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SleepinJeezus's picture

The Failure of a Thirty-Year Experiment in Reaganomics

Since the advent of Reaganomics, both Repubs and Dems have fully embraced supply-side, trickle-down economic policy as the course that would provide growth and prosperity for all Americans. Indeed, there was no greater advocate of this than Bill Clinton, who established NAFTA as the standard for our Free Trade policies.

In the beginning, Reagan and Clinton, et. al., insisted that the benefits of this economic policy would "trickle-down" to wage-earners. What we got instead were stagnant wages, downward "competitive" pressure on pension and health care (and other) benefits, an assault on government safety net programs and regulatory protections, along with the decimation of the Labor Movement. "Trickle-down" has, in reality, become more like a "golden shower," and it is Wall Street that is standing atop it all with its zipper down.

Whatever "benefits" received under this supply-side system were actually a chimera. The housing bubble offered an illusory increase in middle class wealth, and easy credit replaced actual wages as the growth in "income" to be spent by middle-class households. (This "credit-income" was spent, by the way, in support of keeping the consumer-driven economy afloat. That is perhaps the cruelest hoax of all!)

Meanwhile, government spending was increased - not on social programs - but rather on military adventures and corporate giveaways. In addition, we suffered ever greater increases in expenditures to cover the interest costs for the loans that supplanted tax receipts as we slashed tax rates for the wealthy and the corporations to some of the lowest levels in modern history.

At present, there's no longer even mention of any trickle-down benefit to be gained. Thirty years of Reaganomics has redefined the economy itself. It's no longer the objective of economic policy to improve the living standards of all Americans. Rather, our goal is to do whatever is necessary - make whatever sacrifices are asked of us - to grow the Dow Jones Industrial Average and increase shareholders' profits.

Nothing else matters. Cut taxes. Trash Social Security and Medicare. Universal Health Care? Fuggedaboutit! Labor and environmental standards? Yeah, right! We gotta be competitive with places like Myanmar and the Mariannas, and so anything that increases "the cost of doing business" must be avoided.

There's no longer any hope even offered that our children will experience improvement in their living standard or actually receive any benefit from growth in this economy. Indeed, listen to Obama's SOTU Address as he promises that we can become (h/t to obey) "a nation of innovative hobos" if we will just knuckle down and try. Wage earners and the middle class are simply collateral damage to be sacrificed on the path to a far greater good, which is defined quite exclusively as increased profits on Wall Street:

"...the stock market has come roaring back. Corporate profits are up. The economy is growing again."

 President Obama - 2011 SOTU

THAT'S how the Dems and the Repubs both describe a successful economic policy. "If Wall Street is happy, we're all happy!" It must be noted that Obama does offer some bromides about "the success of our people" and even the "quality of our jobs," etc., but the words ring hollow in the absence of any change in policy direction from the status quo. The unemployed worker, after all, knows how futile such expressions of hope are in our present system. These wage-earners no longer believe there is any chance they will improve their circumstance in the choice of that next job. Indeed, he or she wonders if they will ever again gain employment that will pay a wage capable of sustaining them and their family. And Obama can't even begin to assuage their fears. Within the context of the SOTU Address, the best he offers to us and our children is the chance to be "a small business owner who dreams of turning a good idea into a thriving enterprise." Innovative hobos, indeed!

For thirty years, the Dems and Republicans have both been fully on board as advocates for this experiment in supply-side Reaganomics. It's failed. Just look around within all our stressed communities in this nation - from Sarasota-Bradenton to Bakersfield and to all points in between - and you will see that it has failed miserably. It's time to try something different, and I expect we will not know anything close to peace, hope, and prosperity among the electorate until we take some plausible steps toward charting a different course for our economy.

 

 

Walk like an Egyptian.

Thanks for the picture, and thanks to you sleepin.

I shall return

I couldn't agree more with the description of how the middle class has gotten screwed, but I disagree with the assertion that supply side economics caused it. It seems that intellectual laziness finds supply side too often as the bogeyman for economic policy failure. Supply side theory, if you want to really understand it, is simple in its logic, but it has been perverted by too many people who are too lazy to dig to the root causes of our economic evolution. Try reading Jude Wanniski's book, "The Way The World Works," then consider that supply side theory is a simple tool available to policy makers for use occasionally; not the cure all espoused by simple minded conservatives nor the bogeyman criticized by simple minded liberals.

