SINCE 1759

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Last laughs on the market floor

Out of Order
A Wall Street Correction for All

The stock market keeps flirting with crashes, as it did last week, losing some 4 percent of its value. I’m not weeping. Nor would I weep if it crashed in earnest — if the Dow lost 2000, 3000, maybe even 5000 points and brought back to earth those shareholders who’ve spent the last few years living fantasies of paper wealth cynically divorced from the realities the “bottom” 80 percent of the nation’s wage earners — you, me and almost everyone you know — have been contending with.

We’re living the reign of a president disconnected from reality. It stands to treason that we should live in an economy of disconnects. The biggest disconnect is this: Corporate profits this decade have been staggering, both in actual dollars and year-over-year increases, but there hasn’t even been a trickle down effect to the mass of the nation’s workers. To the contrary. Employment is more uncertain, benefits increasingly miserly, and pension promises essentially zilched. Meanwhile, those at the top of the pyramid have been reaping the rewards of everybody else’s work.

Corporate profits in 2006 hit $842 billion after taxes, breaking 2005’s record of $761.8 billion. In fact, corporate profits haven’t just set records every single year of the Bush presidency. The year-over-year increase in profits—a more accurate representation of the grasping effect—have set huge records, averaging 18 percent a year since Bush took office, compared with 7.3 percent a year during the Clinton administration. The last time corporate profits reveled in so much smack was, of course, during the Reagan years, but not at this pace (it was closer to 12 percent in year-over-year increases).

All well and good, you say, if healthy corporations mean a healthy economy for all? If only it were so. There’s a reason 60 percent of Americans give the nation’s economy bad ratings (according to the latest Gallup poll), while just 27 percent are satisfied with the direction of the country (the lowest rating in that category was 12 percent in 1979). While corporate profits have bulged year after year, overall wages and benefits have increased an average of just 4.8 percent a year in the six years of the Bush administration, compared with 7.4 percent annual increases during the Clinton years. Inflation averaged 2.6 percent a year during the Clinton years, compared with an average of 2.7 during the Bush years. That means wages and benefits increased, over and above inflation, a net average of 4.8 percent a year during the Clinton administration. And during the Bush years? 2.1 percent. Some boom. The president loves to talk up the low unemployment rate, the low inflation rate, the healthy growth in gross domestic product. But the numbers are skewed by that overwhelming slant toward the top.

The numbers understate the depth of the problem, because once we start analyzing the “benefits” portion of the dollars going to workers, we’re faced with another staggering reality: wages and salaries have been eroded that much more by the massive increases in the costs of insurance premiums, medical and otherwise. While it may be true that, over and above inflation, wages and benefits have increased by 2.1 percent during the Bush years, employees’ portion of insurance premium costs have increased 87 percent between 2000 and 2006, or more than four times the increase in wages before inflation.

It gets worse. Taking the long view, the share of the nation’s economic output going to corporate dividends since 1980 has increased from 1.5 percent to 4.8 percent. Corporate profits’ share has increased from 2.97 percent to 5.87 percent. At the same time, the share of the nation’s total economic output going to wages and benefits since 1980 has fallen from 60 percent to 57 percent. Not a big change? That measly difference of 3 percentage points works out to about $400 billion, which is roughly the net increase going to corporate profits and, in turn, corporate dividends over the same period. Take that $400 billion and divide it by the number of people in the workforce as of June (146 million). What you get is $2,740 per employee. That’s $2,740 per worker diverted to corporate profits since 1980.

I’m not suggesting here that corporations shouldn’t make a profit. Of course they should. The question is: How much, and at whose expense. The numbers don’t lie. Since 1980, corporate America has made a concerted choice, abetted by government policy, to take from workers and to give to corporations and shareholders. It’s been a lucrative heist, from workers’ pockets to shareholders’ portfolios. Nothing justifies it when it’s come at the expense of ordinary workers.

Weep over stock market losses? I’m cheering the belated equalizer, although it’s not a stock-market correction we need, but a correction in our thinking about the market and who should be its principal beneficiary.

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