Class Warfare

Class warfare is commonly used as a rebuttal when economic reforms that benefit the working poor and middle class are proposed. The term is launched as an attack at those who believe in a more equitable distribution of wealth. It's laughable to think that class warfare hasn't been occurring for over 30 years. The part that's not funny is that the war was over a long time ago and it was not won by the lower end of the income spectrum. If you need a visual representation depicting the evaporation of middle class income and in turn their social mobility, then look no further than the productivity vs. compensation of the American worker in the chart below.





This doesn't include the offshoring of jobs in the name of profit, reduction in retirement benefits, and increasing costs of basic survival such as health-care or housing. Yes, there are those who have fared exceptionally well under this system. However, many Americans can tell an economic story similar to the one pictured above. Americans find it troubling that trade deals, arms deals, or deals to cut taxes for the wealthy are made with minimum opposition in congress, while legislation that may benefit the lives of the working poor is stalled or not introduced at all. 


Americans have been working longer, harder, and under more general stress due to inadequate social security for workers who may not qualify as being below the poverty line but also find themselves worrying about making ends meet. Since 1979 the only thing that has trickled down is greater inequality. The actual change in income for American households looks like this chart below.



Whether you're a coal miner, service worker, or working in almost any other profession, you're probably completely fed up with the fact that your life is full of anticipation, anxiety, and pinching pennies while others may never experience the existential dread that comes with economic insecurity. 


This is not to say that everyone is asking for a mansion with a Ferrari in the driveway, but instead simply looking to receive a fair distribution of the wealth that they have helped create. Isn't that what hard work in America is supposed to reward? 


The problem is that wages are viewed by corporations as a cost of doing business. Any smart business model will keep costs to a minimum. The result of this practice is that hard working people in America today are unable to achieve the American dream. 


At the individual level this may make for a more profitable company with a higher stock price and happier shareholders. But as a whole this practice has dried up the liquidity of American consumers. Recent studies indicate 49% of America is living paycheck to paycheck. These are hard working Americans upholding their end of the social contract. 


Why is it important to put money in the hands of lower income earners and not stash it away for the executive class or shareholders?


Because we also know the velocity of money is faster in the hands of individuals with lower incomes. The velocity of money refers to the speed at which money exchanges hands in the economy. It only makes sense that people with more needs would spend their money at higher rates. This is good for the economy as it's exactly what we want consumers to do. The current velocity of money in this country can be viewed as being the lowest ever in recorded history. Even lower than the Great Depression depending on how you want to look at it.





If you prefer to use a smaller percentage of money supply known as M1 then the chart still shows a disturbing drop in the velocity of money since 2007.





The need to pay workers higher wages goes beyond moral beliefs. It even goes beyond improving the dignity of workers. It supports the basic belief that in a free market economy there is a flow of money changing hands at a preferable rate. We need to support policies that incentivizes corporations to raise pay.


It's not as if corporations are struggling to make a profit. Here is an overlay of corporate profits and worker pay since 1970.



This culture of maximizing profits at the expense of economic activity permeates business and society. Some of these same corporations that do not increase wages in a meaningful way have managed to stockpile $2.6 Trillion in offshore accounts


That is a lot of money being kept on the sidelines of the U.S. economy. It would clearly be in the best interest of workers and the economy to invest it back home. Why hasn't this happened? Because corporations do not want to pay income tax on money earned overseas. They are waiting for a tax holiday similar to the one in 2004 where corporations were able to pay only a 5.25% tax on repatriated cash. 


The effect of this did not have it's intended goal as corporations did not use the money to hire workers or increase wages. Instead they used the cash to perform accounting tricks to boost their stock values.


This is just the tip of the class warfare iceberg. There is a war and it's a very unpatriotic one combining a disdain for worker pay raises with a disdain for income tax. 


The money is there to be divided in a number of more equitable ways for working Americans. 


70% of Americans have less than $1,000 in savings and 50% of workers make less than $30,000 a year.


There is a top down assault on the American middle class in this great nation. 


Government gets the blame and is publicly dysfunctional while the corporate world reaps all the benefits and operates like a fine tuned machine. 


No more government of profit, by profit, for profit.


It's time for government of the people, by the people, for the people.