Why Our Record Inequality?

 Financial FAQs

“Why are we the only developed country without universal health care, tuition free public college, mandated paid vacations and paid child leave, among other benefits, all major indicators of social well-being? We should not need a Michael Moore documentary, such as his latest Where To Invade Next, to tell us what we either no longer provide to our citizens or that cost more?” H Green/Huffington Post

CIA World Factbook

I first wrote a version of this column in 2016, on seeing what I consider to be Michael Moore’s best documentary, Where to Invade Next, a portrait of what other countries have taken from us that we no longer provide for our own citizens, a better standard of living

Nobelist Robert Shiller lamented this fact in a recent New York Times Upshot column. "Economic inequality is already a concern, but it could become a nightmare in the decades ahead, and I fear that we are not well equipped to deal with it."

In fact, the latest CIA World Factbook statistics have told Americans for years that we have a very unequal society; in fact the greatest income inequality in the developed world.

The US is ranked 102nd in the Gini inequality index of 145 countries that the CIA measures for income distribution. Only China of major countries is lower. Even Russia has less income inequality.

And it is this statistic that best highlights the social benefits that all Americans no longer enjoy. For instance, US residents going to public colleges and universities paid no tuition until the 1970s, making a university education prohibitively expensive. 

Another measure that helps to smooth out income inequality is an adequate national minimum wage, which is still $7.25 per hour in many states that did not enact a higher minimum wage of their own, whereas Australia’s national minimum wage, a country with similar demographics, is $16 per hour for a full time working adult.

Why aren't we equipped to deal with it? Dr. Shiller and even Angus Deaton co-discoverer with wife Ann Case of the exploding drug and suicide rates of non-college educated white adults, commenting on what he called the "grotesque expansions in inequality of the past 30 years," gave a pessimistic prediction: "Those who are doing well will organize to protect what they have, including in ways that benefit them at the expense of the majority."

And that has happened since the 1970s and the dominance of free market, so-called Laissez Faire ideologies that strove to cut taxes and government regulations for the sole purpose of protecting the wealth “at the expense of the majority” which has resulted in the election of Donald Trump twice.

Yet we do know how to level the playing field. We should reenact the labor laws of earlier years that allowed collective bargaining and disallowed the right to work laws in 25 states where a mass exodus from unions occurred with the loss of manufacturing jobs that paid higher wages and salaries. Then raise the income tax rate that prevailed before President Reagan succeeded in lowering taxes of the wealthiest 70 percent of Americans.

We could also pass real universal health coverage that all other countries enjoy. It would lower health costs--maybe to what it is in other developed countries, which is 50 percent less than Americans currently pay.

So, we do know how to enact economic programs that create a more equal society. European countries have succeeded via higher tax rates but provide many more services and at much cheaper costs than so-called private enterprise.

Private enterprise has been allowed to decimate the public good to such a degree that the CIA World Factbook showed an unpleasant fact; we are in danger of becoming a developing country in the company of other Third World, developed countries once again.

And because of it, the CIA announced this year the Trump administration is no longer allowing its publication, in a vain attempt to hide the damage over the last 30 years that such income inequality has done to our democracy.

Harlan Green © 2026

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Time To Pay the Piper

 Popular Economics Weekly

 “The time to repair the roof is when the sun is shining. [State of the Union Address January 11 1962]” President John F Kennedy

Wikipedia

Two of our largest domestic economies are heeding President Kennedy’s words, “when the sun is shining”; it’s time to begin paying our national debt during this record-breaking stock market run that is currently benefiting the wealthiest Americans.

We are drowning in a federal debt that is endangering our good faith and credit while crowding out domestic spending on the public services that make life more bearable for ordinary Americans. We have a federal debt that is now 120% of the annual output of the U.S. economy (Gross Domestic Product).

New York City’s Mayor Zohran Mamdani, and California Governor Gavin Newsom have announced that it’s possible to balance a budget. Maybe that’s something Republicans should also heed if they want to remain relevant to America’s future by offering more than tax cuts and bloated military budgets.

New York City is the largest U.S. city with an 8.5 million population, and the State of California has the fourth largest economy in the world behind the U.S., China and Japan.

Mayor Mamdani announced the $124.7 billion Fiscal Year (FY) 2027 Executive Budget, putting New York City on firm financial footing while protecting the services working people rely on. “Through strong fiscal management, Mayor Mamdani balanced the budget through a combination of aggressive savings, new tax revenue, partnership with Albany and critical new investments.”

California’s 2026-27 budget, as revised by Governor Gavin Newsom on May 14, 2026, “projects no deficit for that year and the next budget year (2027-28), with a structural deficit eliminated through July 2028.”

It’s a sign that Americans in Democratic states at least want to move on from the trickle-down economic policies that Republicans have practiced since 1980, resulting in five recessions including the Great Recession on their watch.

It has perpetrated the greatest income and wealth inequality of all—red states depriving their own citizens of a livable minimum wage and social services that make their lives bearable, with no minimum wage higher than the national minimum wage of $7.25 per hour (portrayed in the Wikipedia map), or state taxes to pay their bills and provide adequate health care.

That’s a reason most Republican-led, so-called red states, have fallen far behind in growth compared to Democrat-led blue states –many with surplus tax revenues that go to many of the red states in the form of benefit payments to balance their budgets.

California, for instance, has the largest tax ‘imbalance’ in the nation. Varying estimates show Californians pay between $83billion and $275billion more to the IRS than the federal government returns to the state in the form of Social Security, healthcare, military contracts, and disaster aid.

