The Propaganda of False Trade-Offs: Pitting the Public against Social Spending, Good Wages, and Environmental Protection

March 27, 2012   ·   1 Comments

Source: NYTX


By Kevin Young:

One objective of propaganda is to convince the public that achieving a more equitable, democratic, and sustainable world would entail unacceptably high costs, or trade-offs. This form of propaganda is common in mainstream discussion of many issues, and is particularly apparent in debate over economic, fiscal, and environmental policies. Right-wing politicians and media specialize in this art, but even relatively liberal media outlets like the New York Times and NPR have helped reinforce trade-off myths.

False Trade-Off #1:

Higher Social Spending Means Higher Taxes

One common assumption about fiscal policy (i.e., government taxation and spending) is that any increase in social spending requires an equivalent increase in taxation. Leaving aside for the moment the option of deficit financing, which can and should be used during recessions to stimulate the economy, the standard presentation of this trade-off is misleading because it neglects the vital question of who bears the tax burden. In reality, an increase in spending need not translate to higher taxes for most of the population as long as the wealthy are taxed appropriately. And increasing social spending need not raise overall spending levels at all: simply shifting a fraction of US military expenditures, which constitute nearly half the annual federal budget, into social programs is one obvious option (doing so would also create more jobs than military spending does [1]).

A February 12 New York Times article provides an example of the false trade-off between spending and taxation [2]. The authors interviewed a number of beneficiaries of social spending, including people who benefited from the Earned Income Tax Credit, unemployed benefits, Medicare, Social Security, and other programs. Many were nominally “middle-class” people who had been hit hard by the recession, and some expressed shame at relying on government programs. But the most notable assumption in the interviews and the accompanying commentary by the authors is the notion that expanding these social programs would require government to raise taxes on these very same people, or at least their children and grandchildren. One small-business owner and father of five making $39,000 a year said that “I don’t think most people could bear to pay more.” The authors write that he “would rather give up the earned-income credit the family now receives and start paying for school lunches for his children.” A 71-year-old woman struggling to survive on Social Security benefits “cannot imagine asking people to pay higher taxes. And as she considered making do with less, she started to cry.” The woman felt guilty for the fiscal burden she was allegedly imposing on the country and future generations, saying that “We’re reasonable people. We’re not going to say, ‘Give it to me and let my grandchildren suffer.’”

The article’s authors write that government has “expanded the safety net without a commensurate increase in revenues,” which is “a primary reason for the government’s annual deficits and mushrooming debt.” Furthermore, “as the population ages and medical costs climb, the budget office projects that benefits programs will grow faster than any other part of government, driving the federal debt to dangerous heights.” They go on to target the usual objects of right-wing criticism, Medicare and Social Security. No federal programs “are more central to the nation’s financial problems,” they write, with Medicare in particular occupying a “starring role” in those problems. The problem is that “its premiums are not nearly high enough. In simple terms, Americans are getting more than they pay for.”

These claims are dishonest on several levels, as I and many others have analyzed in depth elsewhere [3]. The main reasons for government deficits and debt are not Medicare, Social Security, or other forms of social spending, but:

1) the financial crisis that followed the bursting of the housing bubble in 2007-08, caused by the reckless and fraudulent behavior of banks and government deregulation [4]

2) ever-increasing spending on wars and the military

3) tax cuts for the wealthy, particularly since 2001

4) the skyrocketing cost of private health care

Medicare and Social Security are trust funds, funded by special payroll taxes levied on employers and workers, and are separate from the discretionary federal budget. Social Security is in perfectly sound condition—actually, the government has borrowed repeatedly from the fund’s surplus to finance other programs—and it will continue to be through 2036, after which it may require relatively minor tweaks to ensure sustainability. Medicare costs are escalating, but the real problem is price gouging in the United States’ radically inefficient and profit-driven private healthcare sector, costs that have nothing to do with Medicare itself. In fact, Medicare is far more efficient than private health insurance, with administrative costs of 2-4 percent compared with 11 percent for private insurance [5]. The only aspect of Medicare that has contributed substantially to the deficit, its prescription-drug fund (Part D), was engineered by the Bush administration to do just that when it was created in 2003. Economist Jack Rasmus explains that the administration “made certain that it would not be funded by a payroll tax, like the Part A hospital fund of Medicare,” meaning “that every penny of the drug program would have to be financed out of deficit spending” and patient premiums. The strategy is to create a deficit in Medicare by depriving it of funding. “The strategy for privatizing Medicare and Social Security is the same,” Rasmus says: “create a funding crisis and deficit however possible”—for example, through payroll tax cuts and giving free rein to healthcare providers to engage in price gouging—“then claim they are broke or about to go broke, then use that excuse to privatize them” or cut benefits [6].

