However, not everyone is as optimistic. Nearly 30% of respondents rate their financial situation as “only fair” and 15% say it’s “poor.” Meanwhile, 25% worry “all” or “most” of the time that their household income won’t be enough to cover their expenses. Their biggest concerns: Saving enough for retirement and unplanned medical costs, with 54% and 51%, respectively, saying they’re “very” or “moderately” worried about each prospect. Other studies could point to why: Northwestern Mutual surveyed more than 2,000 U.S. adults in 2018 and found that a third have less than $5,000 stashed away for retirement, though experts generally recommend trying to accumulate $1 million. Meanwhile, 21% have nothing saved at all, the data shows.
A third of Americans don’t have enough savings to cover an unexpected $400 expense, like a medical emergency, without selling something or borrowing money, the Federal Reserve found. And one in four Americans have skipped a medical treatment in the past year because they couldn’t afford it, another recent Gallup poll found. Plus, while key expenses like housing and student loans continue to rise, wages have remained mostly stagnant for many American workers. Retirement and health care aren’t Americans’ only fears. About 36% say they’re concerned about not having enough money to pay their monthly bills and another 36% worry about not being able to pay for their children’s college, Gallup reports. Around a third, or 30%, worry they won’t be able to keep up with housing costs, and 20% worry about paying down their credit.
Next month marks the 10th year since the Great Recession was officially over, although it wasn’t until September 2010 that the National Bureau of Economic Research made the announcement. Since then, numerous aspects of the economy gradually improved through the rest of Barack Obama’s presidency, and since Donald Trump began squatting in the White House. But while the acute economic problems of that terrible downturn have vanished, most of the chronic ones that predate it remain. And, of course, many people who lost their jobs then are now employed but haven’t yet recovered from losing their homes, obliterating their savings, delaying or eliminating their offsprings’ college plans, or even making as much money as they were when the economy went south thanks in great part to well-paid rip-off artists whose only “punishment” was smaller bonuses for a couple of years.
Every month, Advisor Perspectives takes a look at what non-farm, non-supervisory, and production employees are being paid. They make up about 80% of all U.S. workers. Using the Consumer Price Index for Urban Consumers to adjust wages for inflation and adding that to the average number of hours employees work, AP’s Jill Mislinski comes up with hypothetical real annual earnings. In 1964, the average work week was 38.8 hours. Now it’s 33.7. If pay had risen commensurately, that would be a good thing. A four-day work week would be a boon for all but the most committed workaholics. But that’s not what happened. Thus, today, taking the average work week and multiplying it by the average hourly wage, he comes up with average inflation-adjusted annual earnings of $39,277. That’s down 11.5% since the peak in weekly hours in October 1972. And that gross figure doesn’t take into account reductions for taxes or other deductions. Hourly inflation-adjusted wages for four-fifths of the workforce—what economists label “real wages”—are now way above what they were in the depths of the Great Recession, but slightly less than they were at their peak 47 years ago. This is after a decade of economic growth since that recession officially ended in June 2009.
“Oligarchy” means government of and by a few at the top, who exercise power for their own benefit. It comes from the Greek word oligarkhes, meaning “few to rule or command.” Even a system that calls itself a democracy can become an oligarchy if power becomes concentrated in the hands of a few very wealthy people – a corporate and financial elite. Their power and wealth increase over time as they make laws that favor themselves, manipulate financial markets to their advantage, and create or exploit economic monopolies that put even more wealth into their pockets. Modern-day Russia is an oligarchy, where a handful of billionaires who control most major industries dominate politics and the economy.
What about the United States? According to a study published in 2014 by Princeton Professor Martin Gilens and Northwestern Professor Benjamin Page, although Americans enjoy many features of democratic governance, such as regular elections, and freedom of speech and association, American policy making has become dominated by powerful business organizations and a small number of affluent Americans. The typical American has no influence at all. This is largely due to the increasing concentration of wealth. In a 2019 research paper, Berkeley economics professor Gabriel Zucman determined that the richest 1 percent of Americans now own 40 percent of the nation’s wealth. That’s up from 25 to 30 percent of the nation’s wealth in the 1980s. The only country Zucman found with similarly high levels of wealth concentration is … Russia.
America has had an oligarchy before – in the first Gilded Age, which ran from the 1880s until the early 20th century. We are now in a second Gilded Age. As the great jurist Louis Brandeis once said, “We can have democracy in this country or we can have wealth concentrated in the hands of a few, but we cannot have both.” We must, once again, make the correct choice and reduce the economic and political power of the American oligarchy.