Whereas red states like Kentucky require $Billions from the federal coffers to meet their budget needs. For instance, 10 red states have no Medicaid health insurance for their low-income residents.

The results show the glaring damage the minimal, ‘bare bones’ red state budgets wreak on the health and safety of their citizens. Red states exhibit higher premature mortality rates and higher incidences of death from major internal causes, such as heart disease, cancer, and stroke. Blue state citizens on average live longer.

NIH research shows a clear partisan health divide in the United States, with "blue" (Democratic-leaning) states consistently outperforming "red" (Republican-leaning) states across major public health metrics, including life expectancy, infant mortality, and preventable chronic illnesses.

The New York City and California examples show that state and federal governments know how to balance a budget that benefits all Americans, not just the wealthiest. The Clinton Administration even created four consecutive years of budget surpluses in the 1990s that paid down the federal debt.

A consensus is building that our national debt must be dealt with. Balancing budgets are the responsible way to deal with it, not the trickle-down economic policies that have created the monstrous debt from the many Republican tax cuts that have deprived red states’ citizens of a decent standard of living.

Harlan Green © 2026

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

A Place of Tolerance and Understanding

 Answering Kennedy’s Call

“I believe our political divide can be repaired. But our leaders must act with moral clarity and take their cues from the good people of this nation, who in times of tragedy always seem to find our better angels.” Pennsylvania Governor Josh Shapiro

Pennsylvania Governor Josh Shapiro wrote the above appeal just days after an arsonist invaded and attempted to burn down the Governor’s residence. Governor Shapiro attributed the attack to “the political division and violence in America today.”

He also gave thanks for the good people, whose “…prayers, blessings and messages of support we’ve received have lifted us up and shown us the way forward in the wake of a traumatic event.”

How do we find the “better angels” of our nature; was there a time when Americans were less partisan, more united in purpose?

There are many explanations and explainers of the political divide that led to red states vs. blue states and Donald Trump’s re-election. A major economic reason was the migration of many manufacturing jobs overseas, and politics shifting to the right after the stagflation of the 1970s while Fed Chair Paul Volcker’s Federal Reserve raised the Fed Funds rate to 20 percent, causing several recessions .

The loss of manufacturing jobs resulted in a very angry rust-belt populace and a huge surge in drug use and suicides among white males living there that was first documented in the best-selling Deaths of Despair and the Future of Capitalism by Nobel Laureate Angus Deaton and his wife, Ann Case.

The result is the share of Americans still living middle class lives in 2023 has shrunk to 51 percent from 61 percent in 1971 due to the loss of those jobs as well as Republican legislatures and the Supreme Court limiting labor unions’ collective bargaining power to replace them.

PEW

The loss of incomes and jobs led to the current economic divide, GW Bush’s war on drugs and the highest incarceration rate in the world. The hollowed out American middle class became a predominantly consumer society living on cheaper imports mostly employed in lower paying service sector jobs, whether as professionals in high tech or recreation and leisure activities.

Best-selling author Robert Putnam in Bowling Alone: The Collapse and Revival of American Community attributed the growing political divide to the consequent breakup of communities as they moved away from their birthplace or original communities in search of better jobs.

Whereas our neighbor Canada with a similar population mix had greater income equality by maintaining a predominately middle-class society, in part because it had strong labor unions. A 2023 Pollara survey of 3,000 Canadians 18 and older found that a much larger 78 per cent of Canadians consider themselves middle class, including 39 per cent of those earning less than $20,000, and 92 per cent of those earning more than $150,000.

Australia with a similar population mix is also considered a much more egalitarian society. Approximately 56 percent of the population self-identify as middle class, while 43 percent identify as working class and 1.4 percent as upper class. Other surveys suggest that around 58 percent of the population is in the middle-income class. The HILDA survey indicates that a significant portion, roughly 80 percent, of Australians are classified as middle class based on one measure.

Just the fact that most of their inhabitants considered themselves in the middle-class contributed to their sense of wellbeing.

We can also begin to restore our sense of wellbeing by growing our middle class once again with a simple but profound change—heeding Governor Shapiro’s appeal to find political leaders who will work to raise the national minimum wage above $7.25 per hour that was last raised in 2009.

Many of the poorest red states in the south and Midwest rust belt don’t even have a minimum wage, so they must adhere to our national minimum wage. Yet we know blue states such as California and New York have raised their minimum wage above $15 per hour, attracting a more creative and productive work force.

Working towards greater income equality that other developed countries have maintained with a strong middle class would help to bring Americans together again.

“William Penn founded our commonwealth as a place where all would be welcome — a place of tolerance and understanding where people of different faiths could live together in peace,” said Shapiro.

Where better to find such a leader who will take his cues from the good people and listen to our better angels than the Governor of Pennsylvania, in the original home of the Declaration of Independence and U.S. Constitution.

Harlan Green © 2025

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

What Happened to the Minimum Wage?

 Popular Economics Weekly

As of January 2025, Alabama, Louisiana, Mississippi, South Carolina, and Tennessee have not adopted a state minimum wage. This means that workers in these states earn the federal minimum wage of $7.25 per hour.

PBS.org

Currently, just 34 states, territories and districts have minimum wages above the federal minimum wage of $7.25 per hour, according to the National Association of State Legislatures.

