Page 2 of
4 SUPERCAPITALISM, SUPER
IMPERIALISM PART 2:
Deregulation: Global war on
labor By Henry C K Liu
worker benefits and job security.
The new contract allowed GM to shift to a new
independent trust called Voluntary Employees
Beneficiary Association (VEBA) $51 billion in
liabilities for union retiree health care by
contributing to it only $35 billion of tax
deductible income.
The push by GM to
unload its "legacy cost" is aimed at matching
lower Japanese worker benefits. Both GM and
Japanese wage are
now
around $25 per hour. The gap in total labor cost
between Detroit and Japan is in benefits, with $75
an hour for GM as compared to Japanese producers
of $55. A pro-labor solution would be to force the
Japanese car makers to raise its benefit cost to
$75 an hour rather than to lower GM worker benefit
to $55. A pro-labor trade policy would impose
countervailing tariffs to offset the difference
and level the playing field between GM workers and
Japanese auto workers. But neo-liberal free trade
is designed to push global wages down, not up.
Income shift from workers to corporate
profit Given the magnitude of these income
shifts away from workers, it is not surprising
that corporate profits have increased at
double-digit rates every quarter for the last
three and a half years to more than $1.4 trillion;
or that CEOs and the top five managers of US
corporations have increased their total share of
national income from around $50 billion a year in
2001 to more than $140 billion a year in just five
years; or that the wealthiest 1% (1.1 million)
households have seen their share of total national
income reported grow to levels of 20-22% of total
national income, levels not seen since the gilded
age of the 1920s.
National income that
passes through the conduit of the corporation is
disbursed to shareholders, senior managers, and
CEOs in the form of dividends, interest payment,
capital gains, and various forms of deferred and
total compensation. What is not disbursed may be
accumulated and expended on corporate expansion
(ie, invested) or held by the corporation as
retained profits or used for share buy-backs to
lift share prices. Official figures for retained
profits by US corporations are now at the level of
more than $500 billion a year, about $200 billion
a year higher than long term historical averages.
And those figures only represent retained
profits that are reported. Largely unreported are
additional profits by multinational corporations
that get transferred by various accounting means
to their offshore subsidiaries and affiliates and
then held there as un-repatriated profits for
years to avoid US taxes. The precise totals for
such un-repatriated profits are not known, either
by the IRS or the US government. Morgan Stanley in
2005 reported that the total in offshore
un-repatriated profits held by US corporations
amounted to about $700 billion.
A third
and even more opaque category of profits consists
essentially of unknown profits from domestic US or
foreign operations that are diverted to offshore
tax shelters and never reported to the IRS. The
latest unofficial indication of the level of
income held today in offshore tax shelters is
about $7 trillion, up from $250 billion in the
mid-1980s. At least $4 trillion of that $7
trillion is held by US corporations and wealthy
households, the mix between corporations and
individuals remaining unknown. An annual
additional net flow of income from the US into
such shelters is easily around $200 billion a
year, not counting interest earned annually on the
$4 trillion already there.
This income
shift to the wealthy has been a result of
government policies providing record tax cuts on
capital (dividends, interest, capital gains,
estate, gift tax, etc), extending from Reagan's
then record $752 billion tax cut in the early
1980s which launched the nation towards the
largest peacetime deficit up to that time, to
George W Bush's sequence of annual tax cuts from
2001 to 2006. During George W Bush's first term
alone, more than $4 trillion in tax cuts were
passed. Approximately 80% of these cuts are
accruing to the wealthiest 20% households and
largely in turn to the highest income groups
within that 20%. Should the Bush tax cuts be made
permanent, the amount will grow to $11 trillion,
again with the highest income groups receiving the
lion's share of the cuts and income. Additional
corporate tax cuts amounting to more than $1
trillion were also passed under Bush and have
contributed significantly to the bulge in
corporate retained profits.
Who widened
inequality? Reich continues in his Wall
Street Journal piece: "Yet the philosophical
debate [on inequality] is coming up all the time
these days, and it helps explain the new economic
populism. Consider, for example, the Bush cuts.
They've mainly benefited the top fifth of
taxpayers. Supply-siders argue the cuts have
generated enough extra revenues to pay for
themselves so they haven't enlarged the budget
deficit. That's debatable but let's make the
heroic assumption the supply-siders are correct
and no one has been made worse off. Yet even so,
most Americans have not benefited - nothing has
trickled down. Real median wages have barely
budged since they were enacted. So the underlying
question is whether they're justified by the fact
that rich Americans have gained from them while no
one has lost ground. The answer is no. They've
widened inequality."
Reich reminds one of
the famous fable by Mencius (372-289 BC) in which
those who retreated 50 paces from the battle line
turned around and laughed at those who retreated
100 paces for being cowards. The Bush
administration has not been the only one adding
inequality to the US economy. The philosophical
issue of inequality has only come up "these days"
because neo-liberals thought it was not a
worthwhile issue as long as all incomes are rising
even though some may rise much faster than others.
Bill Moyers, the true
liberal Bill Moyers, key participant in
president Lyndon Johnson's "Great Society" that
was tragically aborted by the Vietnam War, in a
June 3, 2004 speech titled "The Fight of Our
Lives", given at the Inequality Matters Forum at
New York University, said:
Astonishing as it seems, no one in
official Washington seems embarrassed by the
fact that the gap between rich and poor is
greater than it's been in 50 years - the worst
inequality among all Western nations. Or that we
are experiencing a shift in poverty. For years
it was said those people down there at the
bottom were single, jobless mothers. For years
they were told [that] work, education, and
marriage is how they move up the economic
ladder. But poverty is showing up where we
didn't expect it -among families that include
two parents, a worker and a head of the
household with more than a high school
education. These are the newly poor. Our
political, financial and business class expects
them to climb out of poverty on an escalator
moving downward.
The inequality that
Moyers rightly protests about did not start with
the second Bush administration. It started with
the Carter
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