Then do some research into how our world of floating exchange rates and inability of the Fed to EFFICIENTLY manage them has caused more disruption to our economic cycles than supply side policy.

Finally, since our great method of taxation in this country penalizes achievement and provides a fertile playing ground for special interests, how would you expect the middle class to thrive? Either you use the power of the government (who specializes in special interest legislation) to try to level the playing field for the middle class, or, you fundamentally change the playing field (the Tax Code). Tax reform ideas like The Fair Tax are automatically dismissed by the same people who aren't intellectually honest about supply side. Even the Flat Tax is better than what we have now, but entrenched special interests, with much of the power (certainly not the middle class), will resist changing the playing field.

You want to chart a different course? You want to escape the conventional bubble? Even if you can't agree with the overall effects of The Fair Tax, study it and put together your own idea using some of its ingredients. It is a radical departure from what we have known, but do we not need a radical change to help the middle class?

I know he can handle this on his own, but, rather than fully explaining your points of disagreement with Sleepinjeezus, you call him lazy and simpleminded and then tell him to go read a book.

If Sleepin is simpleminded, and the opposite (which you no doubt consider yourself to be) is complicatedminded, I have to wonder how you can declare anyone to be the former from reading one blog of his.

Thanks for offering your perspective.

I hope you'll expand the discussion.

Tax policy is a VERY important element.

He that controls the purse stings, controls the agenda.

If Obama and the Republicans are sayin "everything is on the table"

I'd like to see more revenue from Tariffs and Duties, to address our deficit problems. 

Not cuts to the Social net.

Establish a sound Social net, and all other policies of wealth creation are subservient.

We the people have established the parameters. Live with them.

Tell the corporations go to Egypt if they want, but we aren't allowing you to import without paying into the fund to support our safety net.

Have at it, you capitalists, you industrialists, you know the rules, live within them and we'll leave you alone.

 

The point made, pete (not verified), is that we have put all our eggs in the supply-side basket for thirty years, and it has failed to produce benefit to the vast majority of Americans as promised. I therefore agree with you when you say: "supply side theory is a simple tool available to policy makers for use occasionally; not the cure all espoused by simple minded conservatives."

However, in making the case that supply-side economics has indeed been made the "cure all" for so long by both Repubs and Dems, it follows that supply-side economics is in fact "the bogeyman criticized by simple minded liberals" who happen to be paying attention.

You go on to suggest the use of tax policy as the cure all. It is but one tool in the arsenal in developing a reasoned economic policy. Fiscal policy, Trade Policy, Labor and environmental and energy and other regulatory measures are included, as well.

Simple minded I may be, but I am not so bold as to suggest that I, alone, have all the answers on a specific policies portfolio that will address all the problems visited upon us by this thirty year failed experiment in trickle-down.

But I do know that we need to charge the economists and our political leadership with developing a path for the future that has as its objective the improvement of living standards for ALL Americans.

That's a pretty good place to start. And it's wholly missing in favor of shareholder profits and growth in the DJIA at present.

Despite the 'reputation defender's' counter-argument, I put myself on the side of people that agree with you, Sleepin', about Supply Side economics. It was always a bad idea.  It may be a glowing revelation to prissy conservative academics, but it stinks in execution and everyone that believes in being guided by the principles of Supply Side economics deserves our scorn.  Just another indication that Wall Street has won the war for the hearts and minds of our elected officials.  The 'will of the people' has been replaced with 'the will of Wall Street', and there isn't even any embarassment about it.

Excellent post Sleepin... as usual.

One of the major problems with 30 years of pervasive corruption of the Democratic Party and the rise of corporate "centrist", "pragmatist" Democrats in Washington is that many younger Democrats, who have known nothing else but continual retreat and surrender by Democrats on even the most basic Democratic policies actually believe that there really is no other choice.  Since they've lived in a world where they don't remember anything but Democratic capitulation to the demands and wishes of the predator class they think the pitiful half measures and avoidance of conflict with the far right are the best we can do.  It's a shame that the lies of revisionst "pragmatists" have taken hold so that many younger Democrats don't even consider what seems like such obvious common sense which is to return to policies we know have worked.  They are so badly misinformed they believe what is required is immediately to return to the policies of the 1930's because they don't realize that those policies evolved over the decades and worked very, very well and the well tuned evolutionary offspring of those policies were only dismantled over the last 20-30 years.  Many of the most important and effective of those policies were only repealed or made toothless in the past decade! 

