Class War in America: the Book

Economic absurdities that
Democrats must expose:

...because it's wrong to penalize success and hard work.

...therefore, we should eliminate the capital gains tax.

...After all, they came from, and understand, business.

...even though it is based on pitting the worlds' workers against each other.

...union bosses are only out for themselves.

...and the more the rich have, the more will trickle down to everyone else.

...Democrats are communists, or at least, socialists at heart. when we tax wealthy investors, we lose jobs. investors, not workers, create wealth. we should give them all the tax breaks possible.

...Democrats just want to tax and spend today.

General Issues:

...check out this 2-minute video.

...It's a mountain, and a terrible defense of globalization.

...for those of Indonesia, Mexico, China and India.

...and how not to do it again.

...and the "crisis" is just a ploy by those who want to destroy it.

...Republicans' most important propaganda technique.

...and get the media on your side

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The “Wage Inflation” Con:

      It’s Not Wage Inflation,

     It’s Profit Inflation

Many members of the American public have come to accept the manipulation of the prime interest rate as a necessary tool to curb increases in workers’ wages. After all, as conservatives are fond of repeating, rising wages create a greater demand for goods and services, and a greater demand for goods and services raises prices—which hurts everyone, rich and poor alike.

What conservatives never acknowledge, however, is that when the incomes of any class of people go up, there is an inflationary result. Although the disastrous effects of inflation caused by the wealthy will be covered in greater detail in Chapter 18, it’s sufficient to point out here that they have been driving up the prices of all manner of things, especially the depleting supply of desirable land and the consequent skyrocketing costs of homes and rent.

Conservatives also gloss over the obvious fact that inflation bene fits those who are causing it and can stay ahead of it, which is what America’s wealthiest citizens have been doing for more than 20 years now. And for those same 20 years, most workers’ incomes have lagged behind the inflation rate. It’s well past time for their rising incomes to cause a bit of inflation, although, as will be pointed out shortly, that doesn’t necessarily have to be the case.

The Conservative Spin on Inflation

When conservatives try to justify the huge incomes of America’s top 20%, they claim that “wealth is not a zero-sum game.” In other words, there is an unlimited sum of money, and the more the wealthy make, the more money will “trickle down” to others when they spend it. Result: everyone benefits.

With no regard for logic, however, when they speak of inflation, they always call it “wage inflation.” They reason that, if workers make more money, it has to come from a finite money pie—and that pie will have to be made bigger via higher prices. So, when it comes to worker incomes versus CEO and investor incomes, it’s as zero-sum as you can get. The more the workers get, the less corporate profits and, hence, lower income for stockholders and the CEO. 

Conservatives also never consider the possibility that corporations could accept lower profits, allow wages to increase, and still not raise prices. In addition, they ignore, at least in public, the economic benefits of “gush over-and-up” that occurs when workers make and spend more money in the marketplace.

Despite these realities, financial conservatives were able to sell the public on the idea that wealth is not a zero-sum game, that we need not worry about the skyrocketing incomes of the wealthy, and that we need worry only about minuscule increases in working-class wages. After that bit of sleight-of-hand, it was a simple matter to convince voters to elect politicians into office who had the “political courage” to keep workers’ wages from going up.

To keep this hoary scam alive and kicking, The Wall Street Journal, Forbes, Fortune, Barron’s, and Business Week never admit that the incomes of investors and corporate executives cause inflation—or that, in their opinion, workers shouldn’t share in the prosperity of our country. They simply blame inflation on the “wage-price spiral.”

Then they sadly shake their collective headlines and conclude that there’s nothing that can be done about inflation, except to destroy workers’ incomes. This has been their ritual for the past two decades, especially during the explosive economic growth of the 1990s.

The Wall Street Journal distorted economic realities when, contrary to all the evidence, it blamed inflation on workers’ wages, instead of corporate greed. In a 1994 headline, it screamed that our economy was “Entering the Wage-Price Spiral.” It explained the view of some economists about what can result when

…the demand for workers already exceeds, or is close to exceeding, the supply of people available to fill the jobs. When that happens, employers boost their pay offers, and a wage-price spiral may start. Since labor represents 70% of final product costs, inflation can result.1


The basic problem, as conservatives see it, is that there are simply too many workers for them to have a decent living.  So,

· A “wage-price spiral” is when wages go up and corporations raise their prices in order to maintain the royalty status of their investors and executives. Conservatives never worry about inflation caused by the skyrocketing incomes of the wealthy, apparently because there are relatively few of them, say, the top 20% of  Americans.

· But the large number of workers who produce America’s wealth make up 70% of final product costs. Obviously, if our new class of American royalty shared the wealth with so many people, they wouldn’t be royalty anymore.

