Back to Work - Bill Clinton [37]
This approach has continued unchecked, amplified by the dramatic rise in executive compensation based more on short-term stock appreciation than long-term viability and by an even more explosive increase in funds dedicated to complex financial transactions. These deals generate huge incomes for those who put them together and for CEOs whose companies get a bump in stock prices, but they rarely create jobs for or raise the incomes of ordinary Americans.
Over the last thirty years, this “financialization” of the American economy, combined with the antigovernment tax cuts, weaker oversight of everything from banks to polluters, and, in the last decade, lax enforcement of our trade agreements, has created a “you’re on your own” economic and social policy that is the bedrock of antigovernment governance.2
This approach has continued to increase the percentage of GDP claimed by the financial sector and to concentrate income gains among already wealthy Americans. It has helped a considerable number of people become millionaires and billionaires, but it has led to stagnant wages for almost everyone else. When the market is rising, it does provide substantial returns to many other Americans through their own investments and those made by retirement, mutual, and other funds, but it’s been lousy for job growth.
Look at the following charts, showing the numbers of jobs created and the growth in national income since 1953. The 1960s performance was the best, followed by my two terms. President Reagan had the third-highest number of jobs, as he began America’s big experiment with trickle-down economics and permanent deficits, but the steam ran out under President George H. W. Bush for all but upper-income Americans, as the big deficits led to higher interest rates and slower growth. All along, middle-class incomes were barely rising, and only 70,000 people moved from poverty to the middle class from 1981 to 1993, compared with 7.7 million in the following eight years.
Meanwhile, incomes on Wall Street and in executive suites of large corporations began their three-decade explosion. For example, in the 1960s, when our economy enjoyed its most rapid rate of growth since World War II, CEO pay in large corporations averaged 25 times that of the average worker. In the last decade, after executive compensation at our largest companies had quadrupled since 1970, the ratio rose to more than 400 times average worker pay before the financial crisis, when it fell back to 300 to 1 because so much executive compensation is tied to stock prices. It’s already rebounded to almost 350 to 1, even though unemployment remains high and most Americans’ incomes are stagnant or declining.
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One of the best characteristics of Americans is that most of us applaud, not resent, the success of other people, as long as it’s fairly earned. But we’ve all read stories of the golden parachutes that bestow millions on CEOs who leave companies in worse shape than they found them. Or stories about companies that have to be downsized to cut costs enough to cover debt payments for buyouts that made a killing for those who did the deal but cost workers jobs or years without pay raises even though they had helped make their company profitable before it was brought low by new debt.
The 2010 filings of 483 companies in the S&P 500 show that their 2,591 executives in total received $14.3 billion in compensation, an average of $5.5 million. Median CEO pay at large corporations was $10.8 million, which is less than it was before the recession. But in 2009 and 2010, 179 companies in the S&P 500 raised executives’ pay even as the value of their shareholders’ stakes fell. Meanwhile, the average American worker took home $752 a week, an increase of one-half of 1 percent, which, after inflation, was a decrease in real income.
In spite of these examples, and the well-known tales of enrichment through illegal conduct at Enron, Tyco, and others, I think most Americans respect people like Steve Jobs, who made a fortune producing