Why is no one talking about the $4 trillion in cash corporate America had on the books in January 2020? I read the Bloomberg Open and Close newsletters every day. Did I miss or not understand some bit of news in February, March, and April?
The financial state and fate of the U.S. postal service is a hot topic in political forums this week (April 27 through May 1, 2020). It joins on-going questions about the economy, the physical and financial health of the U.S. workforce, the public health responses to the Coronavirus pandemic, when a vaccine will arrive, and when life, work, and the economy will return to normal. A question not on the table, though, is corporate America’s $4 trillion in cash. Unless, of course, all that cash just disappeared.
We ask whether the federal government should provide financial support (aka a bailout) to keep the USPS operating past September 2020. It’s a good question, but we get caught up in the debate. Some people believe that the Constitution requires that the government fund the USPS to keep it operating. Others think the government’s money (that is, our taxes) are better spent otherwise and believe privatizing does not violate the Constitution.
The USPS debate; the arguments between Congressional Republicans and Democrats about the Coronavirus stimulus package; the arguments between governors and President Trump about when and how to relax stay-at-home guidance; the militaristic actions of protestors in Michigan; and the rapid deterioration of the economy over the past three months have roiled our minds for weeks.
Sometimes, the questions we ask are like the distractions a magician uses to perform a trick.
The questions provide a distraction from the discomfort of social isolation, the financial fear, and the fear of a disease we don’t yet understand.
I tried to find a way out of the anxiety going round and round, faster and faster—I have never liked amusement park rides down monster-filled dark tunnels. I read the Book of Job. I wrote a list of my top ten reasons to appreciate social distancing.
But, my anxiety turned to anger as I looked at photographs of mass burials in New York and read stories about meat production employees packed into workplaces that killed them and drove the pandemic into their families and communities.
My anger turned to rage at photographs and stories of farmers destroying food—potatoes, chickens, milk—because it was produced for restaurants that are now closed. Ten thousand people in Texas were in line to get food from a pantry, and we can’t figure out the logistics of redirecting food from restaurant use to groceries and food banks. We can give the agriculture industry $23.5 billion, but we can’t figure out how to buy excess food and distribute it to people who need it.
Once I reinstated a calmer mind, I began to ask other questions. A little Googling produced interesting information, as I pointed out at the beginning:
In a Harvard Business Review article from January 17, 2020, I read that “U.S. non-financial corporations are sitting on just over $4 trillion dollars in cash, according to the latest Flow of Funds estimates…”
According to an article in the Washington Post on March 26, 2020, the coronavirus stimulus package is $2 trillion.
I wonder what corporations are doing with that $4 trillion in cash.
I’ve been quiet here, but that’s because I’ve been writing at Countable. Check it out. It’s a version of democracy in action and less of an echo chamber than other discussion forums.
My strengths include developmental, substantive, content, line, and general editing.
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♦ I’m the Boss of Me: A Guide to Owning Your Career by Jeanne Beliveau-Dunn (Upper Saddle River, NJ: Pearson FT Press, 2017).
♦ Tour Guide to Alternative Medicine, edited by Marilyn R. Freedman (TBD). [Originally Mosby’s Tour Guide to Alternative Medicine, Mosby Editorial Board (St. Louis, MO: Mosby-Yearbook, 1997 unpublished).]
I’ve successfully edited college textbooks in economics, statistics, psychology, technology, nutrition, and health.
♦ Nutrition from Science to You by Joan Salge Blake, Kathy D. Munoz, and Stella Volpe (Pearson Education, 2014)
♦ Principles of economics by Paul Krugman and Robin Wells (Worth Publishers, 2006, 2009)
♦ Principles of economics by Michael Parkin (Addison-Wesley Publishing, 1993, 1996)
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♦ Information Technology & the Networked Economy by Patrick McKeown (Course Technology, 2003)
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I believe that family, work, and play are what make life rich and help us grow. Growth is what my life has been about from early on. To grow, you need teachers and directed practice. My closest teachers are my twins, older son, dog, and cat.
I’ve been growing in my career for more than 30 years, first editing best-selling college textbooks and now writing and ghostwriting, along with development editing. My most recent continuing education course was news writing at the Nackey S. Loeb School of Communications in Manchester, NH.
I learn as much from my authors as I learn from my family, and I think they learn from me as well. But I’ll let my authors speak for themselves.