The greatest problem we have is in ovcercoming the corrupt Democratic politicians who run the Democratic establishment in Washington.  Do we even read of any discussion of retaking the House and beefing up the Democratic numers in the Senate?  Not really.  The corrupt DC Democrats like it just fine the way it is because now most of the pressure to actually do something is off of them since they can rest easy and rely on their old dodge of responsibility which is that the Republicans have too much power for them to do the things they claim they want to do but which the record shows they have no intention of doing.

The time grows near for the left to forcefully split off and start denying the corporate Democrats the offices they covet.  Only then will they start becoming responsive to the desires of the Democratic electorate which is far more liberal and progressive than the corrupt political office holders will ever respond to as long as the left blindly supports them regardless of how many lies and double crosses they commit on the voters.  Glenn Greenwald has written at length on this topic and I agree with him 100%.  What reason, after all, do politicians interested primarily in their own careers and the booty they can reap after leaving office (like Obama and his ilk) have to pursue progressive policies when they know that in the end the left will back them regardless of how far to the right they take the party?  The answer of course, is zero reason.  The proof of how true this is can be seen in the repeated lies and flip flops coming out of the White House since January 21, 2009.

I have no doubt that the real Democrats will prevail in the end as they have in the past.  I only hope that we can see that happen before the corrupt DC Democrats and their Republican Lite policies have made things much worse for the common people than they already are.  Keep the faith!

Without prior electoral reform (ranked choice virtual runoffs) , however, denying office to corporate Dems means that the index of efficacy is the election thrown to an otherwise losing Repugnant. Sometimes (2000) the world will pay a fearsome price during the birth pangs of a new majority. (Before our latest screwing, I would tsk-tsk the Greens, though I was one in 2000) Now. not to put too fine a point on it, myself, I have drunk so deeply of the bitter dregs of betrayal by Prez Bait'nswitch, I say (along w/ Tiny Tim) fuck'em all, every last one! Vote Classwariccan and damn the consequences...

Yes. 

The difference in defeating corporate Democrats in name only in the Congress is negligible.  The Republicans run the Congress no matter what the partisan split is.  That is crystal clear and has been for a long time.

If the left starts inflicing damage on them, particularly in primaries, then it won't be long before the careerist politicians so willing to do the bidding of the rich will be forced to respond to the left instead of ignoring the left.  We have seen this happen on the right in the Republican Party.  it's basic political physics.

As for the reluctance of many to defy the right wing Democrats and punish them at the polls by denying them primary nominations and/or office in general elections in order to get them to come back to Democratic princiaples and policies I understand it, but that's what it is going to take.  The longer we wait, the worse the situation gets. 

I would add it really is important that people understand that it is completley false to use the Naderite/Green example from 2000 as the corporate Democrats blew that race on their own.  Remember, Gore won more votes in Florida than Bush and lost several states he could and should have won including Tennessee that had nothing to do with any votes Nader might have gotten.  That is all beyond question and has been documented thoroughtly.  I certainly didn't vote for Nader in 2000, but it's just not accurate to lay that defeat at his feet or at the feet of the Green Party that he used that year.

It wasn't Nader who beat Gore in 2000: it was the foolishly conservative and ineffective race Gore ran and how it blurred the substantive differences that did exist between Gore and Bush which worked perfectly for Bush as that was the entire objective of his plan: blur the differences to appear moderate and then govern hard from the right.  Had Gore run as a real Democrat and been unapologetic for doing so he would have crushed Bush.  Gore put his faith in the DC Democratic common wisdom and he was wrong to do so.  Gore learned that too late.

But the point IS to deny election to those who, like Gore, are not prepared to run as REAL Dems. That's what happened in 2000 Nader showed the potential for efficacy of that threat.

Ross Perot was correct about the giant sucking sound.

 

I understand.  I think primaries are the best venue frankly.  If the corporate Democrats start seeing that they can be eliminated prior to making their specious argument about how they may be bad, but not as bad as their Republican opponent then the whole atmosphere starts to change and fast.

