"Great article in the Ny Times about what must be done to end the great recession."
Well, I guess it's a great article if you support the current administration. Even if you don't, it might be considered great since it gives insight into the mindset of progressive economists. "The first fact it points out:" "Even if nearly everyone was employed, the vast middle class still wouldnt have enough money to buy what the economy is capable of producing. " Fact? I'd say the first opinion. I looked for supporting data for this statement and couldn't find any. Maybe you can help me with this. Why does the vast middle class need to buy what the economy is capable of producing? Our economy is capable of producing stealth bombers, yet I don't think my neighbor needs one. I honestly think I must be on the wrong page here because I don't think that is what he meant. Does he mean the necessities of life like a housing, clothes, and food? If so, then I disagree. There are plenty of ways for the middle class to live comfortably now just by implementing common sense. Don't buy a McMansion if you don't need one, buy a gas efficient car instead of a Suburban, don't eat out four nights per week, send your kids to public school, buy a 32" TV instead of a 58" TV, and so on. I don't think that is what he is talking about either. It seems to me that he is saying that the middle class can't stock up on "stuff". They cannot be super materialistic. I am not so sure that is a bad thing. Another point about this is the economy itself. Those participating in the economy on the production end need to make a product that is needed or wanted. If a business is not doing well, it needs to examine its business model. It needs to adept or go the way the dinosaur. "The next question would be Why." The answer is because the economic gains did not go back to the middle class and the general folk, the economic gains went primarily to the ultra wealthy. I do understand this better. The wealthier got wealthier. As a result, the middle class have less buying power. Now, they can't buy as much "stuff". "So what is the problem with the rich getting more money?" "The rich spend a much smaller proportion of their incomes than the rest of us. So when they get a disproportionate share of total income, the economy is robbed of the demand it needs to keep growing and creating jobs. " I will say that he is right when in that the rich spend a smaller proportion of their money , at least in regards to living expenses. The part where he says that the economy is robbed of the demand it needs to keep growing and creating jobs is a bizarre. Demand for necessities will be there regardless of where the wealth is. So, is the economy robbed of the demand for luxuries? Some would argue that the middle class pursuit of luxuries led to debt, leading to a stagnant market. Others could argue that the market needs to adjust itself to the market that wants luxuries and cannot afford them. Finally, the wealthy are the people who create jobs. Or at least they used to. It seems the government is the only thing expanding now. What exactly does the government produce? Here's another quote: Whats more, the rich dont necessarily invest their earnings and savings in the American economy; they send them anywhere around the globe where theyll summon the highest returns sometimes thats here, but often its the Cayman Islands, China or elsewhere. The rich also put their money into assets most likely to attract other big investors (commodities, stocks, dot-coms or real estate), which can become wildly inflated as a result. Mr. Reich admits in the first sentence that the US is not friendly towards investment anymore. He doesn't answer why? Many would say too much lost in taxes. This crisis began decades ago when a new wave of technology things like satellite communications, container ships, computers and eventually the Internet made it cheaper for American employers to use low-wage labor abroad or labor-replacing software here at home than to continue paying the typical worker a middle-class wage. What are some of the main reasons that businesses think American labor is more expensive than offshore labor? Union costs, health care costs, FICA and social security taxes, and so on. Wow, these seem to be related to government and union expense. Interestingly enough, Mr Reich mentions some of these: THE Great Depression and its aftermath demonstrate that there is only one way back to full recovery: through more widely shared prosperity. In the 1930s, the American economy was completely restructured. New Deal measures Social Security, a 40-hour work week with time-and-a-half overtime, unemployment insurance, the right to form unions and bargain collectively, the minimum wage leveled the playing field. Not a small percentage of economist and historians say that the New Deal actually prolonged the Great Depression. You know, I find it frightening the way our industrial base has been destroyed. If the US were to ever get involved in an extended land war like WWII again, could we compete? How many years would it take to ramp up production? "Even though the American economy kept growing, hourly wages flattened. The median male worker earns less today, adjusted for inflation, than he did 30 years ago." Yes. Wages have flattened. There is less to go around after the huge tax burden business are under now along with the other costs mentioned above. Then there is an expanded pool of labor. Women and minorities compete in fields that weren't open to them 30 years ago. On the manual labor front, illegal immigrants certainly bite into the wages of citizens. "What is the end result of all this? What is the solution?" "THE Great Depression and its aftermath demonstrate that there is only one way back to full recovery: through more widely shared prosperity." "Policies that generate more widely shared prosperity lead to stronger and more sustainable economic growth and thats good for everyone. The rich are better off with a smaller percentage of a fast-growing economy than a larger share of an economy thats barely moving. Thats the Labor Day lesson we learned decades ago; until we remember it again, well be stuck in the Great Recession. " Ahhh. There it is. Redistribution of wealth. Spread the wealth around. "What else could be done to raise wages and thereby spur the economy? We might consider, for example, extending the earned income tax credit all the way up through the middle class, and paying for it with a tax on carbon. Or exempting the first $20,000 of income from payroll taxes and paying for it with a payroll tax on incomes over $250,000. " So, what is the earned income credit? A refundable tax credit that even those who don't pay taxes can receive. How to pay for it. Cap and tax. Go figure. Then add a new payroll tax on those making over 250k per year. While certainly making a nice income, I don't look at those making 250K per year as be the rich. It gets better. In the longer term, Americans must be better prepared to succeed in the global, high-tech economy. Early childhood education should be more widely available, paid for by a small 0.5 percent fee on all financial transactions. Public universities should be free; in return, graduates would then be required to pay back 10 percent of their first 10 years of full-time income. So, every financial transaction is taxed to pay for early childhood indoctrination. After college graduation, we have a new class of indentured servants. There is no provision for education in the constitution. Get off of it. Another step: workers who lose their jobs and have to settle for positions that pay less could qualify for earnings insurance that would pay half the salary difference for two years; such a program would probably prove less expensive than extended unemployment benefits. The idea of unemployment insurance doesn't bother me as long as it is offered by private firms and paid for by the recipient. I don't think this is what Mr. Reich has in mind. