The Wageless, Profitable Recovery

June 30, 2011, 10:44 AM

By STEVEN GREENHOUSE

Economists at Northeastern University have found that the current economic recovery in the United States has been unusually skewed in favor of corporate profits and against increased wages for workers.

In their newly released study, the Northeastern economists found that since the recovery began in June 2009 following a deep 18-month recession, “corporate profits captured 88 percent of the growth in real national income while aggregate wages and salaries accounted for only slightly more than 1 percent” of that growth.

The study, “The ‘Jobless and Wageless Recovery’ From the Great Recession of 2007-2009,” said it was “unprecedented” for American workers to receive such a tiny share of national income growth during a recovery.

According to the study, between the second quarter of 2009, when the recovery began, and the fourth quarter of 2010, national income rose by $528 billion, with $464 billion of that growth going to pretax corporate profits, while just $7 billion went to aggregate wages and salaries, after accounting for inflation.

The share of income growth going to employee compensation was far lower than in the four other economic recoveries that have occurred over the last three decades, the study found.

“The lack of any net job growth in the current recovery combined with stagnant real hourly and weekly wages is responsible for this unique, devastating outcome,” wrote the report’s authors, Andrew Sum, Ishwar Khatiwada, Joseph McLaughlin and Sheila Palma.

According to the Bureau of Labor Statistics, average real hourly earnings for all employees actually declined by 1.1 percent from June 2009, when the recovery began, to May 2011, the month for which the most recent earnings numbers are available.

The authors said another factor explaining the weak performance for aggregate wages and salaries was the slow growth in weekly hours during the recovery. At the same time, worker productivity has grown just under 6 percent since the recovery began, helping to keep employment down while lifting corporate profits, the study said.

Professor Sum noted that the aggregate wage and salary figures exclude employer contributions to benefits and payroll taxes, while they include bonuses, overtime, commissions and tips.

He said that nonwage benefits rose in real terms by $27 billion during the first seven quarters of the recovery. “These small gains were exactly offset by a similar $27 billion loss in real wages and salaries over the same time period based on newly released data from the Bureau of Economic Analysis,” he said. “It was a wageless and jobless recovery.”

The study called that $27 billion loss in aggregate wages and salaries during the seven quarters after the recovery began “the first ever such decline in any post-World War II recovery.”

The study said that of the previous recoveries since the 1970s, the recovery following the 2000-1 recession was next worst in terms of the share of increased income going to wages and salaries. The study found that 15 percent of income growth went to aggregate wages and salaries in the six quarters after the recovery began following that recession, while 53 percent went to corporate profits. The growth in national income can also go to net interest, rental income or proprietors’ income.

The story was very different for the recovery that began in 1991. In that recovery, 50 percent of the growth in national income went to wages and salaries during the first six quarters after the recession ended, while corporate profits actually fell by 1 percent during that period.

With regard to corporate profits, the report noted that the preliminary estimate for the first quarter of 2011 was $1.668 trillion, an increase of $465 billion of just under 40 percent since the recovery began.

“Aggregate employment still has not increased above the trough quarter of 2009, and real hourly and weekly wages have been flat to modestly negative,” the report concludes. “The only major beneficiaries of the recovery have been corporate profits and the stock market and its shareholders.”

Related Posts

FROM ECONOMIX

• The Logic of Cutting Corporate Taxes

• How Businesses Create Wealth

• Why College Brings a Huge Return

• Cars as a Harbinger of an Upturn

• Man vs. Machine

The New Antiwar Republicans

Three presidential candidates want a faster exit from Afghanistan, and so does much of the public. Jill Lawrence on why their 2012 rhetoric will boost the pressure on Obama.

July 1, 2011 1:22 AM EDT

Say you’re among the growing number of Americans who want U.S. troops to come home from Afghanistan soon. There are at least three candidates in the 2012 presidential race who are on your wavelength, and President Obama isn’t one of them.

