The Talking Dog

August 28, 2006, Perhaps it's the economy, stupid

The Grey Lady treats us to this discussion of the fact that American real wages are now at their lowest levels measured in appropriately "real" terms, to wit, as a percentage of Gross Domestic Product, than at any time since they have been measured since the measuring began in 1947. "Worst ever" seems extreme even for me (I mean, even George Dubya can always point to Buchanan... James, not Pat...) so we'll just say "the worst in 60 years", and leave it at that. Which is pretty bad, all things told.

By contrast, corporate profits appear to be at their highest level, under the same measures. People kind of intrinsically figure this out for themselves, given their own financial realities, though the low wage level statistics reported would be even worse still if a portion of corporate earnings representing compensation of extremely high paid executives (in lieu of profits for tax or other reasons) weren't part of the wage calculations. Rising benefit costs had also kept total employee compensation levels propped up as an overall matter, but even these are no longer keeping up with inflation.

Again... corporate profits are way, way up. And the economists seem pretty much in consensus that this is directly the result of the lower wages. And this result also applies in other major industrial countries, where there is downward wage pressure.

Which, many will say (me included), all other things being equal, "is capitalism". People are in business to profit. People are entitled to a fair wage, but then, we still mostly have a free labor market, so if people want to earn more, they are welcome to peddle their human capital in the market, etc., etc. Of course, other things aren't really equal. We actually have government policies that are driving this result, including such disparate things as taxation policy, decisions not to enforce our immigration (and labor) laws against employers, trade policies (including subsidizing some of our most inefficient and destructive industries, like sugar growing in the Everglades), energy policies, etc., etc., all of which put the wage-cost squeeze on workers (at least, most workers.)

Now, to be sure, a lot of these policies play off each other, some offset each other, some exacerbate each other, and sorting out the whole thing is remarkably hard. So let me just state my view, FWIW: if every American ready, able and willing to work earned a decent, living wage, including access to health care, if we had a world-class educational infrastructure for all our children, if we could reduce child poverty and infant mortality rates to, say, no worse than Northern European or Japanese levels, if our national pension (including both social security and private pensions) were on solid footings, and our national finances did not appear to project unlimited deficits far into the future (both in terms of import/export and government spending)... it would be a lot easier to simply stop and say "well, that's capitalism; there's nothing INTRINSICALLY wrong with businesses making profits-- even humongous profits." And I'd probably agree. Resentment of the rich for being rich... doesn't play, politically... on the other hand, it seems that there is an appropriate level of social spending to ensure some semblance of a social safety net well above what we are currently spending, which we proved could be paid for at Clinton tax levels, which, at a maximum 39.5% rate, were not only far from onerous, but by the standards of the industrialized Western nations, remarkably low.

But I'm not sure that's how this is going to play. Note our pal Frank Luntz (discussed in my recent interview with Professor George Lakoff), commenting on how this economic situation will play (and be played), to wit, people will "blame corporate America" for any disparities and their own economic suffering, and not the Republican government which (the public just might perceive as...) bought and paid for by corporate America. Certainly, you might well see some right wing talking points about how this is "just" the ebb and flow of the economy, and (of course) while any good news at all is 100% the result of the President's tax cuts, any bad news is the fault of mysterious "corporate America." No, economic problems of any kind are NOT the responsibility of the Republicans who have controlled all branches of government for pretty much the last 5 1/2 years, especially those in Congress...

I don't know about you... but that tack doesn't sound very satisfying.

We'll see. Stagnant wages, rising petroleum costs, perhaps the tail end of the "housing bubble"... continuation of Republicans in Congress may prove a hard sell. The strategy of relying on fear of terrorism may overcome this, of course... or it might not. Unfortunately, thanks to gerrymandering and other reasons (including some lackluster candidates in potentially takeable districts) I'm not all that optimistic about Democrats taking back control of either house of Congress. However, at just over two months to the election, if news like this keeps trickling out there, and people realize that improving their own individual fortunes may require a change in national direction, not even the Democrats may be able to snatch defeat out of this.


I cannot believe this....

Iran Defies U.N. Deadline to End Uranium Enrichment Program

Posted by efw at August 31, 2006 7:52 PM