I confess to utterly elliding the primary process, which was, indeed, a fruitful field for the baggers to plow this cycle. That said, it is far less useful on the presidential than the local level,.

(NOTE: My apologies for posting this blog this am, and then not participating in the follow-up discussion that has occurred in the meantime. Unfortunately, my job schedule interferes and so my continuing involvement will probably be a bit sporadic. ;O) 

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As much as it pains me to say so, I am very reluctantly coming to the same conclusion, JR.

I have made the analogy before, but here goes:

If you pull yourself back and look at the long term prospects for where we are going under present economic policy (Republican or Dem), you see that we are ultimately headed in the same direction. You can either take the Express Bus (Repub) or the Local (Dem), but either way you arrive at the same destination where the oligarchs rule and we are nothing more than a "human resource" to be used up and discarded as the next "human resource" becomes available. I explained this dynamic in a previous post that included the following quote - a quite chilling assessment of the need for "Rebalancing" in our global economy, offered by an editor at The Economist:

"Now, the U.S. consumer is not going to play that role in the future. There's been a huge loss of wealth in the country. People are not going to spend as they used to spend. So in order for the global economy to grow - even moderately - we have to find different sources of spending.

"And that's what this 'rebalancing' means. It means rebalancing away from reliance upon the U.S. consumer toward, for example, greater reliance on China so Chinese spend more at home..."

We find nothing in what is being promoted by Obama, the Dems in Congress, nor the Repubs (most certainly!) that steers us away from such "Rebalancing." Indeed (as is oleeb's point) we are treated to this prospect as an inevitable course for this economy; our abandonment to the ash heap is regarded as a function of some kind of Natural Law. "Been fun, folks! But it's time to move on! Sucks to be you!"

The real horror in this comes from the realization that this works amazingly well in delivering the fruits of our common economic enterprise to the feet of the oligarchs who own our political system. There is, after all, an inclination to deny that such an outcome of abandonment is remotely possible. I mean, we can't all be destined to serfdom, can we?

Not only can we, but it serves the interests of those in charge to achieve such an objective. And they have the politicians under virtual contract (via present campaign financing realities) to deliver such an outcome.

The oligarchs allow for a pretense of "opposing" choices to be made of the vehicle (Dem or Repub) within which we will be delivered, but the destination remains the same. Thus, the Local Bus is allowed to take an occasional detour (i.e. the Health Care Insurance Reform Profit Enhancement and Protection Act; Banking Regulation Reforms written by Wall Street; etc.). We might even be allowed to stop long enough to get a rainbow bumper sticker applied to "our" bus or help a disabled motorist change a flat tire. But ultimately, even on the Local Bus we are all put back on board to be driven closer to the ultimate destination.

The oligarchs have thus provided a plausible argument that there is a "difference" between the two parties, and so we see the argument made that "Sure! The Dems really suck! But the GOP is so much worse that we can't allow them to win. We must therefore hold our nose, vote Dem, and hope for the best."

I've made that same argument for most of these last thirty years. I've been quite adamant that the Dems are the only thing between us and a GOP nightmare that would speed us into the hands of fascism and the cruelties of an unfettered free market capitalist society.

But when I now take care to actually see where both buses are ultimately headed, I see we are offered nothing more from the Dems than being taken for a ride. The itinerary is not ours to determine, but has rather been pre-ordained by the monied interests to deliver us all - Republicans and Democrats - to the same Corporate Nirvana where shareholder profits are King and nothing shall limit their growth.

There really is no present alternative in the choice of destination. We gotta change that, either by making of the Dem Party a vehicle under control of the people and not the oligarchs, or by creating a whole other bus within which to gather folks who are interested in arriving at a place of their own choosing.

The first option remains the most attractive, but I fear the latter is becoming more and more the only viable choice as Dems continue taking orders from the K Street Crowd that pays their operating expenses.

We simply gotta' do something different. Either that, or follow Obama's WTF lead and "Quit Worrying and Learn to Love Our Jobless Recovery."

(BTW: Ranked Choice Virtual Runoffs is a worthy topic for discussion as we look for ways to reform our electoral system with intent of getting away from the dominance of corporate interests in dictating outcomes.)