“Five states have not adopted a state minimum wage: Alabama, Louisiana, Mississippi, South Carolina and Tennessee. Three states, Georgia, Oklahoma and Wyoming, have a minimum wage below $7.25 per hour. In all eight of these states, the federal minimum wage of $7.25 per hour generally applies.” NASL

How is that possible in today’s inflationary economy when the price of everything is too high? Republicans call it States Rights, the mantra that conservative Republicans use to justify the high poverty rate prevailing in these red states, which is the reason a Donald Trump could become the president.

The federal government is so evil (too many gays, immigrants, taxes), say the red staters, that they must oppose as many of its policies as possible (other than social security, Medicare and Medicaid, of course).

It’s also a total con but Republicans have succeeded in convincing the majority of their electorate in those states to listen to them rather than the blue states whose excess (higher) tax monies pay their benefits and help to balance the budgets of the red states.

Kentucky is a prime example, where prosperous blue states such as California and New York have large surplus taxes that flow to poor red states like Kentucky—more than $60 billion annually in their case for pensions and healthcare owed its citizens—to support its citizens and its own budget deficit (due to a low tax rate).

The above PBS map highlights where the poorest (gray colored) states are located, mainly the south and Midwest where right-to-work laws that obstruct union organizing still prevail. These are laws that say one can work for a company that has unionized its workers in these states, but the Supreme Court has ruled they don’t have to pay the union dues that support the benefits being unionized (higher wages and benefits, generally) such membership gives them.

It's difficult to believe such ignorance still prevails with the modern mass media, but culture wars still exist in America with its many ethnic and racial divisions. Such a variety of immigrants has been the reason the United States of America has been the most prosperous country in the world, but also the most divided in these red states.

It’s the overweening bigotry, a relic of the civil war, that has kept red states poor; and a propaganda network of Fox News and conservative talk shows that has kept the likes of autocrats and dictators in power.

High inflation since COVID-19 is a good example of fear and paranoia topping common sense. Most people understand that inflation is caused by a shortage of things; in this case because of the COVID-19 pandemic that caused a brief recession and shut down the world economy.

But fear does funny things to people, and only such a well-oiled, conservative propaganda network could convince red staters that it was because Democrats had given them too much money to spend. Yet it is Biden’s New, New Deal legislation that is modernizing the American economy and keeping them at full employment!

But when has common sense prevailed in politics? We need to bring back the middle class that prevailed after World War Two, but was decimated by so many recessions since then, as politics gradually moved to the right and budget deficits grew.

Common sense could prevail if congress can avoid renewing Trump’s first term tax cut in the budget negotiations, which will increase the federal debt by another $4 trillion, while cutting Medicaid benefits in the red states that need them the most.

But since when has common sense prevailed?

Harlan Green © 2025

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Make Trump 2.0 Irrelevant Again!

 Answering Kennedy’s Call

“The United States now has the highest percentage of low-wage workers – that is workers who make less than two-thirds of the median wage- of any developed nation. Fully 25 percent of all American workers make no more than $17, 576 a year.” Harold Myerson The American Prospect,

We know how to counter the Trump administrations attempts to wreck the U.S. economy and our constitution from his past history. Blue states in particular have the power to keep their citizens healthy and safe. They did it in his first term, as I said in a 2017 Huffington Post article, when it was becoming obvious Trump wanted to act like an anti-democratic oligarch.

Climate change has been the target of Trump’s “drill baby drill” fossil fuel supporters since his first term, yet climate change poses the greatest danger to Americans’ health and safety, particularly to our west coast inhabitants (wildfires and floods) and east coasters (hurricanes and tornadoes), not to speak of the record low winter temperatures tormenting Midwesterners.

Huffington Post

“The U.S. just released its latest congressionally mandated Climate Science Special Report that says 2017 wreaked the most catastrophic destruction in 90 years with an estimated $175 billion in property damage. Only the San Francisco Earthquake (1906), Chicago Fire (1871), and Great Flood (1927) caused more destruction,” I said then.

Trump’s other first term attempts at relevance included, “his fiasco of an Asian trip, where he fawned over foreign leaders who gave him massive pageants, but no trade concessions, while abandoning the Trans- Pacific Partnership.

“The remaining 11 countries, including Japan, Australia, Mexico and Malaysia, said they had revived the Trans-Pacific Partnership (TPP) deal, a multilateral agreement championed under the Obama administration.

And also, “American leaders from state capitals, city halls and businesses across the country have shown up in force” in Bonn, Germany, to discuss carrying out the 2015 Paris climate agreement,” said California Governor Jerry Brown and Michael Bloomberg in today’s New York Times.”

This is when President Trump announced at the beginning of his Presidency that he was abandoning the Paris Accord in favor of supporting a return to coal and oil energy. But that wasn’t what the rest of America wanted, as some 50 percent of U.S. states and cities were represented in Bonn.

And now it is his indiscriminate use of import tariffs that threaten to wreck international trade.

President Trump’s attempts to return to the predominately white middle class of the 1950s have become irrelevant to most of the problems facing Americans and the world today. Trump is ignoring the damage revenge policies will do to the U.S. economy, and his own red state supporters by also attempting to destroy American’s social safety net, including cuts to Medicare and Medicaid that most harm red state citizens, protections against climate change, and wanting to downgrade the military alliances that have kept us safe.

