NEW YORK (TheStreet) -- Income inequality has been growing since the 1970s, but President Obama's economic policies are making it worse and much faster than Presidents Bush or Clinton.
Globalization is driving the sinking fortunes of many ordinary Americans.
Prior to World War II, the U.S. economy was largely isolated. It traded with the world much less than rivals like Germany, labor was scarcer and wages were higher for ordinary workers than just about anyplace else.
The New Deal strengthened unions and the post-war growth of manufacturing created a thriving middle class. Competition for workers tended to raise wages in service activities too. Subsequently, the United States championed freer trade through the WTO. Cheaper ocean freight, then jet travel and now the Internet blurred boundaries between national markets. Combined with the rise of Japan and China, those severely injured U.S. electronics, auto and other manufacturing, and are now eroding employment in many professional services. An open global economy created broad opportunities for college educated Americans with sophisticated skills in advanced technology, finance and the creative arts -- like film making. First National City Bank, a dominant player in New York State, became Citigroup, a dominant force in global finance. All of this decimated unions and lowered wages for workers with only a high school education or soft college degree, while enriching the relatively few in engineering, finance or other highly technical areas. The top 1% now earn nearly one-fifth of the country's household income, and the top 10% more than half. That's the most since 1928, and Obama's policies have made things worse -- faster. In a globalized economy, America has to play its strengths, but during the Obama recovery the international trade deficit has nearly doubled. Bans on offshore drilling and in parts of Alaska require expensive oil imports, and send purchasing power and high paying jobs to the Middle East and Russia. The flood of manufacturers from China keeps growing, thanks to an undervalued yuan and other subsidies the administration refuses to address. Dodd-Frank bank reforms have not stopped reckless and unethical behavior on Wall Street. Witness JPMorgan's London Whale and how often that venerable institution and Goldman Sachs are dragged into court these days.
Yet, new regulations have imposed burdensome costs on smaller banks, forcing many to sell out to the Wall Street casinos and permitting the latter to grasp control of more than 50% of U.S. bank deposits. The resulting downward pressure on CD rates deprives many older Americans of retirement income, while permitting the barons of Manhattan to continue receiving multi-million dollar bonuses. Obama Care is forcing businesses to divide full-time jobs for ordinary workers into part-time positions to avoid expensive health insurance mandates, and those jobs pay less.
The administration's weak positions on enforcement against illegal immigration, and undiscerning application of visa policies for well-educated applicants drive down wages for laborers, skilled craftsmen and many middle class professionals.
Higher taxes on top income earners have hit small businesses the hardest. Financiers, high tech entrepreneurs and movie producers can pass off their salaries as capital gains through loopholes in the tax code. The president rails against that opportunity to enjoy much lower rates than the rest of us, but has done little to fix it.
Meanwhile, small businesses paying marginal rates as high as 60% in states with liberal governors like New York, California or Maryland don't invest and create jobs. During the Obama recovery, the top 1% has captured 95% of the income gains -- almost double the average for the Clinton and Bush recoveries. Obama tells Americans he's for the middle class. The facts tell another story. The president's policies are enriching the same folks that support his campaigns -- the rich liberals on Wall Street, in Silicon Valley and in Hollywood. Follow @PMorici1 This article was written by an independent contributor, separate from TheStreet's regular news coverage.
Professor Peter Morici, of the Robert H. Smith School of Business at the University of Maryland, is a recognized expert on economic policy and international economics. Prior to joining the university, he served as director of the Office of Economics at the U.S. International Trade Commission. He is the author of 18 books and monographs and has published widely in leading public policy and business journals, including the Harvard Business Review and Foreign Policy. Morici has lectured and offered executive programs at more than 100 institutions, including Columbia University, the Harvard Business School and Oxford University. His views are frequently featured on CNN, CBS, BBC, FOX, ABC, CNBC, NPR, NPB and national broadcast networks around the world.
No comments:
Post a Comment