It's becoming the Bay Area norm-thus, an Asian woman is mayor of Oakland with (pulls number from ass) 3rd place amongst the first choice votes...maybe 2nd or 4th but anyway not first past the pole.

Very well put! 

"...made things much worse" There's some elegant French phrase about winning through "le pire" that I can't track down, but shit, these are some seriously lumpen proles we got if they ain't motivated yet...

Proletariat: working class people concious of the ongoing class struggle and organized to assert their class interest Lumpenproletariat: working class hypnotized to think their interests will be vindicated by the Ruling Class. eg Joe the Plumber, Teabaggers etc That's why we call it the Classwarrican Party

You're thoughts on Duties and Tariffs, eliminating Free trade agreements?  (Yes I know there will be those who’ll bring up the ghosts of Smoot/Hawley)

I believe we should do as the US does and freeze the bank accounts of those we disagree with. Sanctions are a favorite tool.

We get into the pockets of the multinational corporations.

The picture given by cmaukonen, at the beginning of this post, of the burning in Egypt raises a question. .....If this were a factory on fire, of a multinational, which produces cheap goods to be imported to the US, would they be able to avoid taxes in the US, claiming this is overhead expenses?

If so; why are we underwriting, companies who leave America?

What costs do they incur, when they think they can abandon us, to screw with our safety net.

What risk contributes to their decision making process, to set up shop to undermine American workers?

1. Free trade agreements are licenses to engage in what used to be called "Labor Racketeering" Give the 6 month notice. Likewise notify the wto that we are out the door. 2. yes. under current tax law, your burned building (net of insurance) is a casualty loss and deductible. 3 I like a VAT where the first $100,000 spent is exempt.

"Take a method and try it. If it fails, admit it frankly, and try another. But by all means, try something." ~ Franklin D. Roosevelt

 

Was supply side worth trying?  

Yes, IF we can learn from it.

No, IF society's most vulnerable are expected to rely solely on what trickles down for their most basic human needs.  

It was a semi-reasonable expectation that reducing taxes on high incomes could have as much stimulative effect as government spending programs.  And, there was some correlation between Kennedy's tax cuts and an expanding economy in the 1960s.  Proving whether or not there was causation seems like a worthwhile experiment as long as there is some buffer to protect the non-beneficiaries of tax cuts from any unforeseen negative effects.

In my mind the really great tragedy of the 20th century was the advent of true believers in economic systems.  An economic system or method will either work or not.  It may only work for some or under specific circumstances while another method or system will work for others or under different circumstances.  The only way we will find out is to try different ones while never forgetting that the true purpose of a society's economic system is to provide for all its members.

 

That is a great quote and in fact, that is what the FDR Administration did.

It tried different things attempting to find social and economic policies that worked.

Of course they did not know that longer and more far reaching policies would work in the end. I mean Social Security was not something you could try for a couple of years and see how it turned out.

Politicians do not like to admit that a plan or a policy did not work.

Kerry was beaten so badly by the press when he admitted that a vote for the War in Iraq was wrong.

Great quote.

FDR is very quotable.  I am a great admirer and not just for the usual reasons.  .

Great comment, emma. And we can really move things forward if only we would settle on your last phrase as the overall objective: "the true purpose of a society's economic system is to provide for all its members."

It seems so plainly intuitive, doesn't it? Yet, we have strayed from that objective long ago, and no one in Washington seems to notice.

Thank you.  It does seem too easy to forget.  

It's no longer the objective of economic policy to improve the living standards of all Americans.

Let's put that on a banner, SleepinJeezus, and hang it in the bathroom, and read it every morning when we splash cold water on our faces.

 

Thanks, Red Planet. It really IS an unvarnished truth that becomes painfully obvious if you just step back from the political fray and take a look around. And if you hold such a thought in your head, I think such things as the President's WTF SOTU begin to take on a whole different meaning. It wasn't a message of hope at all, but rather a pretty horrifying glimpse into just how truly f*cked we all are who would choose to be a wage-earner in this economy.

After all, contrary to the President's "promise," we can't all become CEO's or Hedge Fund Managers.

