Voodoo Economics in the 21st Century
Big banks, corporations and Wall Street are making record profits, but workers, small businesses and Main Street are suffering. Will voters blame President Obama or the real culprits?
After decades of deregulating and tax-cutting for the wealthiest corporations and the rich (so these ‘job creators” will help the economy, supposedly), results show that the theory of “trickle-down” economics – which claimed that benefits gained by the affluent eventually will drip down to the rest of us – has failed.
Nevertheless, the rich and powerful seem to be manipulating what they can to make things worse between now and Election Day.
In Illinois, Caterpillar plans to temporarily lay off thousands this fall. Cat’s done this before when demand lags behind production (and its unions historically haven’t objected), but the timing seems odd.
Elsewhere, the country’s biggest defense contractors announced their intention to send plant-closing notices in October or November, supposedly due to Congress’ self-inflicted scheme mandating budget cuts in January.
Tom Buffenbarger, president of the International Association of Machinists, said, “Neither campaign has thought about the impact. They’ve created a problem that could really be a disaster. With 1.3 million people voting [after getting the notices] that could be determinative in a close race.”
Also, gas prices are up dramatically. In one month, there’s been a 9 percent rise – when prices usually level off for the year, and weeks after falling demand and slowing growth globally saw prices lower than 2011. Some experts had predicted $3/gallon gas by fall. Now, industry apologists blame everything from the drought to refinery fires, but few mention speculators – much less political opportunists who wouldn’t mind Obama shouldering the blame for prices others can manipulate. (Still, the Lundberg Survey reminds us that gas hit $4.11/gallon in July 2008.)
Five U.S. senators – Maria Cantwell, Mark Pryor, Jay Rockefeller, Olympia Snowe, and Ron Wyden – asked the Federal Trade Commission to investigate whether gas prices are being manipulated. The job of assuring energy markets should be the Commodity Futures Trading Commission’s responsibility, but it hasn’t curbed speculation or price hikes because the Dodd-Frank Financial Reform bill, enacted in 2010 and requiring the CFTC to write rules to stop speculation from controlling prices, has been stonewalled by traders who make huge profits from the oil markets and the lobbyists and lawyers that represent them.
Meanwhile, corporate profits are up dramatically, going from $1.2 trillion in 2008 to $1.9 trillion at the end of 2011, according to the U.S. Bureau of Economic Analysis (BEA). Corporate profit margins just hit an all-time high, according to the St. Louis Federal Reserve Bank, and corporate profits also are at a record high as a percentage of GDP, going from less than 8 percent in the 4th quarter of 2008 to almost 15 percent this year.
(And some still say that companies face “too much regulation” and “too many taxes.”)
Also, the Dow Jones Industrial Average has improved a lot from 8,577.9 on October 15, 2008, to 13,275.20 on August 17 – a 55 percent gain.
Overall, the economy remains a mixed bag. Excuse the numbers-crunching …
* The jobless rate is improving from 9.7 percent in 2010, with the newest numbers showing it holding steady at 8.2 percent, with 12.7 million still jobless. Private-sector jobs gained 172,000, although – pushed by austerity-above-all zeal – government jobs lost 9,000. Private jobs numbered 106.8 million in 2010, and now that’s up to 111 million; government jobs were 22.5 million in 2010, and this year dropped to 22 million.
Most corporations, however, still aren’t hiring, which helps their bottom lines but hurts society.
* Americans’ income is lagging – disposable income per capita languishes at $32,000, down from $33,000 in 2008, the BEA shows. Corporations are paying wages as a percent of the economy at an all-time low, which also impedes consumers’ buying power.
Henry Blodget, editor of Business Insider, says, “Our current system and philosophy is creating a country of a few million overlords and 300-plus million serfs.”
* Still, rates are better for 30-year, fixed mortgages, which were 5.76 percent in 2008 and this summer fell to 3.66 percent, according to Freddie Mac.
* The Gross Domestic Product (GDP) is up to $13.5 trillion from $12.7 trillion in 2009.
* Inflation went from 4.3 percent in 2008 to 0 percent this summer.
* The federal government’s annual deficit improved from $1.4 trillion in 2009 to $1.3 trillion now, but the cumulative national debt rose, from $6.3 trillion in 2009 to $10.9 trillion.
For blame, Main Street must look at Wall Street – corporate America (and the Congress they control), that is – and the phony charity-for-the-rich trickle-down excuse.
Bill Knight is a freelance writer. The opinions expressed are not necessarily those of Tri States Public Radio or Western Illinois University.