t begins to sound a bit naughty — all this talk about the need to “stimulate” the economy, as if we were discussing how to make a porn film. I don’t mean to trivialize our economic difficulties or the need for effective government intervention, but we have to face a disconcerting fact: For years now, that strange stimulus-crazed beast, the economy, has been going its own way, increasingly disconnected from the toils and troubles of ordinary Americans.
The economy, for example, has been expanding, at least until now, and growth is supposed to guarantee general well-being. As long as the gross domestic product grows, World Money Watch’s Web site assures us, “so will business, jobs and personal income.”
But hellooo, we’ve had brisk growth for the past few years, as the president has tirelessly reminded us, only without those promised increases in personal income, at least not for the poor and the middle class. According to a study just released by the Economic Policy Institute, real wages actually fell last year. Growth, some of the economists are conceding in perplexity, has been “decoupled” from widely shared prosperity.
I first began to sense this in the boom years of the late 1990s, when I was working in entry-level jobs for my book “Nickel and Dimed.” While the stock market soared and fortunes were being made in the time it takes to say “IPO,” my $6-to-$8-an-hour co-workers lunched on hot dog buns because that was all they could afford and, in some cases, fretted about whether they could find a safe place to sleep.
Growth is not the only economic indicator that has let us down. In the past five years, America’s briskly rising productivity has been the envy of much of the world. But again, there’s been no corresponding increase in most people’s wages. It’s not supposed to be this way, of course. Economists have long believed that some sort of occult process would intervene and adjust wages upward as people worked harder and more efficiently.
We like to attribute our high productivity to technological advances and better education. But a revealing 2001 study by the consulting firm McKinsey & Co. also credited America’s productivity growth to “managerial . . . innovations” and cited Wal-Mart as a model performer, meaning that our productivity also relies on fiendish schemes to extract more work for less pay. Yes, you can generate more output per apparent hour of work by falsifying time records, speeding up assembly lines, doubling workloads and cutting back on breaks. That may look good from the top, but at the middle and the bottom, it can feel a lot like pain.
Amen – this boom was sad for a country that routinely considers itseld Christian. It was unprecedented to have a tax cut in the midst of a war, let alone a tax cut that so slavishly served the rich.
RE:”We like to attribute our high productivity to technological advances and better education. But a revealing 2001 study by the consulting firm McKinsey & Co. also credited America’s productivity growth to “managerial . . . innovations” and cited Wal-Mart as a model performer, meaning that our productivity also relies on fiendish schemes to extract more work for less pay. Yes, you can generate more output per apparent hour of work by falsifying time records, speeding up assembly lines, doubling workloads and cutting back on breaks. That may look good from the top, but at the middle and the bottom, it can feel a lot like pain.”
Looks like Barbara Ehrenreich’s trying to portray business as the enemy much as she tried to portray men as the enemy back in the early seventies in her feminist writings. And we all know how much our society has benefitted from that.
Time for me to, once again, discuss the demise of the ‘sense’ of the “common weal’ that has brought the USA to its prsesent situation.
Supposedly, a ‘sense’ of the “common weal’ causes business owners, and this must include stockholders, to integrate the ‘well being’ of their ‘loyal’ employees into their ‘sharp penciled’ economic decisions.
On the other hand, employees are supposed to have ‘sense’ of the “common weal’ and realize that the long term economic well being of the business that they work for is expressed through hard work and loyalty toward their employers and trust in their management decisions.
Well, this has just about disappeared from the American scene.
When employers, frantically trying to ‘shave the silver off the coin,’ tranfer jobs overseas, they leave behind a chaotic situation that forces a productive American work force into ‘service-level’ jobs. Then. they are surprised when those working in service-level jobs can ‘t afford to buy their prodcuts.
On the other hand, there is little sign that the mass of American workers even comprehend the fact that their unionism drove American manuafactures overseas.
