FB Share
Email This Page
add comment
Print

Reich writes: "The stock market is basically back to where it was in 2000, while corporate earnings have doubled since then. Yet the real median wage is now 8 percent below what it was in 2000, and unemployment remains sky-high."

Portrait, Robert Reich, 08/16/09. (photo: Perian Flaherty)
Portrait, Robert Reich, 08/16/09. (photo: Perian Flaherty)



Why Wall Street Soars as Main Street Suffers

By Robert Reich, Robert Reich's Blog

06 March 13

 

oday the Dow Jones Industrial Average rose above 14,270 - completely erasing its 54 percent loss between 2007 and 2009.

The stock market is basically back to where it was in 2000, while corporate earnings have doubled since then.

Yet the real median wage is now 8 percent below what it was in 2000, and unemployment remains sky-high.

Why is the stock market doing so well, while most Americans are doing so poorly? Four reasons:

First, productivity gains. Corporations have been investing in technology rather than their workers. They get tax credits and deductions for such investments; they get no such tax benefits for improving the skills of  their employees. As a result, corporations can now do more with fewer people on their payrolls. That means higher profits.

Second, high unemployment itself. Joblessness all but eliminates the bargaining power of most workers - allowing corporations to keep wages low. Public policies that might otherwise reduce unemployment - a new WPA or CCC to hire the long-term unemployed, major investments in the nation's crumbling infrastructure - have been rejected in favor of austerity economics. This also means higher profits, at least in the short run.

Third, globalization. Big American-based corporations have been expanding and hiring around the globe where markets are growing fastest - even while the U.S. market is lackluster. Tax policies and trade policies have encouraged them.

Finally, the Fed's easy-money policies. They've pushed investors into the stock market because bond yields are so low. On Tuesday, the yield on the 10-year U.S. Treasury note was just 1.9%.

All of this spells widening inequality in America, because the people who invest the most in the stock market have high incomes. Those who rely most on wages have lower incomes.

Corporate profits are claiming a larger share of national income than at any time in 60 years, while the portion of total income going to employees is near its lowest since 1966.

As my colleague Immanuel Saez recently found, all the economic gains between 2009 and 2011 (the last year for which data were available) went to the richest 1 percent of Americans. The bottom 99 percent has continued to lose ground.

And yet the tax code continues to give preference to capital gains over ordinary income - a huge boon to investors.

The sequestration is likely to make all this worse, since it will slow the U.S. economy and keep unemployment higher than otherwise.

It will also hurt the most vulnerable. Some $1.9 billion in low-income rental subsidies are being eliminated, affecting 125,000 people. Cuts to the Department of Agriculture will eliminate rental assistance for another 10,000 low-income rural people. Meanwhile, 100,000 formerly homeless Americans are likely to be removed from their current emergency shelters.

More than 3.8 million Americans receiving long-term unemployment benefits will have their monthly payments reduced by as much as 9.4 percent, and lose an average of $400 in benefits over their period of joblessness.

The Department of Education's Title I program, which helps schools serving more than a million disadvantaged students, will be cut $715 million, and $400 million will be cut from Head Start, the preschool program for poor children. And major cuts will be made in the Special Supplemental Nutrition Program for Women, Infants, and Children, which provides nutrition assistance and education.

The health of an economy is not measured by the profits of corporations headquartered within it or the value of its stock market. It depends, rather, on how many of people have jobs and whether those jobs pay decent wages.

By this measure, we are a long way from economic health. Rarely before in American history have public policies so blatantly helped the most fortunate among us, so cruelly harmed the least fortunate, and exposed so many average working Americans to such widespread insecurity.

 

Comments   

We are concerned about a recent drift towards vitriol in the RSN Reader comments section. There is a fine line between moderation and censorship. No one likes a harsh or confrontational forum atmosphere. At the same time everyone wants to be able to express themselves freely. We'll start by encouraging good judgment. If that doesn't work we'll have to ramp up the moderation.

General guidelines: Avoid personal attacks on other forum members; Avoid remarks that are ethnically derogatory; Do not advocate violence, or any illegal activity.

Remember that making the world better begins with responsible action.

