and congressional Republicans would like to eliminate the already inadequate minimum wage). This is nothing less than the theft of labor, and it must be stopped.

How can this be done? Well, there are two things that should be done. First is to raise the minimum wage and index it to the rate of inflation. No worker should have to work for a poverty wage. The second is to increase the power of unions, making it easier for workers to unionize and bargain with management. Individual workers, no matter how talented or creative, are no match for a corporation -- and cannot by themselves force that corporation to pay them a decent wage or share the rising productivity. It is just too easy for the corporation to simply replace them with someone else (someone desperate enough to be abused).

Unions have been demonized in the United States -- and this has been done deliberately. The corporations know that unions have the power to stand up to them and demand fair pay and a safe workplace, while individuals do not. This demonization has hurt all workers, whether unionized or not (since the rise in union wages tends to put an upward pressure on all wages).

But as long as the Republicans control either branch of Congress, the minimum wage will not be raised and unions (and all workers) will continue to suffer. This is just one more reason why the GOP must be voted out of power in November.

Rising GDP Can't Eliminate Poverty In A "Rigged" Economy

“The federal government needs to remember that the best anti-poverty program is economic growth.”

Those are the words of Rep. Paul Ryan (House Budget Committee chairman), but they have become a mantra for right-wing Republicans -- especially those who are elected officials. And to prove their point, they point to the period between 1959 and 1973. During that period, the nation's economy (GDP) grew about 82% per person -- and the poverty rate dropped from 22.4% to about 11.1%.

Those are some pretty impressive numbers. Why then did this magical solution to poverty not continue to work? In the last generation, the economy has grown by about 147%. Shouldn't that mean poverty would currently be at a historical low (if not eliminated)? But that growth hasn't eliminated (or even further lowered the poverty level -- which has bounced between 12% and 15%, and currently rests at 15%.

The answer, of course, is that the Republicans are touting a simplistic solution to a complicated problem -- and they are ignoring the effect of legislation and policy on that poverty problem. For starters, while the rising GDP may have had a small effect on the poverty level between 1959 and 1973, the poverty programs passed in President Johnson's "Great Society" legislation had a much bigger impact on the poverty level. It is President Johnson's "war on poverty" that is primarily responsible for reducing poverty to a level of only 11.1% (and if more money could have been put into those programs, poverty probably could have been reduced even more).

But starting after 1980, the Republicans began to institute their "trickle-down" economic policy -- a policy that hurt unions, reduced regulations on financial and corporate entities, and lowered teas on the rich and the corporations. In the Bush administration, the GOP doubled-down on those policies. The effect was to stagnate worker wages (since rising production was no longer shared with workers), and since inflation continued to rise, many workers fell into poverty (even though they had full-time jobs).

The combination of this refusal to fairly share rising production, combined with rising inflation, the deregulation of Wall Street, the encouraging companies to export American jobs to third world nations, and falling government revenues (due to even more tax cuts for the rich and corporations) combined to throw the nation into a deep recession (which cost millions more in job losses). This resulted in a poverty level of 15% (which has remained constant since 2011) and a record number of Americans needing food stamps.

And the Republicans only solution for this larger level of poverty is to cut those government programs that fight poverty and lower taxes even more for the rich and the corporations. In other words, they want to give the country a bigger dose of the same policies that caused this economic mess -- and they have blocked all attempts by President Obama and the Democrats to return the country to a fairer and more stable economy.

The truth is that while rising GDP can't eliminate poverty, it can have a small but positive effect on poverty reduction. But it can only do that if unions are strong, production is shared with workers, an adequate minimum wage is instituted, and taxes remain at a level to adequately fund the government -- including the full funding of the social programs that have been shown to be effective in fighting poverty. Rising GDP is not, and never has been, a magical solution by itself to eliminate poverty -- especially when, as now, that rising GDP is hoarded by the rich.

In short, a rising GDP can help in fighting poverty -- but not under the "rigged" system instituted by the Republicans (which funnels all of that GDP growth into the picts and bank accounts of the rich).