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The Upside Down Economy

Posted May 17, 2013 at 3:00 pm, in Allied Approaches, From Harold Meyerson

By Harold Meyerson
Editor-at-Large, The American Prospect

Corporate profits are soaring despite declining sales and temps are working longer hours than regular employees. What gives?

One aspect that defines our current economy is that things are happening that shouldn’t be happening. I don’t mean that things are happening that are illegal or immoral. (Well, some of them are immoral, but that’s not what I mean.) Rather, things are happening that defy economic logic—a slippery term that really means, the economic patterns of roughly the past half-century.

The first such logic-defying thing is that corporate profits are soaring even as corporate revenues limp along. The quarterly reports of S&P 500 corporations for the first three months of 2013 are almost entirely in now, and they show profits rising by more than 5 percent even while revenues have risen by less than 1 percent. Seventy percent of these companies—the largest publicly traded U.S. firms—exceeded the analysts’ profit projections. On the other hand, 60 percent came in under the projections for their sales.

Were this disjuncture just a one-time epiphenomenon, we could pass it off as a statistical oddity, but it’s not. Profits of American corporations have become decoupled from the other indices of American economic well-being with which they’ve historically been linked. They currently comprise the largest share of the nation’s economy that they have since World War II. Yet the increase in consumer spending in the 15 quarters since the recession’s official end is lower than its increase 15 quarters after the recessions of 1982, 1991, and 2001 ended. Similarly, 15 quarters after the recession ended, the increase in GDP is lower than it was in those three preceding recessions. So spending and growth are lagging while profits soar. What gives?

Part of the answer is that the S&P 500 now sell roughly half their wares abroad, so they’re less dependent on the health of the U.S. economy to hit or exceed their profit targets. But how to account for the increase in profits when revenues—which, like profits, are measured globally—also decline? (more…)

Tags: corporations, economy, profits, wages

Labor Wrestles With Its Future

Posted May 14, 2013 at 3:00 pm, in Allied Approaches, From Harold Meyerson

By Harold Meyerson
Editor-at-Large, The American Prospect

Since the emergence of capitalism, workers seeking higher pay and safer workplaces have banded together in guilds and unions to pressure their employers for a better deal. That has been the approach of the American labor movement for the past 200 years.

That approach, however, has begun to change. It’s not because unions think collective bargaining is a bad idea but because workers can’t form unions any more — not in the private sector, not at this time. There are some exceptions: Organizing continues at airlines, for instance, which are governed by different organizing rules than most industries. But employer opposition to organizing has become pervasive in the larger economy, and the penalties for employers that violate workers’ rights as they attempt to unionize are so meager that such violations have become routine. For this and a multitude of other reasons, the share of unionized workers in the private sector dropped from roughly one-third in the mid-20th century to a scant 6.6 percent last year. In consequence, the share of the nation’s economy constituted by wages has sunk to its lowest level since World War II, and U.S. median household income continues to decline.

Unions face an existential problem: If they can’t represent more than a sliver of American workers on the job, what is their mission? Are there other ways they can advance workers’ interests even if those workers aren’t their members?

These questions are anything but easy. Unions have begun to experiment with answers, even if, as the unions readily admit, they’re a poor substitute for collective bargaining. The Service Employees International Union (SEIU) has detailed dozens of organizers to fast-food joints in a number of cities: There have been one-day strikes of fast-food workers in New York and Chicago, and such actions are likely to spread. The goal isn’t a national contract with companies such as McDonald’s but the eventual mobilization of enough such workers in sympathetic cities and states that city councils and legislatures will feel compelled to raise the local minimum wage or set a living wage in particular sectors. This means, however, that the SEIU is helping to build an organization that won’t produce anywhere near the level of dues-derived income that unions normally accrue from collective-bargaining agreements. This new approach may not pencil out, but neither does the slow decline in membership that labor will continue experiencing unless it changes course. (more…)

Tags: capitalism, economy, Labor, safety, Unions, Workplace

Sequestration Stupidity

Posted February 28, 2013 at 3:00 pm, in Allied Approaches, From Harold Meyerson

By Harold Meyerson
Editor-at-Large, The American Prospect

A Mediterranean diet, the New England Journal of Medicine reported Monday, can lengthen one’s lifespan. So inhabitants of southern Europe can look forward to long lives — of anxiety and privation.

