(MintPress) – As average Americans brace for $85 billion in budget cuts and the loss of more than 700,000 jobs in the face of Congress-forced sequester, America’s corporations are celebrating a job well done, reeling in profit levels not seen since the booming days of the 1950s. Corporate earnings have increased on average by 20 […]
(MintPress) – As average Americans brace for $85 billion in budget cuts and the loss of more than 700,000 jobs in the face of Congress-forced sequester, America’s corporations are celebrating a job well done, reeling in profit levels not seen since the booming days of the 1950s.
Corporate earnings have increased on average by 20 percent each year since 2008. All the while, the median American income has dropped 4.9 percent from 2009 to 2012 — it’s not exactly a “trickle down” success scenario.
As reported recently in the New York Times, this explains why Wall Street is enjoying a heyday, with the Dow Jones reporting a near-record industrial average.
The average worker has been forced to increase productivity, picking up the slack of those who lost their positions in the Great Recession, and the corporations are winning. So, what’s the incentive for corporations to hire back a workforce lost, or to increase salaries among workers in the midst of a nationwide unemployment epidemic? At this point, there doesn’t seem to be one.
Financial industry leaders aren’t shying away from the reality: As long as fewer Americans can pull the weight previously carried by their now-unemployed comrades, there is little incentive for “job creators” to hire workers back as their economy improves.
It seems those leading the companies weren’t seeing a cut in their own wages to lead to corporate prosperity. A 2012 report released by the nationwide union organization AFL-CIO indicated America’s CEOs were earning 380 times more than the average worker. CEO salaries also had grown over the Great Recession, increasing 14 percent from 2010, according to CNN Money.
“The U.S. corporate sector is in a lot better health than the overall economy,” Ethan Harris, co-head of global economics at Bank of America and Merrill Lynch, told the Times. “And until we get a full recovery in the labor market, this will persist.”
The implications of his statement were profound, indicating that Americans moving forward will be working in the “new” market — meaning, working more for less, and corporations will be riding the profit wave.
Journalist Naomi Klein summed up the concern of wary onlookers with a tweet Monday about the scenario: “For workers, the ‘recovery’ looks more like a stick-up. Profits way up, but no jobs.”
In the wake of the sequester, Republican House Speaker John Boehner was asked if it would hurt the economy. His response?
“I don’t know whether it’s going to hurt the economy or not,” he told the Associated Press. “I don’t think anyone quite understands how the sequester is really going to work.”
What America can be sure of is that he wasn’t thinking of the economy in terms of the average American, but in terms of corporate — and Wall Street — success.
While corporations will feel the impact of the sequester, it will be transferred to the backs of those who will lose jobs to the downfall, and those who are kept on board to maintain — and improve — companies’ bottom lines.
Savita Subramanian, head of equity strategy for Merrill Lynch and Bank of America, told the Times the nation’s largest companies will be minimally impacted, sacrificing roughly 1 percent in lost earnings, adding that “the market wants more austerity.”
Who are politicians looking after?
The blame game that resulted from the sequester followed the same scenario: Republicans blamed Democrats for not being responsible with the budget and not holding down taxes at a time of financial crisis — protecting job creators, it was argued, is the way to grow the economy.
The Democrats blamed the Republicans for asking the nation’s most vulnerable to bear the brunt of more cuts, without compromising on tax increases for some.
The failure to negotiate hurts America’s vulnerable. Cuts to education will lead to 70,000 children being denied access to Head Start programs, and the elimination of roughly 10,000 teachers. Cuts to mental health will leave 373,000 Americans in need of such services without the ability to get them, according to a White House fact sheet regarding the budget cuts. More than 600,000 women and children will also be kicked of WIC, the nutrition program providing resources and proper nutrition for infants and their mothers.
While neither party openly wanted the sequestration to go through, it did — and while corporations will see a sliver of an impact in the overall bottom line, they’re the winners in the overall economic picture.
This leads to the question: Who do the nation’s members of Congress represent? If looking out for job creators first would lead to the overall benefit for American workers, why isn’t it?
Dean Maki, chief U.S. economist at Barclays told the Times, “There hasn’t been a period in the last 50 years where these trends have been so pronounced,” referring to the growth of corporate earnings (20 percent) and disposable income (1.4 percent).
Workers are still waiting for that 20 percent profit increase to trickle down to their wallets.