What about other forms of social spending? In 2010 spending on the country’s main welfare program, Temporary Assistance to Needy Families, was less than $28 billion, compared to $1.4 trillion spent on the military. Combined spending on all “income security” programs—unemployment benefits, tax credits for low-income people, food stamps, children nutrition, foster care, and others—amounted to less than one-third of military spending. The typical proportion is even less, since the recession triggered a temporary increase in payments by these programs (the government has not “expanded the safety net,” as the Times article claimed). The cost of social programs appears smaller still when we consider the cost of other policies which, like military spending, transfer money to the wealthy. Obama’s extension of the Bush tax cuts for incomes over $250,000 will cost about $68 billion annually over the next decade, with most of that money going to the richest 0.1 percent. Longstanding tax breaks and subsidies for corporations cost tens of billions more each year [7].

In other words, the alleged trade-off between social spending and higher taxes for the general population has no basis in reality. From a fiscal standpoint it would be perfectly feasible to increase social spending while maintaining or even reducing taxes for the majority of the population, without adding to the federal debt or deficit. It would even be possible if the economy were totally stagnant, with no growth in economic productivity or government revenue.

A related argument claims that social spending leads to higher unemployment. In a February 22 post on the Times’ Economix blog, University of Chicago economist Casey Mulligan argues that government welfare spending, and unemployment benefits in particular, end up hurting everyone besides the direct recipients. “Benefit payments by government safety net programs help the families who receive those payments,” but “those payments hurt the rest of us.” There are two reasons, he says: 1) the taxation necessary to fund those programs reduces spending by tax-paying households and businesses, and 2) safety net programs lead many people to work less, thereby lowering economic productivity, the total income of the recipients, and overall consumer demand, with the end result of higher unemployment [8].

Argument #1 is technically true but misleading, for two reasons. First, as in the Times article cited above, Mulligan lumps all taxpayers into the same category—“the rest of us”—and implies that safety-net programs necessarily translate to higher taxes for everyone in society. Second, the key question is which fiscal policy options will produce more aggregate demand relative to other options. Levying taxes in order to fund social programs will reduce spending by the taxpayers (in the case of unemployment insurance, the businesses and workers who fund it), but the boost to consumer demand that results from putting money into the hands of poor and unemployed people usually outweighs the drop in demand resulting from the taxation, particularly if the tax targets the wealthiest income brackets, as it should. The reason is that the wealthy save a higher proportion of their income than poor and working-class people do; when the latter get money they must spend it quickly to survive, thereby fueling demand and leading businesses to invest more money in job creation. A more equitable distribution of wealth in society would not only be fairer, it would also lead to stronger and more stable economic growth. A strong safety net also helps all workers in another way, by increasing their bargaining power vis-à-vis their employers and reducing the costs of getting fired. The same is true of higher wages, which tend to benefit workers across the entire economy (see #2, below).

Mulligan’s argument that the safety net leads people to work less echoes the age-old mantra that welfare spending creates dependency and laziness among recipients who enrich themselves on the backs of hard-working taxpayers. Taking away the safety net, we are often told, is just the kind of “tough love” that the poor and unemployed need, since it will force them to get off their butts and start working. In reality, the problem is not laziness or that workers aren’t working enough. US workers spend more time working than people in most other industrialized countries, and their working hours have increased significantly since World War II (meanwhile, in the last few decades real wages have stagnated or declined—see below).