Trump’s first term policies have been irrelevant in so many ways. He has done nothing for his red state supporters. As Thom Hartman highlighted in my last blog, red states continue to suffer most from:

— Spousal abuse
— Obesity
— Smoking
— Teen pregnancy
— Sexually transmitted diseases
— Abortion (at least before Dobbs; now it would be “forced births”)
— Bankruptcies and poverty
— Homicide and suicide
— Infant mortality
— Maternal mortality
— Forcible rape
— Robbery and aggravated assault
— Dropouts from high school
— Divorce
— Contaminated air and water
— Opiate addiction and deaths
— Unskilled workers
— Parasitic infections
— Income and wealth inequality
— Covid deaths and unvaccinated people
— Federal subsidies to states (“Red State Welfare”)
— People on welfare
— Child poverty
— Homelessness
— Spousal murder
— Unemployment
— Deaths from auto accidents
— People living on disability
— Gun deaths

Climate change is a good start, since the worldwide droughts have been a major cause of the worldwide migrations escaping from poverty that have upset the existing geopolitical order.

Let’s continue to make Trump and Republicans’ actions irrelevant that are attempting to destroy our federal government by supporting cities, states and even international organizations (UN, WHO?) that pursue the policies that have kept America great and the world at peace—policies that build rather than destroy, that breed trust and community, rather than hatred and division.

This strategy doesn’t minimize the suffering Trump has already inflicted on so many Americans but could mitigate some of the cruelty to come.

Harlan Green © 2025

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

The Bully Mentality--III

Answering Kennedy’s Call

JONATHAN ERNST / REUTERS

“Fostering a culture of fear and ignorance is not the way to run a political party, or country, if it would ever come to that.”

I wrote this in 2014 about what I have called the Bully Mentality pervading the Republican Party that has enabled it to coerce its own supporters to vote against their own self-interests, making Republican red states the poorest states in our country.

These are states that in the main have opposed a higher minimum wage, union organizing that would enable workers to bargain collectively, and rely on the richest states via transfer payments to fund much of their governments. (Red states such as Mississippi, W. Virginia, Montana and Kentucky receive more than 30 percent of their revenues from other states).

Why does the USA have such a problem with bullies? Whether in the schools, in politics, or on Internet social media? The result has been teenage suicides, horrendous school shootings by students who felt bullied or belittled, and now a whole political party that opposes anything that smacks of aiding the poorest, seniors, and less educated.

That possibility has come closer with former President Trump seeking a second term without ever conceding that he lost the last election.

Bully Mentality is a state of mind that pervades those who are only good at one thing, preying on the weakest to empower themselves. 

It is something Nobel Laureate Paul Krugman wrote about during the Obama administration when it created Obamacare.

"But nobody expects to see a lot of prominent Republicans declaring that rejecting Medicaid expansion is wrong, that caring for Americans in need is more important than scoring political points against the Obama administration. As I said, there's an extraordinary ugliness of spirit abroad in today's America, which health reform has brought out into the open."

I said then the "ugliness" is really a textbook definition of bullying behavior.  Bullies prey on the most vulnerable and have tried every trick in the book to oppose any programs that smack of aiding those most in need.

• · Derogatory name-calling and nicknaming
• · Spreading rumors or lying about someone
• · Threatening someone
• · Yelling at or talking to someone in a rude or unkind tone of voice, especially without justifiable cause
• · Mocking someone's voice or style of speaking
• · Laughing at someone
• · Use of body language (i.e., the middle finger) to torment someone
• · Making insults or otherwise making fun of someone

The textbook definition fits former President Trump.

If the Republican Party can't keep its constituents poor and less educated, then the Republican Party, now Trump’s party, would lose its hold over them. Conservatives oppose expanding educational opportunities such as Head Start and pre-school aid because it would encourage rational thinking, and an appreciation of science. Their constituents would then begin to understand global warming, and maybe evolution instead of creationist theories that the world was created by a God just 7,000 years ago!

The danger of such behavior is even greater today. We have a Republican presidential candidate who has no compunction about endangering our national security by wanting to weaken NATO and other alliances, been indicted and awaiting trial under the Espionage Act for his carelessness with Top Secret documents, and endangered our economic security with his tax cuts that have created record deficits.

How then have Republicans been given the edge in various polls on the economy and foreign policy? It is another attribute of bully behavior—the total disregard for truth and facts that is at the heart of their propaganda machine.

There are many ways to counter bully mentality. Firstly, by recognizing that bullies are cowards at heart, which is why they avoid confronting those showing strength. It creates a pervasive culture of victimization, a feeling of powerlessness in which those so afflicted transfer their allegiance to a con artist such as Donald Trump.

That is how dictators all over the world have taken and maintained power. Can that happen to the world’s oldest democracy? It’s up to ordinary citizens to stand tall in opposing such behavior. It’s surprising how quickly bullies will disappear when citizens take back their own strength.

Harlan Green © 2024

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen 

How Do We Ease our Workload?

 Financial FAQs

occupydemocrats.com

Why do Americans worker harder with longer hours than in other developed countries? And why is America’s income inequality the worst in the developed world?

Both questions can be quickly encapsulated by NY Times’ columnists Bret Stephens and Gail Collins in a back and forth Q&A opinion column.

To Gail Collins question whether Stephens was still enthusiastic about Joe Biden’s big spending initiatives, he said he liked most of them, but:

“…the program I most oppose is the child tax credit, which sounds like liberal nirvana but would be difficult to administer and has no work requirements, which effectively reverses the gains the country made after Bill Clinton’s welfare reform. I’m also not too fond of the huge Medicare expansion, another noble-sounding effort that will further push a financially strained program toward insolvency.”