- The RSN Team

 
+11 # MidwestTom 2013-03-06 08:42
Why not simply cut the wages of the people administrating these programs by about 5% instead of cutting out those receiving the help? There were six TSA employees working each of two the check points for commuter flights with about 32 passengers each yesterday at an airport that has less than 50 flights per day. There are painless cuts than can be made if they really do not want to inflict pain.
 
 
-18 # HowardMH 2013-03-06 11:36
Tom, that would make common sense and that is not part of the Wall Street plan for Obama the Wimp who is totally bought and paid for by Wall Street and Big Business. They are counting on the millions of idiots and imbeciles in the US not to notice and they don’t! Why is the stock market going up, up, up, if Wall Street is not pulling all the strings?

Until there are two hundred thousand (OK I will concede there are not that many that even understand what is going on in Washington DC, much less get pissed off about it so lets say 5 thousand) really, really pissed off people on Capital Hill (all at the same time – with base ball bats, or 2 x 2s) raising some serious hell against the Lunatics, absolutely nothing is ever, ever going to happen to these totally bought and paid for by the richest 50 people in the world that are becoming more and more powerful with each passing rigged election thanks to the stupid people.
How much success have you had with the TOTALLY NON VIOLENT protests over the last few years?

I’m no fan of Sarah’s but this comment is just so appropriate. So how is that Hopei, Changie working out for you now?
 
 
+14 # SOF 2013-03-06 13:07
So, you think it would be better with Romney? The puppet masters couldn't sustain the deception without blaming Democrats. Expose, inform, resist. Non violence is the ONLY way.
 
 
0 # RLF 2013-03-07 07:25
The guy is saying Obama is bought and sold by Wall St. and that the corridors of power are completely ignoring nonviolent protests because paying attention doesn't pay and you immediately call him a REpuck? Wake up...Obama is corrupt or inept...as are almost every other Democrap in Wash.
 
 
+4 # JSRaleigh 2013-03-06 12:25
Quoting MidwestTom:
Why not simply cut the wages of the people administrating these programs by about 5% instead of cutting out those receiving the help?


The law was written to require the cuts MUST be taken from the benefits. The people who "administer" the programs are also being cut back, but the law mandates benefits cuts.
 
 
+4 # ericlipps 2013-03-06 14:43
Quoting MidwestTom:
Why not simply cut the wages of the people administrating these programs by about 5% instead of cutting out those receiving the help? There were six TSA employees working each of two the check points for commuter flights with about 32 passengers each yesterday at an airport that has less than 50 flights per day. There are painless cuts than can be made if they really do not want to inflict pain.

I'm sure there are, but the question is: once you've made all the "painless cuts" you can, how much of a dent have you made in the deficit? Not that much, I suspect.
 
 
+4 # RLF 2013-03-07 07:28
I think all of the administrators should do things to cut that affect congressmen and senators...like take all of the FAA cuts at Washington airports. City of Wash. stop maintaining streets around the capital.
 
 
+13 # Susan1989 2013-03-06 08:53
I agree with everything said here, except for the lower tax rate on capital gains. It is not only the wealthy who invest in stocks--often it is the elderly who are retired and live off the income of their pensions and investments. Please do not forget these people who depend upon a fairer tax rate so that they can support themselves. I do believe, however, that those earning large incomes...say over $500,000 annually should pay higher capital gains rates. The stock market is not only for the rich.
 
 
+1 # RLF 2013-03-07 07:32
Frankly you don't get it...If you can retire...then you are rich compared to my generation that are ripped off by Wall St. or have no chance to ever retire. The elder generations alive now irresponsibly did not fund their own retirements and SS so that it would last. They slept and now my generation don't have health insurance. We will receive a crap SS. If you have capital...you are rich!
 
 
+14 # MidwestTom 2013-03-06 08:56
This President waited until the Statute of Limitations ran out to 'get tough' on the banksters. Therefore no individual banker can be punished, only the shareholders, and many of the shares are held by pensions on whom ordinary people depend for retirement.
 
 
+30 # Diario7 2013-03-06 09:05
The Republicans failed to make Obama a one-term President by making the economy scream, but keep trying to make the economy scream for no apparent purpose long after the election - until Robert Reich made the purpose very apparent. This is all about continuing the Ronald Reagan shift in power and money from humans who work for corporations to humans who own corporations. Same agenda both before and after the election.
 