Leading liberals and grassroots activists have made no secret of their disappointment over Obama’s measured withdrawal timetable. What’s striking is the similarity between their views and those of three Republicans: Ron Paul, a libertarian with isolationist tendencies; former New Mexico Governor Gary Johnson, a fiscal conservative with libertarian tendencies; and Jon Huntsman, an internationalist who speaks of “asymmetry” and “generational opportunities.”

It’s a rare Democrat who would vote for Paul, Johnson, or Huntsman in order to send Obama a message on the Afghan War. Their positions on social and economic issues are light-years from the Democratic mainstream. Still, it would be a mistake to underestimate the impact of the antiwar message from the right. It will help Huntsman with moderates and independents in New Hampshire’s first-in-the-nation primary, and it will certainly help liberals ramp up pressure on Obama.

“It’ll keep this thing in front of him,” Jim Dean, chairman of Democracy for America, told me. “The Republican primary will be competitive and this is going to be discussed a lot. That may help a promote a feeling among most Americans that we should get out of there sooner rather than later.”

Justin Ruben, executive director of MoveOn.org, agreed that the Republican campaign dialogue will fuel the shifting consensus on the war. “The more people who are out there saying there are better approaches to both protecting our interests and fighting our enemies, that’s a good thing for America and a good thing for anybody who wants to wind down the wars,” he says.


“Most of Huntsman’s rivals won’t be seeking the get-out-of-Afghanistan vote.”

The public already appears to be less in step with Obama than with the GOP candidates who want to get out of Afghanistan fast. Several national polls show that huge majorities  of Americans favor the president’s pullout plan, but at the same time, they are getting impatient. An all-time high of 56 percent in a recent Pew Research Center poll said they wanted the troops out as soon as possible, while 58 percent in a new CBS/New York Times poll said Obama’s pace was too slow. Democrats and independents are the bulk of those wanting a faster drawdown.

That was reflected on TV, online and on Capitol Hill after Obama’s speech, in which he said he would bring 33,000 of some 100,000 troops home by the end of 2012 and the rest by 2014. “I’m in favor of trying to go after al Qaeda, but it doesn’t take 100,000 troops to do that,” Massachusetts Democrat Barney Frank said on MSNBC. House Democratic leader Nancy Pelosi said many had hoped U.S. forces would leave “sooner than the president laid out.” Then there wasOhioGringo on Firedoglake.com, who erupted into all caps when Obama described the drawdown as “the beginning” of his effort to wind down the war. “This is the BEGINNING? After 10 freaking years?”

From left: Ethan Miller / Getty Images; Rich Schultz / AP Photos; Jim Cole / AP Photos

The GOP’s out-now trio offered the same critiques, minus the CAPS. Paul called Obama’s plan “too little, too late.” Johnson called it “not much more than lip-service to his pledge to begin withdrawing by this summer.” Huntsman said it was time to shift to “a focused counterterror effort which requires significantly fewer boots on the ground than the president discussed.” The former Utah governor urged “a safe but rapid withdrawal.”

Huntsman, who was Obama’s ambassador to China until April, has credibility when he says our foreign-policy priority ought to be fixing a weak domestic economy that jeopardizes the country’s ability to project power and achieve its objectives. He is backed up by a long foreign-policy resume when he suggests it’s time to shift from a counterinsurgency strategy (fighting the Taliban and other groups trying to overthrow the Afghan government) to a counterterrorism strategy (preventing terrorist attacks). 

In a video on his campaign website, Huntsman says the war on terror is fought against “groups who are on the move and who don’t necessarily call any nation home. We have to be fast on our feet and ready to deploy on a moment’s notice when we find these affiliates are prepared to strike us.” What that means, he says, is that we need “Special Forces capabilities like never before”—not 100,000 boots on the ground.

Obama doesn’t disagree with any of this. In his Afghanistan speech he said that “it is time to focus on nation-building here at home.” A few days later he announced a new counterterrorism strategy designed to prevent terrorist attacks, protect U.S. interests and ensure the demise of al Qaeda. But his actual policies send a “not yet” message on both those fronts, since he plans to keep large numbers of troops there, spending billions each month, until at least 2014.

