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Powerful new data shows just how badly American workers are faring in the 21st Century, as corporate profits soar ever higher.

Labor and capital share in the nation’s economic output, but an awful trend line for working people appears in data released Wednesday night by the Federal Reserve Bank in St. Louis.

fed chart

Dean Baker, the liberal economist who studies income at the Center for Economic and Policy Research, told me this “redistribution from workers to capital, on this scale, has never happened before in the post-World War II era.”

The chart showing a falling share for labor is the “flip side of record profits,” Baker added. “With unemployment still at extraordinarily high levels, workers have little bargaining power. This means that employers are able to take almost all of the gains from the economy’s productivity growth.”

Here is the Fed chart showing the rise of corporate profits for the same period beginning in 1950, with only that one steep but brief drop during the Great Recession:

fed chart 2

These two charts show that 1980, when Ronald Reagan won election, and 2001, when George W. Bush became president, marked major downward shifts in labor’s share and large increases in corporate after-tax profits. America has six million corporations, but just 2,600 of them own more than 80 percent of all business assets.

Major news organizations have done virtually no reporting on how corporate lobbyists are quietly persuading Congress and state legislators, as well as regulators in Washington and the 50 states, to rewrite the rules of business. These new rules decimate private sector unions, insulate big companies from the rigors of competitive markets, take away consumer rights, force workers and customers to pay taxes that corporations legally get to keep and in myriad other ways take from the many to benefit the few. These changes are detailed in my book The Fine Print: How Big Companies Use Plain English to Rob You Blind.

Since Reaganism replaced the New Deal in 1981, labor’s share has drifted downward except during President Clinton’s second term, which also produced the only federal budget surpluses since 1969.

Careful observers may notice that labor’s share rises during recessions. That is because by definition profits fall during recessions, while wages tend to be what the economists call “sticky,” meaning they are less volatile. But the long-term trend since Reagan is clear – more and more for capital, while the slowly dwindling share for labor has plummeted since 2000.

Since 1980 corporate pre-tax profits have grown at almost twice the rate of pre-tax wages. After-tax profits of corporations have grown at 2.4 times the rate of wages, my analysis of Table 1.14 at the federal Bureau of Economic Analysis shows.

Wages are only part of total income and the differences are less stark when the costs of fringe benefits, primarily health care, are taken into account. But benefits are not cash in people’s pockets and many companies have cut spending on retirement and other benefits to finance rising health insurance premiums.

The best evidence of flat-to-falling wages is found in the median wage data, which the Social Security Administration calculates annually from every W-2 form issued to every worker in America.

The median wage – half make more, half less — has been stuck at a bit more than $500 per week for more than a decade.

Measured in 2011 dollars, the median wage was $27,142 in 1999. It then slipped in 2011 to $26,965, a decline of more than $3 per week in real terms.

Now take into account cuts in fringe benefits like pensions, 401(k) matches, health insurance and bigger healthcare co-pays, not to mention working overtime off the books, and the real cuts to worker financial well-being are severe.

Wage growth since 1999 has been almost entirely among those earning $100,000 and up.

Consider 2011. That year 102,694 people were paid $1 million or more for their labor. At the top were the 93 people who averaged $79.8 million, Social Security Administration data show.

Not counted in this high-end labor data are earnings deferred into the future. Most workers could save only $16,500 that year, but a little-known law allows executives, movie stars, professional athletes and top sales agents to save unlimited sums. Some have saved billions of dollars, as I first explained in 1996.

We have known for 16 years that executive pay has been growing faster than even corporate profits, indicating that investors are not doing as well as the managers they hire to run companies.

These shifts are not the result of nature, but of government policy, as I have been showing for years and as I reported in my National Memo column last week on a study of top incomes in 18 modern countries.

Consider what happened after the Great Recession ended in 2009 and the Great Depression ended in 1933 (which, by the way, was the best year ever for Wall Street).

The average income of the bottom 90 percent of Americans rose 8.8 percent in 1934 and it generally kept on rising until 1973.

But in 2010, the year after the Great Recession ended, the average income of the bottom 90 percent declined by four tenths of a percent.

At the top the story was reversed.