 
+9 # geraldom 2013-03-06 11:54
Quoting Diario7:
The Republicans failed to make Obama a one-term President by making the economy scream, but keep trying to make the economy scream for no apparent purpose long after the election - until Robert Reich made the purpose very apparent. This is all about continuing the Ronald Reagan shift in power and money from humans who work for corporations to humans who own corporations. Same agenda both before and after the election.


The Republicans may not have prevented Obama from winning a second term in office, but they can still do extreme damage to the Democratic Party for the upcoming 2014 midterm elections as they did in 2010, and Obama and the Congressional Democrats are once again falling into that very same trap by continuing to act like wimps and wussies.

If Obama and the congressional Democrats cave in even one more time to the Republicans as Obama appears to be doing, what happened in 2010 will look like a cake walk compared to what will happen in 2014.
 
 
+3 # Even 2013-03-07 01:00
Are they wimps or are they just in agreement with their "opposition?"
 
 
+5 # skeeter 2013-03-08 10:29
There's not a dime's worth of difference between the democrats and the republicans. We have a de facto one party system in this country: the BUSINESS PARTY. The liberal wing of the party are the democrats, the conservative wing are the republicans.Oh sure, we can argue ad infinitum about abortion and other social issues, exploring every nook and crany,so we can all feel good about open debate and democracy, but when it comes to the really important stuff about income inequality and a rigged economic system and the impact of climate change, the debate is framed from the beginning to exclude free and open debate and favor the top 1%. Our democracy is a sham, and as long as the American people continue to believe that politicians will save us the situation will only get worse.
 
 
+2 # Madmedic 2013-03-07 08:11
Quoting Harold R. Mencher:
[quote name="Diario7"]The Republicans failed to make Obama a one-term President by making the economy scream, but keep trying to make the economy scream for no apparent purpose ...

If Obama and the congressional Democrats cave in even one more time to the Republicans as Obama appears to be doing, what happened in 2010 will look like a cake walk compared to what will happen in 2014.


Blame Harry Reid first. The "man" and I use that term loosely at this point, cost Obama his entire 2nd term agenda with the filibuster fiasco. He needs to go NOW. This is the message I send back to the DCCC & other Dem. contribution requests I receive on the Internet & in phone calls. I tell them I will consider contributing again when Harry Reid is gone as Senate Majority Leader. Dem. causes appear to be starting to hurt , as I finally received an email back from the DCCC about my refusing to contribute until Reid is gone. Others must be doing what I am doing. It won't change Reid's total surrender on the filibuster, but it will serve as an example to at least some of the rest of the gutless wonders the Dems. have supposedly standing up for us in the House & Senate. Since $ are the lifeblood of politics, I urge others to take the same approach with the Dems. Stop contributing to them & let them know why. If this action costs them the mid term elections, so be it. At least I don't feel totally powerless as I see us being sold out.
 
 
+1 # Firefox11 2013-03-08 16:57
excellent idea; hit them where they will notice, in the pocketbook, and be sure to tell them (Dems) why.
 
 
+34 # reiverpacific 2013-03-06 09:11
Here's another, seldom addressed reason for continuing low employment.
In many states, prospective employees are screened out because the employer checks their CREDIT RATINGS via the huge, corrupt, incompetent, inaccurate and tools-of-the-ba nksters credit bureaus. What the Hell that has to do with employability, honesty, integrity or anything else is beyond me, especially in these depressed times and with a medical non-system that is in itself responsible for the majority of bankruptcies and spreading poverty in the US -the richest and most powerful (if hardly the most civilized) nation in history.
So this in itself is creating a vicious circle of diminished opportunity, low employment and fearful job-seekers who begin to feel condemned even before they start looking.
Interestingly, the states who have passed laws making credit-checks illegal as a condition of employment, are roughly the same who are working on Universal Statewide Health care (thankfully including Oregon where I live).
Read the following and shudder, from Demos and the Huffington Post;
http://www.demos.org/discredited-how-employment-credit-checks-keep-qualified-workers-out-job
It's all related to favor the corporate state.
 
