Entry for August 28, 2006

The cartoon is by Mike Konopacki.  See his 2003 graphic fable adapted from Ambrose Bierce,  The Conservative Employer , and a bio  here.

William Greider posted an entry “Course Correction” to the blog at The Nation.  In it he commends today’s story in The York Times, ,  “Real Wages Fail to Match Productivity” by Steven Greenhouse and David Leonhardt

They write,

The median hourly wage for American workers has declined 2 percent since 2003, after factoring in inflation. The drop has been especially notable, economists say, because productivity — the amount that an average worker produces in an hour and the basic wellspring of a nation’s living standards — has risen steadily over the same period.

As a result, wages and salaries now make up the lowest share of the nation’s gross domestic product since the government began recording the data in 1947, while corporate profits have climbed to their highest share since the 1960’s. UBS, the investment bank, recently described the current period as “the golden era of profitability.”

Until the last year, stagnating wages were somewhat offset by the rising value of benefits, especially health insurance, which caused overall compensation for most Americans to continue increasing. Since last summer, however, the value of workers’ benefits has also failed to keep pace with inflation, according to government data.

They note that new Treasury secretary,   Henry M. Paulson, in his first major speech, while acknowledging the squeeze, sought to deflect attention from the Republican’s contribution.

 It is neither fair nor useful to blame any political party.

This comes from his August 1 speech at Columbia University.  Greider writes,

Early this month, Bush’s new Treasury secretary Henry Paulsen startled the press by also acknowledging the seriousness of the wage deterioration.

I can’t for the life of me see what is so startling.   Actually, Paulson blame the shrinking earning power on failure to gain an education and praised the President’s tax policies.  In doing so, he ignored the concentration of wealth that is occuring in this country, which the tax cuts have accelerated.

Greider also says

Even the new Fed chairman Ben Bernanke took a swing at the problem last week.

If you follow Greider’s link tothe August 25  “Remarks by Chairman Ben S. Bernanke at the Federal Reserve Bank of Kansas City’s Thirtieth Annual Economic Symposium’ in  Jackson Hole, Wyoming, you’ll see that it’s more of a fan than a hit, to continue the baseball metaphor.  Here’s what Bernanke said,

The challenge for policymakers is to ensure that the benefits of global economic integration are sufficiently widely shared–for example, by helping displaced workers get the necessary training to take advantage of new opportunities–that a consensus for welfare-enhancing change can be obtained. Building such a consensus may be far from easy, at both the national and the global levels. However, the effort is well worth making, as the potential benefits of increased global economic integration are large indeed.

In other words, provide some opportunity or face opposition.

Greider also points to Clinton’s treasury secretary Robert Rubin’s recent shift towards arguing the need for more economic security for all American workers in his position paper for the Hamilton Project.  This shift seems more genuine, although one wonders what took him so long.  As Paul Krugman noted in his August 18 New York Times op-ed on Paulson’s speech, “Wages, Wealth and Politics”

since 1980 the U.S. political scene has been dominated by a conservative movement firmly committed to the view that what’s good for the rich is good for America. Sure enough, the rich have seen their incomes soar, while working Americans have seen few if any gains. …

For the last few decades, even Democrats have been afraid to make an issue out of inequality, fearing that they would be accused of practicing class warfare and lose the support of wealthy campaign contributors.

Krugman contrasts this with former policy of Republican Dwight Eisenhower.  Although Krugman doesn’t credit the source, the quotation he uses comes from Eisenhower’a letter of November 8, 1954 to his brother Edgar: 

Should any political party attempt to abolish social security, unemployment insurance, and eliminate labor laws and farm programs, you would not hear of that party again in our political history. There is a tiny splinter group, of course, that believes you can do these things. Among them are H. L. Hunt (you possibly know his background), a few other Texas oil millionaires, and an occasional politician or business man from other areas.  Their number is negligible and they are stupid.

 My thanks to  Snopes’s urban legend reference page  for identifying the source of the quotation.  As the writer of the entry notes,

One favorite tactic in political debate is to put words in the mouth of a respected elder statesmen to make it appear he presciently anticipated some modern  issue or political personality (and, naturally, took a stand that supported the viewpoint of whoever put those words in his mouth). Therefore, given the recent debate over President George W. Bush’s efforts to alter the Social Security system, one would expect a fifty-year-old quote from a former President (and fellow Republican) labeling as “stupid” certain “Texas oil millionaires” who want “to abolish social security” to be a similar fabrication.

In this case, as in his 1961 speech about the military industrial complex, Ike was prescient.

*

By the way, looking for a copy of Krugman’s op-ed, I found it at an interesting blog,  Economist’s View, by Mark Thoma, an associate professor of  Economics at the University of Oregon.

 

 

 

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