Class War in America: the Book
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The Conservatives’ Catch-22
For sheer hypocrisy, nothing can match the Republicans who claim that we should reduce taxes on rich people because that would result in more jobs and higher wages for workers.
Their propaganda spin goes like this:
§ The U.S. should reduce inheritance taxes, capital gains taxes and income taxes on rich people so they can have more money to invest.
§ Greater investment means greater growth in the economy.
§ Greater growth in the economy creates more jobs and a greater demand for workers.
§ Greater demand for workers gives workers more power to nego-tiate for higher wages. And presto,
§ Workers’ incomes go up and they get a bigger share of the wealth that they actually produced.
Undoubtedly, some politicians who make this decrepit argument actually believe it. It’s been repeated so often and so loudly that those who don’t read our best conservative financial publications assume that what they’ve heard on their corporate-owned TV stations is true. You’ll have to decide yourself after you read the following pages, which politicians are deliberately dishonest, and which ones are simply stupid.
There is a Catch-22 to promises that economic growth will create higher wages. True, in the past, the best climate for wage growth has been when the economy was growing. The Catch-22: modern conservatives have learned how to allow the economy to grow to the extent that it increases profits, but, also, how to slow growth when it starts to cause higher wages.
Readers of our premier financial publications know that, as soon as growth reaches a point at which workers begin to benefit, Wall Street will scream bloody murder and demand that their congressional stooges in Washington do something to cool off the economy.
Economic growth does not determine wages—power determines wages. Since Republicans and conservative Democrats got control of our federal government, corporations and investors have all the power and workers have none.
Conservative politicians know damn well that if they really wanted to stimulate economic growth in the United States, they would protect workers’ abilities to earn higher incomes! In fact, as the excerpts throughout this entire book demonstrate, higher wages always result in a greater demand for products, a growing economy and, mostly because of corporate greed, inflation. When this is unintentionally allowed to happen, conservatives call it “excessive growth.”
On the other hand, when the wealthy make more income, either through tax breaks or increased profits, they will invest it in whatever part of the world most brutalizes workers. That’s usually not the U.S.
Note how Barron’s described growth—to the point where wages might increase—as “something wicked this way comes.” Under the head, “Investors Beware: It Seems Inevitable That Greenspan & Co. Will Pull the Trigger on Rates,” it warned investors
…to dust off their copies of Shakespeare’s Macbeth, because something wicked this way comes: tighter Fed policy.…
In recent months, Fed officials have made it clear that they have been placing their bets on slower growth in the second half. But the economy continues to grow faster than the Fed would like, a predicament that may fan smoldering fears that inflation will rise later this year.1
When does the Fed’s trigger finger start to itch? Easy. When the rate of growth starts to increase the wages of working Americans! It’s automatic:
§ Whenever wages (“something wicked”) start to go up (“this way comes”), the Fed must satisfy the corporate financial supporters of Republican and conservative Democrat politicians—and raise the prime.
§ You see, the economy wasn’t following the script. Despite the 1993 tax increases on the wealthy, the U.S. had a robust, growing economy for the rest of the decade.
§ Unemployment was still going down, which means that working Americans might actually start to benefit—as conservatives had always promised—from increasing economic growth.
§ As usual, good news for workers about the “health of the labor market” is bad news for investors.
§ And when those investors realize the “predicament” they are in (wages going up) and the economy is growing faster than the Fed would like, it’s time to “pull the trigger.”
Under the head, “This Slowdown May Be Short-Lived,” Business Week warned its readers that they “had better take a closer look,” at the seemingly favorable economic growth figures (slower) and favorable unemployment figures (higher). Although the economy seemed to be slowing at the time, “cheers could quickly turn into boos” if it didn’t slow enough to stop workers’ incomes from going up:
The markets had better take a closer look. First of all, while nonfarm employment growth slacked off last quarter, other key labor-market statistics give no indication that slower economic growth will continue into the fourth quarter…. Even if the slowdown were lasting, it would take time for worker shortages to ease and the upward pressure on wages to abate….
The economy is slowing and so is inflation. But if the emerging trends in wages and labor costs continue, those cheers could quickly turn into boos.2
The tone of the previous articles is as important as their substance. Feel how these financial conservatives are talking about the lives of working Americans: Their incomes, their standard of living, and their ability to make it through this decade of the conservative revolution. Wall Street likes it when the economy slows enough to force working Americans into unemployment:
§ They “applauded” the news that nonfarm payrolls went down by 40,000 live human beings—fellow citizens of this country.
§ But, “take a closer look” investors, a warning is in order. Even if the bad news for workers is real, it would take time for the “upward pressures on wages to abate.”
§ Still, Business Week cited other good news: Fifty-seven thousand workers got fired the month before. A mixed blessing though, be-cause the factory workweek rose, and overtime remained high.
§ So, contentment for Wall Street is: stagnant wages, record profits, a skyrocketing stock market, growing income disparity—and Republicans and conservative Democrats in control of the politi-cal process. What a great new world conservatives have created.
§ But, again, the warning: if workers, despite all the power aligned against them, start getting better incomes, then “the cheers be-come boos.”
Joining this hysterical anti-too-much-growth frenzy, The Wall Street Journal made the crucial distinction between a merely “sizzling” economy and an “overheating” economy. Under the head “Economy Warms, but Isn’t Overheating,” it reported that
The economy continued to sizzle last month, but cast off few sparks indicating overheating.
And with Mr. Greenspan having told Congress earlier in the week that he continues to remain vigilant for any warning signs that might force him to boost interest rates later this month, the markets were examining the tiniest details of Friday’s releases for any glimpse of inflation.…
[Indications that “raises aren’t escalating and are quite possibly decelerating”]…isn’t enough to pacify anti-inflation hawks. They look for advance signs that wage increases will begin. Mr. Greenspan, for one, scrutinizes worker insecurity. He has said in recent remarks that he believes a pervasive fear of unemployment has kept wage demands modest, but he is worried that the robust labor market would soon embolden workers to demand more.3
The economy “sizzles” when investors get wealthier. But the economy “overheats” when workers start to participate in its benefits.
A General Truth versus a Deliberate Lie
It is important to distinguish between a general truth and a deliberate lie. When Republicans and conservative Democrats say that most economists agree that a growing economy will bring about higher wages for working Americans—they’re telling what should be a general truth.
However, that general truth becomes a deliberate lie when those same politicians know full well that they will use their power to prevent the general truth from functioning—if economic growth should actually start to improve wages.
In fact, wages don’t even have to begin affecting inflation. All they have to do is to give warning signs that provide, as the Journal put it, a “glimpse of inflation.” Most Republicans and conservative Democrats could rest assured at this point in 1997, however. Because, despite the booming economy:
§ It looked as if wages were “quite possibly decelerating.”
§ Still, that’s not enough for “anti-inflation hawks” who don’t want increases in wages to even begin, let alone catch up with inflation.
§ Horrors! Workers may become emboldened enough to ask to share in our country’s growing prosperity.
It’s not a debatable issue: Through their economic policies, conservatives force huge financial sacrifices onto working Americans. And The Wall Street Journal clearly described who benefits from those forced sacrifices. Under the head “The Great Divide,” it reported that
CEO pay keeps soaring—leaving everybody else further and further behind. The earnings gap between executives at the very top of corporate America and middle managers and workers has stretched into a vast chasm. Last year, the heads of about 30 major companies received compensation that was 212 times higher than the pay of the average American employee…. That’s nearly a fivefold increase since 1965, when the multiple was 44.… Meanwhile, U.S. wages and benefits climbed just 2.9% last year. That was the smallest advance in 14 years.4
Under the head “Executive Pay,” Business Week also presented a clear picture of the growing income gap between working Americans—and wealthy investors and the executives who work for them:
Few doubt 1996 was a stellar year. The Standard & Poor’s 500-stock index rose a stunning 23%. Corporate profits rose, too—an impressive 11%.…
For 1996, CEO pay gains far outstripped the roaring economy or shareholder returns. CEOs’ average total compensation rose an astounding 54% last year, to $5,781,300…. That largess came on top of a 30% rise in total pay in 1995—yet it was hardly spread down the line.
The average compensation of the top dog was 209 times that of a factory employee, who garnered a tiny 3% raise in 1996.5
All these articles appeared in roughly the same time period, 1996-1997, thus removing any doubt that those in power knew exactly what they were doing. People who read these publications know these things all go together: “just-right economic growth,” stagnant wages, record corporate profits, soaring executive incomes, and a skyrocketing stock market. These articles also are typical of the entire two decades of the 1980s and 1990s, and continued to be published in late-1999.
At the time of the last draft of this book, conservatives were still debating about whether economic growth was merely sizzling or “dangerously” overheating. In “Which Mask Will Greenspan Wear Next?” (November, 1999) The Wall Street Journal reported that
For three years now, Alan Greenspan has morphed back and forth between the New Economy’s most powerful advocate and its most menacing skeptic. With the recent revival of the on-again/off-again debate about whether the U.S. is growing too fast for its own good, the Federal Reserve chairman once again is forced to make a choice: Does he want to play Santa Claus this year, or Scrooge?6
As usual, in the very same Journal issue, there was the almost daily celebration of a skyrocketing stock market. Under the head, “Stock Market Regains High Spirits After Shaking Off October Demons,” it observed that
Stocks are skyrocketing. Amid signs that inflation is weakening and that interest rates could stop rising, the Nasdaq Composite Index, heavy in technology stocks, already has soared back [after an October sell-off] into record territory….
Coming right after labor-cost and economic-growth data that suggested strong growth and low inflation, the comments [by Greenspan] fueled hopes that the Fed would step aside and let the stock market surge again.7
Two days after the previous two articles came out, November 3, 1999, the Nasdaq composite stock index closed for the day above 3000 for the first time in history and was up 113% from 13 months before. In other words, in 13 months, passive investors more than doubled their wealth without doing a lick of real work. These are the people who panic if workers—who made it all happen—see their incomes start to rise at a rate of just 3% per year.
Record stock market; wages, adjusted for inflation, still below the 1973 level. Getting monotonous, isn’t it? But it’s not surprising and it’s no accident. Very simply: Conservative politicians always appoint Federal chairmen who will control the labor markets and fine-tune the growth of the economy—not too hot, which would allow workers to benefit—but not so cold that corporate profits would be hurt.
These actions over the past 20 years have allowed CEOs, investors, and the established wealthy to get much richer. They are the same people who
§ lecture American citizens about why workers must make wage sacrifices—so our corporations can remain competitive with for-eign corporations,
§ blame any price increases, that they implement, on labor costs—the old “wage-price spiral,”
§ sit in on each others’ companies’ boards of directors and vote themselves huge income increases, and promote anti-worker managers to positions of power,
§ support politicians who promise to do all they can to destroy labor unions,
§ blame complaints about poor working conditions on the lack of a “work ethic” among working Americans,
§ support politicians who will allow them to do whatever they wish with the environment or to the American public, and
§ promise voters that they should continue to put Republicans and conservative Democrats into Congress, because they are the ones who gave us this fantastic economy.
Now it’s time to look at how these paragons of virtue, via their personal political representatives, were able to create this kind of an economy. Without a doubt, the biggest weapon in the conservative class warfare arsenal is the myth of unmanaged “free” trade.
Now go to: