Opinion

David Cay Johnston

America’s long slope down

By David Cay Johnston
June 20, 2012

A broad swath of official economic data shows that America and its people are in much worse shape than when we paid higher taxes, higher interest rates and made more of the manufactured goods we use.

The numbers since the turn of the millennium point to even worse times ahead if we stay the course. Let’s look at the official numbers in today’s dollars and then what can be done to change course.

First, incomes and jobs since 2000 measured per American:

Internal Revenue Service data show that average adjusted gross income fell $2,699 through 2010 or 9 percent, compared to 2000. That’s the equivalent of making it through Thanksgiving weekend and then having no income for the rest of the year.

Had average incomes just stayed at the level in 2000, Americans through 2009 would have earned $3.5 trillion more income, the equivalent of $26,000 per taxpayer over a decade. Preliminary 2010 data show a partial rebound, reducing the shortfall by a fifth to $2.8 trillion or $21,000 per taxpayer.

Wages per capita in 2010 were 4.3 percent less than in 2000, effectively reducing to 50 weeks the pay for 52 weeks of work. The median wage in 2010 fell back to the level of 1999, with half of workers grossing less than $507 a week, half more, Social Security tax data show. The bottom third, 50 million workers, averaged just $116 a week in 2010.

Social Security and Census data show that the number of people with any work increased just 1.5 percent from 2000 to 2010 while population grew 6.4 times faster. That’s why millions of people cannot find work no matter how hard they try.

In May, nearly 23 million workers, 14.8 percent, were jobless or underemployed, the Bureau of Labor Statistics reported. At shadowstats.com, a website dedicated to exposing and analyzing flaws in government economic data, economist John Williams also counts people who have given up hope of finding work. His figure for May brings the total to almost 30 million people, one in five.

PRESSURE ON WAGES

An economy with many millions more workers than jobs puts downward pressure on wages, especially for those without highly developed skills.

Now let’s look at debt per American since 2000 using Federal Reserve data:

Mortgage debt grew 51 percent through 2010, even though incomes and wages fell, which should result in steady or lower housing prices, not higher prices.

(In 2011, as banks foreclosed on more homes, mortgage debt per capita declined, but was still 42 percent greater than in 2000.)

Consumer debt was virtually unchanged, at nearly $8,300 in 2010, helping explain weak sales of automobiles, furniture and appliances.

Now how about trade? Exporting more than we import creates jobs and riches.

From 2000, the year before China joined the World Trade Organization, to 2011 imports from China grew 62 percent faster than exports to China, Census data show. The annual trade deficit soared to $302 billion from $112 billion.

U.S. exports to China in 2011 ($106 billion) were smaller than US imports from China back in 2000 ($133 billion), showing the lopsided nature of trade with China, where workers lack rights, safety rules are minimal and pollution rampant.

Some 56,000 American factories have closed since 2000, as jobs and the knowledge that goes with those jobs moved to China.

Trade with China has destroyed every 55th job in America, nearly 2.8 million positions, analysis of government data by Robert E. Scott of the Economic Policy Institute shows. That equals wiping out every job in the greater Philadelphia metropolitan area. Nearly two million of those jobs were in manufacturing, Bureau of Labor Statistics and U.S. International Trade Commission data show.

SHRINKING TAX REVENUE

And what of taxes? The 2001 and 2003 tax cuts were promoted as keys to prosperity. Now Mitt Romney, virtually all Republicans and a fair number of Democrats say more tax cuts will make us prosper. President Barack Obama wants to cut corporate tax rates by a third.

Again, measured per capita, the IRS data show a pattern of shrinking numbers, with modest upticks in 2010.

Individual income taxes in 2010 averaged $2,995, down $1,654 or almost 36 percent from 2000. Use 2001 as the base year — because it was both a recession year and the first year of the temporary George W. Bush tax cuts — and in 2010 per capita income tax revenues were down one third.

In 2011, as the economy improved slightly, income tax revenues rose, but were still 26 percent smaller than in 2000.

The bottom line: less income, hardly any more jobs, sharply increased mortgage debt and Washington ledgers awash in red ink as voters are asked to endorse even more tax cuts.

How many years of evidence does it take to establish that a policy worked or failed?

Will continuing our current tax, credit and trade policies produce favorable results in the future? Will they produce higher incomes?

My reading of this and tons more data is that the Bush tax cuts utterly failed, the Fed’s artificially low-interest rate policies under presidents Bush and Obama do far more damage than good (especially to savers), and that the United States is harmed both by the imbalance in the trade relationship with China and scores of trade agreements with South Korea and other low-wage countries that are deeply flawed at best.

We need to recognize that the tax cutters were snake oil salesmen, the Federal Reserve an enabler of damaging debts and that bilateral trade deals are written of, by and for global financiers, not workers.

To paraphrase the Huey Lewis song, we need a new policy.

Comments
66 comments so far | RSS Comments RSS

David, courageous as ever to speak the truth.

Import tariffs and less taxes (with less loopholes) will do it.

Posted by robb1 | Report as abusive
 

The free trade idea does not work high wage nations. We should only import how much we can afford. There should be export subsidies for expansion high wage industries for firms willing hold down prices.

We should tax to pay for things that make us more competitive like education. We should brake up uncompetitive companies and agreements.

Posted by SamuelReich | Report as abusive
 

The disconnect between the reality we have experienced historically and the line of bull we’re being sold by the right is simply exasperating. It shows just how uninformed we have become and that we are heading into a Presidential election that will be determined by misinformation. I mean, taxes are at their lowest, our debt is at its highest, and the Republicans are saying we need to cut more taxes. A child can figure out that taxes need to go up. It worked for us in the past, and this is not working for us in the present.

Mitt Romney was on Face the Nation this past Sunday and he was unwilling to give concrete answers to anything. Over the last few weeks I’ve been listening closely to what Romney says when he speaks, and I’m frankly astonished at how little he says. Actually, that’s not what astonishes me. It’s the fact that he gets away without saying anything. He still has support even though he’s offered nothing. He couldn’t tell Bob Schieffer whether or not he’d end Obama’s recent executive order on immigration. He can’t stop criticizing Obama on it, and yet he doesn’t even know where he stands on it. And yet he’s running neck and neck with Obama in the polls. Crazy. And this guy could become our President?

It’s like most of the right has completely forgotten American history. A lot of things worked well for us in the past, but Republicans are insisting on going in a direction that has been disastrous for us. The only ones who benefit from Republican policies are a very small number of people and they’re all mega-rich. It seems that the masses on the right believe whatever they’re told, and that’s extremely dangerous. Cutting taxes for the rich will help everyone. Cutting the number of teachers is good. All regulations are bad. The smaller government is, the better. Americans don’t deserve affordable healthcare. Obama wasn’t born in the US. If you’re poor you’re just lazy. Whatever they’re told, they swallow greedily and cry out for more.

I’ll go so far as to say that the right is offering America a choice. We either allow the Republicans to turn America into a one-party state or they will use all of their considerable power to prevent our government from functioning. Either way, Democrats and their supporters will not be allowed to have representation. Look what they did with Eric Holder today. Unprecedented. How do we stop this? They’ve declared war on our democracy.

Posted by flashrooster | Report as abusive
 

Thanks for nothing, Wall Street.

Posted by borisjimbo | Report as abusive
 

I disagree with the facts/conclusions of your first sentence (which the rest endeavors to support. This data merely shows that America and Americans were better off at an unspecific date in history between twenty and thirty years ago.

You are entitled to speculate as to why that is the case, but it is disingenuous to present such personal speculation without meaningful and convincing evidence. You want America to change it’s course. On that point I wholeheartedly agree.

Wages per capita have decreased, but what would you expect at the end of perhaps the longest “boom time” in American history? Since the number of jobs “…increased just 1.5 percent from 2000 to 2010 while population grew 6.4 times faster…” perhaps America allowed too many illegal and legal aliens into the country to compete with those born here?

You admit that any “…economy with…more workers than jobs puts downward pressure on wages, especially for those without highly developed skills.” Guess what? Today’s America is producing more and more of the latter and less and less of the intelligent, educated and motivated who will create tomorrow’s jobs. In my opinion, teacher unions have made it all but impossible to get rid of bad teachers and reward those that motivate students to excel.

Trade with China has destroyed every 55th job in America? Well I never saw that many Chinese building those 4,000 sq. ft. plus McMansions American designers, American contractors and American lenders apparently convinced so many they could afford when they couldn’t.

The construction jobs that disappeared didn’t move to China! It’s silly to say that “Some 56,000 American factories have closed since 2000, as jobs and the knowledge that goes with those jobs moved to China.” Some of the TECHNOLOGY may ALSO be available in China (and elsewhere), but specific knowledge remains with those laid off…small comfort since it is no longer needed here.

You argue that “…voters are asked to endorse even more tax cuts. How many years of evidence does it take to establish that a policy worked or failed?” You ask “Will continuing our current policies produce favorable results in the future?” We agree only on the answer “NO”.

Only an idiot would continue to do the same things and expect different results, and yet that’s the essence of YOUR argument! You want taxpayers to turn over ever more revenue to a government comprised of a privileged political class and apparently mindless and clueless federal bureaucracies that have consistently shown themselves incapable of meaningful oversight and productive use of the mind boggling number of dollars they shovel out together with never-ending increases to our “debt limit”.

when Congress increases the debt limit,before they have shown themselves able to properly prioritize that which they have? Considering the mind boggling amount of taxpayer funds they increasingly shovel out year after year when Congress increases the debt limit

Back in the sixties, Americans were generally aware of the “Population Bomb”. Fast forward to the above period and everyone, including the unmarried are enthusiastically popping out babies without restraint (remember Octomom?) America has had more choices than most countries and seems determined to choose stupidly. We reaping what we sow.

Before America can balance it’s budget there must emerge a majority consensus as to what government services available revenue can sustain, i.e. what is to be “in” the budget. The journey of a thousand miles still begins with THAT single step FORWARD! Only THEN can we debate how much of THAT goes WHERE. Let’s call these “needs”.

Then let “we, the people” debate what further government spending WE will willingly support. Let’s call that “wants”.

It makes NO sense to me to continue to throw every dollar the federal government can beg, borrow or steal into the bottomless pit of a mindless culture that has NEVER learned how to prioritize. It’s past time they do.

Posted by OneOfTheSheep | Report as abusive
 

This article is much a do about nothing. Post WWII was a fantasy world where 3/4 of the world’s population consumed virtually nothing. Weeping over the fact that the OECD has to reduce its consumption and standard of living so that another 1/3 of world’s population can start to have a reasonable life illustrates either selfishness or ignorance. Before crying too hard, I suggest a trip to Africa. No matter how bad it gets in America, it is orders of magnitude better here than there.

Posted by NRGoracle | Report as abusive
 

Excellent – I’m very pleased that respected mainstream writers are making people aware of this enormous (yet predictably popular) political fraud.

Mitt Romney’s father understood these principles. Why not Mitt?

Both R and D parties now advocate policies that could sound the death-knell for U.S. economic leadership during the current generation (policies which could effectively make slaves of millions more Americans), yet none of the Western political big-wigs appears willing to publicly acknowledge the dangerous flaws in Gordon Brown’s excessively broad “anti-protectionist” rhetoric.

Anyone desiring to see more evidence of DCJ’s assertions might start with this article (previously recommended by me, the author of the same, on Reuters comment threads):
http://www.slyman.org/blog/2011/07/reaga nomics-and-prudent-taxation/

Posted by matthewslyman | Report as abusive
 

The US is only 5% of the world population, but still consumes 25% of it’s resources. This can not continue. The US middle class still earns the equivalent income of royalty in other countries. The “poor” in the US still have cable TV, a flat screen, and probably a car if they are not urban. They are probably over-weight too. There are still millions of people on several continents that are literally starving to death.
So yes, as Mohamad El-Erian from PIMCO said once, “American workers need a pay-cut” or something close to that. Well, we can’t just say to Americans, “look, it’s unfair that you get to run the world and live like kings while our people starve”. Most Americans would not give a crap and would not give up any of their luxuries. So, we freeze wages, off-shore jobs to those that need them, change taxes to extract more, and most of all, print lots of money. These things in combination will give the US the much needed pay-cut and they won’t really know it’s happening. After a few more years, maybe a decade, things will have smoothed out and the playing field will actually be fair.
Before you chastise me, think; Are you a citizen of the world first, or an American first. And if you are religious…..

Posted by tmc | Report as abusive
 

any risk of a flawed conclusion when your measurement window starts at an economic peak (2000) and ends +1 year after an economic trough? just sayin’….

Posted by jambrytay | Report as abusive
 

tmc-

you need to add one very important bit of data to your comment “The US is only 5% of the world population, but still consumes 25% of it’s resources.” The comment to add is that the US also produces ~25% of the world’s GDP. Adds context to the ‘consumes 25% of resources’ statement.

Posted by jambrytay | Report as abusive
 

Columnist here,

@jambrytay, I also use 2001 as a base — a recession year when the Bush tax cuts were in effect. As I show above, the trend line is the same, sloping downward. The key is that without qualification candidate Bush said his policies would make us better off than in 2000 and I offered the campaign the opportunity to hedge at the time, which was declined with vigor.

@OneofTheSheep, I have shown in other columns and my books that for the 90% incomes peaked four decades ago and since then more hours worked and more debt have been the overwhelming trend.

Posted by DavidCayJ | Report as abusive
 

@jambrytay
Yes, it does add context. That is why we are off-shoring jobs and manufacturing too. Other countries need the ability to manufacture goods. They can’t all buy everything from us or their trade imbalances will eventually destroy them. It is obvious that off-shoring jobs hurts the American economy as this article implies, yet neither political party shows any inclination to stop or even slow it. People like @AdamSmith rants about it all the time.

Posted by tmc | Report as abusive
 

DCJ’s article and its title in particular (America’s long slope down) prompted me to have a look at household income data published by the US Census (Table H-17. Households by Total Money Income, Race, and Hispanic Origin of Householder: 1967 to 2010). This data looks at long term incomes (measured in constant 2010 dollars) in various income groupings.

If you do a simple grouping of that data into 3 income groups (lower = under 25k/yr, middle = 25k to 100k/yr, and high = over 100k/yr) and look at the 3 groups over time, you’ll see very clear trends. In 1967, 30% of households were in the lower income group, 55% were in the middle income group, and 6% were in the higher income group. Fast forward to 2010, and 25% of households were in the lower income group, 42% were in the middle income group, and 20% were in the higher income group.

Conclusion (supported by data supported) households in the US have become steadily more prosperous over the long haul.

A large segment of the population enjoys wallowing in bad news and dire forecasts (and DCJ is always there to enable them) but the facts don’t always agree.

We do have real problems in this country. We need to fix our debt situation. DCJ is always ready with his ‘raise taxes’ mantra, but if you look at forward projections on spending and tax revenues, one of these curves is way outta whack, and it’s not taxes, it’s out of control spending.

Posted by jambrytay | Report as abusive
 

ambrytay- then an 20% drop in our consumption would result in our GDP being higher than our consumption rate and would in effect be an injection of wealth from foriegn sources into our economy. The point is, we consume too much. We do it to please the masters. We are referred to as consumers. We aquire personal debt to consume things we don’t need which forces us (well, many of you) to work crappy jobs we hate. Then we are told it is the fault of the liberal, gay, welfare recipient drug addict zombies from an athiest hell. It’s not that you are stupid and put yourself in a bad spot.

Posted by brotherkenny4 | Report as abusive
 

your chart shows that the adjusted gross income indicators were going up until 2007, the year after the democrats took control of the house and senate, and have continued o go down to the present, with the democrats in full control till 2010 but still having having the presidency and senate now.

Posted by zotdoc | Report as abusive
 

Mr. Johnston is absolutely right! The long slope indeed, since tyhe mid 1980′s, the slope is called “supply side economy” (Milton Friedman/Adam Smith) At the time because of the competition between Wall Street and te City a new (old fashioned) form of economy became the trend.

….At the time (Easter Europe still communist, China closed of from the outside world, Brazil a developing country, probably not the silliest thing to do, but then the wall came down and China became with the suport of OUR business community open for business.

The lesser part is trade the bigger part is exported production.

The only way to change this …barriers…. (after all China -the biggest importer of labor- does not play by the “capitalist” rules, but our (these days financially orientated) businesses do not mind, because it keeps them cheap. (Currency/non open investment/low inflation, for which they do follow the rules of the IMF)

Absolutely the only reason behind our (and the rest of the Western world’s + Japan) social economic mess!

The race to the bottom, we share poverty in stead of wealth. The result of the uncontrolled postive freedom in the financial world.

Posted by Beobachter | Report as abusive
 

Not so sure I agree re taxes, etc., but strongly agree attribution of problems associated with not using the manufactured goods we make.

Of course, we have some REALLY BIG problems there that must be addressed, yet we cannot get past the political gameplay to do. Unions. Outdated regulations. Pragmatic yet innovative approaches to address environmental concerns AND keep people working. AND recognition that keeping people working instead of being on welfare (a program that should be overhauled) is a must … even if we DO pay a little more.

The US is growing. While its population base is not as large as India’s or China’s, strategies that we use to do certain things will not scale as we grow … we can see why not even now if we apply some of our methods to these larger populations. Promoting and using our own goods and services is not protectionism from all legitimate points of view.

Posted by tomwinans | Report as abusive
 

tmc: There are at least 3 critical ingredients that you left out of your advocacy for further screwing of the Middle Class and the poor in America:

1.) Healthcare. No where in your marvelous display of 30 years worth of plutocratic propaganda do you account for one of America’s most pressing needs: healthcare. This is not an optional product. It is not cable tv, a smart phone, or a flat-screen tv (the latter two which I don’t own. How would you classify me? Über poor?) Healthcare is a necessity, yet millions of Americans can’t afford it and millions more go bankrupt trying. This is uncivil, unconscionable. Perhaps you should ask yourself, “and if you are religious?”

2.) Fairness and the gross disparity of wealth in the US. I’ve heard the rightwing group-think on this, that the rich are rich because they happen to be smart and work hard, and the other 99.9% of us are dumb and lazy. No endeavor known to man has been more thoroughly mined than that of increasing ones wealth. To think that America’s most financially successful entrepreneurs limit their efforts to the designing, production and marketing of their products is naive. Everything is run by the rich and they’ve designed our system to maximize their own profit. They utilize everything, including our government and our media. The Citizens United ruling is not some fluke of nature. Tax rates for the rich aren’t approaching historical lows because the masses were clamoring for cutting taxes on the rich. In fact, just the opposite it true. The majority of Americans believe that taxes on the rich should go up, and this despite the persistent propaganda on the part of the ruling plutocrats to convince Americans that the rich pay too much. And so what is the result of America’s opinion that taxes should rise on the rich? A major Presidential candidate, Mitt Romney, is advocating cutting taxes further on the rich, and he’s running neck and neck with Obama in the polls. One way or another, taxes will probably be lowered further for the rich despite the wishes of the American people. Democracy?

Wealth distribution is an important indicator for the fairness of a society’s economic structure and America ranks last among all developed nations. Let me be clear, the major causes of America’s grossly lopsided distribution of wealth are by design imposed on the rest of us by a tiny fraction of our population, and we’ve allowed this power grab, this cancer to metastasize to the point that we can no longer consider ourselves as having a democracy since the outcomes of our elections are determined by money and only a few hold all the wealth. Again, that’s by design. They are sucking the life out of us like vampires.

3.) What works best for the US economy. Briefly, there’s plenty of room to debate what is best for the economy. I wish law makers (not that they really care) would all take refresher courses on American history, paying particular attention to our nation’s economic health through the years. Let’s retry things that have worked for us in the past and toss strategies that haven’t worked so well.

Our nation’s debt didn’t start getting out of hand until Reagan cut taxes so drastically. That’s when it started, and the only time since then that we haven’t had deficits was after Clinton raised taxes. Bush followed by cutting taxes again, and up went the deficits AGAIN. I’m not blaming it all on taxes. Spending is certainly part of the equation, but taxes are a big part of it, and for Republicans and their plutocrat benefactors to insist that taxes never be raised again and, shockingly, should be lowered further, is nothing short of madness, national economic suicide. If this is allowed to continue, we will be saddled with a system run by a few very wealthy individuals while the rest of us scramble for their crumbs. It’s called a plutocracy, a form of feudalism.

I agree that there must be spending cuts, but we should also be thinking outside of the box. Why cut Medicare and Medicaid without exploring ways to provide more Americans with less expensive healthcare? Those wanting to cut funding for healthcare programs aren’t talking about how to provide more Americans with affordable healthcare because they don’t care about that. They only care about maximizing their own profits. Period. Why make cuts to education without exploring ways to improve education? Why make cuts to student loan programs without assuring our nation that we continue producing the best educated population in the world? I’ll tell you why. Because the people who are running this nation don’t care about those things. They care about their own personal wealth.

tmc, I have found that there are two kinds of people who believe the positions you’ve espoused in your post. There are those who push the self-serving propaganda (Is there any other kind?) of giving all wealth and power to the few as the best means for going forward, personally benefiting from public absorption of their carefully designed ideology. And then, of course, those doing the absorbing, those who just swallow what they are being fed, that somehow it is all for the better and that it doesn’t have to make sense today. Just trust those who are in power because they must know what’s best and, importantly, they can protect us from the real evils of the world, like liberalism.

Posted by flashrooster | Report as abusive
 

Well @flashrooser, you have made my point well.
I actually didn’t espouse any positions. I just made an observation about how I see the global societies changing in the 21st century. You still seem to be stuck in the rich vs. poor of our country. If you expand your thinking to global societies, YOU are the very rich person extracting from the poor (the rest of the world). Fairness will be achieved when a person in India, China, Brazil, and the US all make the equivalent money for the same job. It is happening. Very quickly too. In 1998 I was off-shored to an Indian software developer that cost $14 an hour fully loaded. Now that same Indian developer will cost a company at least $32. Reuters has also printed articles on the rising labor costs in China. At this rate, with the rise in incomes abroad, and the shrinking here, we should all even out in another decade, maybe two.
To your Micro economics:
1. Healthcare. I’m a disabled American veteran and I fully believe healthcare should be socialized in the US. I also believe we can do it better than other countries. Geez, even the Germans believe in it.
2. Fairness and disparity of wealth in the US. Well, I think you are right, but I was more talking about the disparity of wealth between the world societies. In that case we are all the uber rich and the rest of the world is the poor.
3. not sure what your number three was about.

Posted by tmc | Report as abusive
 

Always enjoy your articles.

Keep up the good work.

Posted by lhathaway | Report as abusive
 

In the last 5 years it looks like household debt declined over 10% and in the last 2 years incomes have begun to rise again. Is it possible that the de-leveraging of an entire country (personal, private and public) might result in a painful few years? Perhaps a world-wide recession may have exacerbated the effects of poor policies? Has Europe’s strategy fared any better?

Usually your leftist slant is backed up by at least respectably solid facts and figures with a well written argument. What happened? Busy week?

Posted by CapitalismSays | Report as abusive
 

@DKJ,

You said: “@OneofTheSheep, I have shown in other columns and my books that for the 90% incomes peaked four decades ago and since then more hours worked and more debt have been the overwhelming trend.

First, a compliment…even though we agree or disagree on certain subjects, you respond to some comments. In my opinion, that separates you from the “paid by the word” people who seem curiously separate from the “real world.

What constitutes the “90%” incomes from your “other columns and books”? I would expect that considerations of one and two worker households, inflation, and the fact that “disposable income” has increased substantially even as the cost of foreign made electronics, clothes, cars, etc. made overseas has decreased would render “traditional” comparisons and extrapolation of questionable accuracy in objective evaluation of how “well off” the “average American” is today versus a given time in the past.

If people work longer to maintain a certain income, then the value of their labor has decreased. If they work the same number of hours for less income but continue to spend as they did before, obviously their debt increases.

The first group is financially self-sustaining. The second is on “thin ice” (and may not be). I would be leery of any economic “indicator” that ignores that difference between households.

Posted by OneOfTheSheep | Report as abusive
 

This is so obvious it’s painful. Thank you for the article.

Posted by metalworker | Report as abusive
 

This guy is way off base. He’s a die hard socialist and Keynesian that is reaching to justified his failed religion.

Posted by yahyah | Report as abusive
 

tmc: Thanks for clarifying for me your points. I personally think your post is off-topic for commenting on an op-ed about the direction of the American economy, despite how much our economy is now influenced by new global considerations. My post was targeting certain dynamics within our national economic environment. My apologies for misunderstanding your intent.

That being said, I think if I had a chance to talk with you at length about the global economic issues you’ve broached, I’d probably be very much in agreement with you. Things will either have to change on a global scale, change most people can even fathom yet, or the human race won’t survive. And such dramatic change will not come easily. Those with the most will have to sacrifice the most, and many of those tend to be the least willing to sacrifice and the most willing to use their wealth and power to fortify their positions of ascendency.

