As the economy is recovering, it is doing so extremely well for the well-off. According to GOP economic rules, this should allow business to create more jobs. Companies have more cash than ever that would allow them to hire more people, or pay them better wages (this is of course not true for many small businesses, but according to Milton Freedman, those businesses are eliminated by market forces; no tears please). But real jobs do not come from the charitable character of millionaires, but from consumer demand, which is low because the majority of consumers have low paying jobs and part-time work. Wages have not increased in more than two decades (adjusted after inflation) and as a result, consumers cannot spend what they do not have. Today’s split-economy makes it abundantly clear that the job creators are really after profits (that is their ‘job’), not sharing their wealth with their employees, or with their shareholders, cutting hours to not have to offer health care benefits, not paying overtime, demanding on-call duty for part-timers, fighting minimum wage increases, saving taxes by inversions with foreign corporations, or becoming real estate ‘companies’. Tax loop holes galore.
As explained in a previous column, economies are like living organisms. Money has to move through the system like blood has to move through the body. It is economic activity, not cash savings, that make for a healthy economy. That is why high tax rates used by governments to spend on infrastructure, public service and research and innovation has the same beneficial growth effect as companies paying their employees higher salaries which they will spend on goods and services. Money is not something to own, it is something to use. That is why the One Percent spending money on yachts benefits the public, since producing and servicing these objects moves money through a local economy. Building bridges and high speed rail tracks creates jobs as is vividly illustrated buy the economic bonanza in the Dakotas, where fracking has created a rat tail of economic benefits attracting thousands of people to well paying job, followed by the service industry and increased public service investments. Once the gold rush ends, as everyone knows, downward trends are inevitable. What is not inevitable, but often seems so anyway, is our unpreparedness to these economic cycles.