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December 21, 2015 5:49 AM Age: 5 yrs
Growth alone is not the answerCategory: AC - Billboard, AC RSS, A/F Commentary & Opinion, CM Commentary & Opinion, ERM Commentary & Opinion, CSR Commentary & Opinion, GPG Commentary & Opinion, Exec Comp Commentary, Wealth and Income Gaps Commentary, AM Highlighted Commentary
Source: Larry Checco
No one knows for sure what impact the Federal Reserve raising its interest rate from basically zero to one-quarter percent will have on the economy.
One thing is for certain, however. Growth is every economist’s panacea for what ails us.
The harder people work, the greater the productivity, the greater the GDP (which should translate into higher wages) the greater the growth ...is how the theory goes.
Which begs the question: Are we suppose to be working for the economy, or is the economy supposed to be working for us—all of us!
Yes, U.S. economic growth averaged only about 2 percent annually from 2010 to 2014, well below post-World War II averages. But it did grow.
It grew to the point that the New York financial sector in 2014 paid out an average bonus of $173,000, up 50 percent over the last three years, according to the New York City Comptroller’s Office. This at a time when Census data tell us that the average income of 66% of Americans is less than $42,000.
The economy grew to the point that corporations are sitting on trillions of US dollars in cash, and corporate profits are at an all-time high, according to the Center for American Progress. To add insult to injury, many multinational corporations based in the U.S. shift their profits overseas to avoid paying U.S. taxes, denying the U.S. Treasury—and U.S. taxpayers—an estimated $100 billion annually.
It grew to the point that, combined, the 100 largest chief executive retirement funds are worth $4.9 billion—about equal to the retirement savings of 41% of American families. On average each of these CEOs has enough assets to generate a monthly retirement check of more than $277,000, according to Boston College’s Center for Retirement Research.
Corporations are disingenuous when they whine about our current “slow-growth economy.” Fact is if companies want growth they need to stop buying back their stock (which primarily benefits their activist shareholders) and shelling out obscene salaries and benefits to their CEO’s and start paying their employees reasonable wages and decent benefits. That is especially true given that nearly 70% of our economy is fueled by consumer consumption—provided consumers have enough income to consume!
Instead, 55% of Americans say they are falling behind and that their incomes are not keeping up with the cost of living, says a January 2015 Pew poll.
Is there any wonder that, according to the Public Religion Research Institute’s 2015 American Values Survey, seven of every ten Americans believe the country is still in recession? (For those interested, the Great Recession officially ended in June 2009, according to the National Bureau of Economic Research, which officially keeps track of these things.)
American workers are fighting strong headwinds, including stagnant wages and increased living costs.
But beyond that, technologies are gobbling up jobs at an increased pace. The on-line gig economy (think Uber and Airbnb) promises workers flexibility and independence -- but little in the way of decent wages and benefits. And many workers continue to suffer from the lingering impacts of a global economy that transferred once good-paying American jobs overseas.
The Fed raised its interest rate believing that the economy is well into recovery and that we’re back to near “full employment.” Try telling that to the more than 47 million Americans who rely on food stamps to put food on the family table.
If we want a recovery that benefits all Americans, we need a new social contract between employers and employees, and tax reform that levels the playing field.
We need a government that invests in its people and their future through increased funding for education, job training, affordable housing, research, transportation and more.
We need to return to an economy where if you work hard you can get ahead and share in whatever prosperity is gained so that even if the economy grows by a single dollar we’re not distributing more than 90 cents of it to the wealthiest among us.
In short, growth alone won’t do it. We need intelligent, inclusive growth supported by good government and an active citizenry.
Contents Copyrighted (c) 2015 by Larry Checco
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