Here's somethingto add to your reading SJ.  "Jobless growth is only one symptom of increased social conflict, intensified economic inequality and weakened democracy. The prosperity in jobless prosperity exists only for the rich."

http://economix.blogs.nytimes.com/2011/01/17/borderless-economy-jobless-...

Nice post.

"Only for the Rich?"

I can almost hear Summers and Bernanke and all of Wall Street responding "So? What's your point?"

Also from the article:

A recent Time magazine article by Zachary Karabell referred to the new joblessness as a part of a megatrend toward globalization that we just have to live with.

So much depends on who “we” are.

Eggzackly!

 

John Bougearel writing at Naked Capitalism:

"Is GE’s Jeffery Immelt’s partnering with and pandering to China’s interests all that? Or is it that there are such powerful tax incentives for outsourcing that Immelt would proclaim himself to be “a nut on China?” Would reforming free trade agreements and corporate tax structures disincentivize outsourcing and help repatriate jobs back home? I don’t know the answers, but the task to do just that fell to Jeffery Immelt after Obama appointed Immelt to head up Obama’s new Council on Jobs and Competitiveness earlier this month. One of Immelt’s first proclamations as Obama’s new “Jobs Czar” was:

A sound and competitive tax system and a partnership between business and government on education and innovation in areas where America can lead, such as clean energy, are essential to sustainable growth….As one of America’s largest exporters, GE remains committed to producing more products in the United States, which is our home and largest market.

Blah, blah, blah. What a bunch of crap and half-truths. It will be intriguing to see what Immelt proposes and disposes as he takes on his new role as Obama’s “Jobs Czar” after shipping out those “competitive and innovative” clean energy wind-turbine jobs to China in 2009. Marcy Wheeler is not far off the mark when she says Immelt’s actions “make him the poster child for everything wrong with the US economy right now.”

Recent trends in outsourcing are expected to persist no matter what Immelt and Obama propose and dispose. According to The Hackett Group: “On top of 2.8 million jobs lost from 2000 to 2010 in finance, IT, HR and procurement, The Hackett Group projects that another 1.0 million will disappear by 2014 in North America and Europe. By 2014 nearly half of the back office jobs that existed in 2000 will have disappeared or moved overseas. According to the Hackett report and IMF data, the job loss rate due to offshore outsourcing has accelerated since troughing in 2004. Hackett said:

“Our experience in the trenches of strategic transformation in finance, IT, HR and procurement is entirely consistent with the picture of a jobless recovery painted in this research…. There’s no end in sight for the jobless recovery in business functions, such as IT and corporate finance, in large part due to the accelerated movement of work to India and other offshore locations… Realistically, we have to discover ways to create jobs in other industries and in other ways,” said Michel Janssen, chief research officer at Hackett."

(read more, and a cool chart) ;o) 

 

 

 

 

The "jobless recovery" is very real, and Immelt is just the guy to make it all work nicely for those who matter on Wall Street.

The blogger Orion had an interesting post that included a link to an article in The Economist magazine. It outlined how previously stable communities are now suffering increased poverty rates, and that the impact on these communities is spreading like a cancer. The cities cited are in traditionally "Red" zones throughout the south and the west.

We here at dagblog seem to get all involved in political strategy, too often (IMHO) at the expense of sensible policy. DLC-style triangulation and Obama's "pragmatic centrism" allows that we will do best at the polls if we compromise the GOP talking points and ideas (e.g. Reaganomics as our choice of economic policy), therefore stealing "the middle" and pushing the GOP to the margins. It's brilliant strategy, and it works.

But in not presenting an actual alternative economic policy in our politics, we find that we have now stumbled down a ditch and crashed at the bottom, and that no amount of trickle-down is going to fix it.

In my comments on Orion's blog, I laid out the potential for a new "southern strategy" that should appeal to even the wonkiest of non-ideologues in the DLC. People are hurting in communities throughout America. There's opportunity to win them over by exploiting their pain for electoral gain and use it to put more "D's" after the names of future Presidents and Congress-critters.

And who knows? By actually presenting an alternative to failed Republican policies, we might just discover we are afforded opportunity to actually LEAD this country toward a new, more sustainably just direction in the way we choose to order our economy.

Yeah, I know. Democrats? LEAD?? What a concept!

But it just might work.

Harold Meyerson's latest take on the jobs problem and what might be done about it.