Already mired in a depression comparable to that of the 1930s, Spain, Greece and Portugal are going to see things grow worse this year, according to an annual economic forecast released by the European Commission on Friday. Unemployment rates in both Spain and Greece — where a quarter of the populations are unemployed and the share of jobless young people exceeds 50 percent — will rise to 27 percent.

At least the leaders in power in 1930 had an excuse when the economy began to collapse. Then, there was genuine bewilderment among economists and governmental chieftains across the political spectrum about how to induce a recovery. From British Laborite Ramsay MacDonald to the German centrist Heinrich Bruning to American conservative Herbert Hoover, leaders cut spending to bring their budgets into balance.

These austerity policies proved an unmitigated disaster. By reducing government spending while business and consumer spending were tanking, these heads of government constricted all economic activity. In turn, unemployment continued to soar. Frustrated with the inability of mainstream political parties to stop the collapse, voters in some nations turned to extremes — most notably, of course, in Germany.

Unlike their predecessors, today’s leaders have models on how to revive depressed economies. The example of Franklin Roosevelt, whose public investments in jobs and defense turned the U.S. economy around, and the writings of John Maynard Keynes, who demonstrated that the solution to depression is boosting demand, are plain for all to see. Seeing isn’t believing, however, when ideology dims the eye.

Today, in the spirit of the Bourbon kings who reclaimed power in post-Napoleonic France, having learned nothing during their years in exile, many European leaders are repeating the mistakes that their predecessors made in the ’30s: demanding that governments reduce spending even as their private-sector economies limp along. Only this time around, the miracle of the euro has greatly the reduced the autonomy of many continental nations while giving their creditor, Germany, control over their destinies. German Chancellor Angela Merkel is imposing austerity budgets on other nations, even Spain, which had a string of balanced budgets before the 2008 collapse. (more…)

Tags: balance, budget, depression, Europe, Jobs, recession, sequester, spending, unemployment

The Obama Majority

Posted January 28, 2013 at 3:00 pm, in Allied Approaches, From Harold Meyerson

By Harold Meyerson
Editor-at-Large, The American Prospect

“We are the ones we’ve been waiting for. We are the change we seek,” candidate Barack Obama said in 2008. At the time, his comments came in for criticism: They were narcissistic; they were tautological; they didn’t make a whole lot of sense.

But in the aftermath of Obama’s 2012 reelection and his second inaugural address, his 2008 remarks seem less a statement of self-absorption than one of prophecy. There is an Obama majority in American politics, symbolized by Monday’s throng on the Mall, whose existence is both the consequence of profound changes to our nation’s composition and values and the cause of changes yet to come.

That majority, as the president made clear in his remarks, would not exist but for Americans’ struggles to expand our foundational belief in the equality of all men. The drive to expand equality, he said in his speech’s most historically resonant line, “is the star that guides us still, just as it guided our forebears through Seneca Falls and Selma and Stonewall.”

Our history, Obama argued, is one of adapting our ideals to a changing world. His speech (like recent books by Michael Lind and my Post colleague E.J. Dionne Jr.) reclaimed U.S. history from the misrepresentations of both constitutional originalists and libertarian fantasists. “Fidelity to our founding principles requires new responses to new challenges,” the president said. “Preserving our individual freedoms ultimately requires collective action. For the American people can no more meet the demands of today’s world by acting alone than American soldiers could have met the forces of fascism or communism with muskets and militias.”

Having established that the moral and practical arc of U.S. history bends toward equality, Obama vowed to push his demands for equality still further — to ending the systemic underpayment of female workers; the voter suppression that compels some Americans, usually minorities, to wait hours to cast their votes; the deportations of immigrants who would otherwise help build the economy; and the laws that forbid gay Americans to marry. (more…)

Tags: Congress, Inauguration Day, middle class, President Obama

A Tax Deal Only the Ultra-rich Could Love

Posted January 14, 2013 at 3:00 pm, in Allied Approaches, From Harold Meyerson

By Harold Meyerson
Editor-at-Large, The American Prospect

How much do the newly enacted tax hikes on the wealthiest Americans actually affect them? Hardly at all.

Almost all of the debate that convulsed Capitol Hill in December concerned the reinstatement of the highest marginal tax rate on earned income — that is, on wages and salaries. But as Fitzgerald said, the rich are different from you and me, and one of the primary ways they’re different is that they don’t get their income from wages and salaries.

