The Pittsburgh Post Gazette has unfairly and naively criticized Pittsburgh Mayor Bill Peduto for his efforts to persuade Amazon to locate its second headquarters in the Steel City. His plan is too secretive, the newspaper says, as though business negotiations of this kind are conducted publicly. They aren’t. Preliminary plans and negotiations are always confidential, and yes, that’s true even when one of the parties is a public entity. Even the Post Gazette must acknowledge that the Peduto Administration is one of the most open and transparent in the Country. Spend 10 minutes on the City’s website and you will find a trove of information ready for any curious resident to download and read. Want to see who testified on such and such date before City Council? You can because the City posts videos of Council meetings. Want to see every last line item in the City’s budget? You can download that information with the click of a mouse. Bill Peduto, his staff and other community leaders should be praised for making a proposal that edged out the majority of other competitors and secured Pittsburgh a spot on Amazon’s list of 20 finalists. If Amazon chooses Pittsburgh, it will become the City’s second largest employer, and will bring with it a diverse, skilled, well paid and youthful workforce, making an instant impact and propelling Pittsburgh forward as it continues to evolve into one of the most sophisticated tech centers in the world. And the only reason Amazon is even looking at Pittsburgh is because of the foresight and hard work of leaders like Bill Peduto. The PPG need not thank him, but its criticism of him is profoundly misplaced.
Embattled Pennsylvania Gov. Tom Corbett (R) recently took to the airwaves to answer questions why Pennsylvania has continued to shed jobs under his Administration. In an effort to explain Pennsylvania’s dismal job growth, Governor Corbett said that while businesses want to hire more workers, they can’t find qualified applicants because too many Pennsylvanians use illegal drugs. “The other area is, there are many employers that say we’re looking for people but we can’t find anybody that has passed a drug test, a lot of them. And that’s a concern for me because we’re having a serious problem with that.”
So there you have it. It’s not the economy, it’s not Corbett’s misguided economic policies, it’s not that employers are downsizing and squeezing more work out of fewer employees, it’s that unemployed Pennsylvanians seeking work are drug abusers who can’t pass a drug test.
That sounds a lot like a blame game, not facts or reality. Nobel Prize winning economist Paul Krugman recently described facts and reality in The New York Times:
Let’s start with what may be the most crucial thing to understand: the economy is not like an individual family.
Families earn what they can, and spend as much as they think prudent; spending and earning opportunities are two different things. In the economy as a whole, however, income and spending are interdependent: my spending is your income, and your spending is my income. If both of us slash spending at the same time, both of our incomes will fall too.
And that’s what happened after the financial crisis of 2008. Many people suddenly cut spending, either because they chose to or because their creditors forced them to; meanwhile, not many people were able or willing to spend more. The result was a plunge in incomes that also caused a plunge in employment, creating the depression that persists to this day.
Why did spending plunge? Mainly because of a burst housing bubble and an overhang of private-sector debt — but if you ask me, people talk too much about what went wrong during the boom years and not enough about what we should be doing now. For no matter how lurid the excesses of the past, there’s no good reason that we should pay for them with year after year of mass unemployment.
So what could we do to reduce unemployment? The answer is, this is a time for above-normal government spending, to sustain the economy until the private sector is willing to spend again. The crucial point is that under current conditions, the government is not, repeat not, in competition with the private sector. Government spending doesn’t divert resources away from private uses; it puts unemployed resources to work. Government borrowing doesn’t crowd out private investment; it mobilizes funds that would otherwise go unused.
Now, just to be clear, this is not a case for more government spending and larger budget deficits under all circumstances — and the claim that people like me always want bigger deficits is just false. For the economy isn’t always like this — in fact, situations like the one we’re in are fairly rare. By all means let’s try to reduce deficits and bring down government indebtedness once normal conditions return and the economy is no longer depressed. But right now we’re still dealing with the aftermath of a once-in-three-generations financial crisis. This is no time for austerity.
O.K., I’ve just given you a story, but why should you believe it? There are, after all, people who insist that the real problem is on the economy’s supply side: that workers lack the skills they need, or that unemployment insurance has destroyed the incentive to work, or that the looming menace of universal health care is preventing hiring, or whatever. How do we know that they’re wrong?
Well, I could go on at length on this topic, but just look at the predictions the two sides in this debate have made. People like me predicted right from the start that large budget deficits would have little effect on interest rates, that large-scale “money printing” by the Fed (not a good description of actual Fed policy, but never mind) wouldn’t be inflationary, that austerity policies would lead to terrible economic downturns. The other side jeered, insisting that interest rates would skyrocket and that austerity would actually lead to economic expansion. Ask bond traders, or the suffering populations of Spain, Portugal and so on, how it actually turned out.
Is the story really that simple, and would it really be that easy to end the scourge of unemployment? Yes — but powerful people don’t want to believe it. Some of them have a visceral sense that suffering is good, that we must pay a price for past sins (even if the sinners then and the sufferers now are very different groups of people). Some of them see the crisis as an opportunity to dismantle the social safety net. And just about everyone in the policy elite takes cues from a wealthy minority that isn’t actually feeling much pain.
What has happened now, however, is that the drive for austerity has lost its intellectual fig leaf, and stands exposed as the expression of prejudice, opportunism and class interest it always was. And maybe, just maybe, that sudden exposure will give us a chance to start doing something about the depression we’re in.
CEO pay was 354 times that of the average worker last year, according to the AFL-CIO’s new Executive PayWatch database. The labor group asserts that this is “by far the largest pay gap in the world.” In 2012, the chief executives of some of the country’s largest companies earned an average of $12.3 million in compensation compared to the average worker who took home a salary of $34,645. “American chief executives continued to do very well for themselves last year, while workers struggle to make ends meet,” said Richard Trumka, president of the AFL-CIO. “We are calling out the hypocrisy of rich CEOs who have the gall to ask for corporate tax cuts to be paid for by squeezing the retirement security of working America. The American public deserves to know the truth about their self-serving agenda.”
The Executive PayWatch database allows users to not only look up CEO pay, but to also compare their own salaries. Last year, the average worker made $19.77 an hour. In comparison, Richard M. Bracken, CEO of HCA Holdings (HCA), earned $22,288 an hour; David M. Cote, chairman and CEO of Honeywell International (HON), made $15,984 an hour; John C. Plant, chairman, president and CEO of TRW Automotive Holdings (TRW), made $12,597 an hour and Andrew N. Liveris, CEO and chairman of Dow Chemical (DOW), took home $11,052 an hour. “One of the most important and some would say disturbing trends in the U.S. economy over the last twenty years has been the rise of inequality,” says The Daily Ticker’s Henry Blodget. “The rich are getting richer at an astounding rate and the poor and the middle class are staying where they are and this is creating a huge dichotomy in this society.”
According to the AFL-CIO Web site, CEO pay skyrocketed from 42 times the average blue-collar worker’s pay in 1980 to 343 time in 2010. “Not only is U.S. CEO pay out-of -whack with historical norms, it is off the chart globally,” says Trumka. “For example, in Switzerland, where voters recently imposed new limits on executive pay, the CEO-to-worker pay gap is 148 times. In the United Kingdom, the CEO-to-worker pay gap is one-quarter as large as ours. And in Japan, the gap is even smaller.”