Elizabeth Warren Gets It Dead Wrong on Corporate Profits in Convention Speech

By Pam Martens and Russ Martens: July 28, 2016 

Senator Elizabeth Warren Speaking at the Democratic National Convention, July 25, 2016

Senator Elizabeth Warren Speaking at the Democratic National Convention, July 25, 2016

Senator Elizabeth Warren, during her speech at the Democratic National Convention in Philadelphia on Monday night, made the following statement:

“Here’s the thing: America isn’t going broke. The stock market is breaking records. Corporate profits are at all-time highs. CEOs make tens of millions of dollars. There’s lots of wealth in America, but it isn’t trickling down to hard-working families like yours.”

It is true that the stock market has been setting new record highs as measured by the Standard and Poor’s 500 and Dow Jones Industrial Average but that’s primarily because corporations are going into deeper debt and using the money to buy back their own stock. This is happening at a time of a scary profits recession for corporate America. Not only are profits not setting records, but profits in the S&P 500 have declined year-over-year for the past four quarters and this is shaping up to be the fifth consecutive quarter of profit declines.

Last Friday, FactSet reported the following for the second quarter of 2016 (Q2) based on 25 percent of S&P 500 companies having reported so far:

“For Q2 2016, the blended earnings decline is -3.7%. If the index reports a decline in earnings for Q2, it will mark the first time the index has recorded five consecutive quarters of year-over-year declines in earnings since Q3 2008 through Q3 2009.”

Not to put too fine a point on it, but the third quarter of 2008 through the third quarter of 2009 was during the Great Recession – the greatest economic calamity since the Great Depression.

Not only was the statement by Elizabeth Warren unfathomable for a woman of her business savvy but stranger still was the fact that the false statement went unchallenged by the business media.

Fortune Magazine reported on Warren’s comments here but made no mention of the fallacy that corporate profits are setting records. Equally shocking, the Wall Street Journal also quoted those Warren remarks and didn’t correct her statement on corporate profits being at all time highs. We searched high and low and we could find no business media correction of Warren’s statement on corporate profits.

Elizabeth Warren is a former Harvard law professor, teaching commercial contracts and bankruptcy law; she’s a sharp-eyed member of the Senate Banking Committee and a member of its Economic Policy Subcommittee. Warren can go head to head on monetary policy with the smartest minds in Washington. How could a Senator with such a background, and with a multitude of political operatives vetting her speech, make such a mistake?

Given that Warren repeated nine times in her speech “and we’re with her,” a takeoff of Clinton’s campaign slogan “I’m with her,” it is likely Warren’s speech was also vetted or tweaked by the Clinton camp. Surely someone in this throng knows that corporate profits have been tanking for a solid year.

Let’s consider the possibility that this wasn’t a mistake at all. The scripted narrative for the Democratic National Convention is that Hillary Clinton will deliver President Obama’s third term; that Obama has deftly maneuvered the economy from the abyss of the Great Recession to stock market highs and robust corporate earnings. Obama himself flaunted his economic success in his speech last evening, stating: “By so many measures, our country is stronger and more prosperous than it was when we started.”  And this: “After the worst recession in 80 years, we’ve fought our way back. We’ve seen deficits come down, 401(k)s recover, an auto industry set new records, unemployment reach eight-year lows, and our businesses create 15 million new jobs.”

Also last evening, the billionaire and former Mayor of New York City, Mike Bloomberg, remarked on “the American exceptionalism we now enjoy” and echoed a line in Michelle Obama’s convention speech that America is “the greatest country on earth.”

There’s no doubt that America does look like the greatest country on earth to Michael Bloomberg. According to Forbes, his net work in March of 2008, prior to the onset of the financial crash was $11.5 billion. Forbes now puts Bloomberg’s net worth at $47.7 billion. During one of the most challenging economic times in America’s history, Bloomberg has been able to more than quadruple his wealth while the middle class and the poor sink further. And the vast majority of Bloomberg’s wealth stems from the Bloomberg data terminals he leases to Wall Street’s mega banks at their locations around the world. (What message does the Democratic party send by putting such a man on stage at their convention at a time of unprecedented wealth inequality in the United States.)

President Obama and his minions are falling over themselves to secure his economic legacy because Senator Bernie Sanders has driven a stake through the idea that America is exceptional for anyone but millionaires and billionaires. Sanders has stumped around the country for a solid 15 months delivering this message:

“America now has more wealth and income inequality than any major developed country on earth, and the gap between the very rich and everyone else is wider than at any time since the 1920s.

“The reality is that since the mid-1980s there has been an enormous transfer of wealth from the middle class and the poor to the wealthiest people in this country. That is the Robin Hood principle in reverse. That is unacceptable and that has got to change.

“There is something profoundly wrong when the top one-tenth of one percent owns almost as much wealth as the bottom 90 percent.”

President Obama began to fight back on the Sanders’ message in his State of the Union address this past January, stating: “Anyone claiming that America’s economy is in decline is peddling fiction.”

Characterizing fact as fiction and subtly suggesting others should do the same is a dangerous position for the leader of the free world. How do we fix the nation’s problems if we’re not allowed to admit and discuss what they are?

Refusing to acknowledge the tragic toll this institutionalized wealth transfer system has taken on our nation’s children is unethical and unconscionable. How can America be the greatest country on earth with multiple studies showing childhood poverty in the U.S. is among the worst of major countries. The Washington Post ran the headline “Child poverty in the U.S. is among the worst in the developed world” when UNICEF released its 2014 report, noting:

“With 32.2 percent of children living below this [poverty] line, the U.S. ranks 36th out of the 41 wealthy countries included in the UNICEF report. By contrast, only 5.3 percent of Norwegian kids currently meet this definition of poverty.”

This reality stands against Michelle Obama’s statement in her Democratic convention speech: 

“So, look, so don’t let anyone ever tell you that this country isn’t great, that somehow we need to make it great again. Because this right now is the greatest country on earth!”

Tens of millions of Americans believe that neither Hillary Clinton nor Donald Trump can be trusted with the leadership of the country at one of the most critical junctures in the nation’s history. Debating which one would be worse rather than tearing down the artifices like corporate campaign financing and Wall Street’s death grip on Washington that perpetuates this malignant system is a far more important debate.

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