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  • Dr. Julianne Malveaux

ECONOMIC GROWTH IS UP – WILL IT TRICKLE DOWN?


Last quarter’s rate of economic growth is good news, especially after the economy stalled, losing momentum in the first quarter of 2014. Many said it was an aberration, caused by bad weather, especially since economic growth in the last half of 2013 was more than three percent. On the surface the economy is, indeed, recovering, not only because of growth rates, but because other indicators (excepting unemployment) are positive signs.

Of course, consumer spending explains two-thirds of economic growth. If people don’t put their money into the economy, buying durable goods like cars and refrigerators and non-durable goods like clothing and food the economy stalls. Yet while the economy is growing overall, the 99 percent have captured most of the growth. Wages have not yet risen, and according to one report, job creation dropped from 281,000 in June to 218,000 the month before. As of this writing, unemployment data has not been released. But here’s what we do know – the Dow Jones industrial average is under 10,000 as of 2009; it has grown by 60 percent in 2014.

In contrast the official unemployment rate in 2009 dropped by a third, indicating that those at the top have gained more in recovery than those at the bottom. How can the stock market expand so rapidly while the bottom 99 percent are stuck? Low wages mean high profits. Some of the stock market gains that have been realized are a function of wages that have not increased. Indeed, some corporations have chosen to move their headquarters away from the United States.

Fortune Magazine’s Alan Sloan reports that Ireland, Bermuda and Switzerland are the tax havens for the top ten corporate tax - tax avoiders. While these companies hit the road to avoid taxes, they have no hesitation in enjoying the benefits that come from tax protection, and regulation.

When these corporations underpay their workers, who supplement their inadequate wages with government-funded income subsidies (like food and housing assistance). When these countries need securities protection, they don’t hesitate to use the SEC (securities and exchange commission) though the United States government pays for that regulatory agency. While these corporations operate like foreign corporations for tax purposes, then expect the services of the United States government for their protection.

Meanwhile, the leaders of these companies are some of those who argue for lower estate taxes, and lower taxes for the wealthy. Give me a break! These corporations are ripping off United States taxpayers in two ways. First, they don’t pay taxes on the benefits they receive. Secondly, their advocacy to cut personal taxes is yet another attack on the tax base.

Those in the bottom 80 percent gain little from the Securities Exchange Commission and other financial regulatory agencies. They gain little from the regulatory agencies that force corporations to play nice. They’ll pay for these regulatory agencies because they are part of the budget, part of the tax bill.

Can we do something about this? Either those corporate deserters should be heavily taxed before they go (or their products should be taxed), giving their competitors an advantage because of lower prices. Similarly, the companies who choose to stay in the United States ought to gain a tax benefit for their loyalty. The tax system can be used to level the playing field. Some legislators get it, but too many use the free market excuse to say their hands are tied.

Legislation that prevents corporate rip-offs makes sense, but it is likely to be swallowed by the legislative gridlock that is a permanent feature of this Congress. As long as runaway corporations push their tax burden on the rest of us, economic recovery is rushing up instead of trickling down.


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© 2017 by Dr. J. Malveaux