October 5, 2012
During the first presidential debate on October 3, 2012, the question of income inequality should have been front and center. It’s the nation’s biggest domestic issue (Income Inequality is America’s Biggest Challenge: United Nations Economist). And it links to just about every other issue that is on the table: health, education, economic growth, even democracy and the competition that is necessary to a free market (The American Dream Is a Myth: Joseph Stiglitz on the Price of Inequality). But even though the debate focused on the economy, neither candidate mentioned the issue.
Perhaps neither candidate wanted the debate to turn into another round of name calling about moochers and takers. Regardless, the issue remains: inequality has been increasing since 1970 and the gap between the top 20 percent and everyone else has been getting wider. Here’s a very good picture of the data from the West Coast Poverty Center at the University of Washington.
The top 20 percent have about 50 percent of income, while the other 80 percent of us share the rest. And the top 20 percent’s share has been steadily increasing since the late 1960s, while the share of the other four quintiles has been steady or decreasing slightly.
The story for wealth is similar. In 2007, the top 1 percent held about 43 percent of the nation’s financial wealth (richer-rich-and-poorer-poor).
To say that people outside the top 1 percent are pretty unhappy about this income and wealth inequality is an understatement. Most of us are working hard, but are not getting the same rewards that other hard-working people—those in the top 1 percent—get. In fact, our productivity at work has been increasing, but for people outside that top 1 percent, wages and income have stayed pretty much the same (“You Have Nothing to Lose But Your Gains available at http://www.motherjones.com/politics/2011/02/income-inequality-in-america-chart-graph).
Discussion about income inequality veers off in several directions. The liberal side tends to talk about redistributing income so that we end up with an outcome that looks fairer. The conservative side says that people in the top 1 percent have earned their large share of income and wealth because they work harder, are more productive, and create jobs that produce economic growth. In fact, they say that some of the wealth the top 1 percent generates will eventually trickle down and improve the economic circumstances of the middle and lower economic groups. No evidence from the income distribution data supports this idea, which has been around since the Reagan administration in the 1980s. The evidence is clear: the wealthy are staying wealthy and becoming more so, the middle class is getting poorer, and the poor are staying poor (http://economix.blogs.nytimes.com/2012/07/10/richer-rich-and-poorer-poor/). A lot of finger-pointing and more name-calling goes on.
Both sides look at federal taxes to either support their position or construct a solution. But a look at federal taxes doesn’t help that much.
The highest income quintile has the largest share of income, but also pays the largest share of taxes. When you break that highest quartile into smaller groups, though, a different picture emerges.
Still, in 2009 the top 1 percent paid almost 39 percent of individual federal income taxes (that’s 39 percent of the taxes collected, not 39 percent of their income) and 47 percent of corporate income taxes—more than any other group. This is consistent with the income picture: greater share of income, greater share of taxes. But it isn’t consistent with actual tax rates. For example, the federal income tax rate in 2009 for married individuals filing jointly and earning more than $357,700 was 35 percent. So people in the top 1 percent (about 1.1 million households) paid a little more than the top income tax rate, but no one else in the highest income share quintile came close (about 22.5 million households).
Our social insurance programs and tax programs really don’t appear to be redistributing wealth or income from those at the top to those at the bottom or in the middle—an argument that is often made.
Can we pin responsibility for unequal income distribution on one political party or the other? No such luck. Between 1969 and 2012, we’ve had eight different presidents, five of them Republican and three of them Democrat. We’ve had 22 different Congresses, with sometimes one or the other party seemingly in charge. But the Senate and House must work together, and no party has had enough votes in recent years to enact legislation on its own.
So, which political party is responsible for the increasingly unequal income distribution in the United States? Conservative or Democrat, Republican or liberal, the outcome seems to be the same. Not incidentally, the salary of most members of Congress is $174,000. The average before tax income of people in the 81st – 90th percentile of income shares was $131,700 in 2009; for people in the 91st – 95th percentile of income shares, it was $175,800.
I suspect that the income inequality we are observing is the end of a long process that is a bit like the card game war. The player holding most of the cards from 10 through the face cards is likely to win.
But life is not a card game. In a card game, the players either agree to play another game, or they find something else to do—eat, watch TV, go outside, or go their separate ways. And in life, the winner makes the rules. And the rules that are being made (or unmade) are resulting in an ever greater concentration of wealth and power among a small group of people. For an example, look no further than the financial crisis of 2007 and the resulting recession, the effects of which are still being felt by most people—well, with the exception of the top 1 percent of the income distribution. They are doing just fine.
