Friday, December 17, 2004
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Good economic times roll for high rollers, that is
Fri Dec 17, 6:31 AM ET
In some ways, 2004 is starting to feel like the booming 1990s. Stock in stun-gun maker Taser International is up eighty-eight-fold in the past two years. XM Satellite Radio, which lost $637 million in the most recent year, has a market value of $8 billion. More than 200 companies had initial public offerings this year, including casino operator Las Vegas Sands, shares of which jumped 61% Wednesday, its first day of trading.
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Call it the New, New Economy, or irrational exuberance redux. Hot stocks are hot again. IPOs are on a tear. Even big mergers are back: Sprint-Nextel and Johnson & Johnson-Guidant this week alone.
As the artist once again known as Prince used to sing: Let's "party like it's 1999!"
Only this time, the invitations are harder to come by. The recovery is showing up in stock values, corporate profits and other measures at the upper end of the economic spectrum. But in data more meaningful to most Americans, things don't look so rosy. Employment has trickled up during the past year, but still stands at 400,000 fewer jobs than in 2001. Productivity gains and outsourcing mean some U.S. jobs are gone for good.
Wages have risen, but only modestly. The ranks of those without health insurance grew by 1.4 million to 45 million in 2003.
Left unchecked, this type of disparity builds resentment. Until the captains of industry find ways to share more of the wealth with those in the trenches, they risk a political backlash against the policies that have made them wealthy.
Free trade, moderate regulation and low taxation may make sense for many reasons. But if the benefits are concentrated among a relative few, these policies will be hard to maintain over time.
Companies that want to preserve this benign regulatory environment, and maintain employees' goodwill, would do well to reconsider the balance between workers' pay and top executives' compensation. And President Bush (news - web sites) and Congress, authors of an absurdly large federal deficit, would do well to rebalance the tax cuts of 2001 and 2002 that primarily benefited the wealthy.
Some of those tax-cut recipients seem intent on displaying their riches as conspicuously as possible.
In such places as East Hampton, N.Y., and Seal Harbor, Maine, the $10 million weekend place is commonplace. Yacht sizes have swelled, and superluxury cars are selling like, well, Volkswagens. Volkswagen, for its part, is about to introduce a 1,000-horsepower Bugatti that does 250 mph. The price tag: at least $1 million.
To quote another artist, Billie Holiday: "Them that's got shall get. Them that's not shall lose." Great song. But not very good economic policy.
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