Obama promised to help working people. Instead, he has presided over the greatest wealth transfer to the top of any president in history. Look at what has happened to workers's share of national income since he took office.
Wednesday, June 15, 2011
Obama presides over the greatest wealth transfer to the top of any president in history!
Obama promised to help working people. Instead, he has presided over the greatest wealth transfer to the top of any president in history. Look at what has happened to workers's share of national income since he took office.
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Sorry to shift names but I would argue that the 107.5 to 100 fall from 2000 to 2008 was larger than 100 to 95 - maybe that is just me.
I wrote this on Mosler’s site on the same article:
After the 1980 date, that chart appears to inversely track the growth trend in federal debt rather well. Just an idea on top of my head: Could the increase of aggregate demand by government spending be allowing capital owners to take large slices of the pie – in other words crowding out “the importance” of consumer demand in growing the economy.
What I mean by this:
Since federal deficits allow the private sector to save while keeping aggregate demand up, and since capital owners tend to save more of their income than worker’s do, does that situation allow the private sector to pay workers less of the output (i.e the increase in savings, afforded by the federal deficits, is mostly enjoyed by the capital owners) without facing decreases in total demand?
For example, if government did not deficit spend to make up for losses in consumers demand, would capital be able to pay wages less than productivity increases (i.e. take a large percentage of the pie) without causing economic growth to be at risk because demand would not keep pace with output?
In other words, do you think federal deficits are a possible enabler of allowing an economy to continue to grow as workers get a less percentage of the economic pie?
Do not get my wrong, I am not calling for the government not to deficit spend, just thinking this could be a negative consequence from it but one policy could treat (i.e. tax rentiers more through capital gain or dividend taxes or income tax sur charges on high incomes and transfer to workers to balance it out.)
Thoughts?
Crake,
A decline from 107.5 to 100 over 8 years is a decline of 0.9% per year
100 to 95 over two years is a 2.53% decline per year.
You decide which is worse.
Clonal,
I was referring to "of any president in history." Maybe if relected, and the trend continues that will be Obama, although is wages as percentage of economy and wealth transfer equal? I would think the 2008-2009 stock market crash on retail investors and the housing market crash are perhaps larger wealth transfers from middle class than the imlications from that wage chart.
Crake,
Yes, the Bush period was also pretty bad.
Is anyone seriously surprised by this? I may not agree with the MMT perspective, but surely you guys are smart enough to realize that Obama is just as beholden to Wall Street as the Republicans.
I still wonder about how much it seems to track the trend in debt since 1980. Do you think most of the private sector's increase in savings went to the capital owners and the relative loss of consumer demand from workers pay not increasing with their productivity increase was sustained by the increase in demand from the deficits?
Can we face reality here folks. The drop in worker's income has nothing to do with who the POTUS is and what party he represents. It's a reflection of the offshoring of labor costs. If we want cheap Chinese trinkets, we employ Chinese labor. Anything that can be done cheaper by offshore labor and/or machines will result in lower wages and the loss of jobs here in the U.S.
yes James unfortunately Obama is not all that he was cracked up to be...he's really milking that "saved us from the brink of financial meltdown" thing. ugh!
YES CRAKE !
IT'S BUSH'S FAULT
AND OBAMA HAS BEEN HI JACKED INTO THINKING THAT HE IS REAGAN
WAKE UP OBAMA NARCISSUS FLOWER IMAGE IN THE RIVER
Crake @ 4:28: I understand what you're trying to say, but first, you are assuming that the average saver is aware of the effect of his or her actions on the macroeconomy. And second, deficits can not feed into demand and savings at the same time - it's either one or the other (for every unit of account, that is).
Oliver,
I see no reason to make the assumption a saver is aware of his effects on the economy. Maybe my comment about the chart tracking debt trend inversely so well makes the 1 for 1 assumption you are saying my argument must accept but I am more concentrating on the general trend than a month to month tracking (that tracking is just what made me think of it.) On assumptions, I feel I am only making the assumption that absence a counter to demand loss, it would not be sustainable, over time, for the economy to grow with a trend of workers receiving less of the output.
