Henry Blodgett, Business Insider

Now we're joined by Henry Blodget economist joining us today on the financial exchange. Henry welcomed the show are you doing. Very well thank you for having me. Henry I've been reading a lot of your material lately in particular interest to me was. The your statement I believe -- yesterday with -- task -- the middle class has been guided during the last ten years. What what do you mean that. That's right -- if you look at the long term income growth in the United States you what you need is bit. You know lack. Thirty years and especially in the last ten years most of the income gains in the country have gone to go to the 10%. Of Americans to make the most money. And this is a big change from the prior sixty years went back it was reasonably split between my highest 10% and the other 90%. And they're really -- -- to the problem economically. Aside from just fairness others a lot of people Paribas. Is that the middle class. But 90% of Americans could make the middle income. By the once you spend the most money in the economy. Up to the idea that we're gonna fix the economy by giving a tax cut to say that 1% of the point 01%. Is just is simply not gonna help the cart situation what we have to do is figure out ways to get more money to the middle class. Mean does the middle class feel like they've been disenfranchised. Is if they. Big do they still feel they have the opportunity to advance save money get ahead by -- house. I I think it. Certainly a lot of discontent in the middle class -- what was do you fueling the Occupy Wall Street movement last year where there was this general sense that the American system isn't working anymore the way it used to work. And if you look at the inequality scales such as the one I reference where. The top 1% of the country is now burning. Any record level of the national -- come relative to the prior couple of century you don't pick except for the 1920s who then another similar -- You can understand what people are frustrated that had made it used to be very recently said that. It's certainly the middle class just saying it's harder to maintain a standard of living today that was it harder to advance. Not impossible goal but definitely more difficult than it has been in the back. I think I read that recently where the top 1%. Of American wage earners are making about 24% of all the income generated does that. Accurate with your your your research Henry. That sounds about right it would let our put together a business insider big chart USA that shows the breakdown by incompetent in its very strike and what usually strike if you look at if it's not -- 5% of the top 50%. Re so -- one person makes 44% and thirty years ago that same 1% made about 8% of net. I did that sounds a little I think yeah I don't I don't think it's quite that extreme I have to look at the numbers but it but long term there's no question that the richest 1%. Is it a level of the national incumbency -- -- higher than any time the last seventy years the only time it was this high before it was in the 1920. Henry how does our CEO pay compare to CEO compensation in Germany or in China are and other countries does it seem. I've studied CEO content that pay and it seems that we pay our Chief Executive Officer a lot more than other countries do. I think that's right I haven't seen studies that -- focused only on CEO pay but if you look at the the inequality of the 1% vs other countries -- America has developed equality of the war. Most of the rest this civilized world and and there are a lot of reasons that I wanted. The globalization where a lot of the middle class jobs that -- ever sees one it. Policy without tax policies for thirty years now but it basically given tax cuts for the richest Americans encouraged investment. But it is not falling through and and there are a lot of reasons for it. I think it there's no question that America is -- greater inequality and just about any other country have not church just focus on the -- level. Bush Henry when you look at that in and and I know your solution to it is that you know CEO should hire more people and pay their workers more. Why you why would they do that -- be given the -- be in the environment. You know why would they voluntarily do something like that when they don't have to. Well -- I think that it's certainly we've given it hurt coming up to a presidential election there are lots of boat discussion about how the government can -- Problem and there are different approach that certainly the Republicans respect what they gotta give money to the rich people. That Democrats are more focused on getting my middle class. I think the unfortunate answer is that the government can't solve this problem and Arctic congress. Just completely dysfunctional but it will block any day -- -- I think private sector have to do it and the answer to why should companies pay people more are more people. It is indeed in theaters right now what in the American large companies have a record profit margin as a percent of the economy so the idea that our business they're hurting. Did you simply -- bit higher profit margins in it it ever. High end and highest amounts of cash ever right -- they are so beyond two trillion dollars in cash. -- -- -- -- -- Ten and they are certainly are good points made it that we have this ludicrous flaw that they -- so that they can't repatriate cash that they ever need and don't put those all and be loosened. No question that some regulations can be stripped down. Fundamental issue for corporations and for the richest American -- there really is nothing to investing in because the customers. The Mac market opened the American chamber are hurting their blue -- you can do we have to stick that this year. -- that is that why there's no demand because it all comes back to demand right wire people -- houses they're not buying cars because they can't afford to buy a house we can't afford to buy a car. Exactly we've already made it so borrowing money is essentially. -- you know they've mortgage Richard blows whatever they haven't -- the housing market is still on the tank and that's because people are still stuck. And it just don't have the income to support it build it back -- question of how we can convince corporations to hire more people and pay them more. Hey I think they're cute thing to a one. Over the long all of this well actually accelerate revenue growth because if you get money into the middle class where will be spent. Ultimately that means revenue for other companies. It's just simply money by calling in the economy so that can help to accelerate that's the whole theory with government stimulus by the way yeah. It's just in this case it would be a private sector stimulus is that the government. And then the second reason -- it's more than you. Urban ecological view of what corporations should be doing well we've developed a religion in the last thirty years of shareholder value Liberty Bowl leasing companies are supposed to care about is Akaka. -- I think that that in fact it's gonna pendulum has swung way too far in that direction and we need to start looking at companies more realistically whether believe constituencies that there are certain shareholders. But they're also customers deserve to get great product -- and then very importantly there are employees. Who are -- their lives for the company and in many of our biggest companies. People who works full time that the company still live below the poverty line and that's just didn't ever say yeah so I think it. Ultimately there has to be a message. -- that gets absorbed by our our capitalist he goes which is company's. Should really look out for their employees and they should do Henry Ford famously did it which was under no pressure from his employees. Doubled their -- In order to give them -- -- -- keep them at the company and happier. It is in 1914. It was because refuted heresy and crazy. And -- what brought about are very strong middle class what other companies began to follow the example. Known Henry a and I'm sure a lot of people listening hoping that their wages will be doubled thank you very much for joining us. That's Henry Blodget joining us today he's from the business insider. Terrific economist with his perspective. On what's going on amazing to see the income -- -- disparity figures that have developed over the last thirty years will be right back with more on the financial exchange.