In 1934 the super-rich top 1 percent of the top 1 percent saw their incomes fall 3.4 percent, while in 2010 their incomes soared by 21.5 percent.

These dramatic changes in fortune for the vast majority and the tiny elite are not natural. They are bought and paid for.

The buyers are among (but by no means all of) the already super-rich, who have politicians on speed-dial, lobbyists on their payrolls and jobs for family and friends of officials who demonstrate fealty to those at the top.

This should not be news, but to millions of Americans it is. Or, rather, it would be if it were reported in the major newspapers and on the evening network news instead of manufactured scandals.

Just as some of us who follow the economy saw an Internet bubble and the Wall Street bubbles building and warned about them, there were warnings that labor’s share would fall sharply. These were warnings that official Washington responded to with willful blindness, especially Alan Greenspan’s fact-free statement that no one saw the 2008 Wall Street crisis coming.

In 2004, economist Michael R. Pakko wrote in a St. Louis Fed publication about what appeared to be a decline in labor’s share of national income.

“The allocation of national income between workers and the owners of capital is considered
 one of the more remarkably stable
 relationships in the U.S. economy,” Pakko wrote, adding:

As a general rule of thumb, economists often cite labor’s share of income to be about two-thirds of national income … labor’s share of national income has averaged 70.5 percent over the past 50 years and has remained within a narrow range of that average. Only time will tell if a significant shift in income allocations is underway. However, a long-run perspective suggests that it would indeed be unusual for labor’s share to deviate far from its historic value.

Time has now told.

Here is another prediction: Labor’s share will continue to move downward because current government rules, federal and state, favor capital at the expense of labor.

Photo: “kaje_yomama” via Flickr.com

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Rep. Bennie Thompson

Photo by Customs and Border Protection (Public domain)

Chairman Bennie Thompson (D-MS) Friday afternoon announced the House Select Committee on the January 6 Attack has issued subpoenas to 14 Republicans from seven states who submitted the forged and "bogus" Electoral College certificates falsely claiming Donald Trump and not Joe Biden won the 2020 presidential election in their states.

The Chairman appeared to suggest the existence of a conspiracy as well, noting the "the planning and coordination of efforts," saying "these so-called alternate electors met," and may know "who was behind that scheme."