Stephens in this case repeats the conservative mantra that government-paid benefits strain the taxpayers’ coffers, and discourage work. But in reality, he is parroting conservatives’ opposition to any public spending that grows government programs, which is the reason Americans have been deprived of the welfare benefits of other developed countries—e.g., universal health care, paid family leave, a livable minimum wage, and nationally mandated paid vacations.

Denmark is probably the best example of what modern technology has enabled to ease the workloads of working folk, with its $20 per hour minimum wage and 33-hour average work week.

Whereas, according to NY Times guest columnist Bryce Covert, “Prepandemic, nearly a third of Americans clocked 45 hours or more every week, with around 8 million putting in 60 or more. While Europeans have decreased their work hours by about 30 percent over the past half century, ours have steadily increased.”

EPI.org

There is no secret where the increased wealth generated by modern technology has gone in the US; to the owners of capital—stock holders, CEOs, and financial entities that hold their debt—rather than wage-earning employees.

Why? It has been outright wage suppression since the 1980s, at least, as the Federal Reserve under Paul Volcker fought any form of incipient inflation by tightening credit, which largely suppressed wage growth while Big Business began its lobbying campaigns to enact anti-labor legislation that weakened unions’ collective bargaining efforts.

Much of the anti-government rhetoric came under the guise that government was less efficient in producing overall wealth than the private sector. The pandemic is also bringing another problem to light that requires more government oversight—more work from home in an expanded ‘gig’ economy.

Steven Hill in an article for Project Syndicate, says “According to an April 2020 survey in the United States, 74% of companies are planning to “shift some employees to remote work permanently.” Similarly, a May 2020 analysis by researchers at the Federal Reserve Bank of Atlanta found that companies expect the share of working days spent at home to increase threefold, with many employees operating remotely 1-3 days per week.”

Working from home or other sites away from the office will hurt employees in so many ways without a government that clearly defines these new working conditions—because it blurs the line between regularly employed workers with clearly defined benefits and independent contractors that must provide their own safety net (e.g., healthcare, hours worked), for starters.

What does all this ultimately lead to? More work will be performed by algorithms and robots, of course, which can easily be trained to perform repetitive, predictable tasks.

“Historically, researchers have found that automation is adopted faster during economic downturns, and the COVID-19 recession was no exception. At the height of the crisis in advanced economies, the bots appeared to be making major advances,” says Hill.

“The net effect of this technological adoption over time will be to render more humans obsolete. Yes, some experts predict that new jobs will be created to service the robots and artificial-intelligence (AI) systems. But whether those jobs will be as numerous, pay as much, or be of the same quality as previous jobs remain open questions.“

So we have it in a nutshell. America will have to find new ways to benefit workers in this new economy, as other developed countries are doing—i.e., with the help of their governments working for them, rather than for Big Business.

Harlan Green © 2021

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Labor Productivity is the Golden Fleece

Financial FAQs

Graph: Econoday

Rising labor productivity is the golden fleece of economic growth, the pot of gold at the end of the rainbow, because major economists maintain it is really the only way workers can raise their standard of living. This means raising incomes above the inflation rate, which is where average household incomes have been stuck since the end of the Great Recession.

The sheep’s fleece was an ancient Greek method of extracting gold from flowing streams.  The heavier gold flakes would stick to the fleece, hence the Greek myth of Jason bringing home the Golden Fleece came to signify the accumulation of wealth and power.

For that reason it’s good news that labor productivity seems finally to be recovering. Workers’ output rose at a very hot 4.8 percent rate in the second quarter, up from an already solid 2.6 percent rate in the first quarter. Hours worked rose at a 1.9 percent rate vs. the first quarter's 2.6 percent.

But we don’t see its benefits being passed on to wage and salary earners. Wages have stagnated and income inequality increased because workers’ productivity hadn’t risen substantially since 2010, as the graph shows; when benefits from ARRA, the $831 billion American Recovery and Reinvestment Act enacted during the first year of President Obama’s administration, petered out. It was much too inadequate to help restore states’ and consumers’ personal wealth from the worst recession since the Great Depression.

“Obama officials and Congress clearly made a big mistake early in the recession by focusing more intently on saving banks — and, thus, bankers and investors — and much less on directly helping families facing foreclosures and layoffs,” says a recent NY Times Op-ed. “Later in the recovery, the decision by Republican leaders in Congress to oppose every Obama proposal prevented the government from doing much to help people regain what they had lost or to heat up the tepid recovery with infrastructure spending and other stimulus measures.”

More government public sector aid was necessary, in other words, because the private sector was recovering from their losses and had little money to invest.

And “Government puts a lot of money into basic research, whereas businesses tend to fund late-stage development that can be quickly commercialized,” says MarketWatch’s Rex Nutting. “However, federal funding for research hasn’t kept pace with the growth in the economy; in the past 10 years, federal R&D investments have risen just 0.3 percent per year after adjusting for inflation.”

A major reason for the rise in productivity at the moment has to be that companies are investing more in new plants and equipment; in part because of the Republican tax cut in corporations’ nominal tax rate, but also because there is a huge deficit in skilled workers that has required businesses to invest more heavily in technologies that replace those missing workers. There are now about one million more job openings than jobs being created each month.

So workers aren't really benefiting from the productivity increase, as nominal compensation fell to a 2.0 percent rate from 3.7 percent in the first quarter, according to Econoday. When adjusting for inflation, real compensation rose 0.3 percent and was little changed from the first quarter's 0.2 percent rate.