The Blame goes to Us more than China
I do in large part blame China for manipulating various factors that created an uneven playing field on trade, resulting in the hemorrhaging of millions of good-paying manufacturing jobs from the U.S. But most of all, I blame U.S. policies for allowing China to get away with it for decades. I also blame our policies for overlooking the issue & taking positions that feed into our increasingly crony-capitalist, oligopolistic economic system, as described in this article posted from huffpost.com/entry/american-
The fact that American workers are grappling with the loss of manufacturing jobs isn’t the fault of China but is due to the U.S. government’s failure to tap into burgeoning corporate profits to improve workers’ plights, a leading economist argued in a CNN column Sunday. “China is being made a scapegoat for rising inequality in the United States,” economist Jeffrey Sachs charged. The richest 10 percent of Americans in 2018 represented 70 percent of all wealth in the nation, according to a recent study. China has been playing economic “catch-up” in the marketplace to battle poverty and improve living standards for its residents as any nation would, emphasized Sachs, a world-renowned Columbia University economics professor and public policy adviser. At the same time, American corporations have eagerly sold goods to China’s vast market — and boosted profits by exporting U.S. jobs to Chinese workers earning lower wages.
“Instead of blaming China for this normal phenomenon of market competition, we should be taxing the soaring corporate profits of our own multinational corporations and using the revenues to help working-class households, rebuild crumbling infrastructure, promote new job skills and invest in cutting-edge science and technology,” Sachs argued. The most “basic lesson of trade theory” is not to stop trade but to “share the benefits of economic growth so that the winners who benefit compensate the losers,” Sachs wrote. “Yet under American capitalism, which has long strayed from the cooperative spirit of the New Deal era, today’s winners flat-out reject sharing their winnings.”
President Donald Trump, with the backing of Republican lawmakers, slashed corporate taxes from 35% to 21%. Sixty of America’s top corporations — including Amazon, Netflix, Chevron and IBM — paid $0 in federal taxes for 2018 under the new law. U.S. businesses contributed the smallest share of federal tax revenue in at least 59 years in 2018, according to the IRS. Individual taxes accounted for 57% of total revenue, and an additional 33% came from employment taxes, Bloomberg reported. Corporations paid only 7.6% of the total tax revenue. After adjusting for refunds, the share may be even lower, Bloomberg noted. Businesses got more than $60 billion back from the IRS.
Whatever the future holds, China’s growing economic power can’t be quashed, Sachs cautioned. “China refutes America’s pretensions to run the world. The United States, after all, is a mere 4.2% of the world’s population, less than a fourth of China’s,” he wrote. “The truth is that neither country is in a position to dominate the world today, as technologies and know-how are spreading more quickly across the globe than ever before.”
President Trump’s signature tax law, the 2017 Tax Cuts and Jobs Act, left wages growing less quickly than the overall economy, which itself got only a minimal boost, according to a Congressional Research Service (CRS) report released Tuesday. “On the whole, the growth effects tend to show a relatively small (if any) first-year effect on the economy,” the report found. The report said the tax law’s effects on the economy were smaller than those predicted by a slew of forecasters and added that the economy’s growth was not consistent “with the direction and size of the supply-side incentive effects one would expect from the tax changes.” The CRS, which functions as a think tank of sorts for Congress, also found wages were not growing as quickly as the economy writ large. Adjusted for inflation, wages grew 2 percent in 2018, less than the 2.9 percent gross domestic product growth rate. For workers in production and nonsupervisory roles, wages grew only 1.2 percent.
The report’s findings fly in the face of many arguments Republicans made in support of the bill, including claims that it would pay for itself by producing a spurt of economic growth that would cover the revenue losses. As proof, the GOP had pointed to big companies, such as AT&T, which announced large worker bonuses following the law’s passage. The CRS found the combined bonuses accounted for only 2 to 3 percent of the overall tax cut. Instead, companies used large portions of the tax cut to buy back stocks, a move Democrats have criticized because it helps enrich stock owners, not workers. Sen. Ron Wyden (D-Ore.), the top Democrat on the Senate Finance Committee, said the report showed the law did not live up to its promises. “Republicans made three unbelievable claims about their bill: It would pay for itself, raise wages by $4,000 and jump-start investment in the United States,” he said. “In fact, the tax cuts are paying for just 5% of their cost — not 100%. Workers did not see a significant wage increase — the tax cuts largely paid for stock buybacks that push CEO compensation even higher. And the tax cuts have had a negligible effect on investment in the United States,” he added.
Sorry, America’s middle class: President Donald Trump’s signature tax code overhaul has not generated any meaningful new economic growth that wasn’t already underway, the nonpartisan Congressional Research Service (CRS) has found. The new numbers inject further complexity into a contentious and ongoing debate around the landmark tax legislation as to who actually benefited from its passage. But the study should also offer additional clarity: With hard numbers now available on the economy’s performance in the first full year of the legislation, it’s easier than ever to talk instead about who got what and how — and the answers, so far, aren’t pretty. Large corporations with shiny accounting departments ended up being the largest beneficiaries of the tax bill’s largesse, with the rate of tax they actually pay dropping by half in 2018, according to the CRS analysis. But the vanishingly insignificant comparative break Trump’s law gave workaday people lays the game bare. This tax bill is already reshaping the real-world economy in ways that limit the prospects of ordinary people, potentially reinforcing the structural inequities that adversely impact democratic society.