Does the safety net really cause laziness? Even in the most generous states, unemployment benefits typically cover less than 50 percent of unemployed workers’ wages and are time-limited, meaning that workers have little incentive to voluntarily stop working because of the safety net. The problem is the lack of jobs, not lack of motivation. Despite a modest reduction in the unemployment rate in recent months, in January there were still 3.7 unemployed persons for every job opening. And that figure is based on the official unemployment rate of 8.3 percent; the “effective unemployment rate,” which includes unemployed people who have given up looking for work and those who can find only part-time work, was 14.9 percent—meaning that there were 6.6 unemployed or underemployed persons for every job opening in the country [9]. The notion that unemployment is a result of laziness or personal failings is completely untenable.


False Trade-Off #2:

Higher Wages Mean Higher Prices and Unemployment

Another common dogma is that higher wages for workers automatically translate into higher prices for the goods they produce, thus hurting consumers and potentially negating any benefit for the workers themselves. The recent attention to the working conditions in Apple’s overseas factories inspired a number of reflections from Times pundits and bloggers on this matter. In a February 9 post entitled “The Dilemma of Cheap Electronics,” Times blogger David Pogue argued that

Bringing workplace standards and pay in Chinese factories up to American levels would, of course, raise the price of our electronics. How much is hard to say, but a financial analyst for an outsourcing company figures a $200 iPhone might cost $350 if it were built here…The issue is complicated. It’s upsetting. We, the consumers, want our shiny electronics. We want them cheap, yet we want them built by well-paid, healthy workers. But apparently, we can’t have both.

In another article, Times op-ed columnist Jesse Kornbluth casually remarked that “a 40-hour week” for Apple’s Chinese sweatshop workers would mean “doubling the price of iPhones” [10]. The trade-off is deemed so obvious as to require no evidence or explanation.

Again, however, the claim is incorrect, and it’s revealing that Pogue’s source of economic expertise was “a financial analyst for an outsourcing company.” In the case of the iPhone, the cost of producing a 16GB 4S model iPhone has been estimated at $188, whereas the full retail price in US stores is $649 (buying the phone with a wireless contract reduces the price to $199, since wireless providers pay Apple $450 for each phone). In other words, the majority of the retail price is comprised of profits for Apple’s shareholders [11]. Apple could substantially improve wages and working conditions for its Chinese workers without raising the iPhone’s retail price, though its profit margins would be a bit less astronomical. Other Times reporters have actually noted, deep within a January article, that “Apple’s profits are often hundreds of dollars per phone,” meaning that “building domestically” or at US wage levels “would still give the company a healthy reward” [12]. Whether or not any “reward” is justified is another matter, but the point is that there is no direct trade-off between wages and prices.

The iPhone is not unique. A 2006 study by the Economic Policy Institute demonstrated that “Wal-Mart could raise wages and benefits significantly without raising prices, yet still earn a healthy profit.” The authors pointed out that Wal-Mart’s profit margins are far higher than Costco’s, and that “labor costs for its non-supervisory staff account for less than 7% of its total sales” [13].

Apple, Wal-Mart, and other giants exemplify a more general trend in the economy. In 2010-2011 corporate profits constituted a higher percentage (10.3 percent) of the nation’s Gross Domestic Product than at any time in recorded history, while wages (43.7 percent) were the lowest percentage of GDP ever recorded (data go back to 1929). And large corporations have made out splendidly since the Great Recession began: while wages and salaries in the third quarter of last year had risen only 1.8 percent since late 2007, corporate profits had risen 49 percent. Corporate profits after taxes were $1.56 trillion for the third quarter of 2011. Surely the people at the Times are aware of these facts—these very statistics were reported in the paper last fall [14].

The trend started long before the current recession. The US economy has actually remained dynamic in recent decades despite much talk of US decline. Productivity rose 63 percent in the 1990s and 2000s. But the gains in productivity and corporate income have generally translated into higher corporate profits rather than higher wages and benefits for workers. Thus, while productivity rose 63 percent, real wages/benefits for workers rose by less than 20 percent during the same period (with only single-digit increases for workers with only a high-school education) [15]. From 1970 to 2007 average incomes rose by $18,290, but the richest ten percent captured 89 percent of that growth; the bottom 90 percent of US society got only eleven percent. And even that eleven percent disappeared with the Great Recession; the incomes of the bottom 90 percent are now lower than in 1970 [16]. Thus, there is no necessary trade-off between higher wages for workers and lower prices for consumers, since the lion’s share of income growth is being swallowed up in the form of corporate profits. Even if the economy were totally stagnant, with production and income levels remaining constant, it would still be possible to have both higher wages for workers and lower prices for consumers—profits would just have to decline [17].