 
+5 # bmolloy124 2013-03-07 04:26
Great point! Credit is how we are now assessed as human beings with "credibility." I could write a book about this (and maybe I will)...I am solvent to the tune of a blessed amount. But, I refused to pay Verizon and AT@T dollars they said I owed after I extricated myself from contracts because they failed to give me the services I'd payed for. When I gave back phones and asked to be terminated, both Co's said I had to pay THEM to terminate..! This is akin to taking back a deficient product to Fred Meyer and being told you not only get no refund, but you have to pay for returning the item! I continue to have "no credit." Luckily, that doesn't matter to me on day to day basis. But others in my same boat w/out funds might be truly "f'd."
 
 
+23 # Fraenkel.1 2013-03-06 09:22
The big corporations are sitting on their money. Since it isn't cycling through the economy the economy will continue to decline, as will the value of the cash these companies are hoarding. If they are really spending the money elsewhere that isn't doing he US any good.
 
 
+38 # Todd Williams 2013-03-06 09:28
How about getting the fuck out of Afghanistan right now instead of next year? Hoiw much will that save? How about pulling out any remaining troops in Iraq?
 
 
+30 # Vardoz 2013-03-06 09:34
They want to make us into a slave wage nation and bring the majority of Americans to their knees as the cost of living soars- This is the big agenda- slave labor to enrich those at the top at the expense of everyone and everything. This agenda does not care about the health, safety or welfare of the 99% or the planet itself. So either do something or perish.

By the way a friend of mine who is a financial manager in a prestigous firm told me yesterday that there is going to be a big correction on the stock market soon. So put your money into safe places like bonds.
 
 
+6 # raclis 2013-03-06 09:55
On the contrary - bonds are not the place to be right now and the smart money is getting out, or is already gone. The market is going to correct and it will be bad, so think about this next.
 
 
+7 # Philothustra 2013-03-06 09:39
The stock mrket may not only be "for the rich," but people who "live off the income of their pensions and investments" should not get
preference over those who work to earn a living. Only a small percentage of Americans can afford to retire on invested capital, sorry. In real-world terms, yes Susan, pensioners are the rich. And BTW, you can't just tax one persons capital gains at one rate and another at a preferential rate.
 
 
+2 # Selwick 2013-03-06 11:30
I agree with you. Some of these rich retirees don't even have a clue how poor the working people are. And then they still want to compete in the local job market because they think they have such invaluable skills. However they are taking the few jobs away from those who have to work for a living.
I repeat what Philothustra says:
Yes, Susan pensioners are rich!
 
 
+22 # Regina 2013-03-06 09:50
As long as the uber-wealthy can make money without making and selling a product to a consumer, and pay a mere 15% tax on the money they don't succeed in off-shoring, the market will soar and the people will sink.
 
 
+17 # giraffee2012 2013-03-06 09:55
The banks now keep my money without giving me any interest unless I "gamble" and they use our money for their own profit, while gambling on the stock market -

So .... if they give the mid/lower class a break -where will they get their bounty to gamble with?

DUH - Republicons have set up the banks over the years and Mr. Public still can't figure out NOT TO KEEP VOTING them in? Oh yeah, maybe they'll pass another several dozen laws against women's rights (or voting rights defining the "right to vote" if you are a minority = as an entitlement) . . .

Bahhhhhh humbug! Call your Congress people DAILY and tell them NO MORE of their stupid voting on anything except JOBS, JOBS, JOBS -- or out they go at their next election. (that is = if you still have the "entitlement" of the right to vote)
 
 
+22 # mainescorpio 2013-03-06 09:57
The last paragraph in Reich's commentary reminded me of a famous Churchil quote;(paraphra sed).."Never before in history, have so few, done so little, to hurt so many". Mainstreat has become a captive if Wall St.
 
 
+24 # sandyclaws 2013-03-06 11:44
Cmon folks! What's with this 15% tax on the rich? The rich obtain their income through one method(capital gains)and the rest of us through wages etc. Why are the low income people taxed at 35% and the rich at 15%? It's time to get these corrupt Republicans out of office. We also need to develop a vaccine for stupid! There are a lot of voters that need that vacination!
 
