Profits up, payrolls down, but Obamacare could help

>>> america is in mourning tonight. people have taken to blog and rebuild stories and photos of the twinkie . no disrespect to the others, but the twinkie is the prize product in the hostess cornucopia. the twinkie with its mix of vanilla and cake and weird shelf life , which is just about a month, not 25 years. that's a myth. twinkies which retail at 10 for $5 which have had their star turns on television.

>> what do we have? hostess twinkies. yes, sir, i know the folks will surely love these.

>> twinkies, which are made by hostess brands, which tonight announced that mediation talks with the bakers union have failed and it's filing for bankruptcy. you and i might look at that news and think, ohno, no more twinkies, but kroegman see es the end of a broader economic era. an era called the twinkie rare. a time when corporations did well and so did the people who worked for them. that was when family income doubled, which gave mom and dad more money to buy twinkies and televisions and cars. taxes were higher in that period both on the rich and corporations. and labor unions were much, much stronger. and yet in the twinkie era, corporations still managed to be profitable. the u.s. economy expanded more than at any other time in history. but something happened because corporations are still doing really, really, really well. but the people that work for them, not so much. corporate profits measured as a percentage have hit record highs. but compensation has hit record lows. look at this chart compared to profits and compensation over the last decade. profit profits is a percentage has surged to record levels. compensation, which workers get, has declined. and these are partially the same trend. corporations threaten to go overseas, they cut costs by give less and less to workers and keep more revenue as profit. in fact, it looked like a dragon. the dragon of inequality. so how do you slay the dragon of inequality and low worker compensation? the twinkie era is not coming back. and and here's what is coming. the affordable care act . explaining what it has to do requires moving from twinkies to pizza. and i recognize there's some irony in talking about junk food , but we're going to do it any way. papa john 's has been complaining that the affordable care act might add 12 cents to the cost of their pies. that means it asks something of the company. if their workers end up needing to use public subsidies to afford health care , then papa john 's needs to pitch in too or to the tune of about $2,000 per employee over the number of 30 or an eighth of the cost of the health care plan. that's not such a bad deal for papa john 's. richard nixon 's plan was 75%. bill clinton 's plan was 80%. but it still gives papa onjohn's reason to hate the act. but you know who it helps? businesses that have taken another approach to roft. the ones that have sought success by giving them reasonable benefits and delivering a higher-quality product. under the affordable care act , they take less in profits or they have to raise prices. either way , that means their competitors, the ones paying more for benefits and get a bit more of an advantage in the marketplace. the high road strategy becomes more profitable. and as for those workers, they are not going to be able to get health insurance either from their employer or from the government. that doesn't bring us back to the twinkie era or anything close, but it does, perhaps, mark the end of the papa john 's era. joining me now is nick canour, it's good to see you.

>> how are you?

>> i'm good. i want to put up that dragon chart again. nick, as a venture capitalist , somebody who has been involved in growing companies, with you look at that, how do you understand the trends on that chart?

>> you know, my view is that the papa john 's complaint, the chart, the way in which our economy is structured to, you know, increase inequality in this crazy way represents a death spiral . when all of the money in a society is accumulated in the hands of a tiny minority of people, most people can no long longer afford to buy the products from the companies. and the reason why our economy is in such tough shape, the reason the recovery has been so slow is we have created this crazy spiral of increasing inequality. and that's what's reflected in that chart. and you know, the papa john 's complaint is the classic trickle down complaint and the trickle down idea takes two forms. if the rich get richer , the economy will be better off and also, it's never stated like this, but it's equally true, if the poor get richer, the economy will be worse off. and nothing could be farther from the truth. trickle down guys have been making this claim for generations. it was the claim when child labor laws were put into effect. basic safety rules were put into effect. when women started being paid fairly. frankly, slavery, the idea if we pay workers fairly, the whole world would come crashing down would prove not to be true. not only do we make people's lives better, but we animate a cycle of increasing returns for everyone. because the job creators is the purchasing power of the middle class .

>> one thing on that cycle you're talking about, i think you see this in the economy and the kind of strategies we're talking about. when they lose the purchasing power , when i have trouble buying cars and going out to eat and things like that, you then get these retailers. some of then are dining, some are consumer goods , but they need to offer goods that are cheap enough for these consumers who are now more strapped to buy so they squeeze costs on their supply chain and their producers and paying their workers less and less. you try to lift the middle a little bit and they say you're destroying the business model . i'm quite sympathetic to what papa john 's is saying, but at the same time, that at some point you need to break the cycle. an endless cycle in which you have retailers like walmart who are squeezing their employees in order to make goods cheap enough for folks to buy down the road, that doesn't get you prosperity. it doesn't build an economy more people can benefit from.

>> not to get all wongy on you, but human social systems are complex and e koe stmic. they are by positive feedback loops that take two forms and only two forms. you either have virtuous cycles where things get better or death spirals where things get worse. races to the bottom. and this ridiculous idea if. we just keep squeezing workers at the bottom we'll get more prosperous is categorically untrue. if there was a shred of truth of any of these arguments, given how rich the rich have gotten, we would be drowning in jobs and prosperity. it's the opposite of true. the way you animate prosperity in a capitalist economy is by raising the bottom. and using the surpluses.

>> nick, we'll have to leave it the there. thank you for joining me tonight. and enjoy.

>>> coming up, new jersey governor chris christie isn't getting any love from his own party. and later, one person we shouldn't be listening to when it comes to when workers should be able to retire. the ceo of goldman sachs . i'll explain why. take alka-seltzer