To elaborate just a bit on a point I made earlier, I think the picture you paint of poor Americans is inaccurate. Yes, Americans enjoy certain advantages just by virtue of being born and living within America’s borders, but the poor in America aren’t all just sitting around in front of their big flat screen tvs playing on their i-phones stuffing Doritos into their fat bodies. I’d argue, though unscientifically, that the 2 biggest reasons so many poor are fat are a poor diet and poor health education. Yes, there are many countries around the world where people are literally starving in the streets, but there are also many countries where they are not and it’s a bit unfair and distorting to take the worst and compare it just to America, suggesting that the poor in America live like royalty. Yes, America is still the richest country in the world, but it’s also true that America has the greatest disparity of wealth among all developed nations. The wealth is not shared and that’s growing worse. Poverty in America is a very serious and growing problem. And as I stated before, many don’t even have access to healthcare, and that is no small thing. Millions of American die prematurely because greedy people are controlling our government and have designed our “healthcare system” to maximize their own personal wealth, and they keep that from changing through some very clever and persistent propaganda. Americans are not without their problems. Very few of us live like kings. Compared to some countries? Sure, but to push the notion that America is rich and therefore bad and the rest of the world suffers because of it is a contortion of the truth and not very helpful. That’s a step toward adopting some of the attitudes that make America so problematic.

I’m not saying feel sorry for Americans. We should save our sympathy for the worse atrocities and the worst suffering where ever it takes place. But the homeless American who is trying to survive by digging refuse from garbage cans, and they exist in alarmingly large numbers, are not suffering any less than those who are doing the equivalent in other countries. Believe it or not, there are many other countries who now have it better than the US, thanks to the governmental-industrial alliance that has taken control of this nation.

Americans have to deal with their own problems themselves, which is what this excellent op-ed is targeting. But if we can’t get the plutocrats who have taken over our government to stop the extracting from the 99% of us Americans, how are we going to get these global robber barons to rethink the world’s priorities? Increasingly these people are developing allegiances to other wealthy industrialists around the world, allegiances that know no national borders. There’s little concern for the American people on the part of those governing us. The thinking American has been all but silenced and the most powerful military in the world is increasingly being controlled by irrational, self-serving, megalomaniacs who have no qualms about military engagement.

You end your post by stating, “Before you chastise me, think; Are you a citizen of the world first, or an American first. And if you are religious…..” Unfortunately, most Americans don’t think much beyond our borders, compliments of the propaganda that we are being fed 24 hours a day, 7 days a week. Half don’t even believe in global warming. And increasingly Americans, particularly on the right, aren’t putting America first either. The new line of thinking is to put yourself first, even if it means screwing others. I’m sad to admit this, but I’m afraid it’s true. We’re going in the wrong direction. And religion? The most practiced religion in America is hypocrisy.

Posted by flashrooster | Report as abusive
 

I can sense the anger in the author of this article.

Blames have been laid on several things
- Low tax is bad
- Low interest is bad
- Unfair free trade with low wage countries like China and South Korea (?!)

From what I can see, it looks like a typical profile of a US baby boomer senior citizen’s unhappy sentiment with the low interest rate (damages fixed income), low tax (on other working people’s income), free trade (damages job prospects for his many children).

I hope this open the eyes of Krugman and other Keynesian inflationary economists. Now you perhaps understand why Merkel is careful with inflation. There are many more potentially angry (but currently silent) senior citizens with saving in Germany.

Yes, revolution and social chaos won’t come from the elderly, the seniors. But you push too much, there will be troubles from them too.

Posted by trevorh | Report as abusive
 

Mr. Johnston consistently demonstrates solid, objective analytical skills. He makes his findings available to the average American. Unfortunately, it’s not the average American who can do anything about his concerns.

The Constitution gives each citizen the right to vote to influence the election of their representatives and the making of laws. As the Supreme Court justices have made clear, the court has the power to confirm or change the laws. With the Citizens United decision the Supreme Court changed the voting mechanism from the voting box to the pocket book. Billionaires now have billions of votes while the average American has only a few hundred or a few thousand votes. Flooding the television with enough advertising for their candidates convinces many people to vote for the candidates backed by the billionaires. Even non-citizens (foreign corporations) can donate millions or billions to PACs supporting the candidates willing to do their bidding.

Additionaly, many corporations and billionaires pay $100,000 annually to belong to ALEC (American Legislative Exchange Council). Elected representatives and senators, however, can join for free. Together they make template state and federal laws that the representatives and senators take to their respective states and to federal congress and work with their fellow elected representatives to pass into law.

Until we average Americans have enough votes (i.e., dollars) to influence the efforts of the very wealthy to control the government at the state and federal levels, Mr. Johnston’s efforts can have little benefit to average Americans. It is reassuring, however, to know that we still have someone in the U.S. who has the skill and desire to uncover and present a thorough analysis of information.

Posted by VoveoPacis | Report as abusive
 

There are good points here, but it’s pretty one-sided. After all, trade with China and other countries has dramatically lowered the cost of things here. Just imagine what a T.V. would cost if they were made by workers here in the U.S. Same thing for clothing. Pants are made by women in China and other places around the world. These are good jobs for desperately poor women in villages where people would otherwise go hungry and maybe die for lack of medical care. There should be higher taxes on the wealthy here, no doubt about it, but as we can see with California, high taxes alone won’t fix everything. Runaway pension costs are a big problem, and Mr. Johnston all but admits that illegal aliens are making it harder for low-skilled Americans to get work and negotiate for decent wages.

Posted by Calfri | Report as abusive
 

@Flashrooster, thanks for your comments. I think we agree on most things in this topic. I did get a bit off topic. I guess I was trying to point out that no matter what we Americans do with our economy, we will not be able to maintain our economic position in the world without some major calamity happening, or we do it at the point of a drone. Eventually the global social forces will even things out, whether we like it or not. You could say it is capitalism at the global level?
On our national level, we can obviously do many things to soften the blows. Unfortunately our government has not kept up with the times. Our two party system was great during the cold war and aftermath, but not doing so well in the 21st century global economy. John McCain once said on Meet the Press, a long time ago when he really was a maverick, he said: ” If you really want to change Washington, there are only two things we need to do. Term limits for congress, and campaign finance reform.”. I doubt he would ever say it again now that he has found his way back to party loyalty. But he was absolutely right. If anyone actually got any of the suggested “fixes” in place, they would just wait a cycle or two and change it back, or just modify it to their needs. We would have to break the powerbases in congress to allow new people in that might actually do right by the people. I would expand his statement now to include term limits for the supreme court. Campaign finance reform is a tough one, but once we get the cronies out of congress, I’m sure the real congress people will be able to find a solution to that too.

Posted by tmc | Report as abusive
 

The United States has been on the long slippery slope of economic desolation. Old news, except the people refuse to believe it.

As for the end of the article, the author proves that he is another one that knows nothing about economics. In fact, almost no one knows anything about economics. The first thing to learn is that politicians/economists/governments are unable to change the economy. There is NO quick fix.

Paraphrasing the author; tax and spend does not work, tried over and over again with repeated failure; socialist policies, same result.

Censorship is evil.

Posted by ALLSOLUTIONS | Report as abusive
 

Columnist here,

I am delighted that my column provoked robust debate. My hope is that those who disagree with my analysis will keep raising issues — and also question their own assumptions.

@ Allsolutions, there are no quick fixes. It has taken us decades to dig the holes we are in and it will take at least years to work our way out — once we start. I am sure you will be shocked too learn I have studied economics my whole life, including study at the Chicago School (I am an apostate) in 1973.

@ Trevorh, I don’t have any fixed income and its not about me, it is about the public policy effects of artificially low interest rates. See my previous columns on this and, please, read the ones I am working on that will show more of the damage caused by government artificially setting interest rates instead of the pricing mechanism of the market making such determinations.

Some posters here evidently misread my works. My column, and my books, champion competitive markets.

But then as economist Robert McCullough says, those of us who defend actual markets are routinely called socialists and communists by people who do not understand that markets require rules and people like us who point out rules that damage or destroy the benefits of competitive markets. Calling something a market does not make it one, just as calling a trade deal “free,” does not prevent it from being a rigged deal.

Evidently it would also surprise at least one poster here that I qualify for that au courant title of “job creator,” as co-founder and chairman of a corporation with (at the moment) two dozen employees and I hope some day many times that number.

From the local government boards whose budgets I dissected when I was 17 (using long division because neither calculators or spreadsheets existed back then) to exposing the many inefficiencies of the LAPD to explaining the effects of our tax and regulatory policies today, I have always tried to show what policies do, not regurgitate what politicians say they do. Big difference.