And on President Obama, I just feel it is easy to blame an administration. What would be more helpful is to pinpoint policy that caused a problem and in this, I think my hunch is related because if my hunch is right, then no specific policy caused the trend in the chart – fiscal policy just enabled it along with deregulation and union busting, which were all part of a 30 to 40 year process. While I am sure everyone here, including myself, are disappointed that President Obama is not trying hard enough to reverse that trend, I think blaming him is more an act of frustration than one of merit.
I see, Crake. You're saying because there is minimal growth, workers are not on the streets to protest against the upward transfer, say by demanding higher wages? Makes sense.
No, I am hypothesizing that paying workers lower amounts of output would cause negative growth, over the long term, if not for deficit spending, and therefore unsustainable. That is all.
makes sense and lower taxes would help to buffer that. Also the type of rentier government spending that is allowing for such wealth transfers and wage destruction is not the only type of government spending. Not all government spending necessarily equates to a drop in wages down the line.
Does anyone know what the Federal Employee Pension system invests in? I'm curious if some of the volatility lately results from Treasury not funding the pension because of the debt ceiling issue. That lack of current funding may require assets to be sold when pension funds are disbursed to the millions of retirees. I found a document from 2006 that suggested they were invested in a wide range of assets but no information on current holdings.
don't know about that or if you'll be able to know their books. I'd be surprised if Treasury payments to pensions is what keeps the market up however.
TomatoBasil,
On market volatility: Are markets (equity and commodities) perhaps going through what Warren Mosler termed a fake bumper crop of dollars. He feels that with almost all traders thinking quantitative easing would add dollars, all of them piled into commodities (and I assume equities but he concentrates on commodities) but since QE not only did not add to dollars but subtracted dollars by removing interest streams from the bonds that were purchased, fundamentals (no dollar increase) are now catching up to that incorrect speculative outlook.
Mario,
Just a correction on my ‘guess.” You wrote, “Not all government spending necessarily equates to a drop in wages down the line.” Please do not get me wrong, I am not saying deficit spending “caused” the trend in that chart, I am just guessing it enabled it because without deficit spending taking up the slack in demand, the economy would have faltered from that trend in my opinion.
for sure Crake. And now it appears even that is trying to be pulled...considering that we don't have a trade surplus like Japan, I am beginning to wonder if our state of affairs is even worse than Japan's!!!
Crake,
Regarding the correlation between federal debt and the stagnation of wages, that is probably one piece of the puzzle. Ever since the "Reagan Revolution" deficit spending has boosted the economy. While this was good at the time for many who were allowed to get a piece of the stock market pie, the flip side is that consumer debt increased tremendously and that is what is unsustainable and will ultimately is bringing the era to an end.
Of course, now that private debt has passed its peak, government deficits are needed more than ever.
The fact that government deficits enabled the supposed ending of big government is a fact that has yet to sink in across the land. So, upon reflection, I agree that your point is an important part of the picture...
if this were a chess match and I wanted to destroy the middle class...I'd say that check mate is in my sights. Obama wants more exports and a weaker US $, there's tons of unemployment, terrible wages, and no alternatives...hmmm...sounds like the next best thing to slavery eh?!?!
There is actually a term for this. It is called "financial repression." It's what China practices to a great degree and Germany less so. Workers are forced to accept lower wages to finance exports. Thus, at the macro level workers are not working for themselves by producing goods that they will purchase, but rather they are working for foreign consumers.
"There is actually a term for this. It is called "financial repression." It's what China practices to a great degree..."
i don't buy that. as far as i can tell they've been attempting a wicked fast industrialization development. can't do that without the institutional infrastructure (product regulation, consumers with high expectations, distribution systems, and on and on). and consumer here does not mean only individuals, it also means selling components to sophisticated producers.
they've been attempting to piggy back their industrial development on our consumer infrastructure. if they had depended on internal consumers it would have taken a far longer time.
at least that is how i see it
(standard disclaimers re "wtf do i know?" but i'm pretty sure no one else on this thread actually knows either. we're all just making best guesses).