Why?? Firstly, many more low-paying service sector jobs are being created than manufacturing jobs; which have been shipped overseas by corporations where wage and benefit costs are a fraction of Americans’. It is a major reason President Trump has initiated tariff increases in the hope foreign manufactures become less competitive in a bid to bring home some of those manufacturing jobs.

But that may or may not succeed, as a burgeoning trade war with higher tariffs would probably raise prices and inflation to a level that would nullify any benefits from more domestic jobs. Nobel economist Paul Krugman has said that it could eliminate 8 to 9 million jobs from companies that would shrink as a result of the increased tariffs, due to foreign businesses looking elsewhere for cheaper products not affected by the tariffs.

Increasing the national minimum wage from $7.25/hour last set in the 2009 would definitely help the lower wage sector, which Big Business has been resisting. Workers are producing more than ever, at present. But that doesn’t mean their standard of living will rise because of it, unless employers pass on more of the productivity increase to their employees

Harlan Green © 2018

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

U.S. Taxes Not Too High!

Financial FAQs

No, our taxes are not too high, and Americans suffer for it. In fact, the non-partisan Tax Policy Center says U.S. taxes at all levels of government represented 26 percent of GDP, compared with an average of 34 percent of GDP for the 34 member countries of the Organisation for Economic Co-operation and Development (OECD) in 2015.

Graph: TPC

Then why do Americans complain so much about high taxes? It’s because we have to pay for services out-of-pocket that other developed countries’ governments provide—including universal health care, tuition free colleges; services that developed countries consider to be their citizens’ rights.

“In many European countries, taxes exceeded 40 percent of GDP. But those countries generally provide more extensive government services than the United States does,” says the TPC report. “Among OECD countries, only Korea, Chile, Mexico, and Ireland collected less than the United States as a percentage of GDP.”

Actually, the ‘other’ developed countries provide public services as well, including such mass transit conveniences as high-speed trains (in Europe, Japan, and China), and worker-friendly laws—including decent minimum wages, paid maternity leave, and at least 4 weeks paid vacations—the list goes on and on.

The best way to look at this is what typical American households pay. A 2016 PEW Charitable Trust analysis showed how financially stretched we are.

“After declining during and after the Great Recession, expenditures increased between 2013 and 2014 in particular,” said the study. “…In 2014, the typical American household spent $36,800, but median household income continued to contract. By 2014, median income had fallen by 13 percent from 2004 levels, while expenditures had increased by nearly 14 percent.”

Graph: PEW

In other words, declining American household incomes mean Americans are spending more out of pocket for the essential services, such as education and healthcare than other developed countries. About two-thirds of families’ spending goes to core needs: housing, food, and transportation, said PEW.

Alas, it will take an American electorate that finally wakes up to these facts to call for the benefits others enjoy. Why should we deserve less? One reason that hasn’t happened yet is our huge federal deficit—due to the fact that 60 percent of the federal budget goes to the military and defense spending.

Harlan Green © 2017

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Bad News for Workers = Worsening Economic News!

Popular Economics Weekly

Personal incomes have been increasing just 2.5 percent on average for several years. But that doesn't boost GDP growth enough to pay down the $10 trillion in worldwide debt that’s been issued since 2008 to get us out of the Great Recession.  We need at last 3 percent GDP growth, which is closer to the long term average; or raise taxes, which this administration won't do.

So where have all the profits gone that were generated since 2009 for corporate execs and their stockholders? Executive Pay Watch, in a report conducted by the American Federation of Labor and Congress of Industrial Organizations (AFL-CIO). Last year, CEOs were paid 335 times the average worker. The average production and non-supervisory worker earned $37,600 annually in 2016. “When adjusted for inflation, the average wage has remained stagnant for 50 years,” the report said.

That’s not a formula that will pay down the $10 trillion accumulated since 2009 by central banks. The conundrum is why so much debt with so little economic growth, and the US at near full employment? With the Federal Reserve finally becoming serious about selling some of its $4.5 billion hoard of excess reserves, we could see a serious slump in economic growth coming.

“When looking for the next financial crisis, it’s hard to escape from the fact that we’re seemingly in the early stages of the ‘great unwind’ of global monetary stimulus at the same time as global debt remains at all-time highs following an increase over the past decade—at the government level at least—which has been unparalleled in peacetime history,” wrote Deutsche Bank strategists led by Jim Reid in an 88-page study entitled, “The Next Financial Crisis,” and cited by Marketwatch.

Why? Interest rates will finally begin to rise (i.e., less money in circulation), and less money also means credit tightening when weak household income growth has already stretched budgets.

A recent employer survey tells us exactly why personal incomes haven’t grown with corporate profits; still at record levels as a percentage of GDP. Corporations have been able to successfully resist their employees’ demands for higher wages. The top 1 percent have garnered 96 percent of all income generated since the Great Recession, since most of their profits have come from cheap money printed by the central banks. It has only enriched the banks and Wall Street, in other words.

Marketwatch reported on the Aon survey, recently: “Pay raises for U.S. employees are not expected to improve next year, according to a survey released Monday by global professional services company Aon, based on a survey of over 1,000 companies. Base pay is expected to rise 3 percent in 2018, up slightly from 2.9 percent in 2017. Spending on variable pay — incentives or bonuses — will be 12.5 percent of payroll, low levels not seen since 2013. This suggests a “pessimistic view of corporate performance in the coming year,” Ken Abosch, a strategy and development analyst at Aon, said in a statement.