Posts offering useful critiques, smart alternatives, or reasons our existing policies are just fine, are all encouraged and invited.

Posted by DavidCayJ | Report as abusive
 

“…the Fed’s artificially low-interest rate policies under presidents Bush and Obama do far more damage than good (especially to savers)…”

It’s a shame to read so much that’s so good here only to read something like that. I suppose the implication is that tight monetary policy reduces leverage and loose monetary policy reduces it. Nothing could be further from the truth. (Welliam Jennings Bryant knew this.)

First of all, nominal interest rates should never be taken as a measure of monetary policy stance, otherwise the inflationary 1970s had the tightest money in American history and the deflationary years of the Great Depression the loosest. The best measure of monetary policy stance should be the rate of nominal income growth which was abismal in the 2000s, and continues to be so today.

The long rise in household debt since 1980 occurred during a great disinflation. Americans actually did not borrow much during the 1980s and 1990s, but rather ran a primary surplus. (They did borrow during the early to mid 2000s but that was mainly due to financial deregulation.) Real effective interest rates (mortgage rates, installment debt and revolving credit) soared after 1980 as inflation fell. Meanwhile nominal income growth stagnated.

Tight money helps leverage increase and makes delevering harder. If you want to see what loose monetary policy can do to debt take a look at the early years of the New Deal. Every kind of debt, household, business, financial and total government (federal, state and local) plunged as a percent of GDP from 1933-37 after FDR pledged to raise the price level and took us off the gold standard.

“The Administration has the definite objective of raising commodity prices to such an extent that those who have borrowed money will, on the average, be able to repay that money in the same kind of dollar which they borrowed.”
FDR – Second Fireside Chat, May 7th 1933

Posted by MarkSadowski | Report as abusive
 

@DavidCayJ

I do understand your concern, very reasonable and it’s not for you only. I also don’t say your concern is not reasonable.

I simply try to point out a demographic group that would very much be in agreement with your article and your view.

And for interest rate, I support an interest rate equal to GDP growth minus population growth (or at least the essence of it).

As for the long slope down, I propose 2 simple explanations, 2 root causes:

1. The world is catching up, and America is losing its technological superiority which ultimately leads to loss of economic competitive advantage.
2. America is the place with the worst inequality in the developed world because it is also the place with the clearest and blatant sign of “the poor and the lower middle class outbreed the rich and the upper middle class” among all developed countries.

Posted by trevorh | Report as abusive
 

I totally agree with your article, but unfortunately it appears to be way above the heads of most of those reading it, even though you seriously “soft-pedaled” the problems and could have added a few more.

We need something concise and to the point like “it’s the wealthy, stupid” and keep repeating it ad nauseam until they begin to believe it.

Asking the majority of the American people to even remotely understand what is going on is far too great a task for them, even if they were interested.

Posted by Gordon2352 | Report as abusive
 

“…the Fed’s artificially low-interest rate policies under presidents Bush and Obama do far more damage than good (especially to savers),…”

I love everything else about this post except that.

The implicit assumption is of course that low nominal interest rates are equivalent to loose monetary policy and that loose monetary policy increases leverage. But if that were true then the high nominal interest rates of the 1970s would have meant tight money (and yet there was inflation) and the low nominal rates of 1929-1933 would have meant loose money (and yet there was deflation). During the loose money 1970s leverage fell or remained steady and during the tight money Hoover years leverage soared.

You should take lessons from Roosevelt:

“The Administration has the definite objective of raising commodity prices to such an extent that those who have borrowed money will, on the average, be able to repay that money in the same kind of dollar which they borrowed.”
FDR – Second Fireside Chat, May 7th 1933

Posted by MarkSadowski | Report as abusive
 

Here is a simple solution. But sadly, it is too complex for most Americans to understand, so it has not become an important election issue:

The USA should apply steep tariffs to all goods imported from any nations that manipulate their currencies – until those nations allow their respective currencies to float freely. In other words, access to the vast USA market should be limited to nations who play fair.

For example, China holds the yuan at an artificially low value, to gain an unfair advantage in world trade. Why is this allowed?

Obama has repeatedly refused to name China a currency manipulator. Thus, Obama is responsible for the enormous destruction to the US economy that has been caused by the artificially low yuan.

If the yuan were allowed to float freely, it would rise sharply, making Chinese imports more expensive and making USA exports more competitive. This would increase production in the USA and bring jobs back home.

Only Romney has promised to get tough with China. But he cannot be trusted. He is beholden to the wealthy trans-national corporations who earn huge profits from Chinese labor, which is ultra cheap thanks to the low yuan.

Note that I am not against China, or world trade. But international trade must be fair, and manipulating currencies to gain an advantage is simply not fair.

Americans must wake up to this simple reality, or the US economy will continue to struggle.

Posted by DifferentOne | Report as abusive
 

@DavidCayJ:
“Some posters here evidently misread my works. My column, and my books, champion competitive markets.
But then as economist Robert McCullough says, those of us who defend actual markets are routinely called socialists and communists by people who do not understand that markets require rules and people like us who point out rules that damage or destroy the benefits of competitive markets. Calling something a market does not make it one, just as calling a trade deal “free,” does not prevent it from being a rigged deal.”

- This is almost worth an article on its own. I think anyone who has consistently been reading/ watching your column, will know that you have characterized yourself correctly here (I remember, for example, your championing of free & fair competition between FedEx and UPS, in the context of equality in union laws).

Laissez-faire is NOT a “free market” – rather, low-tax laissez-faire “markets” typically become fiefdoms under the hegemony of a few anticompetitive oligarchs. Based on the evidence I am seeing, significant taxation is actually required for the health, freedom and fairness of the market, as well as to support spending for the common benefit of all that naturally falls under the remit of government and ensure opportunities for any/all to succeed at the mere cost of hard work…

Posted by matthewslyman | Report as abusive
 

p.s. In case anyone is still in doubt, I have read a number of DavidCayJ’s articles and don’t remember a single case where he advocated Keynesian “tax and spend” (deficit spending “stimulus”) “economics”; most particularly not in the context of the current crisis. Rather, his general speciality appears to be in exposing ways in which the big “market” players deliberately rig the “market” in their favor. Long may the exposure continue – we need journalists like DavidCayJ to help overcome the general fog of voter apathy/ indoctrination/ bamboozlement/ lack of education…
I love the way DavidCayJ reduces the issues to the simplest possible terms. I’m trying to figure out how he does this so I can copy his style.

Posted by matthewslyman | Report as abusive
 

It sounds like the take away is that we have a political economy that favors traders in the financial markets versus savers, workers, and producers. We can probably start by addressing the mechanics of market intervention: get rid of the Fed so that we have a more accurate assessment of the value of money and the currency’s underlying economy. In addition, craft policies that promote production and discourages issuing credit that supports conspicuous consumption. Finally, restructure government such that all agencies focus on economic development and facilitate moving natural resources into the hands of producers that value it most and can put resources to best use.

Posted by AltonDrew | Report as abusive
 

@AltonDrew, so, you want our currency to bounce around with the latest political polls? I despise the concept of the Fed too. But I’ve never heard anyone put forth an alternative other than the gold standard. I doubt that old bird would ever fly again. As another commenter above discusses, currency must be manipulated for the markets to continue working their present form. @DiffentOne doesn’t seem to think that printing trillions of dollars to get out of debt is not currency manipulation. Well, it is. We do it as much as any other country.
I think what we should do with the Fed is rake away their privacy. Start by renaming it to something the public will understand. Like “group of banksters in charge of your money” or “Bankster Solutions” or BS for short. Why? If you ask 99% of Americans what the fed is, they will stutter out that it is anther government agency and they have no idea what it does. I hate them, but we need them. Politicians would destroy our currency in a few short election cycles.

Use cash, starve a bankster!

Posted by tmc | Report as abusive
 

@tmc

There is a big difference between the Fed’s quantitative easing (QE) and China’s currency manipulation.

China’s dictators depress the yuan’s value to gain an unfair advantage in world trade. The low yuan value makes Chinese labor very cheap compared to American labor. This gives Chinese exporters and manufacturers a huge advantage, and explains China’s massive trade surplus. The cheap yuan also attracts large transnational-corporations, who switch production from the USA to China for two reasons:

1. To earn higher profits, and
2. Because they have been forced to switch to China, to remain competitive with rivals who already manufacture in China.

In contrast, the Fed’s dual mandate is to simultaneously limit inflation and maximize employment. Have they also devalued the US dollar? Certainly not against the yuan or the Euro! The yuan value has increased only 3.5% annually over the past two years. And the Euro is under pressure.

