Pub. 15 2018 Issue 4

Issue 4 • 2018-2019 13 O V E R A C E N T U R Y : B U I L D I N G B E T T E R B A N K S - H E L P I N G N E W M E X I C O R E A L I Z E D R E A M S that President Trump is in office, the same people who were citing those figures to discredit Obama’s economy are citing the same figures to further the notion that the economy is booming, and vice versa. The point this illustrates is that the economy that Obama created is the one that Trump now presides over. It’s pure partisanship to consider them different economies in any significant way. Critics on both sides of the aisle are correct in that it’s a flawed economy. As some economists would label it, it’s a “house of cards” economy. It looks mighty from the outside, but is susceptible to collapsing easily. According to the Pew Research Center, “today’s real wage (that is, the wage accounting for inflation) has about the same purchasing power it did 40 years ago. And what wage gains there have been have mostly flowed to the highest paid tier of workers.” Last July, The New York Times published an inter- esting piece that documented how much of the economic boom is due to corporate profits soaring and how little of it has to do with an increase in wages and upward worker mobility. One woman, who had been laid off from a paper company where she worked for 13 years, had a quote that summed it up per- fectly: “Sure, you can get a job slinging hamburgers somewhere or working in a warehouse. You hear, ‘Oh, the unemployment rate is as low as it’s ever been, but it’s been discouraging.” This is a sentiment that a low unemployment rate hides. According to the same Times article, “In 2000, when the jobless rate last fell below 4 percent, corporations pulled in 8.3 percent of the nation’s total income in the form of profits; wages and salaries across the entire work force accounted for roughly 66 percent. Now, the jobless rate is again fluttering below 4 percent. But corporate profits account for 13.2 per - cent of the nation’s income. Workers’ compensation has fallen to 62 percent. "If workers’ share had not shrunk, they would have had an additional $532 billion, or about $3,400 each,” said Jared Ber- nstein, an economic adviser to former Vice President Joseph R. Biden. “And at this point in the recovery, shifting some of those corporate profits to workers would have no effect on inflation,” he noted. In a healthy economy, there would be a more equal balance between growth in corporate profits and worker wages. An economy where the growth is strictly at the top becomes an oligarchy, defined as a form of power structure in which power rests with a small number of people. It’s not a coincidence that the stock market, which is a measure of the growth of cor- porate profits and the economic stability of the very wealthy, is often cited as a signal of a booming economy. The market does extraordinarily well when corporate profits soar, as they have been in recent years. The Times article also mentions that “the recent tax overhaul has further pumped up corporate earnings. The promises that lower tax bills for businesses would translate into higher wages have yet to materialize. Higher gas and medical care costs have eaten away at whatev- er gains most workers have made.” The stock market is certainly an economic indicator as far as the sentiments of those buying and selling within the market and the welfare of the companies that list their stocks on the exchange. Obviously, a surging market is an indication that those particular factors are on an upward trend. Howev- er, only half of Americans have any stake in the stock market (mostly through a 401(k), Individual Retirement Account, or a pension fund that is invested in stocks), but, according to a paper by New York University professor Edward Wolff, 84% of the total value of stocks is owned by the top 10% of the wealthiest Americans. While the stock market is certain- ly one economic indicator, it is rarely noted by pundits and politicians that it is largely an indicator of the fortunes of the wealthiest Americans and corporations, not the average work- er. A person living paycheck to paycheck, which according to a report by CareerBuilder last year is 78% of full-time workers, will have far less opportunity to invest their money with any long-term goals in mind. The Tax Cuts and Jobs Act, signed into effect in late 2017, has not had the effect that was promised. Since the beginning of 2018, American companies including Apple, Walmart, and McDonalds have announced over $700 billion in buybacks of their own stock. The windfall is going largely to investors and highly-compensated executives, not to employees. According to the Times article, “The United States may be leading other big industrialized countries in economic growth, but its labor force does not fare well in comparison. The American workers’ share of their country’s total output fell sharper and faster than the average reported by the Organization for Economic Coopera- tion and Development. The United States also had a larger pro- portion of low-wage workers than nearly every other member.” To tie this in on a local level, New Mexico, one of the nation’s poorest states, has experienced very little overall economic growth since the Great Recession. New Mexico is a microcosm of the state of the economy overall. The state has a high percentage of people living in poverty and thus a high percentage of New Mexicans have not felt the effects of the economic recovery. Logically, states and areas with greater wealth (many more densely populated areas) have experienced a greater economic recovery in recent years. Many poorer and more rural areas have unfortunately been left behind. With the U.S. economy, it’s not an issue of overall economic growth and employment. It’s a question of is it positive to have much of the growth being funneled directly to the top? Obviously, we all want to be successful and live comfortably, but is there a limit to when we must question if too many Americans are struggling even with this economic growth? What are the factors in the system that have allowed this to occur and have we really made the necessary course correc- tions since the Great Recession? These are not easy questions, but worth asking. n