Despite the Journal’s fears, we had three more years of record corporate profits and stagnating wages, when, in 1997, Forbes added its own spin to the “wage-price spiral.” Its periodic column, “The Forbes Index,” referred to comments of Anthony Chan, chief economist at Banc One Investment Advisors who was

…worried because, for the five quarters ended in September, average hourly earnings rose faster than the overall Employment Cost Index (wages plus benefits)—meaning nonwage benefits have been lagging. Chan expects these benefits to surge this year, driving up total compensation and forcing businesses to protect margins by raising prices.2

Realize what Chan is saying here: At a time when corporations and investors have been making outrageous profits—and not sharing any of the benefits with workers—future labor costs will force coporations to raise prices if they are to continue making huge profits!

Fortune also joined this unholy crusade—blaming workers for inflation—with the same perverted distortion: that an increase in workers’ wages, not corporate greed, is the primary cause of inflation. Under the head, “It’s Fear of Inflation That’s Spooking the Market,” it repeated the same nonsense:

With the unemployment rate already low, many traders and investors quickly concluded that companies bidding for scarce workers would start offering higher wages. Firms would then try to recoup by boosting prices, and we’d be back in the same inflationary inferno that’s burned bond investors before. Stephen Roach, Morgan Stanley’s influential chief economist, is even pushing a “worker backlash” thesis, arguing that after years of little real growth in wages, workers now have enough leverage to garner a bigger share of the pie.3


Not to be left out of this inspirational movement, Business Week joined the chorus under the head, “Inflation Is Still on the Mat—But Don’t Count It Out Just Yet.”

The biggest concern for 1997 will be a tight labor market. Inflation has been down for so long, a few analysts have pronounced it dead…. To be sure, price pressures have been almost nil. Last year, slower growth in benefits offset bigger pay gains, even in a tight labor market.… The question is: Will inflation stay down? In 1997, higher labor costs will mean that many companies must either raise prices or watch their profits get squeezed.4

These publications were not referring to the then-current wages. They were referring to the fear of, or the possibility of, workers’ wages going up! And they concluded that if wages should happen to go up, it would be fair and just—to our new American Royalty—to recoup their outrageous profits by raising prices. After all, corporations have no moral obligations to their employees or the public. Their obligation is only to their executives and stockholders.

Note also that an “inflationary inferno” is never due to obscene levels of profits. It is always due to the increase in workers’ wages. Prior to this period, as noted in Fortune, “there had been years of little real growth” in workers’ incomes.

The fraudulent nature of the “wage-price” con is especially evident when you read two articles that appeared in the same issue of Business Week. First was the traditional blame-the-workers nonsense under the head, “Trouble Ahead in the Battle to Contain Labor Costs.”

Companies can no longer rein in benefits to offset pay raises.… Rising labor costs mean that businesses will face a tough choice: Raise prices, if they can, to cover the added expenses and protect profits. Or hold prices steady, hoping that increased sales and productivity gains will save the bottom line. How the price-profit dilemma plays out will determine inflation’s performance this year….

    Tight labor markets also mean that workers may begin to lose their “heightened job insecurity” that, in Greenpan’s words, “explains a significant part of the restraint on compensation and the consequent muted price inflation.”5  

After thus claiming that companies will have to raise prices if workers get more money, Business Week then unwittingly gave us a classic description of greed and profit inflation in a following article of the same issue. Its headline revealed “An Enormous Temptation to Waste” for corporations and pointed out that

U.S. companies are piling up cash.… “In company after company, we’re seeing huge buildups of cash,” says Jeffrey D. Fotta, CEO of Ernst Institutional Research in Boston…. All told, liquid assets held by U.S. nonfinancial companies hit a staggering $679 billion at the end of the third quarter, up 21.5% in a year.… But too much money creates a vexing problem: what to do with it. “Having that much cash is an enormous temptation to waste,” cautions Steven N. Kaplan, a professor of finance at the University of Chicago’s business school.…

   The worry is that many companies are taking on cash so fast they can’t spend it efficiently.… Some companies, such as Boeing Co. and the Big Three automakers, plan to keep huge cash reserves to see them through the next economic downturn…. “Can you ever have too much capital?” asks Maurice R. Greenberg, chairman of insurance giant American International Group, Inc., who continues to add to his company’s coffers. Like many executives, he thinks not.6

Could the hypocrisy of blaming inflation on workers’ wages be clearer? After 20 years of warfare on the incomes of working Americans:

§         Corporations now have so much money they have an “enormous temptation to waste.”

§         For years companies have told workers that they couldn’t raise wages because “competition demands it.” If we were to have a healthy economy, and remain competitive, companies had to reduce labor costs by firing employees, also called “restructuring.”