Nor is there any automatic connection between higher wages and unemployment, though right-wing voices continue to parrot the old argument that raising wages leads employers to lay-off workers [18]. Businesses hire or fire employees in response to fluctuations in the demand for their products; when demand goes up as a result of consumer or government spending, they hire more workers, and when it drops they fire workers. And since money in the hands of workers stimulates more consumer demand than an equivalent amount of money in the hands of the wealthy, higher wages actually tend to produce more overall employment. Higher wages in one company or sector of the workforce also help workers throughout the economy by boosting wage standards and workers’ bargaining power, just as “right-to-work” laws and other attacks on unions undercut wages and benefits across the board [19].

The Great Recession provides poignant illustrations of the logic behind corporate hiring and layoffs. In 2009 large corporations like Microsoft, IBM, Verizon, Monsanto, Aetna, and Phillip Morris enjoyed fabulous profits but nevertheless cut jobs. Microsoft, for instance, recorded $14.6 billion in profits but announced plans to cut 5,000 jobs over 18 months. IBM’s profits rose by 18 percent from the previous year, but it slashed 10,000 jobs. US corporations outside the financial sector are currently holding at least $1.2 trillion in cash reserves (most of it outside the country, to evade taxes) [20]. The lack of aggregate demand, and not companies’ lack of capital, is the main reason why the unemployment rate remains high.

False Trade-Off #3:

Saving the Planet Will Cost Jobs

One of the oldest mantras in the repertoire of the corporate propagandist is that environmental regulations destroy jobs. The claim remains common in discussion of climate change agreements, emissions and air quality standards, oil and gas drilling, and, in the past year, of the Keystone XL oil pipeline project. While the right incessantly repeats this argument, a number of liberal media outlets have helped reinforce it. Even while avoiding the virulently pro-corporate, anti-environment positions of the right, liberal media have reaffirmed the notion of an irreconcilable conflict between “workers” and “environmentalists.” A November 2011 NPR story entitled “Pipeline Decision Pits Jobs against Environment” was typical. Describing Obama’s September 2011 rejection of stricter smog emissions standards, the report said that “[e]nvironmentalists groaned” and “workers cheered” (in fact, the main cheers came from the American Petroleum Institute and other corporate spokespersons). While “unions are big supporters of building the Keystone pipeline,” only a few environmental NGOs oppose it (in fact, some of the country’s most important unions have opposed it). A similar New York Times report about a month earlier was titled “A Pipeline Divides along Old Lines: Jobs Versus the Environment.” Both stories avoided an overtly pro-business position; the propaganda was more subtle, contained in the unquestioned assumption of an inherent antagonism between workers and the environment [21].

Other Times reports have subtly reinforced corporate rhetoric about job creation in the fossil-fuels industries. A recent post on the paper’s Economix blog uncritically cited the World Economic Forum’s claim that oil and gas drilling in the United States created 150,000 jobs in 2011. It failed to report that the World Economic Forum is composed of multi-billion-dollar corporations including Exxon, Shell, BP, and Chevron, which have an obvious interest in distorting economic reality [22].

Not all Times coverage of the pipeline and of oil/gas drilling has been this bad. Several editorials have pointed out that “there are better ways to create jobs, without endangering the environment.” Times editors have also commented on the dishonesty of right-wing claims about “tens of thousands” of jobs that would result from the pipeline, referencing the State Department estimate of only 6,500 temporary jobs and the Cornell University study that estimated perhaps “no more than 50 permanent jobs.” In his columns for the Times, economist Paul Krugman has rightly noted that “U.S. energy policy has very little effect either on oil prices or on overall U.S. employment.” Despite a massive expansion of oil and gas extraction in the United States in the last five or six years, the industry has created only 70,000 new jobs, “around one-twentieth of 1 percent of total U.S. employment.” The contrast with the above claim by the World Economic Forum is rather stark [23].