In 2006, the bottom four-fifths of U.S. tax filers got 82 percent of their income from wages and salaries, a Congressional Research Office study found. The richest 1 percent, however, got just 26 percent of their income that way; for the richest one-tenth of 1 percent, the figure is just 18.6 percent.

The study also looked at dividends and capital gains. The bottom four-fifths got just 0.7 percent of their income from those sources. (Those who believe we’ve become an “ownership society,” please take note.) The wealthiest 1 percent, however, realized 38.2 percent of their income from investments, and the wealthiest one-tenth of 1 percent realized more than half: 51.9 percent.

The tax deal Congress passed last week raised the top rate on wages and salaries from 35 percent to 39.6 percent. The rate on income from capital gains and dividends, however, was raised to only 20 percent from 15 percent. There has been no rending of garments nor gnashing of teeth from our super-rich compatriots; they got one sweet deal.

The intellectual foundations of this deal are even more dubious than the deal itself. Taxing investment income at a lower rate than labor income presumably fosters more investment in the U.S. economy. But say you buy a share of General Electric. The money you pay for your stock will be invested both at home and abroad, because GE, like virtually every major U.S. corporation, is a global company that retains a U.S. headquarters. Now suppose you’re an assembly worker at a GE aircraft engine parts plant in Dayton, Ohio. All your work takes place in the United States, and most of your spending is local, even though many of the products you buy are made abroad. Yet our GE employee may be taxed at a higher rate than our GE investor. We reward the investor for, in effect, sending money abroad, while the worker who produces wealth entirely within our borders gets no such reward. Globalization has completely changed the investment patterns of American corporations, but our tax breaks for investments chug placidly along as though U.S. companies still confined their work inside our borders. (more…)

Tags: capital gains, GDP, offshoring, taxes, wealth

Wal-Mart’s Strategy of Deniability for Workers’ Safety

Posted December 2, 2012 at 8:00 am, in Allied Approaches, From Harold Meyerson

By Harold Meyerson
Editor-at-Large, The American Prospect

Bangladesh is half a world away from Bentonville, the Arkansas city where Wal-Mart is headquartered. This week, Wal-Mart surely wishes it were farther away than that.

Over the weekend, a horrific fire swept through a Bangladesh clothing factory, killing more than 100 workers, many of whose bodies were burnt so badly that they could not be identified. In its gruesome particulars — locked doors, no emergency exits, workers leaping to their deaths — the blaze seems a ghastly centennial reenactment of the Triangle Shirtwaist fire of 1911, when 146 workers similarly jumped to their deaths or were incinerated after they found the exit doors were locked.

The signal difference between the two fires is location. The Triangle building was located directly off New York’s Washington Square. Thousands watched the appalling spectacle of young workers leaping to the sidewalks 10 stories down; reporters and photographers were quickly on the scene. It’s not likely, however, that the Bangladesh disaster was witnessed by anyone from either the United States or Europe — the two markets for which the clothes made inside that factory were destined. For that, at least, Wal-Mart should consider itself fortunate.

The Bangladesh factory supplied clothing to a range of retailers, and officials who have toured the site said they found clothing with a Faded Glory label — a Wal-Mart brand. Wal-Mart says that the factory, which had received at least one bad report for its fire-safety provisions, was no longer authorized to make its clothing but one of the suppliers in the company’s very long supply chain had subcontracted the work there “in direct violation of our policies.”

If this were an isolated incident of Wal-Mart denying responsibility for the conditions under which the people who make and move its products labor, then the Bangladeshi disaster wouldn’t reflect quite so badly on the company. But the very essence of the Wal-Mart system is to employ thousands upon thousands of workers through contractors and subcontractors and sub-subcontractors, who are compelled by Wal-Mart’s market power and its demand for low prices to cut corners and skimp on safety. And because Wal-Mart isn’t the employer of record for these workers, the company can disavow responsibility for their conditions of work.

This system isn’t reserved just for workers in faraway lands: Tens of thousands of American workers labor under similar arrangements. Many are employed at little more than the minimum wage in the massive warehouses in the inland exurbs of Los Angeles, where Wal-Mart’s imports from Asia are trucked from the city’s harbor to be sorted and packaged and put on the trucks and trains that take them to Wal-Mart stores for a thousand miles around. (more…)

Tags: factory, Wal-Mart, worker safety, workers' rights

The Amalgamated Pole Vaulters

Posted October 1, 2012 at 12:00 pm, in Allied Approaches, From Harold Meyerson

By Harold Meyerson
Editor-at-Large, The American Prospect

A common refrain among union critics is that Americans no longer need unions—that unions were well and good for the exploited sweatshop workers of a century ago, but today’s empowered Americans need no such crutch.

