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COUNTERVAILING FORCE AND WAGE INEQUALITY

June 8, 2017

COUNTERVAILING FORCE AND WAGE INEQUALITY

Both such celebrated economists as Piketty and Stiglitz (and others) lament the loss of countervailing force as a prime factor in the some four decades leading to the wage inequality of today, which began in earnest with the election of Ronald Reagan, the trickle downer, and is ongoing and is in my opinion the greatest domestic issue of the day.

So what is countervailing force? In a word, unions. It was unions that demanded better and safer working conditions, better wages, pensions and shared costs of employer-funded healthcare (via employers who can take such costs as deductions from income). When those represented by unions (and even those who are not) are successful in sharing the wealth and income from the economy (aka wage equality), enhanced demand leads to a strong economy, less unemployment, increased worker productivity and real economic growth (as opposed to so called “economic growth” we now have as measured by stock values which in turn are measured not by real growth but rather by corporate tax cuts and other goodies parceled out by politicians in their eternal search for “campaign contributions”).

It was strong unions (aka countervailing force) and FDR’s New Deal labor policies (see the Wagner Act, Fair Labor Standards Act et al.) that were the most influential factors leading to our prosperous post WW II years that built our middle class, when there was wage equality and only one worker in the family made enough to buy a house, a car and send kids to college. Now we find that in a typical family both husband and wife work, even some with multiple jobs, and still do not make enough money to meet their needs and that of their families which has led to our currently underperforming economy, and as for kids going to college – forget it. Now the kids are saddled with more tuition debt than all of the outstanding credit card debt put together, and like credit card debt, such loans are made at interest, but unlike credit card debt, with no grace period.

Apparently Republican policy is to make it difficult to get an education while making sure that their rich campaign contributors profit from loans made to those who seek to better themselves in the hope of the latter that they can make enough with an education to pay back their investment in their futures. Meanwhile, many of such students live with their parents, have delayed or foregone marriage and suffer wrecks to their credit standing if late on their student loan payments, among other such adversities visited upon their respective futures by Republican policies.

With the near demise of unions and weakening or even withdrawal of employer healthcare coverage, Republicans are now hard at work to make healthcare less affordable for the old and sick while in the same bill have the chutzpah to call for hundreds of billions of dollars in tax cuts for the rich and corporate class. It is not a healthcare bill but rather a tax cut for the rich and corporate class bill in transparent disguise, but one called a healthcare bill by its Republican sponsors because a stand-alone tax cut bill might not pass muster since the stench would be too much even for some Republicans.

How can these people look in the mirror and vote for such atrocities? Who are they? Every dollar they give away to the rich and corporate class is added to the bill that the people they supposedly represent must either pay or become liable to pay when added to the debt, and these are the same people (see McConnell the Supreme Court manipulator and Ryan, who worships at the altar of Ayn Rand)) who vote in favor of  tax cuts, additional credits and deductions for American corporations both domestic and multinational, many of the latter who take our jobs overseas in search of cheaper labor and looser environmental standards and in the process import lower competitive wage scales to our shores for domestic corporations who did not leave, thus making our wage inequality situation even worse.

Trump talks of bringing jobs back to this country, but that is all it is – talk – and besides, a panel of economists has found that 83 percent of the jobs didn’t go anywhere. They were lost to automation, and the 17 percent that did go overseas if returned would largely be lost to automation upon their return. When campaign chatter in Trump’s narcissistic world meets reality, reality always wins, as we are finding out (e.g., Trump and Pence early in Trump’s reign made great political hay on TV out of keeping Carrier from moving jobs from Indiana to Mexico with the help of Indiana taxpayers who paid for the privilege of foiling such a move. Just recently Carrier announced that 455 jobs were going to Mexico, and I hear nothing from either Trump or Pence on TV about such a loss since there is no political hay to be harvested). I reiterate: When campaign chatter meets reality, reality always wins.

So now what? What can we do to restore the “countervailing force” that led us to historic prosperity following WW II? We can remove Republicans from positions of power while simultaneously strengthening labor policies that end wage inequality which will in turn bring prosperity to all Americans, including even corporate America when demand for their goods and services go through the roof and we experience real economic growth rather than through the present system of giveaways to support stock prices where the allocation of risk falls on taxpayers (socialized risk) but profits realized remain with the paper shufflers on Wall Street, whose net income is further increased through capital gains, “carried interest,” and other such preferential tax treatment.

Can’t be done because of global competition? False. That is propaganda bought and paid for by those of the status quo who reduce their risk of failure in the real economy of actual production of goods and services in favor of handouts (aka corporate welfare) by politicians. Germany and Sweden have the same global competition we have and are prosperous and are building a middle class as we did after WW II, so what’s our excuse?

The fact is that corporate America needs neither to be productive nor competitive to be profitable so long as we taxpayers funnel money into their bottom lines, and Trump trickle down chatter aside, we are clearly in the hands of a “trickle up” economics where wage inequality and other such misallocation  of risk (socialize the losses and privatize the gains) stifles real economic growth and will accordingly keep us on the edge of recession for the foreseeable future.

Perhaps Trump should ignore the advice of Boeing and General Electric and Verizon (who paid zero taxes on huge profits five years running with some even getting refunds) and (if he can see through his narcissistic haze) call Merkel for advice. She, after all, is a PhD and he is still bullying his way through a third grade sandbox of ideas fashioned by Leninist and Goldman Sachs advisers to suit their own (and his) particular interests. Maybe if he listened to Merkel and acted on her advice he could make America great again. Maybe.    GERALD     E

 

 

 

 

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