I am talking about, for instance the incredibly preposterous union-management agreements that have been reached in the domestic American auto industry. People who are not even high school graduates receive benefits that exceed those of many college graduate engineers with masters and doctoral degrees.
Madness.
The economic illiteracy of this country is increasingly dismaying:
The Kennedy/Johnson tax cuts were at the start of a buildup for Vietnam when a significantly higher percentage of the GDP went to national defense. That cut, enacted by Johnson in 1964, led to a sustained economic growth in time of war.
And as for Bush’s tax cuts going proportionately to the wealthy:
try this – http://www.heritage.org/Research/Taxes/images/chart6_lg.gif
yea, the heritage foundation – unbiased source
as context, the tax cuts are nearly three times as much as the tab from September 11, Afghanistan, Iraq, and homeland security combined
Bob,
The source is the Congressional Budget Office.
All three of the tax cuts enacted in 2001, 2002, and 2003 totaled $188 billion in constant 2003 dollars ($185.8 B in actual). My source is the US Joint Congressional Committee on Taxation. In reality tax revenues went up.
Thanks for proving my point about economic illiteracy.
The non-reality of the economic boom was not the product of the tax cuts – but of bad lending decisions. The middle class has spent its savings including equity in its housing stock. Unemployment has been at record lows so those that want to work have been able to do so. The American worker is now competing in a global economy and there will be losers in that competiton. So I think we must all expect to need to work harder and save more in order to maintain our lifestyles – people do benefit from strong economic growth – some benefit by merely staying in place – it could and likely will get much worse.
Chips,
Every tax cut in this century has been followed by an economic expansion. To say that “non-reality of the economic boom was not the product of the tax cuts” (which is convoluted syntax as well as faulty economics) is futher demonstration of my contention that economic illiteracy is rampant.
Further –
From the Congressional Joint Economic Committee:
“A new Congressional Budget Office (CBO) report produced at the request of Congressional Democrats confirms that tax cuts since 2001 increased the share of federal income taxes paid by the highest earners while decreasing the tax share of lower- and middle-income groups. The CBO analysis, Effective Tax Rates Under Current Law, 2001 to 2014, shows that the income tax remains highly progressive, with the top 5 percent of earners paying more than half of all federal income taxes.
Highlights:
* As a result of the tax cuts since 2001, all taxpayers face lower effective federal income tax rates than they would have without the tax cuts.
* While many characterize the CBO report as evidence that the tax cuts shifted the burden of taxation to the middle class, CBO data show precisely the opposite effect. The tax cuts actually made the tax system more progressive. The highest 20 percent of earners now pay a larger share of federal income taxes than they would have without the tax cuts, while the share of income taxes paid by all other income groups fell.
* The overwhelming majority of federal income taxes are paid by the very highest income earners. The top 1% of income earners pays 31.6% of all income taxes, the top 5% pays 51.4%, the top 10% pays 63.5%, and the top 20% of income earners pays 78.4% of all federal income taxes. The bottom four-fifths of income earners pay just over one-fifth of all federal income taxes.
* Some analysts cite total effective federal tax rates, as opposed to effective income tax rates, as the best measure of the effects of the tax cuts across income groups. This method can be misleading because it measures the burden of payroll taxes without accounting for the highly progressive Social Security and Medicare benefits to which payroll taxes are linked.”
Just so we all know the source of this article –
http://en.wikipedia.org/wiki/Barbara_Ehrenreich
her degree is in physics, not economics.
I’m inclined to compare Ehrenreich to the current PB. Her degrees are in oceanography; her DD is honorary and she is quite out of her element when discussion theology.
I did not mean to imply by my post that the tax cuts did not help expand the economy – they surely did. However, some portion of the recent boom/expanison was also due to real estate speculation and home equity loans which were in effect a withdrawal of savings by the middle class. That portion of the expansion attrbutable to the subprime loans which put the renting class into “home ownership” – will I think be seen as a mirage.