§         And what are American corporations doing with all the money that they got from the sacrifices they forced on working Americans? Simple. To hell with working Americans! They’re going overseas where wages are even lower.

§         General Motors made the headlines during this same time period, fighting the unions that wanted more investment in jobs in this country. GM’s position: competition demands that we go over-seas, that we continue to pay executives huge salaries, that we give outrageous returns to wealthy investors—and, by the way, who-ever said the American employees who built this company had any rights?

§         And if corporations spend their money so fast they can’t “spend it efficiently”—hey, that’s their right.

§         Naturally, CEOs and wealthy investors must be able to make it through “the next economic downturn.” How nice. Too bad the bottom 20% of working Americans aren’t sure how they’re going to make it through next week, even in this “prosperous” econ-omy.

Take a look at two more revealing articles—again from the same issue of a single publication. On May 5, 1997, The Wall Street Journal made a detailed analysis of the possibility that working Americans may start making higher incomes. Under the head, “Economy’s Hot Pace Will Cool a Bit,” the Journal observed that

…it is hard to ignore the fact that the unemployment rate dropped to 4.9% of the work force in April—the lowest level since 1973—from 5.2% in March…. The question now is: How much will the economy slow?…

   The economy may be slowing to a more-sustainable pace, as the Fed had hoped, but the jobless rate remains too low for the Fed’s comfort.7

In another article of the same issue, the Journal proclaimed that “Corporate Profits Leap Unexpected 18%” in just one quarter of the year:

Companies’ earnings surged a better-than-expected 18% in the first quarter, boosted by a surprisingly strong economy, slowing growth in worker-benefit costs and a renewed drive for more efficiency.… Most companies in industries ranging from autos and airlines to steel, semiconductors and pharmaceuticals beat Wall Street estimates of earnings growth.8


With both kinds of data hitting Republican and conservative Democrat politicians between the eyes daily—often in the same publication—you know that what they are doing to working Americans is deliberate.

The people who read these publications—politicians, corporate executives of all levels, investors, small business owners, inheritors of wealth, doctors, accountants, investment bankers and so on—all have to know that:

§         Every piece of objective evidence shows that the income and wealth disparity between themselves and working Americans is becoming a vast chasm.

§         Our present conservative economic policies ensure that this condition will continue; wages will stagnate and corporate profits will soar, at least until consumers run out of money.

§         Corporations could share more of their bounty with working Americans without having to raise prices, if they would accept lower profits.  And, in sum,

§         They are enjoying their affluence on the backs of, and at the expense of,  working Americans.

So the bad news for workers is that anytime their wages start going up, it will be a signal for conservative politicians to take additional action against them, even if corporate profits went up 18% in the previous quarter.

This period, from 1994 to 1998, is especially significant. There still was considerable doubt among conservative economists that working-class Americans had been entirely stripped of what little econom-ic and political power they once had. Almost every issue of every conservative financial publication during this time had some refer-ence to the state of wage increases across the country.

By mid-1999, at least some conservatives were beginning to breathe a bit easier. On April 30, The Wall Street Journal repeated its feigned mystery-that-defies-economic-theory with the somewhat optimistic head and sub-head, “Pace of Wage Growth Slowed in Quarter; Slowdown Defies Textbooks As Figures Come in Face of Tighter Labor Market.” It went on to note that

The news may not be great for workers.… But it’s good for companies, and for investors and policy makers worried about the possibility of inflation. A slowdown in compensation helps explain why profits for many companies rebounded in the first quarter.9

Incredible. After more than 20 years of economic growth, evertighter labor markets, continuing wage stagnation, rising corporate profits and a soaring stock market—policy makers still “worry about the possibility of inflation.” This, at a time when wage growth was actually slowing.

With these trends continuing well into 1999, one would think that conservatives could relax a bit about workers making more money. Not so. Three months after the above optimistic Journal article, in July 1999, Business Week resumed the worrisome trend and reported, “Good News about Jobs Is Bad News to the Fed”:

The Federal Reserve cannot come out and say it directly, but the main reason policymakers want to restrain economic growth is to loosen up the labor markets. To admit that would be political suicide. But the Fed knows that, with markets already so tight, job growth must slow if the economy is to avoid a surge in wages that could trigger a rise in inflation.10

One wonders why Business Week thinks that the Fed can’t “say it directly”—that our country’s official economic policy is to keep working-class wages from going up. Greenspan has been making such public pronouncements for years now. However, possibly it would be political suicide to admit the extent to which Fed policy is overtly, consciously and blatantly anti-worker and pro-investor.

So far, we’ve been concerned with workers’ wages, the prime rate and inflation. Now let’s look at The Great Debate, in which America’s modern barbarians speculate about the best way to destroy workers’ incomes—without cutting into corporate profits.


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