New York Dems warn that Wall St. gains are no sign of healthy economy

A pair of House Democratic leaders warned this week that record profits on Wall Street are no sign of a healthy economy.

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The Dow Jones Industrial Average on Tuesday hit an historic high, just days after the launch of steep sequester cuts that threaten hundreds of thousands of jobs this year.

Reps. Joe Crowley (N.Y.), vice chairman of the House Democratic Caucus, and Nita Lowey (N.Y.), senior Democrat on the House Appropriations Committee, said the discrepancy is sign of an increasingly disturbing trend in which handsome corporate gains benefit investors and other well-heeled people, but fail to trickle down to working-class Americans.

They called on Congress to act to prevent the $85 billion sequester cuts for the sake of those workers.

"Because the stock market is soaring … that doesn't mean that unemployment rates are going down," Lowey said. "It means that corporate profits are going up, but they are not hiring people."

Crowley piled on.

"There's been a further de-linking, in many respects, in terms of what the stock market does and what the effects on our economy are," Crowley said. "We've seen the stock market rise throughout the last four years, and yet our economy has still been very stagnant overall."

The comments arrive on the same day that the Dow topped 14,200 for the first time in history, even as the national unemployment rate remains near 8 percent.

Although Washington policymakers – in the White House, on Capitol Hill and in the Federal Reserve – have tried repeatedly to locate policies to encourage hiring, the jobless rate has remained at that stubbornly high level for roughly six months.

Meanwhile, the Dow has rebounded from the recent recession in tremendous fashion, rising from 6,626 in March 2009 to above 14,200 Tuesday.

Economists say a number of factors are driving the discrepancy, including the rising productivity of the nation's workforce, a wariness among companies to hire in a still-volatile economy, and tax and benefit considerations that often spur employers to hire cheaper overseas workers. Also, there's the simple fact that new hires cost money, creating the ever-present incentive for companies to keep their payrolls at a minimum.

Rep. Xavier Becerra (Calif.), chairman of the House Democratic Caucus, said Tuesday that the widening divide between corporate profits and middle-class prosperity is reason enough for Congress to prevent the sequester cuts from being fully implemented.

"Some folks may not feel it, maybe the folks on Wall Street aren't feeling it, maybe some of those corporations that are making record profits aren't feeling it," Becerra told reporters in the Capitol. "But I guarantee you, there will be a lot of Americans who will be devastated if we don't deal with the sequester in a smart way."