Trump and his congressional allies had forecast massive jumps in GDP growth and working-family incomes from the package. None materialized in year one. Annual growth hit 2.9% – identical to the 2015 mark, well below the 3.3% the Congressional Budget Office forecast when it sought to predict the tax bill’s impact in April of 2018, and right in line with what the CBO had predicted the economy would have done without Trump’s corporate-tax munificence. The report’s findings underscore the deceitful nature of the administration’s first-term sales pitch. Working people were supposed to benefit from the slashed corporate income tax rate and related rules tweaks intended to lure offshored profits back into the U.S. economy. American companies weren’t hiding $3 trillion in profit outside the country out of malice, the argument went. Rather, they were afraid of seeing it taxed too sternly, and would happily bring it home to make productive and equitable use of it just as soon as they felt it was safe from the taxman.
Some business heads dutifully followed this script in small and symbolic ways shortly after the law was signed, issuing year-end bonuses to their frontline employees and accompanying them with heavy fanfare in the press. But even the high-end estimates of those bonus payments account for less than 3% of the money corporate payers got handed back to them by the tax law. Those bonuses may have had as much to do with firms’ recognition that falling unemployment rates would make it easier for unhappy workers to leave for greener pastures, the CRS report notes. So what happened to the other 97% of the money corporate accountants were handed by the government? A trillion dollars of it went to shareholders, as the law triggered a record wave of stock buybacks – an unproductive back-scratching activity that keeps the money firmly ensconced in upper-class hands that have little reason to spend that new cash back into the economy where working stiffs make their living. This grand act of class solidarity between wealthy elected officials, wealthy corporate executives, and wealthy investors was entirely predictable.
Corporate tax repatriation enticements and rates-slashing typically generate this kind of unproductive reshuffling of capital – thereby reinforcing the working class’s sense that they aren’t even being dealt into the hand. Such stark differences in outcomes for the masses and the privileged few help fuel the populist anger that’s on the march across nearly every developed democracy on the planet. Wages – a more stable indicator of how much wealth capitalists are allowing to pass through to their labor than any one-off bonus – offer no respite from the gloomy CRS diagnosis. Blue-collar wages rose just 1.2% in 2018 after accounting for inflation, the report’s authors found, which “indicated that ordinary workers had very little growth in wage rates.”
The impact on wages has been insignificant, despite the $4,000 yearly increase for households promised by the White House. “Real wages grew more slowly than GDP: at 2.0% (adjusted by the GDP deflator) compared with 2.9% for overall real GDP. Such slower growth has occurred in the past,” the report said. “The real wage rate for production and nonsupervisory workers grew by 1.2%.” The corporate tax cuts did not results in new investment from abroad or wage increases: “While evidence does indicate significant repurchases of shares, either from tax cuts or repatriated revenues, relatively little was directed to paying worker bonuses, which had been announced by some firms.” The report underscores how unbalanced the tax cuts were. (“Statutory rate reductions for individuals were relatively small compared with the corporate rate reduction.”) If the tax cuts were intended to be a middle-class tax-relief plan, it was the least competently drafted bill in history.
Transfers of headquarters overseas for tax purposes (inversions) had actually slowed before the tax cuts. The tax-cut supporters’ promise to decrease inversions was therefore akin to the rooster claiming credit for the rising sun. The ramifications from this finding are both economic and political. On the economic side, the tax cuts did not come close to paying for themselves. (“Data on GDP are not consistent with a large growth effect in 2018, and thus the tax cut is unlikely to provide enough growth to significantly offset revenue losses in 2018”). The growth promised is much less than promised, and huge wage bumps never appeared. To the contrary, “The Department of Labor reports that average weekly wages of production and nonsupervisory workers were $742 in 2017 and $766 in 2018. … The nominal growth rate in wages was 3.2%, but adjusting for the GDP price deflator, real wages increased by 1.2%. This growth is smaller than overall growth in labor compensation and indicates that ordinary workers had very little growth in wage rates.”
Politically, this should inform the 2020 debate. Republicans have been disguising a massive corporate and high-income tax break as a boon to the middle class and the reason for continued economic good times. Neither is the case. Democrats should hammer home again and again that if we stopped rewarding corporations that do not plow investment back into facilities or wages, there would be more money for middle-class tax breaks and for programs that help the middle class. You’d think Republicans would give up on supply-side economics, which at least in more recent incarnations does not produce benefits for the middle class. But it’s invaluable in appealing to upscale donors and easily scammed Fox News viewers. Until it stops working politically, they have got no incentive to revisit false assumptions.