As these specific examples suggest, the “jobs-versus-the-environment” argument is a myth concocted to serve corporate interests. The myth relies on a series of distortions about the relationship between environmental regulation and unemployment. There are three types of unemployment: 1) the cyclical unemployment resulting from insufficient aggregate demand—like during the Great Recession—which requires government stimulus; 2) frictional unemployment, referring to the temporary unemployment when workers change jobs; and 3) structural unemployment, when there is a mismatch between the skills of the workforce and the jobs that are available, and/or when workers and jobs are located in different places [24]. Of these three types, only structural unemployment can be worsened by tightening environmental regulations.

But economic research has demonstrated that the rise in structural unemployment that sometimes results from stricter regulations is temporary and miniscule compared to other causes of structural unemployment. In fact, tighter regulations tend to increase overall economic efficiency—and in the process actually create jobs—by forcing companies to adjust the technologies they use and reduce the harmful “externalities” of production (when producers pollute their surroundings or otherwise shift costs onto the public). A 2011 report by the Political Economy Research Institute at the University of Massachusetts estimated that tighter EPA regulations on emissions of sulfur dioxide, nitrogen oxide, mercury, arsenic, and other pollutants would force power companies to invest around $200 billion in capital improvements, leading to the creation of 1.46 million new jobs over five years; most of those would be “skilled, high-paying jobs, including engineers, project managers, electricians, boilermakers, pipefitters, millwrights and iron workers.” As economist Robin Hahnel explains in his excellent book Green Economics, environmental regulations impose “short-run transition costs to achieve long-run efficiency gains” [25].

And as Hahnel also emphasizes, “Tightening environmental standards may cause some [temporary] structural unemployment, but it is by far the least important source of structural unemployment in the U.S. economy.” During the decade of the 1990s over two million workers per year lost their jobs because of imports, changes in market demand, or corporate downsizing, compared to about 2,000 layoffs per year because of tightened environmental standards—meaning that the effects of neoliberal globalization and corporate profit-seeking on unemployment outweighed the effects of environmental regulation by a factor of 1,000 to 1. Nor do environmental regulations typically drive businesses to relocate overseas, since the cost they impose is small compared to other production costs (in contrast, cheaper labor costs often do lead companies to outsource) [26].

Moving beyond regulation, the government could create tens of millions of jobs by directly investing in green energy development. Research by the Political Economy Research Institute and others has revealed “that clean-energy investments generate roughly three times more jobs than an equivalent amount of money spent on carbon-based fuels” [27]. A far-reaching “economic conversion” program directed by the government is the only way to reorient production and resource allocation quickly enough to avert devastating climate change. It also happens to be an excellent way to create jobs. And the US government has directed massive economic conversion programs before, for instance in preparation for World War II.

Nonetheless, there are transition costs involved in the conversion to a clean energy economy, and the environmental movement must fight to make sure that those costs do not fall onto the working class. As Jeremy Brecher and Brendan Smith argued recently, opponents of the Keystone XL pipeline must be attentive to the short-term economic needs of the workers who may miss out on pipeline-related jobs, even if the number of jobs is far smaller than industry representatives claim. We must forcefully advocate the national economic conversion program that is vital to the planet’s survival (i.e., pushing the government to invest in green jobs on a massive scale and reorient production toward mass transit, sustainable agriculture, solar and wind energy, etc.) while supporting short-term stimulus measures to put people back to work in decent-paying jobs. A related objective must be the expansion of government “readjustment assistance” to fund retraining programs and relocation for workers in dirty-energy sectors. Coal miners, lumberjacks, and pipeline workers should not be made to bear the transition costs of converting to clean energy and averting catastrophic climate change. Many in the environmental movement are aware of these imperatives, and have begun forming alliances with labor unions that are surely quite terrifying to corporate elites [28].