Whatever the short term result, the long term result won’t be good for anyone. One of the factors that promotes a country’s general welfare is economic growth. When the economy is growing, everyone’s prospects are better. Economic growth relies on productivity, which depends on physical capital, human capital, and technology. Human capital and technology are both affected by the workforce’s quality of education. Without a well-educated workforce, it’s unlikely that we can keep research & development, innovation, and technology advancing at the pace we’ve been experiencing. Growth also relies on political stability and property rights. And it is affected by how well the financial system functions. We’ve already seen cracks in the edifice of our financial system. As income and wealth become increasingly concentrated and higher education becomes increasingly more expensive, the quality of our workforce’s human capital is bound to deteriorate; deteriorating health will also have a negative impact on the quality of our workforce. Even without social unrest, a loss in our capacity for economic growth is likely to follow.
Countries that have a pattern of unequal income distribution that is similar to the trend in the United States are Guatemala and Honduras, both commonly referred to as banana republics. A small group of very wealthy people are in charge in these countries, and the majority of their citizens are poor—an economic underclass or peasantry, if you will.
If we allow the political process to carry on as it has been, is our fate to become a banana republic? Maybe we’re already there, and we just don’t want to admit it. I’m not the only one who speculates in this direction. New York Times columnist Nicholas Kristoff made this same comparison in 2010 the day after midterm elections. And Christopher Hitchens, writing in Vanity Fair, made the observation in 2008 in the wake of the financial crisis.
So, what comes next? I don’t have a concrete answer to that question, only a metaphor. If you’re on Banana Road and you don’t like where it leads, find a new road. And if none of the other roads are appealing, build a new one.
Someone needs to ask Republican presidential candidate Mitt Romney if he and his party can even acknowledge that the problem exists. And if they can, what they have to offer as a constructive plan for the future, without resorting to failed ideas like supply-side economics and trickle down or name-calling like socialism. President Obama also needs to be asked some hard questions about addressing income inequality. Does he have a constructive plan for the future that does not distort (or not too much) the incentives that drive activity in a market economy? And if the current distribution of power in Congress remains as it currently is, how does he plan to get things done with a group of people who don’t believe in compromise and refuse to be led?
I need to tell a little story before I forget it.
I went to the eye doctor today and received a clean bill of health: no more virus attacking my cornea. But they dilated my eyes. Those slip-behind-your-glasses-sun-shades they hand out took care of the glare when I went outside.
On the way home, I called my mom to share the good news. When I got home, it was time to take Abbie for her walk (I was at the eye doctor’s office from 11:20 AM to after 1:00 PM). I was still on the phone with my mom, sharing good news and bad, listening to her good news, and so on. So she went on the walk with Abbie and me, virtually.
Abbie doesn’t like that too much, but what can she do about it? Not much. We went on our usual route, which amazingly did not result in me getting pulled into the tree at the bottom of this very steep, but short, incline that leads from the apartment complex into the woods.
After awhile, we went back up to the complex. By this time in the conversation, I was reporting the latest aggravation from the divorce proceedings. I was pretty agitated and animated, but I was paying attention to where I was walking. However, my vision was very blurry from the dilation, so I couldn’t find the path back up. It’s not that big a problem because there is not that much undergrowth in that part of the woods.
Because I wasn’t on the usual path, I ended up a bit to the right of the convenient but steep incline. It has stones in it that work like stairs, so it is fairly easy to negotiate. There is also a flexible drainage pipe that runs along that area so it doesn’t get too damp and slippery.
Abbie scrambled up the hill with no trouble—must be those great retriever-style paw pads. I, however, slipped and slid until I ended up rolling down the hill backwards. I still had my phone in one hand, and the leash was over my wrist. Between Abbie’s weight on the end of the leash and my Taekwondo fall training, I did not roll into a tree.
Since I was still on the phone with my mom and out of breath from the rolling, I said, “whoops” into the phone.
It’s a gorgeous day here. A little cooler than yesterday, but bright and sunny with a beautiful blue sky. This morning, I heard birds when I took Abbie out, and I could smell spring in the air, even though it’s still February. Who could be upset about slipping and rolling down a hill backwards on such a beautiful day? I cracked up. I was still laughing when I got to my apartment at the top of the stairs on the third floor.