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February 12, 2018


The business press, its business writers and Trump are in cahoots with their feigned breathlessness in describing the effects of the recently passed “tax bill” on wage inequality. Trump describes the chump change bonuses and miniscule average increases in wages as “a big Christmas present to American workers” but neglects to give us context, and for good reason. When you get a chump change raise from next to nothing, you’re still earning next to nothing to pay the rent, buy groceries, fix the car and buy shoes for the kids in the real world of paycheck to paycheck, always hoping that some trade policy or the oblivious pursuit of corporate greed will not send your job to China or Mexico.

Thus if I am making the federal minimum wage standard (a slave wage) of $7.25 an hour and get a raise to $7.50, I am still making a slave wage and will probably remain on food stamps to keep body and soul together, as thousands of Walmart employees and even some in our military are as we taxpayers are in fact paying some of the wages for these working poor employees that Walmart should be paying a living wage. Parenthetically, Trump also neglects to tell us that the CBO and Joint Committee on Taxation predict serial increases in interest rates by the Fed along with increases in inflation which will more than wipe out all the puny one-time bonuses and wage increases for working Americans he and the business press are trying to sell us in their PR campaign from their perches on Wall Street and the Oval Office. I’m not buying.

Let’s not be fooled with snake oil and propaganda, because when gross becomes net and we consider yet other aspects of the tax law that reduce our ability to deduct on our 1040s, especially depending upon where we live, we are going to find that we have been had, and that this bill was all about making the rich richer and the poor poorer and that it will have succeeded in its primary objective – at the great and continuing expense to the rest of us.

Let’s give some historical consideration to how we came to today’s nadir in wages. For some forty years following WW II under the influence of FDR’s New Deal policies and Keynesian economics, wages moved in tandem with the Dow, were adequate for a decent living where only one in the household was working, and economic growth was in the stratosphere and marked by no significant recessions or economic slowdowns during such period. Following the infamous Powell memo in 1971 and with the advent of Reagan’s trickledown economics and union busting, wages stopped moving in tandem with the Dow and median wages since then, as adjusted for inflation, have not moved, but not so the Dow, which moved from some 1,000 to its present day 25,000 or so die to an obvious political plan to have the economy reward capital far out of proportion to labor and which brought us another extremely negative externality, to wit: we have lost trillions of dollars in economic productivity and profits forever per Stiglitz due to bad policy choices that have led to tepid aggregate demand caused in turn by wage inequality.

I sometimes wonder where we would be today if we had continued with New Deal policies and Keynesian economics, whether such a powerhouse economy could continue indefinitely because there were no more “business cycles” to contend with, or whether due to war or other disasters we would have suffered major recessions or worse, such as Bush’s Great Recession, which was brought about by major tax cuts to the rich and corporate class and failure to regulate the reckless investment practices of big Wall Street banks that became insolvent but were (we were and still are told) “too big to fail.”

We will never know, of course, because it didn’t happen, but Trump’s “tax bill” is happening, and as I have written elsewhere, as its toxic effects start to take hold and demand is savaged, I predict at least a downturn and perhaps a full blown recession later this year or no later than 2019.     GERALD      E







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