Countering the Propaganda

The propaganda of false trade-offs seeks to convince working people who are generally progressive and compassionate that the policies they desire would require wrenching trade-offs. The false trade-offs above all continue to have some traction with the US public. For example, the rhetoric about Social Security and Medicare being “broke” has had some effect on public perceptions. A February poll by the New York Times found that most respondents thought “they would pay more in taxes than they would ever get back from the government in benefits,” and that “Social Security and Medicare will not be there for them when they reach retirement” [29]. The February 12 Times article described in section 1 above provides a number of anecdotal examples of such thinking. Recent polling by Rasmussen also suggests that much of the public still believes the “jobs-versus-environment” claim (though the wording of the questions was highly flawed) [30].

Countering the propaganda of false economic trade-offs requires empowering people with a basic understanding of how the economy works. Unfortunately most schools and universities continue to teach the virtues of neoclassical or neoliberal economics, reinforcing myths like the ones above. A formal education in economics often leaves students dumber than when they began. But on the positive side, basic economics is not nearly as difficult as most economists make it out to be. Ordinary working people already have an intuitive grasp of many of the relationships in the economy, and realize that things are deeply unfair.

The problem is not people’s basic values. Most people want a more equitable, more democratic world, and want future generations to be able to enjoy it as well. What many don’t realize is that getting there does not entail the costly trade-offs for working people that we’re told it does.

Suggestions for Further Reading:

  • Robin Hahnel, The ABCs of Political Economy: A Modern Approach (London: Pluto Press, 2002)
  • Eban Goodstein, The Trade-Off Myth: Fact & Fiction about Jobs and the Environment (Washington, DC: Island Press, 1999)
  • Robin Hahnel, Green Economics: Confronting the Ecological Crisis (Armonk, NY: M.E. Sharpe, 2011) (excerpts available here)
  • Jack Rasmus, “The Real Causes of Deficits and Debt,” Z Magazine (December 2011).
  • Michael Albert, Parecon: Life after Capitalism (London: Verso, 2003) (available online here, and with short summaries here and here)
  • Economic Policy Institute website:
  • Political Economy Research Institute website:
  • Center for Economic and Policy Research website:


[1] Robert Pollin and Heidi Garrett-Peltier, “The Employment Impact of U.S. Military and Domestic Spending Choices,” Security Spending Primer Fact Sheet #10 (2009); Pollin and Garrett-Peltier, “The U.S. Employment Effects of Military and Domestic Spending Priorities,” International Journal of Health Services 39, no. 3 (2009): 443-60; Pollin and Garrett-Peltier, “The Wages of Peace,” Nation (March 31, 2008).

[2] Binyamin Appelbaum and Robert Gebeloff, “Even Critics of Safety Net Increasingly Depend on It,” NYT, February 12, 2012, A1.

[3] See my article “Deficit Myths: The Six Most Prevalent Lies about Budget Deficits and Economic Recovery,” ZNet, July 25, 2011. See also the detailed breakdown in Jack Rasmus, “The Real Causes of Deficits and Debt,” Z Magazine (December 2011).

[4] The financial crisis not only reduced government revenues but also led to other actions, such as the bank bailouts and stimulus measures, which further added to the deficit/debt.

[5] Young, “Deficit Myths,” section 1 and notes 9-10.

[6] Rasmus, “The Real Causes of Deficits and Debt.”

[7] Ibid., notes 5, 7-8. The total cost of extending the tax cuts is far higher—$3-4 billion—but I’ve excluded the cost resulting from tax cuts on households making less than $250,000. On government hand-outs to corporations see Mark Zepezauer and Arthur Naiman, Take the Rich Off Welfare (Monroe, ME: Common Courage/Odonian, 1996), a detailed analysis which, if updated to reflect current figures, would be an even more damning indictment of corporate welfare. As Lawrence Mishel pointed out in response to the February 12 Times article, the government has not “expanded the safety net”; the increase in benefit payments was automatically triggered by the recession and is not permanent (“No, NYT, There’s Been No Expansion of Government Benefits, No ‘Entitlement Society,’” Economic Policy Institute blog, February 18, 2012, reposted at NYTimes eXaminer).

[8] Mulligan, “The Safety Net Isn’t Free.”