With workers’ incomes falling, and with the United States leading all industrial nations in the percentage of its workers in low-wage jobs, it’s increasingly clear that today we need unions for many of the same reasons that the workers of 1912 did: They’re exploited and underpaid. But if it’s only the nation’s most exploited workers who need to band together, why have America’s most talented employees formed unions of their own?

Actors, writers, directors, and cinematographers all have unions. Baseball, football, and basketball players have unions. And now, ESPN.com reports, America’s track and field athletes want a union of their own as well.

The immediate grievance that has spurred the athletes to action is Rule 40 of the International Olympic Committee (IOC), which prohibits Olympic athletes from advertising for non-Olympic sponsors in the days leading up to and then during the Olympic games—that is, when they are most marketable. Rather than just trying to get the IOC to change this one provision, however, the athletes have decided to form a union to win more power for themselves with the IOC on a host of issues.

Among the leaders of this effort is Olympics star Sanya Richards-Ross, who told ESPN:

I’ve seen my husband [Aaron Ross, a cornerback for the Jacksonville Jaguars], who has been in the NFL for six years, an I’ve seen what a strong players’ union does, not only for the benefit of the players but the benefit of the sport. … There are unions in every industry because they need to have that voce, not just for financial reasons but for consideration of other things. (more…)

Tags: Jobs, sports, Unions, workers

Where is Today’s Teddy Roosevelt?

Posted September 4, 2012 at 12:00 pm, in Allied Approaches, From Harold Meyerson

By Harold Meyerson
Editor-at-Large, The American Prospect

What America feared above all was the growing concentration of wealth and political power. A Republican alliance with big business had flooded election campaigns with torrents of money, and it threatened to reduce — if not eliminate — whatever influence ordinary Americans had with their elected officials. Wall Street and the oil industry wielded outsize power and received commensurate criticism.

America in 2012? To be sure, but also America in 1912. And what’s profoundly depressing is that three of the four presidential candidates in the campaign 100 years ago confronted the challenge of corporate and financial power more forthrightly than do our candidates today. (A good guide to that century-old election is “1912,” by the late James Chace, the longtime managing editor of Foreign Affairs.)

The incumbent in the 1912 race, President William Howard Taft, wasn’t one for confronting corporations, however. Taft was a big-business Republican who opposed such radical notions as a minimum wage, the legalization of unions and increased regulation of business. His predecessor as president, Theodore Roosevelt, had regarded Taft as his protege and felt profoundly betrayed when Taft failed to live up to his expectations.

Though Roosevelt had already served nearly two full terms (as vice president, he had ascended to the presidency in 1901 after the assassination of William McKinley) he challenged Taft for the GOP nomination. He proceeded to wage probably the most radical campaign ever run by a major-party candidate. Roosevelt called for women’s suffrage, a federal minimum wage, an end to child labor and federal insurance that covered “the hazards of sickness, accident, invalidism, involuntary unemployment and old age.” He wanted to create a legal right for workers to unionize “to see [that] manhood is not crushed out of the men who toil by excessive hours of labor, by underpayment, by injustice and oppression.”

TR didn’t stop there. He also wanted to create a national industrial commission with “the complete power to regulate all the great industrial concerns engaged in interstate commerce.” Such a commission could set wage standards and even set prices on commodities like oil.

A crazy platform for a Republican candidate? Republicans didn’t think so. The party held presidential primaries in 12 states that year. Roosevelt won 1,157,397 votes to Taft’s 761,716, while Wisconsin Sen. Robert LaFollette, running to Roosevelt’s left, won 351,043. Combined, Roosevelt and LaFollette almost doubled Taft’s vote, but Taft’s control of the party machinery secured him the nomination at the GOP convention that summer. Furious, Roosevelt and his supporters bolted and formed their own Progressive Party, with TR as their standard-bearer. (more…)

Tags: big business, GOP, Wall Street, wealth

What Happens if GOP’s Voter Suppression Works?

Posted July 30, 2012 at 3:00 pm, in Allied Approaches, From Harold Meyerson

By Harold Meyerson
Editor-at-Large, The American Prospect

Suppose Mitt Romney ekes out a victory in November by a margin smaller than the number of young and minority voters who couldn’t cast ballots because the photo-identification laws enacted by Republican governors and legislators kept them from the polls. What should Democrats do then? What would Republicans do? And how would other nations respond?