Ah, but not for the CEOs of these companies that have used most of those profits to buy back their stock, and so enhance their earnings. CEO pay spiked 19.6 percent last year, before inflation.
The median total compensation for CEOs at S&P 500 companies totaled $11.5 million last year, an 8.5 percent increase from the previous year and the largest increase since 2013, according to a joint report by the Associated Press and the executive pay data firm Equilar released earlier this year. 

So, we could be seeing a growth slowdown next year, or worse, unless we can reverse the huge redistribution of wealth that has occurred since 2009. But that would mean raising the nationwide minimum wage from its current $7.25/hour, last set in the 1990's, for starters.

And, then stopping the Trump administration and Republican congress from cutting taxes of the already wealthy, and cutting spending that supports the poorest and elderly in the new tax and budget proposals.

Their most blatant attempt to increase their profits further, while hurting those in most need, has been the repeated attempts to repeal Obamacare (another tax cut for them). Otherwise, all that stimulus has gone for naught, and we could see this Great Recession turn into another Great Depression.

Harlan Green © 2017

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Why Aren't Wages Rising Faster?

Popular Economics Weekly

Everything should point to higher wages and salaries ahead for employees with a 4.3 percent unemployment rate and record corporate profits, but corporate profits go mainly to their executives and owners (and their stockholders) these days. The result is stagnant wages and household incomes.

Graph: Econoday

“Real", or inflation adjusted average hourly earnings slipped 2 tenths in July to a year-on-year 0.7 percent. This reading has been under the 1 percent line since October last year. The monthly reading for this measure did finally show some life in the prior week's employment report with an unadjusted 0.3 percent gain, but it will take a continued run of strength to level out the 2-year trend line which remains in a deep downslope, says Econoday.

It’s as if corporate bosses no longer are interested in maximizing their growth, which is the normal way to maximize profits. They have been successful in boosting profits, but mainly through financial engineering—that is, stock buybacks paid with borrowed money, or mergers and acquisitions that consolidate markets into fewer players.

This increases their monopoly powers to boost profits and resist employee calls for higher wages. It has helped to keep the stock market humming, but not the economic growth that should accompany such profits.

Wages in the United States increased 2.95 percent in May of 2017 over the same month in the previous year. But a better idea of healthy wage growth in the United States is a historical average of 6.26 percent from 1960 until 2017, reaching an all-time high of 13.77 percent in January of 1979 and a record low of -5.77 percent in March of 2009, according to Trading Economics.

Graph: Trading Economics

This is what normal wage growth should look like, if workers were earning a living wage, and inflation was rising at a normal rate. The inflation rate in the United States averaged 3.28 percent from 1914 until 2017, and was 14 percent in 1980. Wages since then have been suppressed in the name of suppressing inflation, as employees’ bargaining power has been curtailed.

That’s why the national minimum wage is still $7.25 per hour, last raised in 2009, though some cities and states are beginning to raise it to $15 per hour, which is what economists calculate is the minimum living wage for a family of four. And that is just enough to cover what a household has to pay for housing, gas, food, clothing, and other everyday items.

But it’s an uphill battle when business interests rule the markets with little push back or bargaining power held by 80 percent of the workforce that are wage earners, and we wonder why so many refuse to return to work. So we shouldn’t wonder why U.S. labor productivity, which ultimately sets our standard of living, has remained so low of late. It increased at an average annual 2.5 percent from 1948-2007, but just 1.2 percent from 2010-14.

It’s also the reason the U.S. have the highest income inequality in the developed world. The U.S. ranks 106th of the 149 countries in income inequality as ranked by the CIA’s World Factbook with a Gini inequality index of developing countries like Peru and Cameroon. 

Harlan Green © 2017

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Holiday Cheers--Consumers Feeling Happier!

Popular Economics Weekly

It’s back to school time, and consumers are feeling the holiday spirit already. Americans in September were most optimistic about the economy since the summer of 2007, in part because of a happier view of the U.S. labor market. And coupled with rising wages, could mean a very good holiday season for businesses.

The index of consumer confidence climbed to 104.1 this month from 101.8 in August, the Conference Board said Tuesday. That’s well above the 99.3 forecast of economists and it marks the highest level since August 2007, just a few months before the onset of the Great Recession.

The Conference Board says it is about better job security, but I believe rising wages are a better reason for optimism. The present situation index, a measure of current conditions, climbed to 128.5 from 125.3. That’s also the highest level since August 2007.

“Consumers’ assessment of present-day conditions improved, primarily the result of a more positive view of the labor market,” said Lynn Franco, director of economic indicators at the board. “Looking ahead, consumers are more upbeat about the short-term employment outlook, but somewhat neutral about business conditions and income prospects.”

But there is also new data showing middle-class household incomes growing at the fastest rate since the recession, which seemed to confirm that a recovery is finally touching the lives of ordinary, especially middle-class Americans.

This may shake up retail sales that have also been in a summer swoon, because the largest wage growth is occurring in the lowest income brackets that have to spend most, if not all, of their incomes to maintain a decent standard of living.

Graph: Marketwatch

This could largely be due to the rise in the minimum wage in some large cities, of course. The official poverty rate fell 1.2 percentage points between 2014 and 2015 to 13.5 percent, and the number of people in poverty fell by 3.5 million, says the Census Bureau. The threshold for a family of two adults and two children to be considered living in poverty was $24,036. 