[9] The February figure for job openings was not yet available at time of writing, so I use the January number; unemployment figures correspond to February, however. On the “job-seekers ratio” over time see

[10] “Who’s King of Pop Now?” NYT, February 12, 2012, SR3. For critiques see Peter Hart, “For NYT, Apple Making Less Profit Is Not Even an Option,” FAIR blog, February 13, 2012.

[11] The figure of $188 “account[s] only for hardware costs and do[es] not include other expenses such as software, licensing, royalties or other expenditures” (Andrew Rassweiler, “iPhone 4S Carries BOM of $188, IHS iSuppli Teardown Analysis Reveals,” October 20, 2011); Ryan Chittum, “Pogue Misses on Cheap Gadgets and Foreign Labor,” Columbia Journalism Review online, February 10, 2012.

[12] Charles Duhigg and Keith Bradsher, “How U.S. Lost Out on iPhone Work,” NYT, January 22, 2012, A1.

[13] Jared Bernstein and L. Josh Bivens, “The Wal-Mart Debate: A False Choice between Prices and Wages,” EPI Issue Brief #223, June 15, 2006, pp. 1-2. See also Jared Bernstein, L. Josh Bivens, and Arindrajit Dube, “Wrestling with Wal-Mart: Tradeoffs between Prices, Profits, and Wages,” EPI Working Paper #276, June 15, 2006.

[14] U.S. Department of Commerce, Bureau of Economic Analysis, “Gross Domestic Product: Third Quarter 2011 (Third Estimate); Corporate Profits: Third Quarter 2011 (Revised Estimate),” December 22, 2011, p. 13; Floyd Norris, “For Business, Golden Days; For Workers, the Dross,” NYT, November 26, 2011, B3. The business press is also attuned to this trend: e.g., Scarlet Fu, “Cheap Labor, Higher Corporate Profits,”, December 20, 2011.

[15] Lawrence Mishel and Heidi Shierholz, “The Sad But True Story of Wages in America,” EPI Issue Brief #297, March 14, 2011, p. 1.

[16] In 2008 dollars. Data come from EPI’s State of Working America calculator, available at Original figures compiled by Berkeley economist Emmanuel Saez.

[17] For more explanation see Robin Hahnel, The ABCs of Political Economy: A Modern Approach (London: Pluto Press, 2002), 112-27.

[18] Arindrajit Dube, William Lester, and Michael Reich, “Minimum Wage Effects across State Borders: Estimating Using Contiguous Counties,” UC-Berkeley Institute for Research on Labor and Employment Working Paper 157-07 (2010); David Card and Alan B. Krueger, “Minimum Wages and Employment: A Case Study of the Fast Food Industry in New Jersey and Pennsylvania,” American Economic Review 84, no. 5 (1994): 772-93; Doug Hall and Mary Gable, “The Benefits of Raising Illinois’ Minimum Wage,” EPI Issue Brief #321, January 30, 2012.

[19] Lawrence Mishel with Matthew Walters, “How Unions Help All Workers,” EPI Briefing Paper #143, August 26, 2003; Heidi Shierholz and Elise Gould, “The Compensation Penalty of ‘Right-to-Work’ Laws,” EPI Issue Brief #299, February 17, 2011; Hahnel, The ABCs of Political Economy, 274-76.

[20] Andrea Orr, “Many Highly Profitable Companies Cut Jobs in 2009,” EPI commentary, December 23, 2009; Tiernan Ray, “Apple Leads Tech’s Consolidation of Cash, Says Moody’s,” Barron’s blog, March 14, 2012. Apple holds the most in reserves, about $98 billion. Cash reserve levels were even higher in 2011, at around $2 trillion; see Ben Casselman and Justin Lahart, “Companies Shun Investment, Hoard Cash,” Wall Street Journal, September 17, 2011.

[21] Ari Shapiro, NPR, November 3, 2011; Kirk Johnson and Dan Frosch, NYT, September 29, 2011, A12. For the API reaction see Dina Cappiello and Julie Pace, “Obama Halts Controversial EPA Regulation,” AP, September 2, 2011. On union opposition see the January 18, 2012, statement from the Natural Resources Defense Council, CWA, SEIU, UAW, Transport Workers Union, Sierra Club, United Steelworkers Union, and Amalgamated Transit Union.

