In July, I wrote an op-ed for The Courier-Journal about the tentative economic surge here in Kentucky — that is, the 10,000 jobs and $6.8 billion in capital investments that have been pledged so far by Amazon, Braidy, Toyota and other private-sector employers since the beginning of this year.
I rattled off a long list of questions about these jobs: For example, “Will the employers distribute income fairly? Will the owners and top managers give raises when possible, or hoard profits for themselves? Will mid-level workers receive competitive wages, good health benefits and quality pension plans?”
To me these are all just common sense questions. But to Carl W. Hafele, an investment manager and professor of economics at Bellarmine University, they were silly complaints. Here’s what he wrote for The CJ in response:
“Simon T. Meiners’ article questioning the success of Gov. Bevin and the magnificent surge in companies locating here is an incredibly sad way of looking at the American way of capitalism.
Amazon, Toyota and Braidy Industries Inc. (I know [Braidy CEO] Craig Bouchard personally) are bringing thousands of attractive jobs to our state, and Meiners is complaining:
Will the capitalists run away with all the money? Will they be paid a good wage? Will they get a great pension? Will they be union?
Meiners and other skeptics about free market capitalism need only to look at our own state if you think government and regulation work so well. Or educate oneself on the sorry state of so many government-run programs — can you say Social Security, Medicaid, SNAP and more?
Please stop your skepticism, get off the government handouts, and simply enjoy the opportunity to live like an old fashion American — go to work and say thank you.”
First of all, Mr. Hafele, what kind of economics professor discourages others from asking questions about economic development? Whenever and wherever a lot of capital gets invested, all of us, journalists and citizens alike, should ask the tough questions about it — about who will benefit from it, and who won’t, and about how all the money will get divvied out.
After all, there’s a reason I’m so skeptical of the upsides of growth: Since the 1970s, the rich have gobbled up nearly all of the income growth nationwide — both for pretax and post-tax income.
According to a new study by economists Thomas Piketty, Emmanuel Saez and Gabriel Zucman, the United States has enjoyed steady economic growth overall for the past four decades — but it’s all been pooling at the top of the income ladder. From 1980 to 2014, as the U.S. economy grew by 1.4 percent annually, the bottom 87 percent of adults had a lower rate of income growth themselves, the study says. Furthermore, judging by the rates of growth in prior generations, it says that “even percentiles 88 to 98 experienced unimpressive income gains.” So really, the top 2 percent enjoyed all of the significant growth.
That should tell you why I’m skeptical.
That’s why, when Gov. Matt Bevin announced an influx of jobs and capital this spring, my first thought wasn’t, “How magnificent!” It was, “How will this affect inequality? For whom is this a good thing?”
That’s why I posed all those fussy questions about the quality of these new jobs, including: Will they help close the inequality gap? Will they make it worse? Will the folks who fill them reap the benefits of economic growth, or will their wages keep growing at a slower pace than the cost of living?
Hafele dismisses these questions as trivial “complaints.” Then he himself complains about the “sorry state” of America’s social safety net. If by “sorry state,” he means that it’s horribly underfunded and inadequate, then I agree. According to the Piketty study, all of America’s “tax and transfer” programs put together (Medicare, Medicaid, EITC, SSI, food stamps, etc.) have barely moved the needle on income inequality.
Of course, that’s not because those programs don’t work: it’s because the rich are commandeering all of the income growth, leaving the rest of us — including folks on public assistance — dawdling in their wake.
For example, from 1980 to 2014, the average adult in the bottom 50 percent of earners saw her pre-tax income flatline and her post-tax income rise by 21 percent. (Note: that still pales in comparison to the 61 percent overall growth rate of the economy.) At the same time, the average adult in the top 1 percent saw his pretax income rise by 204 percent, and his post-tax income spike by a whopping 194 percent.
In other words, the rich have only had to forfeit a tiny fraction of their ballooning personal fortunes to the IRS; the poor, meanwhile, have witnessed just a modest uptick in their post-tax incomes. But guess what? That uptick has been offset almost completely by the skyrocketing costs of housing, education, and healthcare. So really, it’s a wash: The bottom half of Americans are no better off than they were back in 1980.
How do we [the non-rich] stop this madness?
Well, we can lobby our state and federal governments to pressure private companies into paying their workers more; to fine them for having deeply unequal payscales; to hike the capital gains tax and marginal income tax rates; to neutralize the threat of interstate capital flight by enacting strong wage protections and labor laws at the federal level; to overturn Citizens United; or to reign in Big Business by any other means necessary.
Or, we can do nothing. We can let our state governments continue with their toxic “race to the bottom,” competing with each other for business by dismantling worker protections and courting zillionaire investors. Here in Kentucky, we can all just bow our heads uncritically and say, “Thank you, O Benevolent Job Creators! Thank you for blessing us with your cargo hubs and aluminum mills! Please accept this basket of multimillion dollar tax breaks as a gesture of our gratitude!”
In other words, we can “simply enjoy the opportunity to live like an old-fashioned American — go to work and say thank you.”
No thanks. •
Simon Meiners has previously written for The Courier-Journal and The New Republic.