In fact, the Fed’s quantitative easing has not degraded the US dollar, because other deflationary factors are working in opposition.

For example, banks are currently reluctant to lend, money circulates more slowly because consumers are poorer, and companies are investing less because they are more cautious. These factors are deflationary, and hence, tend to support the dollar. Also, the US dollar gets bid up when considered a safe haven from Euro contagion panic.

Actually, since the Fed must control inflation, they must limit any measures that would devalue the US dollar. This is because a drastic devaluation would drastically increase import prices, which would cause inflation. Hence, it is Obama who must negotiate for a higher, floating yuan, which would increase US employment and inflation. The Fed would then have to moderate any inflationary consequences.

Clearly, China’s stubborn currency manipulation is gutting the industrialized economies, and is thereby undermining the world economy. It is a dangerous game played by China’s fascist dictators to retain their grip on power, dominate world trade, and build a powerful military to seize Pacific Ocean natural resources.

The time to get tough on China is now, by imposing economic sanctions, including tariffs, until China allows their currency to float freely. Of course, China will try to blackmail the world by threatening to sell nuclear technology to Iran, and by unleashing their attack dog puppet North Korea. But the biggest threat by far is China’s increasing domination of world trade.

Americans must make China’s currency manipulation an important election issue. Otherwise, as China gains more power and buys more media influence and more US politicians, Americans may start to lose their basic rights and freedoms. And as economic stagnation persists, political extremists could gain power, making the world much more dangerous, while America’s anemic economy would undermine it’s defense capabilities. Americans and their children could suffer the consequences for many generations.

Posted by DifferentOne | Report as abusive
 

Yes @DifferntOne, I agree that the two are different. but I also believe both are forms of currency manipulation. Just for different reason and from different view points.
I don’t know the answers to making global economics work smoothly and fairly for everyone, but many of the old 20th century tools don’t seem to work as expected anymore.

Posted by tmc | Report as abusive
 

@tmc

I think you’re comments point to a good understanding of the larger, global picture. I agree, certain things should be completely socialized, mainly health care and education. Things that any civilized country should afford it’s citizens. Right now we seem to be entrenching a democracy for the fortunate.

Stronger workers rights globally will make things fairer across the board. Prices will go up and the mindless consumption addiction will be forced to adjust. Though the purveyors of mindless consumption would rather have humanity converted to profit maximizing machines (that also consume) and morality and ethics viewed solely through the language of markets.

Right again on the McCain comment. Until you get the money out of politics, nothing will change. Right now it is only going the other way. Which Super-Pac will win this November??

“The US is only 5% of the world population, but still consumes 25% of it’s resources. This can not continue. The US middle class still earns the equivalent income of royalty in other countries. The “poor” in the US still have cable TV, a flat screen, and probably a car if they are not urban. They are probably over-weight too. There are still millions of people on several continents that are literally starving to death.

So yes, as Mohamad El-Erian from PIMCO said once, “American workers need a pay-cut” or something close to that. Well, we can’t just say to Americans, “look, it’s unfair that you get to run the world and live like kings while our people starve”. Most Americans would not give a crap and would not give up any of their luxuries. So, we freeze wages, off-shore jobs to those that need them, change taxes to extract more, and most of all, print lots of money. These things in combination will give the US the much needed pay-cut and they won’t really know it’s happening. After a few more years, maybe a decade, things will have smoothed out and the playing field will actually be fair.
Before you chastise me, think; Are you a citizen of the world first, or an American first. And if you are religious…..”

Posted by TheUSofA | Report as abusive
 

The average middle-class American earns $43,000 annually which puts him or her in the richest 1% of the globe. 2 billion, 800 million people in the world live on less than $2.00 per day. I do not think that things are as dire in America as the writer would like us to believe.

Posted by authentic | Report as abusive
 

Sure currency manipulation is a factor.

I value more a fiscal policy encouraging domestic manufacturing while protecting our borders with some import tariffs on key products.

Right now in Singapore a corp. pays 13% flat rate and in China they all get unfair subsidies to export (a de facto negative tax).

We should not force our corp to outsource offshore labor or put up Asia manufacturing subsidiaries in order to compete in our domestic market and worldwide.

Posted by robb1 | Report as abusive
 

of the brainless elected officials managing this country I could just puke. What
does it take to educate Congress to the fact that we are a sovereign currency
issuer. We can issue all the money we want and right now with inflation well
under control and unemployment at 22%, deficit spending is the only way to
assure economic growth. Moreover, the President could use the Coinage Act to
mint a $20 trillion platinum coin, deposit it to the Treasuries checking account
at the Fed and issue all the checks needed to restore this nation. This can be
done due to a peculiar and little known act passed in 1996 that allows the US
Treasury to mint platinum coins of arbitrary value, but no other metals. Why
this was passed, I have no idea, but it is in the code apparently. A single one
trillion dollar platinum coin deposited at the NY Fed by the Treasury would do
the trick for some time.Econospeaks, thanks James Galbraith for
bringing this to my attention. Apparently this was suggested initially some time
ago by the commentator known as “beowulf.” Matt Yglesias provides more
discussion at

http://tinyurl.com/6xub2ab .

http://my.firedoglake.com/beow…

http://mikenormaneconomics.blo…

Professor Warren Mosler
writes, http://www.huffingtonpost.com/…

“From Warren Buffet to
Alan Greenspan and from all the responses to the S&P downgrade by economists
and financial professionals from the four corners of the world, THE WORD IS
OUT:

The US government is the issuer of the US
dollar.

So no matter how large the federal deficit might be:

The US government can always make any payments in US dollars
that it wants to.
There is no such thing as the US government running out of US dollars.
The US government always has the ‘ability to pay’ any amount of
US dollars at any time.

Now connect the dots to:

The US is not dependent on tax revenue or foreign
borrowing to be able to spend, and whereas Greece is not the issuer of the euro,
much like the individual states in the US are not the issuer of the US
dollar,

There is no such thing as the US becoming the next Greece.

There is no such thing as the US getting cut off from spending by the
financial markets and forced to go begging to the IMF to get US dollars to
spend.

Nor is the US government subject to market forces driving up interest rates
on US Treasury bills.

Even after being downgraded US Treasury bill rates remain near 0%.

Why, because, any nation that issues its own currency also sets its own
interest rates. So in the US, the Federal Reserve Bank votes on the interest
rate.

So, then, what is the point of deficit reduction?

Suddenly, it’s NOT solvency.
The US is suddenly NOT going broke.
Social Security is suddenly NOT broken.
There is suddenly NO risk the US federal government will not be
able to make all payments as promised

.

So now, the deficit hawks must CHANGE THEIR REASONS FOR DEFICIT REDUCTION or
shut up!

They must FLIP FLOP or shut up! Yes, there is a new reason they can
flip flop. They can start claiming the current path of deficit spending will
lead to inflation.

Fine. Bring it on!

First, they need to do the research, as they haven’t even thought about this
yet. Then they have to convince Congress to cut social security and
Medicare:

Not because we might become the next Greece
Not because the US government checks might bounce someday
Not because the deficit will burden our grand children

But ONLY because some day, if we don’t do something when the time comes and
even though we don’t have an inflation problem now, and haven’t had one in a
very long time, SOME DAY far into the future, inflation might go from x% to
y%.

Fine.

Do you think Congress knowing this would take draconian steps now, during
this horrendous recession, to make things worse by?

Cutting
Social Security?
By cutting funding or
public infrastructure? and
By raising taxes?

How about we get the
word out and find out, thanks!”

Posted by PotomacOracle | Report as abusive
 

“We should not force our corp to outsource offshore labor…”

Force? You lost me there. This is the viewpoint and language of markets. A language which today lacks morals and ethics. Where the generation of wealth of any kind and by any means is considered value.

Considering that many corporations pay half to none of what they should be paying as it is, giving corporations a freer tax ride isn’t going to bring jobs back. They’re already in the habit of having their cake and eating it too. They’ll game even the lower tax rate and still look for the cheapest labor they can find abroad.

CTJ looked at 280 companies (2008-2010), all of them members of the Fortune 500, and found that “while the federal corporate tax code ostensibly requires big corporations to pay a 35 percent corporate income tax rate, on average, the 280 corporations in our study paid only about half that amount.” And those who paid even half the statutory corporate tax rate paid far more than many of their competitors.