The wars in Iraq and Afghanistan are not the most pressing concerns to New Hampshire voters, by a long shot. In a recent Suffolk University poll, nearly half picked jobs and the economy as the top issue facing the country. But 15 percent said the second most important issue was the wars—an opportunity for Huntsman, assuming that by then he has climbed from single digits to viability.

That’s because independents in New Hampshire can vote in either party’s primary. Called “undeclareds,” they make up 42 percent of the state’s electorate. And history shows they vote in droves in contested primaries, especially when there’s an uncontested race on the other side, as will be the case with Obama running for reelection.

The most recent example is 2004, when George W. Bush was seeking a second term and several Democrats were competing to take him on. According to New Hampshire Secretary of State Bill Gardner, a paltry 7,702 undeclared voters declared themselves Republicans on primary day (11 percent of total GOP turnout). The Democrats—with an exciting race that featured John Kerry, Howard Dean, John Edwards, Wesley Clark and Joe Lieberman—drew 95,634 undeclared voters. That was 43 percent of the Democratic primary electorate that year.

Most of Huntsman’s rivals won’t be seeking the get-out-of-Afghanistan vote. Tim Pawlenty is fashioning himself as an aggressive interventionist in the Bush tradition. He accused Obama of “overruling the best judgment of our military commanders in the field” and said he would draw down troops in Afghanistan “as circumstances warrant”—not a comfort to those who believe we should move on.

Mitt Romney has sounded somewhat interested in a quick exit, but he responded to Obama’s speech by rejecting “arbitrary timetables” and expressing eagerness to listen to “our military commanders.” For the most part, that’s what Obama has done. The result is the longest war in U.S. history, a war that most Americans already want to end, a war that can only become less popular as Huntsman and other Republican primary candidates question its rationale and strategy over the next six months.

This Week in National Insecurity: July 4th Edition

— By Adam Weinstein

| Fri Jul. 1, 2011 3:00 AM PDT

Luigi Crespo/Flickr

Happy (almost) birthday, America! Nothing says red, white, and blue firecrackin' love of country like a roundup of defense dementedness. Each Friday, we grab our lensatic compass, rucksack, and canteen, then mount out across the global media landscape for a quick national security recon. Whether you think our military is too damned busy—or not busy enough—here's all the ammunition you'll need, in a handy debrief.

In this installment: No to "toe shoes"! And no to tech support! But yes to ugly cars, loads of marijuana, $5 trillion wars, and coating your colleagues in "foreign substances."

The sitrep:

The government's national threat level is Elevated, or Yellow "at a heightened level of vigilance."

• Bye bye, Bob Gates. Care for a Presidential Medal of Freedom on your way out? All outgoing defense secretaries get a medal now. (Stars & Stripes)

• And what does the new secdef, Leon Panetta, get? A $5 trillion war on terror. A new study says that's the actual cost of the Iraq and Afghanistan wars (not the $1 trillion the Pentagon estimated last week). The report also gives an "extremely conservative" estimate of 225,000 deaths and 365,000 injuries in the wars. (Time)

• So what are we spending all that money on? Computer systems that don't work, apparently. The Army's $2.7 billion DCGS-A network is supposed to give commanders real-time battlefield data, but "was unable to perform simple analytical tasks" and has actually helped insurgents in Iraq and Afghanistan. "There's a lot of bugs in the workflow," says one officer. Lesson learned: Computers can make chocolate rain, but they can't rebuild failed nations. (Politico)

• But here's something the Army's unwilling to spend money on: "toe shoes" for exercising soldiers. According to a new directive from the brass: "...only those shoes that accommodate all five toes in one compartment are authorized for wear. Those shoes that feature five separate, individual compartments for the toes, detract from a professional military image and are prohibited" during workouts. (Washington Post)

• Speaking of soon-to-be-ex-soldiers, congratulations to the new chief spook, David Petraeus. CIA officers, he'll be the one rolling around your Langley headquarters in his favorite toe shoes. (Stars & Stripes)

