In 1972 the Dow Jones average was at about 850. Yes, that's
right. 3 digits. Last week the Dow cracked 23,000, 5 digits.
Please don't think that I am an economic expert just because I happen
to know how to get these figures. But, to me, this means that over
the past 45 years the amount of wealth generated by those companies
listed on the Dow Jones Exchange increased by a factor of 23. What
is more surprising but irrational is that the wages of the average
worker have increased by zip. That is right. The average worker
in the United States has not received a raise in buying power in 45
years. How can that be possible?
Just today I saw an ad on television that said American businesses
are hurting and can't afford to reinvest these surpluses and hire
additional workers. The ad went on to say that the United States
has the highest tax rates in the world and that we need tax relief.
Thing is the ad didn't really say what it meant. What is true is
that the United States has the 3rd highest corporate tax rate in the
world but that hardly anyone pays it. For instance, for years now
General Electric has not paid a cent in federal taxes. Apple and
Microsoft, two of the most profitable companies in the world managed
to tweak the law to an average tax rate of 16% to 19%.
Hedge funds, which are shelters for people with too much money and
who don't want to risk it on a new reinvestment venture which may
lose money, use something called "carried interest" which
is taxed at a rate of 20%.
Often when I try to talk to people about this they just tell me
"well, they're just smart. What they do is legal." That
is true but that doesn't make it right. What they don't say is that
the financial industry has the resources to lobby Congress for
favorable taxation avoidance laws. Legal as it can be. The money
spent on lobbying is the best money a corporation can spend having
returns of thousands of dollars
for each dollar spent lobbying. One
friend tells me joyfully that his investments have done better under
President Obama than under President Bush by a lot. And that is
after the Great Recession. Why is that? Government was forced to
make investments to prevent the entire system from crashing which
were very favorable to businesses. Much of the money loaned to the
big banks was used not to create more jobs but, instead, to buy back
stock thereby increasing the wealth of its investors. Money loaned
to corporations at rates approaching 0% interest were used for the
same things. Trillions of dollars financed by the federal
government to essentially increase the wealth of investors. Now,
the Federal Reserve is beginning to raise interest rates in order to
pay off the bonds that it sold to finance those trillions and you
should hear the howling.
But, what has that to do with us, the average Joe or Joan on the
street? The question is where is the money? Politicians like to
say that NAFTA allowed our jobs to go overseas and our leaders stuck
it to us. It's true that many low skill, good paying manufacturing
jobs went overseas leaving millions in the lurch but it is also true
that manufacturing in the United States is now higher than is was
before NAFTA. So, why can't people get good paying jobs? The
answer is automation. Look at an assembly line. Where there used
to be a man or woman welding or putting a nut on a bolt now there is
a
machine doing it. How did that happen? Those companies used the
money they borrowed from the Federal Government essentially interest
free to automate and update their plants. Robots don't take
vacations, get sick, have babies or ask for raises. They just work
24/7/365. What a deal!
But we really can't blame those corporations. The investors
invest to make money and this one has a good return on investment.
The real and the most pertinent question is why hasn't the average
American worker shared in that explosion of wealth? Who does the
lobbying for Joe and Joan? How can we restore the American middle
class to the position of esteem it once held. From WWII to the 1970s
it was the American worker who saw the greatest increases in wealth.
Since then wealth has gone almost entirely to the wealthy leaving the
middle class to gradually become the lower class with all of its
attendant lack of benefits.
Now the talk of Congress is tax reform. They don't mean reform
for Joe and Joan, they mean reform for those who just can't stand to
see their millions and billions be subject to taxation like Joe's and
Joan's. Once again they dangle the chimera of lower taxation for the
rich meaning more jobs for you. Don't you believe it. It was a lie
before and it's a lie now. I could maybe support a lower corporate
tax rate if Congress would eliminate most or all of what is know as
“tax expenditures” which are loopholes that corporations use to
avoid taxes. I'll be you'd hear some howling about that. So, when
they come to you talking about voting for tax reform and lower taxes
don't you think for a minute they mean for you because that's not
what they mean.
I want to leave you with a quote from Neel Kashkari who is
President of the Minneapolis Branch of the Federal Reserve.
Minneapolis Fed
President Neel Kashkari said Monday that businesses who complain they
are having trouble finding workers but don't raise wages are just
"whining." In a question-and-answer session in Sioux Falls,
South Dakota, Kashkari said short-handed firms during the recent oil
boom in North Dakota raised wages and "people responded."
"Are you really struggling to find workers? If so, the proof for
me is you are raising wages. If you are not raising wages, then it
just sounds like whining," he said.
My Take is for Joe and Joan to hold on to their wallets because
they're coming for you again. When they say tax reform ask “for
who?” Next time we'll follow the money.