Anonymous @ June 15, 2011 8:54 PM
"The drop in worker's income... It's a reflection of the offshoring of labor costs. If we want cheap Chinese trinkets, we employ Chinese labor."
not sure how much i buy that either. there are a lot of costs associated with offshoring too (there were a series of posts about this at naked capitalism some time back) and there are tons of things we could do here to make effective labor costs lower (end payroll taxes, universal healthcare not tied to employment, universal decent pension system, etc etc).
i think it's possible that each case is different, but there are countries that have gone the high wage route without loosing their manufacturing base.
for a progressive take on this see galbraith:
Why Populists Need to Re-think Trade
http://prospect.org/cs/articles?article=why_populists_need_to_rethink_trade
great article. thank you
@ sellise
What you say is true and that is "financial repression." Chinese workers are forced to work for the ROW, which enjoyed China's real resources and which China saves (which it must do to keep the game going since importers' capital account must equal their current account). This means that Chinese wages are suppressed to prevent inflation and investment goes to export industries instead of domestic production. The consumer share of GDP is an incredibly low ~40%.
Moreover, interest rates have been held low to benefit investment at the expense of saving. Even though the Chinese public are savers, they get very little spending power from interest.
Germany also suppresses wages to subsidize its export economy, so workers are also making stuff for the ROW instead of enjoying the fruit of their labor.
This is called "financial repression."
@selisse @Anonymous
High wages are not the cause of offshoring as much as regulation and taxes. Moreover, offshoring has the added benefit in the US for employers of reducing the bargaining power of workers here. If wages went up in China, it doesn't necessarily mean that jobs would return to the US.
I think by "high wages" they were including payroll taxes, medical, pensions, etc. in that calculation. The point being that those "extras" contribute to companies looking elsewhere. If the US government took on universal health care and solid pensions and took off payroll taxes to a sizeable degree, things would probably turn around here...if only...if only
That Galbraith article was wonderful and well written.
i think it's possible that each case is different, but there are countries that have gone the high wage route without loosing their manufacturing base.
That would be countries that have managed to find niches for themselves. Switzerland is right next to Germany, but pays much higher wages, has lower taxes and a solid manufacturing base in the luxury goods (watches) and heavy machinery (power plants etc.) and some other sectors. But it is a small country, which seems to be an advantage in these matters, and the whole place is subsidized by a TBTF financial sector, without which things would obviously be rather different. Nevertheless, we do manage to get the best qualified personnel because quality of life, which includes wages, is considered high.
Mario, on “If the US government took on universal health care and solid pensions and took off payroll taxes to a sizeable degree, things would probably turn around here..” I always figured that businesses would start demanding the government do this but I now assume it is just easier to move operations than lobby for this or maybe heads of companies are against it in principal and would rather just move than promote it.
@tom hickey, i don't have any reason to disagree wrt to germany. first, because i don't know enough and second, because they are already an industrialized nation.
but for china, i guess i still don't see it... so long as there are potential reasons that the development path china has chosen serves their public purpose -- and i can certainly imagine that rapid and controlled industrialization may fit the description of public purpose for the people of china at least for the time being -- how is that financial repression?
well, unless taxes in the usa and all other mechanisms of limiting the consumer share of production are also, by definition, financial repression?
selise, I didn't say that it is financial repression. I said that this term is now applied to that condition, specifically to China and Germany by economists.
tom, i guess i must have over-read into your comment that you approved of using the term "financial repression," or that you found it a useful and/or accurate description. if i was wrong about that, so sorry -- my bad.
here's a bit of what i got from wikipedia:
http://en.wikipedia.org/wiki/Financial_repression
Financial repression is a term used to describe several measures which governments employ to channel funds to themselves which in a deregulated market would go elsewhere.
...............................
after reading wikipedia, i find the term even more objectionable -- not just with respect to china but in general, a kind of newspeak equating regulation with repression... in addition to being grossly out of paradigm. yikes!
selise, what I meant was that I did not coin this term or apply it to China and Germany. It seems to be standard.
I got it from China expert Michael Pettis here. Scroll down to "Financial Repression."
Crake & Mario: Mario, on “If the US government took on universal health care and solid pensions and took off payroll taxes to a sizeable degree, things would probably turn around here..” I always figured that businesses would start demanding the government do this but I now assume it is just easier to move operations than lobby for this or maybe heads of companies are against it in principal and would rather just move than promote it.
There was a real movement a while back with big companies supporting universal health care. Scared the medical-industrial complex, so they bought stock in and got directorships in said industrial companies like GM, and extirpated such deviationism.
I was wondering what happened to that, Calgacus.
wow...hopefully this means it's only a matter of time then...
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