As suppositions go, this one isn’t actually far-fetched. No one in the Romney camp expects a blowout; if he does prevail, every poll suggests it will be by the skin of his teeth. Numerous states under Republican control have passed strict voter identification laws. Pennsylvania, Texas, Indiana, Kansas, Tennessee and Georgia require specific kinds of ID; the laws in Michigan, Florida, South Dakota, Idaho and Louisiana are only slightly more flexible. Wisconsin’s law was struck down by a state court.

Instances of voter fraud are almost nonexistent, but the right-wing media’s harping on the issue has given Republican politicians cover to push these laws through statehouse after statehouse. The laws’ intent, however, is entirely political: By creating restrictions that disproportionately impact minorities, they’re supposed to bolster Republican prospects. Ticking off Republican achievements in Pennsylvania’s House of Representatives, their legislative leader, Mike Turzai, extolled in a talk last month that “voter ID . . . is gonna allow Governor Romney to win the state of Pennsylvania.”

How could Turzai be so sure? The Pennsylvania Department of State acknowledges that as many as 759,000 residents lack the proper ID. That’s 9.2 percent of registered voters, but the figure rises to 18 percent in heavily black Philadelphia. The law also requires that the photo IDs have expiration dates, which many student IDs do not.

The pattern is similar in every state that has enacted these restrictions. Attorney General Eric Holder has said that 8 percent of whites in Texas lack the kind of identification required by that state’s law; the percentage among blacks is three times that. The Justice Department has filed suit against Southern states whose election procedures are covered by the 1965 Voting Rights Act. It is also investigating Pennsylvania’s law, though that state is not subject to some provisions of the Voting Rights Act. (more…)

Tags: Election 2012, Mitt Romney, voter fraud, voter suppression, voting rights

Thomas Jefferson’s View of Equality Under Siege

Posted July 5, 2012 at 3:00 pm, in Allied Approaches, From Harold Meyerson

By Harold Meyerson
Editor-at-Large, The American Prospect

On the 236th anniversary of our nation’s birth — squalling to the world in our very first utterance that all men were created equal and endowed with unalienable rights — the essence of our politics remains who exactly are those men who are self-evidently equal and inherently vested with those rights. Over the subsequent two-plus centuries, we’ve invoked the spirit of our primal shout every time we’ve expanded our definition of equal men — when we moved to popular elections, abolished slavery, gave women the vote, enacted civil rights legislation and today, when gays and lesbians are winning the equal status and unalienable rights that heterosexual Americans take for granted.

But the author of our founding declaration was concerned with more than legal equality. Thomas Jefferson envisioned a nation of yeoman farmers (and, to be sure, slaveholders like himself) and wanted it to remain chiefly rural to avoid the concentration of wealth and power that would come if the nation urbanized and if finance grew into a dominant sector. His great rival Alexander Hamilton feared that the nation would remain a backwater absent cities, finance and manufacturing. As Treasury secretary, Hamilton used the powers of the nascent republic to foster industry and development. As the United States grew into the world’s dominant economy, the concerns that Jefferson voiced grew more acute. How could the United States retain its formal equality and civic virtue in the face of towering economic inequality that enabled the rich to dominate our political system?

In the first half of the 20th century, both Roosevelts and their allies devised reforms to restore some of Jefferson’s egalitarianism in what was, by then, Hamilton’s America. Progressive taxation, the establishment of wage and labor standards and the legalization of unions reduced economic inequality, while the prohibition of corporation donations to political campaigns diminished, somewhat, the wealthy’s sway over government.

But that, as they say, was then. The war that the American Right and corporate elites have waged against the Roosevelts’ Jefferson-Hamilton synthesis for the past 40 years has largely prevailed. Taxes have grown radically less progressive, the minimum wage has declined as a percentage of the median wage and unions’ legal protections to organize in the face of employer opposition have eroded. In consequence, wages are at their lowest level since the end of World War II as a share of the national income, and U.S. median household income is at roughly the same level it was 20 years ago. The nation is richer and more productive than it was 20 years ago, but all that added income and wealth has gone to the top 10 percent, and disproportionately to the richest 1 percent. (more…)

Tags: America, economy, equality, freedom, rights

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Archive for the ‘From Harold Meyerson’ Category

Corporate profits are soaring despite declining sales and temps are working longer hours than regular employees. What gives?