In fact, in the last three years, 78 corporations had at least one year where they paid no federal income tax at all, while 30 corporations paid not a dime over the entire three years. Those 30 corporations paid nothing, even though they made $160 billion in profits over that period:

– Seventy-eight of the 280 companies paid zero or less in federal income taxes in at least one year from 2008 to 2010…In the years they paid no income tax, these companies earned $156 billion in pretax U.S. profits. But instead of paying $55 billion in income taxes as the 35 percent corporate tax rate seems to require, these companies generated so many excess tax breaks that they reported negative taxes (often receiving outright tax rebate checks from the U.S. Treasury), totaling $21.8 billion. These companies’ “negative tax rates” mean that they made more after taxes than before taxes in those no-tax years.

– Thirty corporations paid less than nothing in aggregate federal income taxes over the entire 2008-10 period. These companies, whose pretax U.S. profits totaled $160 billion over the three years, included: Pepco Holdings (–57.6% tax rate), General Electric (–45.3%), DuPont (–3.4%), Verizon (–2.9%), Boeing (–1.8%), Wells Fargo (–1.4%) and Honeywell (–0.7%).

Posted by TheUSofA | Report as abusive
 

You r right “TheUSofA”, I should have used the verb “allow” instead of “force”. I just assume that corp greed is a given fact… :)

I tend to be brief, but I try to express the following concept:

If we eliminate the loopholes like total deduction of offshore outsourcing, deferred foreign taxation of income etc… in lieu of better fiscal policies for corps that invest and generate jobs here in the US, the situation will improve.

If in the short terms our US corps will be disadvantaged, then some import tariffs will be just fine until they do not generate too much inflation.

Posted by robb1 | Report as abusive
 

@jambrytay,

Look at the three brackets that you created from H17, do you note a reverse coarse or lull near ’80 or ’81? The Recession trend that Reagan heroically corrected? Now look at National Debt http://en.wikipedia.org/wiki/United_Stat es_public_debt. Interesting how the trend is coincidentally ‘saved’ by a new slope to the National debt.
Maybe not so much of a heroic miracle considering this is equivalent to giving everyone a national credit card to ‘supplement’ their income. Of coarse credit limits are not the same for everyone, and something you do not see from Table H17 income data are the new super rich bracket growing within column 200,000+, and the huge swing in wealth accumulation/ownership to these upper brackets.
The prosperity (by income only) you imagine is an illusion derived from the creation of the “debt situation”. And, the investments in trickle-down economics based on credit by our Gov during Reagan, Bush Sr., Bush jr., and Obama, gambling on stimulating us into magical booming debt pay-back days is a failure.

Posted by ConstFundie | Report as abusive
 

@calfri

“There should be higher taxes on the wealthy here, no doubt about it, but as we can see with California, high taxes alone won’t fix everything. Runaway pension costs are a big problem”

Indeed we talk the break down of society here everything for the money, and the people?

As I stated before I firmly believe that we found ourselves at the top of the long slope at the end of the eigties after the start of the rigorouse pursue of supply side economics by two Western conservative political leaders.

The perseverance of these policies by subsequent governments R & D (and the rest of the “free” world) should have been stopped (we should have held a constant healthcheck on our production sector)before it could lead to the crisis of 2008.

Basically supply side economics mean the race to the bottom, …the flow of income levels between comunicating vessels, one wit a thick and the other with a thin bottom. Sothat finally nobody in the “rich” world can afford the product made in the “poor” world because the “rich” workers will have lost their jobs.

Proof…..QRE does not work on jobs, the money is spend on products produced abroad or, at “best”, saved.

Posted by Checksbalances2 | Report as abusive
 

The simple fact is that social cohesion in the USA is gone. Ended. Kaput.

The wealthy and “well off” people here cluster together in walled (“gated”) compounds and seldom see ordinary Americans except when ordering at a restaurant. Not only are they isolated, when it comes to social concerns, they communicate almost exclusively with one another. Not so surprisingly, their range of opinion, like the range of choices in American elections, is quite small. They are very, very myopic and hostile to anyone who does not share their myopia.

If you divide the US population into quintiles by income, and quintiles by wealth, and then generational cohorts by decade, you will see the concentration at the top. And you will also notice that those top rungs are occupied by elderly people who will die relatively soon, setting loose a cascade of wealth and power that will establish a new order in this country. It is simply irresponsible not to try to direct the outcome of this shift in wealth, which will result in a shift in power. No one lives forever, however much money or power they have. What do these people want to leave behind? That is very unclear. Primarily it seems they do want to live forever and to go to their graves clutching their titles and money. But it is still true that you cannot take it with you.

At least leave freedom and taxes which have a positive effect on all citizens. And cutting the prison population by 50% would be a good goal too.

Posted by usagadfly | Report as abusive
 

@ robb1
Indeed, the problem is the Chinese (because they are what you are referring too) have got a heavily controlled economy (Marxism, supported by capitalism) and we support that economy by allowing our companies, because of the benefits for the financial side, to export production there.

In fact the two (Financial economy vs. social economy) work against one another, a battle that will never be won without building -compensating for R/E and diference in living cost (no more)- barriers in the trad with those labor pulling countries.

The relentless pursue of the “ideal” of the supply side economy…the race to the bottom.

As Stephen King speeched before the share holders of HSBC in 2009, we have seen nothing yet…the middle classes in the west will inevitibly will all go down. It is a win, win, win situation for capital.

If so desired I give the full text.

This has been going on since the period of Reagan and Thatcher, the fall of the iron curtain and the opening upo (mid nineties) of China…look at their space and nuclear ambitions.

Posted by Checksbalances2 | Report as abusive
 

US medical costs are 2.7T$ per year. Other countries provide as much, or greater, health care at half the cost, using a single payer system. Single payer could free up 1.35T$ per year, every year. (And don’t believe that we pay so much because of research by Pharma. That number is only $15B/year, according to the National Academy of Sciences.)

If we could reduce our per capita health costs to those of Canada, UK, Australia, and others, the savings would cover most of our annual 1.5T$ federal deficit. Moreover, medical care would be universal rather than the present limited coverage. We would probably also be in much better health, and consequently more productive.

Obviously, to do this, as a people we would need to take charge or our own thinking. Gobbling junk food may be good for US corporations, but it is not good for Americans.

In addition, reduction of our military/security complex by 50% would save an additional 0.5T$. We would still spend 5X the world average. A greater portion of our tax dollars would be spent at home, giving a multiplier effect.

Actually, reinstating the Bush tax cuts would only bring in 0.1T$ (unless I’m mistaken). However, a fairer tax system would make education more available to all Americans, and thus make it more productive as compared to sending only the elites children to top schools regardless of how intelligent they are.

Some of the savings could be devoted to making ourselves more competitive in the world, say through education.

Posted by xcanada2 | Report as abusive
 

The beginning comment that when wealthy elderly people die in the US “setting loose a cascade of wealth and power that will establish a new order in this country” is ludicrous. The money is inherited within family using the same wealth managers running the empire. The Johnson and Johnson family don’t leave all of their companies and holdings to America when one of them passes. Where in America have you been seeing a “new order in this country”???? Ever? The Hearst and Sedgwick families are still the one percent as well as all of the one percent families in America. Dreaming?

Posted by J.O. | Report as abusive
 

In July 2000 there were 111 million private sector jobs, and in April 2012 there were 111 private sector jobs. No growth, even though the growth of the “working population was 25 million from 217 to 242 million. No growth in private sector jobs. There’s an article by professor Andrew Sum analyzing the decade 2000-2010. He says incomes of workers grew 2%, corporate profits by 58%. The slowest growth of the economy occurred, 17%, and it had not been below 37% since the 1930s. http://www.huffingtonpost.com/andrew-sum  /ringing-out-the-old-year-_b_802711.htm l
My blog deals with inequality. http://benL8.blogspot.com
DCJohnson here reports, in 2010 50 million U.S. workers (1/3rd of all workers) had an average income of $6,032 for the year. The average personal income for workers is over $76,000 a year (dividing all personal income by all workers). The average contribution per worker to GDP is over $109,000 according to the S.F. Federal Reserve.

Posted by BenL8t | Report as abusive
 

The WW2 peace dividend was spent about 25 years ago. That peace dividend was of reconstruction, massive global market for easy picking, world reserve currency, millions of immigrants of the world’s best arrived to develop America. It was so good; US became the latest superpower in world history.

A second good fortune of peace dividend arrived just in time in 1990 as the first one ended – that of the USSR and Communism both ending. The US could have taken this one smartly and move to the next stage. But it did not. It squandered it, completely. In fact, it messed things up so bad, we had the 9/11 blowback.