Thanks for the link.

China appears to be taking the concept of mill towns to a whole new level:

"Within the space of a few months, 10 workers inside the company's walled-off Longhua industrial village, a 1.2-square-mile development where 400,000 employees live and work, killed themselves."

Meyerson makes a good diagnosis but I do not think his prescription will work.  It must be hard for big labor supporters to consider leaving the job-based economy behind.  I can almost hear big labor advocates asking, 'where will we go?  what will we do?'  and big business answering, 'frankly, we don't give a damn'.

What we should have learned the past few decades is that how little our labor contributes to the overall economy.  Our primary economic value has been as amplifiers for the velocity of money.  We should be able to find a way continue that function without big business making us their beeches [sic].

 

 

 

For better or worse, we are still a consumer-based economy, Emma. (NOTE: The sustainability of a global economy predicated on the growth of consumerism is a whole other topic.)  And so, what is not taken into account by these asshats who look only so far ahead as next quarter's profits is the fact that labor contributes a great deal to the economy - as CONSUMERS, if not for the value of their enterprise.

Using exploited labor/consumers as "amplifiers for the velocity of money" is akin to putting it all into a howitzer and blowing your wad. It works remarkably well at first in making a forceful impression. But eventually all that accelerated money flutters aground because there is no sustaining force behind it. It's all been spent. As we move from market to market exploiting the cheap labor to be found there - from China to India to the Mariannas and beyond - Wall Street will eventually find that there's no more fodder remaining for their "economic howitzer" that has any energy ("purchasing power") sufficient to drive anything more substantial than a popcorn fart.

Wall Street wishes to use us as a "human resource" at their disposal, to be purchased and consumed at the lowest possible price. In so doing, however, they conveniently neglect the fact that we are consumers, as well. Without us having the wherewithal to purchase their products and services, their markets go away. Yet, it works incredibly well in driving next quarter's profits with all this "accelerated money." In the long term?  Who cares? We'll all be dead, eh?

I must have inadvertently touched a hot button.  Sorry.

What you say is accurate as long as we perceive ourselves as laborers and consumers dependent for our most basic needs on TPTB* who foolishly misperceive money as points in a zero sum game very much like Monopoly.  We, as laborers and consumers,  just shuffle money around the board, amplifying its point value.   The so-called masters of the universe do not even need their math wizards to figure out that shuffling money through 1.25 billion (China) or 1 billion (India) people will result in more points than our own measly 300-400 million.

Sure they are short-sighted and above-average psychopathic but we bought into their game and we will not get out of it until we start checking our most basic premises and thinking in new categories.  That may sound Randian, and it is, except when I followed that advice, I came to very different conclusions than Ayn. More on them later....hopefully.

 

*the powers that be

I was not arguing against your points, emma. I was agreeing (I thought?). Sometimes, my communication skills come up lacking. ;O)

Gotta head for work. Later!

Yes to checking our most basic premises.  I would love to hear more from you on your thoughts here.  The bottom line for America right now, seems to be that there are no incentives for business to behave any other way than they are.  That, and it's hard to beat a foe, (and I do believe that business/finance in the macro sense is our foe), who can move not only personnel and infrastructure across international borders but $$ as well.  So in that sense it's a global game of 3 card monty, but in the meantime the US has options in policy, taxation, and regulation which if implemented might help at least staunch the flow of jobs and money out of its borders.  In the end not just the US, but the whole world will need to take a stand on who the system in its entirety should serve, (corporations or people?).  Or are we just those financial multipliers necessary to create wealth for rent seekers?  Somehow, I think those PTB are thinking further out on the horizon than anyone in DC has yet contemplated.  Certainly China and the rest of the world have a constrained interest in the US, its labor force and policy to the extent that only when it affects their own assets/markets will it matter.  And as you say with a growing middle class in these countries, the US will not be in any position to continue to dicate or influence world monetary policy for long.  Not that I see any hope of anyone in a position of power in DC with the intellect or will to challenge even the most superficial premises, let alone any basic ones.  But let's keep talking and see if any of this trickles up to the vacuum formed by the golden shower that's been trickling down.

e US has options in policy, taxation, and regulation which if implemented might help at least staunch the flow of jobs and money out of its borders

Yes. Despite a lot of arguments to the contrary in the blogosphere, The Obama  administration is correct to suggest our current corporate tax policy is being undermined by other countries and it is at the very least encouraging if not causing outsourcing.

Check out

Testimony of Martin A. Sullivan, Ph.D.
Economist and Contributing Editor,
Tax Analysts
www.taxanalysts.com and
www.tax.com
Before the Committee on Ways and Means,
U.S. House of Representatives
January 20, 2011
Hearing on the Current Federal Income Tax
and the Need for Reform

He's got a lot of data there. An example:

International Tax Rules Favor Foreign Over Domestic Job Creation

Under current law, if an American corporation opens a factory in Indiana, the profits of that factory are subject to the 35 percent U.S. corporate tax rate. If the same corporation instead opens a similar factory in Ireland, the profits from that factory are subject to a 12.5 percent tax rate. If that factory generates a profit of $100, the choice is between an after-tax profit of $65 in the United States and $87.50 in Ireland. Obviously, U.S. tax law provides a large tax advantage for building and moving factories to low-tax countries.

Well, the actual corporate tax rate in the US is more like 15%, so I don't think our corporate tax policy is driving the loss of jobs.  That, and the fact that these taxes are not imposed until the profit is realized, ie. at the time of sale of product/commodity.  So whether the goods were produced in the US at a higher cost or imported with lower cost + transportation/importation costs, I doubt the actual difference is that great.  I know little about importation and real corporate costs vs declared value of imported goods, but I wouldn't doubt that there's some fudging of the corporate books in that area to show lower profits/lower taxes at quarter's end. 

I have lots of thoughts.  Not all of them are yet coherent enough to communicate.  :)

There is one that keeps nagging at me.   What value added do the big banks bring to basic retail and commercial banking that could not also be provided by a GSE bank?  

An excellent question, and one which I think falls firmly outside the circle of constrained ideas bandied about inside the beltway.  I suspect the answer would devolve into a debate akin to the healthcare "dabate" we had last year on healthcare/single payer/public option.  It'd be like taking the public piggy bank away from some spoiled rotten people who've figured out how to pick the public's pocket a long time ago with lo-no risk.  I would also like to have some one explain what the advantages are of the information assymmetries are that exist between the packagers of various financial derivative products sans real regulation/oversight are? 

This is a really good question and one that I've given a lot of thought to over the past couple of years.  As near as I can determine a straight answer, I think it goes something like we license private institutions to create US dollars and loan those dollars to us for a profit - the idea being that the decentralized intelligence of the market delivers a better result than would a centralized system.  Or, to put it another way, we rent the computational force of the market to manage the money supply, which also does things like determining who is a good risk and who is not along the way.

Perhaps there's a better answer to your question, but this is what I've come up with.  If this is indeed the reason for how we do things, it seems like recent events ought to cause us to question the premise more sharply.

Does this answer your question?

Zeitgeist - The Movie: Federal Reserve (Part 1 of 5)

http://www.youtube.com/watch?v=_dmPchuXIXQ&feature=related 

4,283,182 VISITORS 

FIAT EMPIRE 

http://www.youtube.com/watch?v=QTCKHwsKWRU&feature=related 

http://www.youtube.com/watch?v=3i-j2skUVbg

In a word: no.

Second that.

 

America 2021: Jobs and the Economy (roundtable discussion featuring Robert Atkinson, Heather Boushey, Harry Holzer, Thea Lee, Sherle Schwenninger, moderated by E.J. Dionne, Jr.), from Winter 2011 Democracy: A Journal of Ideas, <a href="http://www.democracyjournal.org/pdf/19/Roundtable_for_web_FINAL.pdf">here</a> 

I am just taking another look at this.

Water drains downhill. I mean Upper Egypt is Southern Egypt and I always mix the two up; probably because the Mississippi begins in my neck of the woods and ends up in the Gulf.

These world markets present a problem as well as a boon. China has developed a middle class because of this new world market; and the number of people in that class represents the number in our entire country.

Now Chinese do not all have microwaves and three car garages and such...but they are twittering and cabling and...

The problem is that the treaties between great countries of trade do not smack the corporate pigs down. At least they do not smack the pigs down as much as I would like and the Wall Streeters make so frickin much money because water flows down hill.

the end

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