 
+7 # cmp 2013-03-06 12:21
"We also need to develop a vaccine for stupid! There are a lot of..."

s.c.: I think, that I just busted a rib...
 
 
+3 # Even 2013-03-07 01:09
Schiller famously said: "With stupidity, even the Gods themselves struggle in vain."
 
 
+12 # cmp 2013-03-06 12:13
"The top 200 Corporations in the World control 58% of the World's Wealth. These same Corporations Employ 0.25% of the World's Population."
~David Korten; The Post-Corporate World, 1999~

Can you imagine what this statistic is now, 14 years later?

The greatest myth that's repeated over and over is "productivity gains." If this is true, then why go to Tijuana for $1.68/hr and China for $0.06/hr? Didn't the repeated dogma just tell us that labor is now, obsolete?

Our children, are depending on us to end the Global Corporate Colonialism that reigns over all of our Global Communities..
 
 
+3 # RLF 2013-03-07 07:40
Oh! But haven't you heard? Globalization is irreversible! Just ask the press corps. that stupidly repeat this crap multiple times every day.
 
 
+6 # dkonstruction 2013-03-06 13:17
Of course what Reich never mentions is that is par for the course for capitalism as a whole. From it's very beginnings, capitalism has always tried to maximize profit by keeping its labor costs as low as possible. It was only in response to mass organizing, strikes and other forms of resistance/rebe llion that wages (and benefits for that matter) ever kept up with productivity gains (the vast majority of the profits from which always went to the employer) and cost of living increases. In the absence of organized (or even disorganized) pressure on the employer class (particularly large employers) we should never expect that wages will automatically go up and keep up with inflation etc. It's simply not the way that capital does business.

The same goes for the rate at which workers work hence the recent decision by Yahoo to get rid of employees working from home...this is the same thing that capitalism did when it got rid of the piecework/putti ng out system and created the factory system to replace it. Employers get alot more out of an employee when they can get them all under one roof and directly supervise and manage their work and better control the speed at which we all work.
 
 
+9 # David Starkey - Dallas, TX 2013-03-06 13:19
YOU WANNA STIMULATE THE ECONOMY?
STOP IGNORING 71% OF IT.
Give a $1000 check to every taxpayer.
Then watch the multiplier effect.
I will be cheaper than any other bailout, or stimulus at $200 Billion
 
 
+7 # reiverpacific 2013-03-06 18:59
Quoting David Starkey - Dallas, TX:
YOU WANNA STIMULATE THE ECONOMY?
STOP IGNORING 71% OF IT.
Give a $1000 check to every taxpayer.
Then watch the multiplier effect.
I will be cheaper than any other bailout, or stimulus at $200 Billion

Great: -I'm all for it but it's far too simple for the wise-monkeys and politicos that run this country for the corporate state and disguise their motives in Econo-speak which is then echoed around the country and beyond by it's entrenched, bought and paid for owner-media shills to further confuse the already easily confused "average" American.
Maybe if they turned the economy into a "survival-reali ty" TV show, it would hit home -but too late and too overwhelming in concept I fear!
Your heart is (for me) in the right place tho' and I like the Jim Hightower's (a fellow Texan) simplicity and common sense of it.
I've personally proposed an infrastructure and property return theorem based on the same basic common-sense approach, backed by many facts and figures but so far no reply at either the federal or state level.
Good on ya mate.
 
 
0 # reiverpacific 2013-03-06 20:15
Just in From the BBC;http://www. bbc.co.uk/news/ magazine-216367 23
 
 
+8 # Gord84 2013-03-06 13:38
As Voltaire said "The comfort of the rich depends on the abundance of the poor."
 
 
+8 # Smokey 2013-03-06 14:29
America's political move to the right is amazing.

In 1912, there were socialist candidates who delivered a good fight in state and local election campaigns. There was even a socialist movement at the national level. Nowadays, even the use of the word "socialist" is taboo among "liberals." (Watch the "liberals" try to distance themselves from Hugo Chavez' political legacy.)

"Class warfare" is seldom mentioned in today's political discussions. So, it's difficult to explain Reich, even among some of the "liberal" groups.

If you try to talk about hunger in America, the "liberals" start to talk about Whole Foods. If you say that people are freezing in their homes, you get a lecture about global warming.