Rising consumer confidence is a good sign for continued economic growth, needless to say. But will it be enough to get us out of the 2 percent GDP growth rate of late? We will actually need much more, like more capital expenditures that have been cut back during the years when budget cuts were the priority, rather than productive investments.

Harlan Green © 2016

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Who Opposes Overtime Pay Increase?

Financial FAQs

That’s a no-brainer—Republicans in Congress, of course. Who else would oppose updating the safeguards against working more than 40 hours without overtime pay, part of the New Deal that President Roosevelt called the most important part of the New Deal legislation since the Social Security Act of 1935?

Lawmakers in the House and Senate this week introduced the Protecting Workplace Advancement and Opportunity Act, legislation that will ensure the Department of Labor pursues a balanced and responsible approach to updating federal overtime rules, according to their press release. The sponsors of the legislation—members of the House Committee on Education and the Workforce and the Senate Committee on Health, Education, Labor, and Pensions—released the following statements upon introduction:

“In the 21st century workplace, we need to encourage policies that increase flexibility, reduce regulatory burdens, and create more opportunities for workers to pursue their dreams. Our nation’s outdated overtime rules are in need of modernization, but it must be done in a responsible way that doesn’t stifle opportunities for working families to get ahead. Unfortunately, the administration’s overtime proposal fails this test and should be sent back to the drawing board,” said House Subcommittee on Workforce Protections Chairman Tim Walberg (R-MI).

Sure, this when corporate profits have doubled from 6 percent of gross domestic product to 12 percent and more over the last 30 years, while wages have fallen by almost exactly the same amount, said former Labor Secretary Robert Reich in a recent NYTimes Oped.

Graph: EPI

 It is Repub’s reaction to the Labor Department’s proposal for new overtime rules that are expected to be introduced this summer—rules that require no congressional approval. 

According to the Economic Policy Institute, says Professor Reich, it would give 13.5 million more workers a new or stronger right to overtime pay — substantially increasing both middle-class incomes and employment. “It’s not as high as the $69,000 threshold it would take to return to 1975 levels, after adjusting for inflation, but it’s a courageous step in the right direction. It’s like a minimum wage hike for the middle class,” said Reich.

And opposing any boost to the minimum wage is of course the real target of Republicans. But minimum wages are rising, anyway. California, New York, and several cities have already enacted a $15 per hour minimum wage to be phased in over several years.

This tells us just how out of the mainstream are Republican lawmakers that have little, if any, interest in bettering living conditions of 80 percent of the workforce that are wage and salary earners.

Harlan Green © 2016

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

The Need For More Productive Investment

Consumers’ financial health has substantially improved in 2015, according to the Fed’s 2015 Q4 Flow of Funds report, plus, their real wages are finally rising because of lower inflation.  And since consumer income drives aggregate demand—the overall demand for goods and services, and so Gross Domestic Product —it directly impacts economic growth.

This dearth of aggregate demand has happened at the same time as diminished corporate investment in more productive capacity, according to a recent Bank of America report.  “Since the Great Recession, US business investment has grown at an average annual rate of 4.9 percent, compared with the 8.1 percent average for the corresponding period of all post-war recoveries. This shortfall is a much larger than the 1.8pp shortfall for household consumption, and the 2.0 pp for residential investment.”

Graph:  zerohedge.com

Why?  The Great Recession occurred in 2008, and businesses and financial markets have been slow to recover.  But a recent Economic Policy Institute report highlights a more serious reason for slower growth—wage inequality.

“The rise in wage inequality over the last three-and-a-half decades largely stems from intentional policy choices that have eroded ordinary workers’ leverage to secure higher pay (Bivens et al. 2014), said the EPI author Elise Gould. “These policy choices—made on behalf of those with the most economic power—include allowing the minimum wage to stagnate, eroding workers’ rights to bargain collectively, and (the Fed) prioritizing low inflation over low unemployment. Policies such as these have resulted in hourly pay for the vast majority of American workers stagnating despite growing economy-wide productivity, with economic gains highly concentrated at the top.”

And because wages and salaries of most Americans haven’t increased more than 2.2 percent since 2000, economic growth has also been stuck in the 2 percent range.  This creates ever larger budget deficits, needless to say, and so endangers social security,  Medicare, crimps investments that would increase productivity and boost our standard of living, and is the reason for our crumbling infrastructure of roads, bridges, resulting in even more productivity losses, for starters.

So raising the minimum wage floor is a start.  In fact, states that have already raised the minimum wage have boosted wages of the bottom 10^th percentile—as much as 5.2 percent for women in states where it was legislated, vs. states with no minimum wage increase.

Graph: EPI

That makes it even more important for companies and governments to invest more in capital expenditures, i.e., the best way to spend the profits made from higher productivity.  But it is hardly surprising that businesses lack confidence in any sustained upswing in demand that would justify taking the risks associated with large increases in investment, concludes the BofA report. For many listed companies, returning surplus cash to shareholders through dividends or share buybacks has seemed a safer strategy.

It is the old chicken and the egg puzzle.  Which comes first, investing to expand business, or waiting for household incomes to increase enough to encourage businesses to use their cash for productive growth rather than stock buybacks that benefit the few?

We really do know how to boost aggregate demand.  We have to create more jobs to fix our public infrastructure that hasn’t been upgraded in 75 years, build and upgrade our schools to educate a growing population, and spend more for the research and development of new, productivity-enhancing inventions. 

These are really the functions of governments, when businesses lack confidence to do anything but buy back their own shares.

Harlan Green © 2016

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen