No one knows for sure what impact the Federal Reserve just-announced interest rate hike from basically zero to one-quarter percent will have on the economy.
But we know one thing for certain: Every mainstream economist considers growth the eternal panacea for whatever ails us.
That consensus begs a rather basic question: Growth for who? Are we working for the economy, or is the economy working for us?
Our contemporary economy is growing, but it’s hardly working for us all.
This growth, to be sure, has only averaged about 2 percent annually from 2010 to 2014, well below post-World War II averages. But the U.S. economy did grow over these years.
In fact, the economy grew to the point that the New York financial sector in 2014 had the capacity to pay out an average bonus of $173,000, reports the New York Comptroller’s Office. This average bonus in the financial sector came in a year that saw 66 percent of Americans take home less than $42,000.
Our economy also grew to the point that left U.S. corporations with profits at an all-time high, according to the Center for American Progress. To add insult to injury, many of these corporations routinely shift their profits overseas to avoid paying U.S. taxes, denying the U.S. Treasury — and U.S. taxpayers — an estimated $100 billion annually.
One more set of stats: Our economy has grown to the point that the 100 largest corporate chief executive retirement accounts now hold a combined $4.9 billion, a sum about equal, the Institute for Policy Studies notes, to the retirement savings of 41 percent of American families.
On average, each of these 100 CEOs has enough retirement assets to generate a monthly retirement check of more than $277,000, according to Boston College’s Center for Retirement Research.
America’s corporations disingenuously whine all the time about our “slow-growth economy.” But if companies really wanted growth, they would stop spending hundreds of millions buying back their stock, a move that benefits their deepest-pocket shareholders, and shelling out obscene salaries and benefits to their CEOs. They would instead start paying their employees reasonable wages and decent benefits.
Nearly 70 percent of our economy, remember, is fueled by consumer consumption. We don’t see much fueling when consumers don’t have enough income to consume!
About 55 percent of Americans, a Pew poll found earlier this year, say they’re falling behind, with incomes not keeping up with the cost of living. Is it any wonder that, as the Public Religion Research Institute’s 2015 American Values Survey details, seven of every ten Americans believe the country still remains in recession?
(For those interested, the Great Recession officially ended in June 2009, according to the National Bureau of Economic Research.)
The Fed rationale for raising its interest rate holds that the economy has moved well into recovery and is nearing “full employment.” Try telling that to the more than 47 million Americans who rely on food stamps to put food on the family table.
If we want a recovery that benefits all Americans, we need a new social contract between employers and employees and tax reform that levels the playing field.
We need a government that invests in its people and their future through increased funding for education, job training, affordable housing, research, transportation, and more.
We need to return to an economy where if you work hard, you can get ahead and share in whatever prosperity you help create. Ninety cents of every dollar should not be going to the wealthiest among us.
In short, growth alone won’t do it. An intelligent, inclusive economy will.
Larry Checco is the president of Checco Communications and a columnist for Accountability Central, where he writes on economics, politics, and income inequality. He holds a degree in Economics from Syracuse University and an MA in Journalism and Public Affairs from American University.