Lewison: Slash Jobs, Get a Raise

Posted by Miryam Ehrlich Williamson

I have more to say about fresh produce and children, but it can wait. This post, by someone whose opinions always make sense to me and whose way of expressing them I admire, is more important.

Jed Lewison’s explanation of why our economy is how it is and what needs to happen makes more sense to me than the dozens of opinion pieces by dozens of PhD economists that I’ve read. I’m cross posting it from his diary space on The Daily Kos.

Slash jobs, get a raise
by Jed Lewison
Wed Sep 01, 2010 at 09:46:03 AM PDT

As if you needed another reason to let the Bush tax cuts on the wealthy expire:

Study: CEOs of top 50 job-cutting companies earned $598 million in compensation

The nation’s biggest job-cutting companies paid their top executives an average of $12 million last year, according to a report released today.

The 50 U.S. chief executives who laid off the most employees between November 2008 and April 2010 eliminated a total of 531,363 jobs, according to the Institute for Policy Studies, a research group that works for social justice and against wealth concentration.

In “CEO Pay and the Great Recession,” the institute said the $598 million in combined pay for the 50 executives would have paid one month’s worth of average-sized unemployment benefits for each of the laid-off workers.

It’s obviously enraging to see that the people who really get the shaft in the midst of economic distress are the people who can least afford it, but it’s not really a surprise: in recessions, demand collapses, and when demand collapses one of the primary ways to maintain profit is to cut costs. As a result, in a recession, the private sector tends to reward retrenchment. So you end up with CEOs who get their pay raised after laying off workers. The obvious problem with this dynamic is that what you end up with is a vicious circle — the cost-cutting further depresses demand, which in turn leads to more cost-cutting, and even weaker demand.

To break this cycle, you need to find some way to boost demand — and only government can provide that boost, by way of economic stimulus. Without the stimulus, you end up with an economic death spiral. With the stimulus, you break the cycle and bring the economy back to health. The challenge is finding the right amount of stimulus, and the evidence shows that while we’re better off now than we would have been without the 2009 stimulus, we still need more. If we just sit on our hands, the only thing we’re going to get in return is more economic pain and suffering.

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