• Here's something nobody in the Senate asked Petraeus about in his confirmation hearing: There's a quiet debate on the Hill over whether to keep the intelligence budget buried in the Pentagon's spending bill, where nobody can see any real details about how spies spend taxpayer money. James Clapper, the US intel czar, would like a separate, sort-of-more-transparent budget for intel operations, but a key House committee has stymied him. Given Clapper's job, he probably should have seen that coming. (Washington Post)

• There's plenty of other military budget news this week: Republicans say they are considering deeper military spending cuts, but they're long on talk and short on details as yet. Lockheed, maker of the trillion-dollar Joint Strike Fighter, has an online map to show how much of that money (theoretically) gets funneled back to your state. The Senate is actually trimming more than $1 billion in base construction spending that Obama wanted. (The body is making "tough decisions in Guam, Bahrain, and Germany," says one lawmaker.) Perhaps they can use the savings to pay for these Boeing helicopter parts, which were marked up 21,772 percent when sold to the Pentagon.

• What do you get when you crowdsource the Army's tactical vehicle of the future? Apparently, a dune buggy in a Humvee's clothing:

• Lest you forget that the Coast Guard is a branch of the military, its members would like to remind you that they, too, haze their colleagues (if you could call being "tied down, stripped, coated in foreign substances and called derogatory names" getting hazed). (Navy Times)

• And while Capitol Hill conservatives have been busy warning about a post-DADT upheaval in the ranks, the Navy is making splendid progress integrating women into the submarine service. (Military Times)

• Finally, US soldiers scored half a ton of weed in Afghanistan. Must be the same guys who thought up that Army tactical vehicle of the future. (DOD via Attackerman)

Adam Weinstein is Mother Jones' national security reporter. For more of his stories, click hereor follow him on Twitter. Get Adam Weinstein's RSS feed.

Papantonio: Please President Obama, Don't Blink In Debt Fight

Uploaded by golefttv on Jul 1, 2011

Mike Papantonio appears on The Ed Show to talk about the ongoing debt fight and why the GOP is so desperate to deliver for their corporate masters.

Court strikes Michigan affirmative action ban

By Mary Wisniewski

CHICAGO | Fri Jul 1, 2011 6:11pm EDT

(Reuters) - A federal appeals court on Friday struck down a Michigan law that banned affirmative action in college admissions, creating the possibility of a U.S. Supreme Court battle.

The 6th U.S. Circuit of Appeals, in a 2-1 decision, found that a 2006 amendment to the Michigan constitution, "unconstitutionally alters Michigan's political structure by impermissibly burdening racial minorities."

Michigan Attorney General Bill Schuette said he will appeal the ruling through a formal request for a rehearing by the entire 6th Circuit. The law, known as the Michigan Civil Rights Initiative, will stay in effect pending a final decision.

"Entrance to our great universities must be based upon merit, and I will continue the fight for equality, fairness and rule of law," said Schuette in a statement.

George Washington, a Detroit attorney who represented a civil rights group opposing the law, said Michigan universities already give special consideration in admissions to certain groups of students, including those from rural backgrounds, those with lower incomes, and veterans.

What the law does is prohibit racial and ethnic minorities from asking for the same consideration in admissions as other groups, Washington said.

"What Proposal 2 does is say that for one group and one group alone, you can't follow that procedure," Washington said. He expects the case will go to the U.S. Supreme Court.

Appellate Court Judge R. Guy Cole wrote in the majority decision that the U.S. Supreme Court has twice held that the equal protection clause in the U.S. Constitution does not permit the kind of "political restructuring" caused by the Michigan law.

In her dissent, Appellate Judge Julia Smith Gibbons wrote that Proposal 2 does not draw distinctions on the basis of race but "in fact, it prohibits them."

The fight over affirmative action policies at Michigan's public colleges and universities began in the 1960s and 1970s, when African-American and other minority students first successfully lobbied for the policies' adoption.

The U.S. Supreme Court held in 2003 that universities cannot establish quotas for members of certain racial groups, but may consider race or ethnicity as a "plus" factor along with other factors.

