James Clay Fuller

Things We're Not Supposed to Say

Wednesday, March 17, 2004

Economic recovery is mostly fiction

One of the many things the establishment press isn’t telling us, though it has a duty to do so, is that the economic recovery that CNN, Fox News and the broadcast networks keep talking about is more political fiction than fact.

The supposed return of big time corporate profitability is largely a lie, and, of course, the job situation is far worse than the daily broadcast and press reports state or imply. “And,” as Edith Ann used to say, “that’s the truth.”

Yes, corporations are reporting improved profits in the past few quarters. What the press articles and broadcasters don't say – and what the corporations bury deeply in their reports to shareholders – is that a very big piece of the improvement comes from two sources that have nothing to do with increased unit sales.

One is Republican-provided reductions in corporate tax rates. A major gift to large corporations is a change in the law that allows companies that sell goods or services abroad to pay taxes on their foreign earnings at the rate charged by countries in which the sales are made, rather than at the normal U.S. tax rate. Corporate tax rates generally are lower abroad than in the U.S., which means American corporations received big tax breaks that have shown up as profits in the past year.

Two, more important in many cases, is the big change in foreign currency exchange rates over the past couple of years. In general, foreign currencies have gained substantially in value against the U.S. dollar. That means that companies that do business abroad – essentially all large corporations and many smaller ones – are reporting “higher sales,” even if their sales haven’t increased by single unit of goods or services. That’s true simply because the sale of one widget once brought in, say, $1 and now brings in maybe $1.20 because the euro or the baht or whatever is worth more in terms of dollars.

In many cases, those two factors account for major portions, or all, of the reported increases in sales and earnings. Dig deep into the quarterly and annual reports. It’s there, in the small print.
Of course, top-level executives continue to get huge bonuses and to reap millions by exercising stock options because they have “improved” profits.

So far the only mainstream news organization I’ve seen report those facts in a way that’s understandable to a majority of readers is the New York Times. There may be others; but most haven’t done it and obviously don’t intend to.

And then there’s the job situation. The lack of job new jobs, or recovery of jobs lost under the Republican regime, is so obvious that even outfits like Fox have to report it fairly regularly. They don’t generally tell the whole story, however.

It was widely reported for a few days that there had been major job growth last month. Then, oops, it turned out that only 21,000 jobs had been added to the U.S. economy last month. And then, oops, it turned out that all of those new jobs are in the public sector. There was no gain in business employment in this country in February.

That last fact has not been emphasized on Fox or CNN or in your daily newspaper. And an almost unreported fact is that another 588,000 people joined the ranks of “discouraged workers” last month. Those are the people who finally wore out and gave up looking for work because months (or years) of trying showed them the hunt was useless and/or they simply ran out of energy.

The rapid growth of that pool of officially uncounted “discouraged workers” is the only reason official unemployment rates haven’t gone to, or at least near, the highest levels in modern history. That’s right; discouraged workers are not included in unemployment figures because they’re not looking for work.

And one more little bit of employment information, thanks to the New York Times (March 14), that should interest the middle class backers of the Bushies: The number of U.S. college graduates 25 and older who hold jobs fell from 78 percent in 2000 to less than 76 percent last year. That, said the Times, is the lowest rate in more than 25 years. Oh...and the average pay of employed college graduates also has fallen over the past two years.