Nothing speaks to Joe Biden’s don’t “caring economy” better than the recently released “Wage Statistics for 2020” report by the Social Security Administration.
As it happened, 21.3 million Americans employed last year (out of 167.6 million total) earned less than $5,000 during the entire year and, in fact, an average of only $2,127. And those numbers are damn accurate because they come from Uncle Sam’s tax collection division, which does not under-count.
As it also happened, Goldman Sachs announced that it awarded its top two executives, CEO David Solomon and president John Waldron, one-time stock bonuses of $30 million and $20 million, respectively, designed to keep the executives at the helm of Wall Street’s biggest bank for another five years. And alas, these are their bonus amounts at the current stock price. As the Wall Street Journal further explained,
If the bank were to hit the top targets, Mr. Solomon’s bonus would be worth more than $50 million and Mr. Waldron’s would be worth more than $35 million.
Let’s see. At the top-tick, those Goldman bonuses would equal the annual earnings of 40,000 of the above mentioned wage workers!
And, oh, exactly what is the scale of 40,000 workers lined up check-by jowl?
Well, back in the day, your editor represented about 450,000 people in the Fourth Congressional District of Michigan including men, woman, children, criminals, the infirm and Democrats. So these two cats from Goldman are getting a bonus equal to about what would have been one-tenth of a congressional district. That is to say, “bonus” is a word hardly adequate to the task.
To be clear, we don’t begrudge capitalism’s verdicts and its implicit choices of winners and losers. That’s why it works and is the only route to more prosperity, opportunity and choices for everyone. But we do begrudge state policy that drastically distorts and exacerbates the natural outcomes of the market because its just plain unjust; and, in any event, is unsustainable and prone to disastrous outcomes.
Now, those don’t-know-nothing-about-the-Fed free market purists will say, why not? After all, at the prior market peak on the eve of the Covid lockdowns in February 2020, Goldman’s market cap was $81 billion and now it stands at $140 billion. So why not some rewards for the purported geniuses running the place?
Well, because they actually aren’t geniuses and they are not really running the place; the camarilla of money-printers ensconced in the Eccles Building is actually what is driving the outcomes.
Thus, during the 13-year period between December 2006 and December 2019, Goldman’s LTM revenues grew from $35.7 billion to $36.5 billion. That’s a growth rate of, well, 0.17% per annum, and is most definitely not in the “geniuses at work” category.
But after the nation got socked with Fauci, lockdowns, soaring unemployment and a bacchanalia of stimmies, Goldman’s LTM revenues rose to $60.2 billion for the September 2021 period. That’s 20% per annum growth rate or 120X its pre-Covid trend.
Of course, it wasn’t some kind of entrepreneurial Geritol that put a sprint back into the revenues of Goldman Sachs. To the contrary, it was damn near $5 trillion of Fed money-printing since the fall of 2019 that did the trick.
The latter unleashed such a wave of speculative madness in all markets with cryptos at the front of the pack that the Ordeal of Covid has literally been a goldmine for Goldman Sachs. During the six quarters since December 2019, its revenues have risen by $23.7 billion, while its net income gained $14 billion.
That’s a near 60% incremental profit margin and most definitely evidence of free money, not the free market, at work.
The truth is, Matt Taibbi was essentially right. Goldman Sachs is the Vampire Squid of the present time, jamming it’s money extraction funnel into insanely inflated financial markets, where it hauls in billions upon ten of billions of pure economic rents.
Indeed, the $60.2 billion of LTM revenue did not come from either the commercial banking business of taking deposits and making loans or the investment banking business of raising new capital for worthy companies. Most of it came from the massive churnings of its trading desks, which should surely genuflect to the Fed several times per day. Even its underwriting and IPO business came from out-of-this-world SPAC offerings and from otherwise peddling the stock of Silicon Valley VCs who pay Goldman a generous share of the lucre to front for their scams.
So on the topside of this equation, we are not talking about earned wealth on the free market. This is not a Cornelius Vanderbilt, or John D. Rockefeller or Henry Ford or Thomas Watson sort of thing. Not even a JP Morgan fortune. It’s actually a massive, wanton gift of unearned wealth to gamblers who are playing the Fed’s metastasized financial economy for all its worth.
At the same time, Washington is no less guilty on the bottom side of the equation. After all, we don’t think there is too much violation of Federal minimum wage statutes actually reported to the IRS in payroll and income tax filings. So that means that the 21 million $2,127 per year workers mentioned above only punched the clock for 283 hours all year or an average of five hours per week.
We might wonder how adults in American society at today’s living costs can get by on five hours of work per week. Then again, there are millions of “students” collectively drawing about $140 billion in student loans per year, which they view as an entitlement to eschew work, but do take an occasional paid gig for beer money. And also, there are quite a few seniors working as greeters at Walmart. So there’s that.
Yet when we crank it up a notch to slightly higher incomes brackets from the “Wage Statistics for 2020” report, we find that fully 55.8 million workers, or 33% of all workers reported making under $20,000 and an average of just $17,454. That’s $335 per week and we sincerely doubt that a single adult, to say nothing of a family, can get by on that, even in rural South Dakota.
That is to say, what is going on in an economy where one-third of the work force is at sub-marginal pay?
Actually, there is no big mystery. Washington has flooded the zone with free stuff – so people can get by with that plus gigs and episodic work patterns.
For want of doubt, here’s the trend since 1980 when you editor joined the Reagan Administration’s crusade against runaway entitlements. Back then the transfer payment number from all levels of government was $271 billion and it represented about 9.7% of GDP.
Last year, by contrast, the transfer payment number was $4.2 trillion and it represented more than 20% of GDP. That’s a 15X gain in the last forty years.
So, yes, 55+ million people are getting by on marginal pay because Washington is burying future generations in debt to keep them afloat
Government Transfer Payments, 1980-2020
At the same time, the private economy is not creating enough decent-paying good jobs because the Fed is essentially commanding corporate America to do the opposite: That is, to dissipate cash flows and balance sheet capacity on funding financial engineering distributions to Wall Street in the form of stock buybacks, excessive dividends and pointless M&A deals.
That’s where economic resources are going on the margin – straight to the top of the ladder, even as Goldman’s money funnel grabs its ample share.
The worst thing is that all the fake populists propping up Sleepy Joe don’t even get the joke. They think madman Powell may not pump-out enough money to keep the Dems in power thru 2024 and are fixing to put a genuine article, woke liberal Keynesian, Lael Brainard, in the big chair at the Eccles Building.
That’s Joe Biden’s (Don’t) Caring Economy for you.
So would it be too much to hope that the sleepwalking Senate Republicans might finally use their blocking power to prevent what would truly be a calamity?
When all else fails, we suppose, hopium will have to do.
Reprinted with permission from David Stockman’s Contra Corner.