Something like LBJ's "War on Poverty" looks like radicalism. The moderates have been kicked out of the Republican Party. And the "liberals" among the Democrats have drifted to positions that were once identified with people like
Nelson Rockefeller.
 
 
+6 # Rick Levy 2013-03-06 19:34
"It was only in response to mass organizing, strikes and other forms of resistance/rebe llion that wages (and benefits for that matter) ever kept up with productivity gains (the vast majority of the profits from which always went to the employer) and cost of living increases. In the absence of organized (or even disorganized) pressure on the employer class (particularly large employers) we should never expect that wages will automatically go up and keep up with inflation etc. It's simply not the way that capital does business."

As I've said before, the contemporary Americans as a whole don't demonstrate for their labor rights, unlike their 1930's forbears and European counterparts. Standing up for labor rights this way is still considered subversive which is probably a holdover from the 1960's when it was mainly the radicals who took it to the streets and failed to connect with the labor unions and the working people as a whole. .
 
 
+2 # Smokey 2013-03-07 09:35
[quote name="Rick Levy"]
Standing up for labor rights this is still considered subversive, which is probably a holdover from the 1960's when it was mainly the radicals who took it to the streets and failed to connect with the labor unions and the working people as a whole.

Very true. The New Left tried to build a base in "the youth movement." Which usually meant "college kids."

The baby boomers who ran around with Abby and Jerry at the 1968 Democratic convention in Chicago are now getting ready for Medicare. This was supposed to be "the greening of America" generation? (What happened?)

John Kerry and Hillary Clinton were once symbols of "the new radicalism." Bob Dylan was the great poet of protest. (See if you can find some film clips that show these aging hipsters in their young years. Enjoy a few chuckles.)

In some ways, the Occupy movement has been an attempt to go back to the days of the New Left. Lots of emphasis on campus protests and "young voices."

Oh, well.... Youth fades away.... You get your diploma and (if you're lucky) you get minimum wage on the day shift... Stop laughing at the working class and the labor unions. You need 'em if you want to rise above poverty.

Boomers? Join the Gray Panthers.
 
 
0 # A Woman 2013-03-07 15:10
This country is no longer a Republic, no longer a Democracy, It is a Plutocracy..run by the wealthy in Big Business. Everything is "their way" or "the highway"...I am too old to see it, but I can see a revolution coming and it will be the bloodiest this nation has ever seen.
 
 
0 # thethinker 2013-03-07 17:47
I agree with most of what RReich has said here. However, he fails to mention that mass immigration of 1.2 million people per year is another capitalist tool to keep unemployment high and wages low. Why else would the Chamber of Commerce and other business interests support high immigration of both low and high skilled workers? To keep wages down. This seems to be a blind spot with Robert Reich who has written about increasing immigration? What?
 
 
0 # cybervigilante 2013-03-09 13:11
Except that half our top scientists are immigrants since our school system has become so expensive and rotten. Withouth them we'd lose the little competitive edge that we still retain.

As for unskilled, here in AZ the Mexicans mostly do jobs white people couldn't hack and wouldn't do - like gardening in 115 degree weather all day long, for bad treatment and illegal wages.

And of course, there is the usual Republican hypocrisy. They decry illegal immigrants for the media, but the people who hire them are largely wealthy Republicans. Our rotten sheriff Arpaio goes around with "posses" harassing poor immigrants but the bribe sob has Yet to arrest a wealthy republican for hiring them by the hundreds.
 
 
0 # cybervigilante 2013-03-09 13:06
Let's face it - the DEADocratic Party of today is to the Right of Richard Nixon. And that's Not an exagerration. Nixon created OSHA, the EPA, and even tried for a Guaranteed Annual Wage.

Today's spineless Democrats would flee in fear from such ideas lest Rush Limbaugh call them names. Obama has given up on punishing banksters and Reid has always been a pocket Republican. There is no more Democratic Party. It's a joke.
 

THE NEW STREAMLINED RSN LOGIN PROCESS: Register once, then login and you are ready to comment. All you need is a Username and a Password of your choosing and you are free to comment whenever you like! Welcome to the Reader Supported News community.

RSNRSN