[22] Annie Lowrey, “America’s Fossil-Fuels Jobs Boom,” March 12, 2012. The WEF website states that the Industry Partnership’s Advisory Board, composed of neoliberal economists, “helps drive the Industry Partnership towards analysis, insights and conclusions that fulfil [sic] the Forum’s mission.”

[23] “Say No to the Keystone XL,” October 3, 2011, A24; “Keystone Claptrap,” December 13, 2011, A34; Krugman, “Natural Born Drillers,” NYT, March 16, 2012, A27. See also “Where the Real Jobs Are” (editorial), January 2, 2012, A20.

[24] For more detailed definitions see Hahnel, The ABCs of Political Economy, 147-50.

[25] James Heintz, Heidi Garrett-Peltier, and Ben Zipperer, “New Jobs—Cleaner Air: Employment Effects under Planned Changes to the EPA’s Air Pollution Rules,” February 2011 (Ceres/PERI), pp. 1-2; Hahnel, Green Economics: Confronting the Ecological Crisis (Armonk, NY: M.E. Sharpe, 2011), 97. See also Heidi Garrett-Peltier, “The EPA: A Phantom Menace,” Dollars & Sense, reposted August 29, 2011, on the PERI website.

[26] Hahnel, Green Economics, 97-98. Data on the 1990s comes from Eban Goodstein, The Trade-Off Myth: Fact & Fiction about Jobs and the Environment (Washington, DC: Island Press, 1999), chap. 3, cited in Hahnel, Green Economics, 98.

[27] Robert Pollin, James Heintz, and Heidi Garrett-Peltier, “The Economic Benefits of Investing in Clean Energy: How the Economic Stimulus Program and New Legislation Can Boost U.S. Economic Growth and Employment,” June 2009 (PERI/Center for American Progress), 3.

[28] Jeremy Brecher and Brendan Smith, “Keystone XL Opponents Need a Jobs Program,” Grist, February 1, 2012; Hahnel, Green Economics, 98-100.

[29] Allison Kopicki, “Most Expect to Give More Than They Receive, Poll Finds,” NYT, February 12, 2012, A25. These perceptions might in fact be accurate, but only if social programs like Medicare and Social Security are deliberately deprived of funding by policymakers. But the poll seems to have been asking whether these programs were fiscally sustainable, not whether politicians would defund them.

[30] Rasmussen is a right-leaning polling agency, which is reflected in its poll wording and results: the mentioned poll asked, for instance, “is it more important to create new jobs or protect the environment?,” to which 59 percent chose the former. A number of other polls (also flawed) have found fairly similar results, but usually with slightly higher percentages saying that protecting the environment should take priority over jobs and fuel costs. There is also an extraordinary level of factual ignorance about climate change: as much as one-third of the US public still believes that climate change is not a “serious problem,” and only about 40 percent of the public thinks that global warming is primarily a result of human activity (up to one-third still deny that global warming is happening at all!). Such is the result of the vast sums spent by corporate interests to confuse people.


Readers Comments (1)

  1. publiclobbyist says:

    Good article. Just one comment on #2 wherein you say, “Thus, there is no necessary trade-off between higher wages for workers and lower prices for consumers, since the lion’s share of income growth is being swallowed up in the form of corporate profits.”

    The problem I have is the use of the word “necessary.” If the country’s retirement accounts are tied up in the zero-sum game we call wall street and higher stock prices mirror higher profits, are we not put between the proverbial rock and hard place? If what I say is true, a very necessary trade-off does exist that could only be circumvented by the dismantling of the stock market.

    What if we froze stock prices, determined a fair price and required the corporation to buy back the stock when the fair price equaled the frozen price never to be traded again except by private individuals who would assume personal risk akin to the casino. Few would lose and we would have money for real investments: IPO’s which you could trade but only for original price; entrepreneurial enterprises backed by FDIC-like institutions, etc., which would get the country moving again. Anyway. . .


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