President’s Jobs Bill Is Anything but ‘Class Warfare’
In response to the continuing unacceptably high unemployment rate, President Obama has offered a specific plan to support job creation, The American Jobs Bill.
This bill presents a set of proposals to spur consumer spending (and, thus, remove some of the business uncertainty regarding consumer demand); provides financial incentives to businesses to encourage hiring, training and retention of workers; and makes investments to restore our physical infrastructure, which supports business activity.
These things cost money, so the president has offered a mix of spending cuts and tax increases (slanted heavily to spending cuts) to pay the cost. Now the president is accused of engaging in “class warfare” against that very small segment of the population that would be affected by the tax increases.
It’s worth reviewing some statistics that define the real class warfare that has been going on in this country over the last 30 years.
The chief investment officer of J.P. Morgan Chase recently reported that “U.S. labor compensation is now at a 50-year low relative to both company sales and U.S. GDP” and that profit margins of the S&P 500 companies are at their highest levels since the 1960s.
The report further states that 75 percent of the increase in profit margins is due to a decline in worker wages and benefits, in spite of the fact that today’s S&P 500 workforce contains many more college graduates than in earlier decades.
This trend has led to a problem that is greater than the currently high unemployment rates: Even the employed are increasingly becoming undercompensated in relation to the overall financial health of those “job creators” the Republicans keep talking about.
The second statistic is how the distribution of income in an economy affects employment prospects for the labor force. Over the past 30 years, the U.S. has experienced a steady trend of distorted income distribution that has produced the highest income inequality index among developed nations and the highest in the U.S. since the pre-Depression year of 1928.
We have systematically created a domestic consumer base that cannot afford U.S.-made goods. So “buying American” to support job creation becomes an empty phrase for many American consumers.
In Economics 101, I learned that total national income — a key measure of the economic health of a country — is determined by two factors: the supply of money in the economy and the velocity, or rate of expenditure, in which it is used. The fact is that higher-income families are lower-velocity users of their money than lower-income families.
Slanting more of the money supply to low- velocity users has a depressing effect on total national income which, in turn, depresses employment prospects. When velocity is lowered, the only way to increase national income is to increase the money supply, something the Republicans have chastised the Federal Reserve for doing and which can, in fact, increase inflation pressures in the long term. The better solution is to restore a system of fair worker compensation and truly progressive tax rates.
Thomas Friedman, the esteemed journalist who has researched and written knowledgeably about the implications of global economic competition, recently noted that the historic steady economic growth in the U.S. has been supported by five cornerstones: education, immigration to support skills acquisition in the labor force, incentives for capital formation, and public investments in both infrastructure and research and development.
During his tenure, President Obama has put forth plans to strengthen each of these cornerstones. Republican proposals address only the incentives for capital formation and, frankly, ones that will worsen the distortion in income distribution mentioned above.
Each of the components of the American Jobs Bill is supported by independent economic analyses that show a positive return to the economy for each public dollar invested. I challenge the Republicans to put forth similar data to support their proposals.
Brian Deaton, who lives in Pinehurst, is a former chairman of the Moore County Democratic Party.
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