Keep reading... Show less

Chris Cuomo

News Literacy Week 2022, an annual awareness event started by the News Literacy Project, a nonpartisan nonprofit dedicated to making everyone “smart, active consumers of news and information and equal and engaged participants in a democracy” has closed out. From January 24 to 28, classes, webinars, and Twitter chats taught students and adults how to root out misinformation when consuming news media.
There’s no downplaying the importance of understanding what is accurate in the media. These days, news literacy is a survival tactic. One study estimated that at least 800 people died because they embraced a COVID falsehood — and that inquiry was conducted in the earliest months of the pandemic. About 67 percent of the unvaccinated believe at least one COVID-19 myth, according to the Kaiser Family Foundation.
It’s not that accurate information isn’t available; people are rejecting reports of vaccine efficacy and safety because they distrust the news media. A third of Americans polled by Gallup said they have no trust at all in mass media; another 27 percent don’t have much at all.
Getting people to believe information presented to them depends more on trust than it does on the actual data being shared. That is, improving trust isn’t an issue of improving reporting. It’s an issue of improving relationships with one’s audience.
And that’s the real news problem right now; some celebrity anchors at cable news outlets are doing little to strengthen their relationships with their audiences and a lot to strengthen their relationships with government officials.
The most obvious example is how CNN terminated Prime Time anchor Chris Cuomo last month for his failure to disclose the entirety of his role in advising his brother, former New York Gov. Andrew Cuomo, on the sexual harassment accusation that unfolded in Albany, a scandal that eventually led to Andrew Cuomo’s resignation.
But there are others. Just this month, the House Select Committee to Investigate the January 6th Attack on the United States Capitol revealed that another anchor on another cable news network, Laura Ingraham of Fox News’ The Ingraham Angle, texted then-White House Chief of Staff Mark Meadows last January, advising Meadows how Trump should react to reports of possible armed protests at state capitols around the country. This revelation followed the story that Sean Hannity, host of the eponymous news hour at Fox News, also texted Meadows with advice last year.
And while he didn't advise a government official, CNN anchor Don Lemon revealed information not available to the public when he texted embattled Empire actor Jussie Smollett to tip him off about the Chicago Police Department’s wavering faith in his story about an assault. That’s from Smollett’s own sworn testimony.
When English philosopher Edmund Burke joked about the press being the Fourth Estate — in addition to the First, Second and Third (the clergy, nobility and commoners, respectively) — his point was that, despite their influence on each other, these “estates” — bastions of power — are supposed to be separate.
The Fourth Estate will always be an essential counterweight to government. But, since Donald Trump was elected in 2016, we’ve been so focused on stopping an executive branch from pressing the press to support an administration's agenda — either by belittling journalists or threatening to arrest them for doing their jobs — that we’ve ignored the ways that it affects and influences other Estates, and not necessarily through its reporting.
That is, we have news personalities-cum-reporters who are influencing government policy — and not telling us about it until it’s too late.
The United States has fostered an incredible closeness between the Second Estate — which in 2021 and 2022 would be political leaders — and the Fourth Estate. About a year ago, an Axios reporter had to be reassigned because she was dating one of President Biden’s press secretaries. Last year, James Bennet, the former editorial page editor of the New York Times and brother of Colorado Senator and 2020 Presidential candidate Michael Bennet, had to recuse himself publicly from the Gray Lady’s endorsement process. In 2013, the Washington Post reported at least eight marriages between Obama officials and established journalists.
To be clear, there aren’t any accusations that anyone just mentioned engaged in anything other than ethical behavior. But I, for one, don’t believe that James and Michael Bennet didn’t discuss Michael’s campaign. I don’t think the Axios reporter and her West Wing-employed boyfriend — or any journalists and their federally employed spouses, for that matter — didn’t share facts that the public will never know. Such is the nature of family and intimacy.
And as long as those conversations don’t affect the coverage of any news events, there’s nothing specifically, technically wrong with them. But that doesn’t mean that they aren’t damaging.
As these stories show, when we don’t know about these advisor roles, at least not until someone other than the journalist in question exposes them, it causes a further erosion of trust in news media.
What’s foolish about the Cuomo, Ingraham, Hannity, and Lemon improprieties is that they don't necessarily need to be the problem they’ve become. Cuomo’s show contained opinion content like 46 percent of CNN’s programming. An active debate rages on as to whether Fox News is all opinion and whether or not it can rightly even be called opinion journalism since its shows are so studded with inaccuracies and lies.
What that means is that Cuomo, Ingraham, Hannity, and Lemon are allowed to take a stand as opinion journalists; Cuomo and Lemon never really worked under a mandate of objectivity and Ingraham and Hannity likely wouldn’t honor it if they did. Indeed, a certain subjectivity — and explaining how it developed for the journalist — is part of an opinion journalist’s craft. To me, little of these consulting roles would be problematic if any of these anchors had just disclosed them and the ways they advised the people they cover.
But they didn’t. Instead, the advice they dispensed to government employees and celebrities was disclosed by a third party and news of it contributes to the public’s distrust in the media. While personal PR advisory connections between journalists and politicians haven’t been pinpointed as a source of distrust, they may have an effect. Almost two-thirds of respondents in a Pew Research poll said they attributed what they deemed unfair coverage to a political agenda on the part of the news organization. No one has rigorously examined the ways in which individual journalists can swing institutional opinion so it may be part of the reason why consumers are suspicious of news.
Cleaning up ex post facto is both a violation of journalistic ethics and ineffective. Apologies and corrections after the fact don't always improve media trust. In other credibility contests, like courtroom battles, statements against one’s interests enhance a person’s believability. But that’s not necessarily true of news; a 2015 study found that corrections don’t automatically enhance a news outlet’s credibility.
It’s a new adage for the 21st century: It’s not the consulting; it’s the cover-up. Journalists need to disclose their connections to government officials — up front — to help maintain trust in news media. Lives depend on it.

Chandra Bozelko did time in a maximum-security facility in Connecticut. While inside she became the first incarcerated person with a regular byline in a publication outside of the facility. Her “Prison Diaries" column ran in The New Haven Independent, and she later established a blog under the same name that earned several professional awards. Her columns now appear regularly in The National Memo.


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