John McCain on the Economy:
Accidentally in Touch
by Chris Wissmann
Republican presidential candidate and Arizona Senator John McCain has a largely undeserved reputation for "straight talk": not telling voters what they want to hear, but delivering inconvenient or uncomfortable truths that citizens must receive in order to face down difficult national problems.
One time where McCain's reputation actually meshed with reality came at a Republican debate in January. Discussing an economy then heading toward recession, McCain said, "You could argue that Americans overall are better off, because we have had a pretty good prosperous time, with low unemployment and low inflation and a lot of good things have happened."
Liberal pundits crushed McCain as out of touch, but took McCain's comments out of context (he went on to say "Things are tough right now. Americans are uncertain about this housing crisis. Americans are uncertain about the economy, as we see the stock market bounce up and down.... We've got to address the subprime-housing problem"). In any event, liberals who used the opportunity to take shots at McCain largely missed the point.
It is possible to argue that Americans are better off now than, say, nine or ten years ago, but that's only true for the wealthiest and most privileged Americans. And the rich are in fact doing so well that on average Americans probably are better off. Just look at a few figures that have come out since McCain's statement.
In June, PBS journalist Bill Moyers noted that a recent study in Rupert Murdoch's Wall Street Journal "found that the top .01 percent or fourteen-thousand American families hold 22.2 percent of wealth. The bottom ninety percent, or over 133 million families, just four percent of the nation's wealth."
A July 15 PBS Nightly Business Report online headline drove home the point: "News of Layoffs Shift GM's Stock in the Right Direction."
General Motors fell on hard times because company brass stupidly thought massive sales of their gas-guzzling SUVs would indefinitely continue. Just as in the 1970s, the company wasn't prepared for skyrocketing inflation in gasoline prices with a line of quality, affordable, fuel-efficient compact cars. No problem: General Motors simply threw thousands of their employees into the streets, and the company reaped a little windfall.
It's not a universal truth that investors always make money when companies cut jobs, especially when they lay off employees necessary to basic operations, or when they are already doomed. (General Motors stock has since taken a beating.) But when a company sheds thousands of employees and pockets the payroll savings, there's more money in the company's coffers, so stock prices often rise as a result. The more stock a person owns, of course, the more money that investor makes-- and the people with the most stock are rich. Seldom does the media note the human cost of such profitable stock-price inflation strategies.
Other profits are similarly obscene. According to a July 31 CNN online article, "Exxon Mobil once again reported the largest quarterly profit in U.S. history Thursday, posting net income of $11.68 billion on revenue of $138 billion in the second quarter. That profit works out to $1,485.55 a second."
Poor Exxon. The CNN article goes on to describe the profits of Exxon and other oil companies as "relatively flat"-- Exxon barely broke its own quarterly profitability record, set last year, of $11.66 billion. And it didn't make its expected profit of $12.1 billion, so Exxon stock actually fell by two percent the day it announced its record-breaking profits. But during the last year, when in Illinois average gas prices increased from about $3.15 to $3.97 a gallon or more, Exxon's stock rose from $77.55 per share to $96.12 per share. Last year it made a record $40.61 billion in profits, beating the previous annual profit record of $39.5 billion that Exxon set in 2006. That was twice what General Electric, 2007's second most-profitable company, made.
Exxon is not a company simply passing along the escalated price of oil to its customers in the form of an increased cost of gasoline. Exxon Mobil is price-gouging (and this after the Supreme Court helped the corporation weasel out of paying the full cost of ruining the coast of Prince William Sound, Alaska, in the devastating 1989 Exxon Valdez oil-tanker accident).
Simply put, this is all gluttonously swallowed blood money made from human misery. It's the rich (for whom McCain wants to make the Bush tax cuts permanent) feeding on the poor.
And it's happening at rates not seen since the Reagan Recession. Unemployment in the United States is bobbling around 5.7 percent (up from 4.9 percent in January), while Illinois's current seasonally adjusted unemployment rate is even higher, at 7.3 percent. Carbondale's June unemployment figure of 5.8 percent is up from a six-year low of 3.7 percent in 2006.
But that doesn't even come close to telling the whole story. Just to cite one example, there are the underemployed: people who are working part-time jobs because the companies for which they work (most notoriously Wal-Mart, but most fast-food and big-box stores are guilty of this) discourage full-time hours so as to avoid paying overtime or retirement and health benefits.
To illustrate this point, look at Carbondale. In 2000, the city's unemployment rate was a very low 4.4 percent-- and the Census still estimated that 33.8 percent of the city's residents, a large percentage of whom had jobs, still lived in poverty. (Unfortunately, this writer was unable to find more current U.S. Census Bureau data for Carbondale.)
Underemployment is a rapidly growing national problem. As the New York Times reported on July 31, "The number of Americans who have seen their full-time jobs chopped to part time because of weak business has swelled to more than 3.7 million-- the largest figure since the government began tracking such data more than half a century ago."
An honest profit made by a company that produces a good product at an equitable price in a competitive market while fairly compensating and treating its employees is one thing. And of course companies must behave responsibly when they fall on hard times. Sometimes layoffs are necessary for the good of a corporation and the long-term job prospects of its remaining employees. But a notorious trend indicates that not all employees share in the sacrifices. In June the USA Today reported that "the ten best-paid CEOs made more than half a billion dollars last year. Yet half the members of this stratospheric club were leading companies whose profits shrank dramatically."
In 2007, the paper goes on to note, General Motors CEO Rick Wagoner, whose company lost $39 billion in 2007, received a sixty-four percent pay increase. He now makes $15.7 million. And it's all blood money, squeezed from the lives of GM employees: According to the July 30 Detroit Free Press, GM announced plans to cut twenty percent of salary costs by the end of 2009, fifteen percent of it (totaling five-thousand employees) by November 1.
These, of course, are not the points that McCain meant to make, or that his platform will even attempt to seriously address. But however inadvertently, for once McCain spoke straight.
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