Winning the Class War - Part I

Catherine Rampell reports in the New York Times (23 November 2010), "The nation’s workers may be struggling, but American companies just had their best quarter ever...American businesses earned profits at an annual rate of $1.659 trillion in the third quarter, according to a Commerce Department report released Tuesday. That is the highest figure recorded since the government began keeping track over 60 years ago...As a share of gross domestic product, corporate profits also have been increasing, and they now represent 11.2 percent of total output." (note that the aggregate profit for just six months is as large as the stimulus bill which is spread over three years).

Also in the news, "Real estate agents say Wall Street executives have already begun lining up rentals in the Hamptons for next summer. Dolly Lenz of Prudential Douglas Elliman said the bidding this year was “hotter and heavier” than previous years. “There is a passion now in the market I haven’t seen in a while,” she said.

"She said her clients, almost exclusively from Wall Street, were afraid to lose out. Just recently, Ms. Lenz said, she had three people bidding more than $400,000 for a summer rental in Southampton."

In order to help their bottom line, CEOs have been cutting positions and wages, while corporate profits set records. Bonuses for CEOs are up, as are dividends to stock holders. It is mainly the workers who feel the pain.

Sharron:"It's a daily struggle at this point not to be paralyzed by despair. I am 46, college-educated with excellent references and great skills. I've been told many times I have a great resume. I don't want to be on unemployment. I want a job, but don't even get any interviews."
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Full Article Winning the Class War"

By BOB HERBERT

The class war that no one wants to talk about continues unabated.

Even as millions of out-of-work and otherwise struggling Americans are tightening their belts for the holidays, the nation’s elite are lacing up their dancing shoes and partying like royalty as the millions and billions keep rolling in.

Recessions are for the little people, not for the corporate chiefs and the titans of Wall Street who are at the heart of the American aristocracy. They have waged economic warfare against everybody else and are winning big time.

The ranks of the poor may be swelling and families forced out of their foreclosed homes may be enduring a nightmarish holiday season, but American companies have just experienced their most profitable quarter ever. As The Times reported this week, U.S. firms earned profits at an annual rate of $1.659 trillion in the third quarter — the highest total since the government began keeping track more than six decades ago.

The corporate fat cats are becoming alarmingly rotund. Their profits have surged over the past seven quarters at a pace that is among the fastest ever seen, and they can barely contain their glee. On the same day that The Times ran its article about the third-quarter surge in profits, it ran a piece on the front page that carried the headline: “With a Swagger, Wallets Out, Wall Street Dares to Celebrate.”

Anyone who thinks there is something beneficial in this vast disconnect between the fortunes of the American elite and those of the struggling masses is just silly. It’s not even good for the elite.

There is no way to bring America’s consumer economy back to robust health if unemployment is chronically high, wages remain stagnant and the jobs that are created are poor ones. Without ordinary Americans spending their earnings from good jobs, any hope of a meaningful, long-term recovery is doomed.
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Update 27 November

The New York Times November 27, 2010 (Full Editorial)
The Unemployed Held Hostage, Again

It is hard to believe, as the holidays approach yet again amid economic hard times, but Congress looks as if it may let federal unemployment benefits lapse for the fourth time this year.

Lame duck lawmakers will have only one day when they return to work on Monday to renew the expiring benefits. If they don’t, two million people will be cut off in December alone. This lack of regard for working Americans is shocking. Last summer, benefits were blocked for 51 days, as senators in both parties focused on preserving tax breaks for wealthy money managers and other affluent constituents.

This time, tax cuts for the rich are bound to drive and distort the debate again. Republicans and Democrats will almost certainly link the renewal of jobless benefits to an extension of the high-end Bush-era tax cuts. That would be a travesty. There is no good argument for letting jobless benefits expire, or for extending those cuts.

The recession that began in 2007 has led to the worst unemployment in nearly 30 years. We have record levels of long-term unemployment. The jobless rate, 9.6 percent, has been essentially unchanged since May, and nearly 42 percent of the 14.8 million jobless workers have been sidelined for six months or more.

Some opponents of unemployment benefits — mostly Republicans but a few Democrats as well — would have you believe those figures are evidence of laziness, enabled by generous benefits. They conveniently ignore three facts. One, there are five unemployed people for every job opening — a profound scarcity of jobs. Two, federal benefits average $290 a week, about half of what the typical family spends on basics and hardly enough to dissuade someone from working. Three, as unemployment has deepened, benefits have become less generous. Earlier this year, lawmakers ended a subsidy to help unemployed workers pay for health insurance and dropped an extra $25 a week that had been added to benefits by last year’s stimulus law. More

Data Sources (thanks to economist Paul Krugman)

You can get corporate profits from the Bureau of Economic Analysis. I compared 1st quarter 2000, the time of the Dow’s previous peak, with 2nd quarter 2006, the most recent available. Data is here, line 15.

A good summary graph on productivity and wages, from the Economic Policy Institute’s “State of Working America,” is at stateofworkingamerica.org.

Real median weekly earnings — the amount a typical worker earns, adjusted for inflation – were lower in the second quarter of 2006 than in the first quarter of 2000. See Bureau of Labor Statistics data, here.