At a time when corporate profits are through the roof, the Dow is flirting with 12,000, Wall Street paychecks are fat again, and big corporations are sitting on more than $1 trillion in cash, you'd expect jobs be coming back. But you'd be wrong.
The U.S. economy added just 36,000 jobs in January, according to today's report from the Bureau of Labor Statistics. Remember, 125,000 are needed just to keep up with the increase in the population of Americans wanting and needing work. And 300,000 a month are needed -- continuously, for five years -- if we're to get back to anything like the employment we had before the Great Recession.
In other words, today's employment report should be sending alarm bells all over official Washington. Granted, unusually bad weather may have accounted for some of the reluctance of employers to hire in January. But even considering the weather, the economy is still terribly sick. (Technical note: The official rate of unemployment fell to 9 percent from 9.4 percent, but that's because more workers have left the labor market, too discouraged to continue looking for work. The official rate reflects how many people are actively looking for work.)
We have two economies. The first is in recovery. The second remains in a continuous depression.
The first is a professional, college-educated, high-wage economy centered in New York and Washington, that's living well off of global corporate profits. Corporations continue to make money by selling abroad from their foreign operations while cutting costs (especially labor) here at home. Wall Street is making money by taking the Fed's free money and speculating with it. The richest 10 percent of Americans, holding 90 percent of all financial assets, are riding the wave. And their upscale spending has given high-end retailers and producers a bounce.
The second is most of the rest of America, and it's still struggling with a mountain of debt, declining home prices, and job losses. In coming months most Americans will also be contending with sharply rising prices of food and fuel.
Our representatives in Washington see and hear mostly the first economy. The business press reports mainly on the first economy. Corporate and Wall Street economists are concerned largely with the first economy.
But the second economy will determine our politics in 2012 and beyond.
And not even the first can be sustained permanently on its own. Corporate profits cannot continue to rise on the basis of foreign sales (which are slowing as Europe adopts austerity and China raises interest rates), the purchases of the richest 10 percent of Americans (which are dependent on a rising stock market), and cost-cutting measures at home (which are necessarily limited). Without a strong and broadly-based middle-class recovery, America's big money economy will fall in on itself. A major stock market "correction" is a certainty.
Robert Reich is the author of Aftershock: The Next Economy and America's Future, now in bookstores. This post originally appeared at RobertReich.org.
Robert Kuttner: Business Doesn't Need American Workers
To the wealthy I say you should support this solution and stop lobbying congress for special privileges and exemptions. In the long term you will be wealthier than you will if you don't, and you will enjoy the benefits of a more fair and balanced governance. The middle class lays the golden eggs, but if you take too many, they disappear, and so do you.
To the wealthy I say you should support this solution and stop lobbying congress for special privileges and exemptions. In the long term you will be wealthier than you will if you don't, and you will enjoy the benefits of a more fair and balanced governance. The middle class lays the golden eggs, but if you take too many, they disappear, and so do you.
History is written by the winners. Nothing new there. For our current predicament, who is the winner and who is the loser? The winner will re-write what is going on and stimulate choices of this second economy that will seemingly "make common sense" but will be absolutely wrong. The rich will tell you that it's government that is causing the economy to be bad/slow, but if you cut back spending, won't we be totally repeating all the actions that led to the Great Depression being really a big one, not the minor downturns that had been occuring before 1920s?
Common sense will not be enough to understand calculus. Or Macroeconomics. Or history. It is hard work, tough thinking, you must be able to learn a new concept that is tough. Or you will fail the subject, and thus bound to repeat history.
http://video.google.com/videoplay?docid=-7932485454526581006#
That we have solid workers seeking jobs even as our bridges are falling down and other things need work means only that our economic system is failing us.
Every skilled worker cherishes their tools and private property is, thereby, revealed as a great principle. Even in a more Socialist structure, personal enterprise is necessary to make things work. To deny any of this is ridiculous. Never the less, honor and the sanctity of contracts is more important still. These things involve social attitudes and, as convenient, regulation.
Yet, Americans will continue to vote their pocketbooks. We have the model of the Liberty poll of 1936 that interviewed people with telephones. It predicted a landslide for Alf Landon, but Franklin Roosevelt carried every state except Maine and Vermont. Managers and supervisors with job security actually benefited from the depression and the lower prices, but the most people were badly off and frightened.
The 2012 campaigns may be waged on the federal deficit, abortion, and the culture wars, but an economic recovery -- something that is not assured -- will favor the incumbents.
The average American does have more ego than education and knowledge, even the average educated American. Walk under the night sky and look out into infinity. This is supposed to make us feel small but everything we know says we are at the center of that infinity. That's ego sanctioned by our science!
We also had a Triple AAA rating. Not long ago it went went down to a Double AA Rating. Now we have a A+ Rating. Follow the dollar to see what the real numbers mean. Always follow the money.
The land of Temp Workers & the Unemployed!
Taxes basically fall under the Willy Sutton rule. Sutton, a notorious bank robber, when asked why he robbed banks, said, "That's where the money is."
Taxes are to be taken from wherever the money is. It is responsible to do so and empowers our government to better serve us. Jesus advised the people to pay their taxes, saying, render unto Caesar that which is Caesars." Some Christians argue that was a different time and times change, but if you oppose Christ in every way are you still a Christian, different time or not. This is relevant as many Christians seem to confuse taxes and sin.
1. Corporate taxes are about $220 billion of fed revenue. This is miniscule compared to other sources (income tax and payroll taxes). The adverse impact of tax gimmicks like the breaks the oil companies get creates perverse incentives. We can afford to eliminate corporate taxes IF we get something better in return. No tax = equal incentives to American companies.
2. I would prefer to support the feds with progressive income taxes. Hence, forcing corporations to issue dividends creates a nice revenue stream for taxation. Insofar as stocks are owned outright and aren't in tax deferred accounts they are in the hands of the affluent, who can cough up some more taxes. Likewise, do away with the dividend and cap gain preference. Why tax labor more than capital?
3. I would do away with the regressive payroll tax too. Raising the cap to infinity and dropping the rate would be second best. Insofar I want all federal revenues to come from progressive income taxes I'm quite confident the IRS is up to the task.
4. Once the economy staggers back to its feet the federal budget should equal projected annual expenditures PLUS amortization of the debt and future liabilities of Medicare.
5. The only opportunity for expenditure cuts is the bloated defense budget. Until we rethink our role as the world's cop that won't happen as the "military-industrial complex" lives on, feasting at the trough of neo-imperialistic greed.
Don't believe it? Read this cover story in Business Week regarding the REAL costs of offshore outsourcing - http://www.businessweek.com/magazine/content/07_25/b4039001.htm.
That was written more than 3 years ago.
Looking back over that period, it does seem that the writer of the article and the economists providing their analysis therein appear to be spot on: a significant portion of U.S. GDP being reported is being buffered by international revenue rather than real domestic GDP. The corporations are getting rich by moving tasks overseas. But it's still being counted as "U.S. GDP."
Thus the disparity and incongruency between U.S. economic "growth" and the shrinking number of jobs here. Take away the phantom GDP being made abroad, the real numbers will show that offshore outsourcing has had a devastating impact on the U.S. economy.
The simple fact is corporations love regulation but they want the regulations to protect them and to hurt YOU. H-1b work visas is a perfect example of how the corporate communist have taken over.
Yes, Communist China has much less regulations and it is a shame for us.
Yes, corporations do no like regulations, but DC has so much power, that it can destroy even giant corporations (BP, Microsoft) in a matter of months. DC can crash smaller corporations in a week or two. It is matter of life and death for them to have a lobbying presence in Washington. Also Washington steals so much from private citizens and corporations in taxes, that it is very tempting for some corporations (GE, Citigroup, GM) to get some of the stolen money for themselves without working hard for these money.