One of the MSNBC segments that took place in the immediate aftermath of Obama's SOTU address contained a brief interview with a libertarian US House representative from Illinois' 18th Congressional District named Aaron Schock. Congressman Schock is a tea party Republican whose views on the minimum wage are nothing short of Neanderthal. His reference to any government established minimum as "artificial" was smug and, I must say, quite devoid of any real understanding of basic economics. Anyone knows that the term artificial, when applied to wages, prices or anything else, means created by non-Market forces, usually government. But there is really no such thing as a labor market; markets by definition have to be capable of equilibrium. This is impossible since the number of jobs in an market economy and the size of the workforce will never be nearly equal. This is mostly likely a consequence of extra-economic intervention in the "free market" since employers despise labor shortages and like as much slack in the labor market as possible so as to control wage levels.
Furthermore, economists have long been telling us that six percent unemployment is the "Non-Accelerating Inflation Rate of Unemployment" (NAIRU) which means that in the US economy there must therefore always be at least ten million unemployed workers! Under such circumstances "true market" wages could fall as low as three bucks an hour or less! The entire remark was ridiculous; there is no labor market, only a labor pool since people are forced to work for the wages they're offered or starve! And this is exactly the reality which Congressman Schock, and other tea party Republicans chose never to address.
What was truly disturbing about Schock's comments was his view that no government set minimum wage could ever be sufficient to allow working families to make a living and so we need to scrap the minimum wage altogether along with all existing industrial regulations. Most importantly, according to Schock, was the "need" to reduce the 35% statutory federal corporate income tax to no more than fifteen percent. Follow these recommendations, promises Schock and other Tea Partiers, and we will see millions of high paying jobs pop up like flowers in springtime! This was reminiscent of Romney's ridiculous campaign promise that he could make 12 million jobs in only four years (an unbroken monthly average of 250,000 jobs for 48 months straight, unprecedented even in the best of times!) thus soaking up the unemployed into the job market like a thirsty sponge! This is way beyond absurd!
We've tried this failed strategy for over three and one half decades and we simply ended up with high deficits, stubborn poverty rates, chronic stagnation, high average rates of unemployment and the worst distribution of income since before the Great Depression of the 1930s. The idea that if tax breaks added a few tens of billions to the already existing more than two trillion sitting idle in corporate coffers we'd have enough to start new job creating investment is the silliest claim one could make and even the tea party Republicans know it! Eliminating the minimum wage would simply lower nominal wages to virtually nothing while failing to stop jobs from going overseas.
In the first place, everyone is well familiar with the recent Government Accounting Office (GAO) studies that have shown that most large corporations have declared no federal income tax liability in more than one fiscal year since the late 1990s. Everyone knows that no corporation pays anything near the statutory corporate rate of thirty five percent. in fact, the GAO famously assessed the average effective rate of federal corporate income taxation in 2010 to be a mere 12.6%, one of the lowest in the industrialized world! The GAO was able to calculate this figure from studying corporate Schedule M-3s that corporations are required to file with the IRS "...reconciling the differences between the income and expenses they report to shareholders using generally accepted accounting principles (GAAP) and those they report for tax purposes to the IRS." And everyone recalls 2010 as the year in which GE earned about $14.2 billion in profits worldwide ($5.1 billion of which was earned in the US) but paid zero federal income taxes! In fact, GE was actually eligible for a $3.2 billion tax credit according to the US tax code! So much for eliminating the "loopholes" for "base broadening" that tea partiers claim to want to do along with steep top rate cuts; big corporations will never allow anyone to cut off their welfare! What we'll like end up with is just greater and greater upward shifts of income toward the corporate rich, with no additional job creation of any kind.
Corporate profits rose sharply after 2001 recession ended and came crashing down after the crisis/recession 2007-09. After the start of the recovery, gross profits bounced back up to over 14% of GDP in recent years. According to Bruce Bartlett, a former Senior Reagan Administration policy advisor, by 2010, the long term trend in corporate tax liability as a share of GDP was about 2% a year. This is among the lowest in the industrialized world. Much of the reason is a provision in the tax code allowing corporations to carry losses forward from previous years to offset taxes in future years. This saves corporations billions in taxes over time and is another way that the tax code is written to advantage big business. Furthermore, according to Forbes columnist Mike Collins, effective corporate federal income tax rates have been falling precipitously since the 1980s;
"...history shows that effective corporate tax rate has been steadily declining for decades. Corporations paid more than 49% of their profits in federal taxes in the 1950s, 38% in the 1960s, 33% in the 1970s and 25% in the 1980s. All the while, U.S. wages have been stagnant for years even as productivity has risen. Between 1989 and 2010, U.S. productivity grew by 62.5% — far outpacing wages, which grew by only 12% during the same period, according to a March 2011 study by the Economic Policy Institute."
So are federal taxes keeping the US economy down? It isn't likely and there is no reason to believe that tea party proposals to cut corporate taxes will swell the job market with high paying jobs. The idea that cutting taxes for the rich is more beneficial to working families than boosting the minimum wage is about as ignorant a claim as anyone can make! Tax cuts never work; the 2004 tax holiday, that resulting in $300 billion in corporate overseas earnings being repatriated to the US, did nothing for job creation with over 90% of the repatriated earnings going to shareholder dividend payments. The only way to boost economic growth is through increased consumer demand which means greater middle class incomes. This means union rights and higher minimum wage levels.
What about small business? Isn't the minimum wage an excessive burden on them? First of all, the federal minimum wage is extremely paltry to say the least! Most experts have famously declared that it has yet to reach its peak inflation adjusted value from between 1968-1973. Besides, small business is no longer the backbone of US employment; according to the US Census Bureau, since 2008, more than half of all non-farm payroll employees work in companies employing 500 workers or greater. By 2012, little had changed; large, private sector businesses employed 51.6% of all non-farm, payroll employed persons. As in all advanced capitalist countries, the US capitalism has concentrated not only wealth, income and output, but employment as well!
Therefore, it is no longer small businesses that mostly pay minimum wage but large ones. According to a recent 2012 study by NELP found that more than two thirds of minimum wage workers worked for large corporations employing over 100 workers, not small businesses. Most of these corporations were highly profitable returning hundreds of billions to shareholders and paying their CEOs an average of nearly ten million a year! It is time to stop the excuses and to drop the right wing propaganda against the US middle class and working families. The time to raise the minimum wage is now! The working people of America deserve better than the harmful agenda of tea party Republicans who only serve the very rich and the smug, misleading lies and propaganda by such elected leaders as Aaron Schock!