Americans had lived in a pervasive culture of pure selfish gains since 2000. People, private enterprise and governments even plunged into unfathomable debt to keep up the good times. With a population of 320 million, you’d think there is enough wisdom, enough check and balance, and enough well-educated to self-sustain prosperity. But these have also been squandered. Everything, the whole country, lived for the moment, for instant gratification. The wealthy wanted and got ever less taxed. The less fortunate wanted and got ever more welfare. The military wanted and got ever bigger budget and world’s most expensive armament. Nationally, spending hit beyond 100% and saving hit negative. All for the good times of the moment.

So enough of this. Is there a way out? Yes, but the way out will comes only when enough balance has been restored. And there are a thousand big things way off balance. It will take at least a generation to work things out. In the meantime, everybody, and that include the 1%, pays the unfathomable bills due.

Step one is to take what happened the past decade, condense it into a nice easy understood text book, and start teaching it to grade 5′er. And hope they will grow up smart enough to create a more sane and sustainable nation.

Posted by TomKi | Report as abusive
 

ConstFundie-

Taking on debt is not income and the USCEnsus data i cited doesn’t count it as such. The data i cited is income and shows a very clear trend. Sory to burst your gloom and doom bubble.

Posted by jambrytay | Report as abusive
 

it will be the last days of the french monarchy and the russian empire redux, if something isnt dont to redress this imbalance, and the rich will lose.

Posted by brandonhstubbs | Report as abusive
 

You’ve voted. As for loss of manufacturing jobs, what China does, America won’t want to do. Do you really want to slog 7 hours a day for just USD 70? Its much cheaper in India. Its equally cheap too in Indonesia, Vietnam, Philippines, Africa…… and the list goes on. With EU going down, it looks like they will be the next candidate with low wages amongst the skilled industries (China and India are largely in unskilled industries) competing directly against Japan and US. That’s probably even more serious. But Japan gets to harp on US for defence and China for businesses – that’s one smart nation, just nice in small numbers (population) with also hoards of forex reserves that will get by largely unscathed.

Posted by vision966 | Report as abusive
 

@jambrytay,

National debt is simply creating money out of thin-air. The created money enters the economy as real and very spendable, and adds directly to incomes. Although, i note that the added income is much less equally distributed than the future liability.

Speaking of bubbles, that seems to be exactly what economic bubbles have in common, a build up of ‘created’ money (typically called debt) until it towers so beyond reality that an economy fails(pop!). This is what we witnessed in the US, i.e., the bank bailouts, and are seeing throughout all of the Banks/economies of the west.

Posted by ConstFundie | Report as abusive
 

There are other factors at play.
us population growth v.s. those that left the work force.
u.s is now about 310 million v.s. 210 million a decade to 2 ago. yet the manufacturering jobs left to other shores due to “outsourcing” Corporations built “shell” companies to “shelter taxes off shore and not paid to IRS. The Housing Bubble and the Banksters and their Derivative Funny Money Dealings. Maybe it’s time to RETHINK and REWRITE the Tax code for the Modern Era we find ourselves in as the inequalities have reach their Pinnacle.And for God’s Sake TERM LIMITS on our “DO NOTHING” Congress and their Lobbying Friends !!!!!

Posted by Pangaea7 | Report as abusive
 

I have to disagree and say that the tax cuts are not what is leaving the economy in the red! Tax money goes to the government and let’s face it, the government is not creating jobs or shoring up the economy with that money (no matter what the TARP defenders told themselves in the past or even still do). Further, when you have unemployment so high, employers slashing pay, benefits, etc. to the point that even employed people are taking big financial hits, how is raising taxes going to help them or the economy? It won’t help at all! We need to stop sending so much of our money to China, they have largely the US to thank for their economic boom b/c we freely buy so much of their crap. And the US needs to get serious about what it spends our tax money on. I bet it isn’t a stretch to say that 50% of tax money is flushed down the toilet on bloated salaries, bloated staffing, the chronically abused myriad of welfare services (now including health care), pork barrel spending (like the doomed funding of a Pakistani Sesame Street (meanwhile there is quite a movement to cease federal funding for public television here in our own country – what a joke, we were supposed to fund public television in a foreign country but cease funding here???? Who thinks of this stuff?), billions spent on illegals and trying to stem their flow. I could go on and on. When will the politicians pull their heads out of the ground, to put it nicely??? Nobody wants to do the right thing anymore b/c their only concern is pandering (hand outs, hand outs, hand outs) to the right groups of people so they can get votes, get into office and then do nothing to help the country as a whole! All anyone ever does anymore is vote for the person they think is going to get them the most stuff/benefits/money/handouts. Everyone votes for themselves, not the country, that is a huge part of the problem! When will people smarten up and realize that the politicians who will make wise decisions for our country AS A WHOLE IN THE LONG TERM are the best politicians to vote for? Everyone will end up benefitting from those decisions over time! We are in a vicious cycle right now where politicians make promisses to people (sometimes follow thorugh, sometimes not), people say, “yes please, I will vote for you”, over and over and over. It’s not working people, can’t you see that? Start voting for the country and everyone wins in the end! Unfortunately it appears that most people are not smart enough to realize what is best for the country long term, only what is immediately best for them! Either that or they truly don’t care!

Posted by JLS123 | Report as abusive
 

I believe David Cay Johnston makes an important statement by using the word failure, as he says:

My reading of this and tons more data is that the Bush tax cuts utterly failed, the Fed’s artificially low-interest rate policies under presidents Bush and Obama do far more damage than good (especially to savers), and that the United States is harmed both by the imbalance in the trade relationship with China and scores of trade agreements with South Korea and other low-wage countries that are deeply flawed at best.

At what point can we declare that supply-side economics (Bush tax cuts) and Keynesian stimulus (low interest rates) have totally lost credibility? The Economics community seems to offer the same remedies with each market correction, and if the remedies don’t work, try some more! And more! And more! (Etc.) They’re mad, like doctors who keep shocking the patient with defibrillator paddles again, and again, and again, and again. We have to acknowledge that true economic growth can only be made by gains in efficiency either through production or trade.

Posted by stejamdev | Report as abusive
 

I think we would do well to remember, trees don’t grow to the sky. Economies ebb and flow, sometimes ebb for longer than we’d like. It doesn’t mean the end of the world. If a forest gets overgrown, like our housing market did, either trees starve, or a fire starts. Eventually there is new, healthier growth. The scorched earth in between is ugly, that’s unfortunate, but inevitable, and painful though it is, for the best.

Posted by daphnesylk | Report as abusive
 

This is such a simple logic. This is such simple math. Years ago as a kid, I figured this out.

I recall observing the life of such old American brands as RCA, Zenith, and others who had moved to less expensive countries for labor. Their American manufacturing bases ultimately withered, then died. When just a FEW companies do so, it may not be noticeable. But, the “great escape” of manufacturing to offshore locations seemed so logical. It was cheaper to use labor over there, than here.

Decades on in this great escape, the globalization has actually worked as it should, allowing OTHER countries to raise THEIR standards of living. What I don’t understand, though, is how Americans are so surprised that also at play with the “raising of all boats” to the same level, is the logical expense of lowering the level of OUR boats.

At the end of the day, with the Cold War long over, Capitalism WON. WE, America, WON! Everyone IS playing our game, and isn’t THAT what this was all about?

This idea is so overlooked (or as I believe, is misrepresented to the electorate). To “win” election, politicians “decry” the loss of manufacturing, or “blame” those bad companies, or “bad” policies of someone (anyone) else, just to get elected, or reelected.

“Saving” the U.S. Auto industry made me think of Britain’s attempt decades ago to do the same for their auto industry. You can’t legislate away logic going another direction.

Freedom of speech is a wonderful thing. It’s a shame that such a simple logic isn’t espoused as to what has happened, and why we are where we are, and where we are really going.

Those jobs aren’t coming back. Americans will need to learn new skills, just as happened in the industrial revolution, or any other revolution, in any other era.

Misleading American’s to think they’ll “fix” manufacturing, or “bring” those jobs back, well, politicians will do anything to gain or keep power, won’t they?

Posted by BrilliantEcho | Report as abusive
 

But saddling the middle class, who is making less while burdened with even more debt, with an increase in taxes is dooming them. Rise taxes if you must but leave the struggling middle class out of it. The so-called “job creators” have had their cuts and they’ve created few jobs, time to try something different.

Posted by advocatusdiabol | Report as abusive
 

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