Your turn: Celebrate country's history, freedom

1:06 AM, Jul. 2, 2011  |  

• 
  

Twenty-three grueling days later, on July 4th, 1776, Congress approved the Declaration of Independence, America’s official cry for liberty.

This groundbreaking document stunned and shocked the world. The Declaration unashamedly called for not only an end to British oppression, but for the establishment of a free republic, which included a government that protected every American’s right to life, liberty and the pursuit of happiness.

Our great nation, the United States of America, was born that day; a nation I am both proud and honored to call home!

For 235 years, “we the people” have celebrated July Fourth as the day when a free America became irrefutable evidence to the world of what a nation can be when freedom takes flight on the wings of God’s grace. Even today, I can still hear the sound of freedom as it echoes from her mountains, across her plains and from shining sea to shining sea! God blessed America at her birth, and he continues to bless her today!

Notably, John Adams, a member of the committee that oversaw the writing of the Declaration, foresaw the importance of this monumental day, writing to his wife Abigail that: “(The day) ought to be commemorated, as the day of deliverance, by solemn acts of devotion to God Almighty. It ought to be solemnized with pomp and parade, with shows, games, sports, guns, bells, bonfires and illuminations, from one end of this continent to the other, from this time forward, forevermore.”

I agree with Adams. We should celebrate the birth of our nation.

But this Independence Day, while we enjoy the parades and fireworks, let’s be sure to teach our children just how important it is to be an involved citizen of America.

Four pivotal questions for Tim Geithner

By: Examiner Editorial | 06/14/11 8:05 PM

U.S. Treasury Secretary Timothy Geithner again postponed his scheduled appearance before the House Financial Services Committee to deliver his annual testimony. Michael Nagle/Getty Images

U.S. Treasury Secretary Timothy Geithner was scheduled to deliver his annual testimony before the House Financial Services Committee this morning, but for the second time this year the hearing was postponed. According to a spokeswoman for the committee, Geithner cited a scheduling conflict due to ongoing national debt ceiling talks, and a new date has not yet been set. But whenever Geithner does appear before the committee, here are some vital questions that he should be asked.

First, if political brinkmanship over the debt ceiling is so unnerving to debt markets, why are yields (the rate of return required to attract investors) on Treasury bonds still so low? Back in April, Geithner went on the Sunday morning talk show circuit crying alarms that the debt ceiling had to be increased without delay. Yet two months later, there still is no agreement on the debt ceiling, and yields on 10-year Treasury notes are even lower now than they were then, dipping below 3 percent this week. If investors were seriously worried about the prospect of default because of the political disagreements in Washington, wouldn't those yields be much higher?

Second, when will President Obama offer a detailed proposal to reduce the nation's long-term debt? In February, Obama released his 2012 budget proposal, but that document did nothing to address the nation's debt crisis. In April, after Rep. Paul Ryan, R-Wis., made public his extensively detailed plan to rein in entitlements spending, Obama gave a speech outlining in general terms his thoughts on the need to reduce the debt. But he still hasn't spelled out how he wants to do it. Even so, the Obama administration is pressuring Congress to raise the debt limit above $14.3 trillion to accommodate new spending.

Third, do you agree with Obama's assertion that Chrysler has repaid all the tax dollars it owes, and more? The president earned three Pinocchios from the Washington Post's fact-checker for a recent speech in which he claimed "Chrysler has repaid every dime and more of what it owes American taxpayers for their support during my presidency -- and it repaid that money six years ahead of schedule." By adding the misleading phrase "during my presidency," Obama thought he could ignore the $4 billion that Chrysler borrowed from the government in the waning days of the Bush administration, an action he supported at the time.

Fourth, what is Obama's plan to revive the economy? After 2 1/2 years and spending trillions of borrowed dollars on bailouts, pork-barrel stimulus schemes and potentially inflationary monetary expansion, the U.S. economy is still floundering without sustained growth, job creation or consumer confidence. Unemployment is at 9.1 percent, retail sales have slowed, growth has sputtered, housing prices continue to decline and growing numbers of economists are talking about the possibility of a double-dip recession. What now, Mr. Secretary? We look forward to hearing Geithner's answers