Turns out a rising tide doesn’t lift all boats
From Robert Reich’s blog:
“Today 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.”
The maxim, “A rising tide lifts all boats,” often attributed to President John F. Kennedy (although it turns out he didn’t coin it, see below) is supposed to suggest that a good economy helps everyone in it.
When lefties rail against the ever-increasing concentration of wealth in the top 1%, the right tends to rely on some variation of the “rising tide” logic. It’s wrong for the poor to begrudge the rich their riches because they are the “job creators” whose job-creating is the means by which the rising tide help the unrich rise.
It’s really a logical dodge. The left isn’t saying that there should be no rich people (although that seems to be what the rich hear). They are talking about the increasing inequality of wealth distribution. The right seldom responds on point and seems to have nothing to say about concentration/maldistribution of wealth. It would be a good thing if the smartest and most intellectually honest righties would directly address the concentration issue. Is there no amount of concentration of wealth at the top that would worry them?
As Reich’s data suggests, the rising tide metaphor loses its power when the water is rising under only one percent of the boats.
Reich, an economist and former labor secretary, suggests four factors that have helped separate the fortunes of the few from the many:
“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%.”
By the way, if you were intrigued by the JFK aside above, when I went to write this post I looked up the origin of the “rising tide, all boats” phrase.
“In his memoir Counselor: A Life At The Edge Of History, Kennedy’s speechwriter Ted Sorensen reveals that the phrase was not one of his or the president’s own fashioning. It was in his first year working for Kennedy (during JFK’s tenure in the Senate), when Mr. Sorensen was trying to tackle economic problems in New England, that he happened upon the phrase. He writes that he noticed that ‘the regional chamber of commerce, the New England Council, had a thoughtful slogan: ‘A rising tide lifts all the boats.’’ From then on, JFK would borrow the slogan often. Sorensen highlights this as an example of quotes mistakenly attributed to President Kennedy.”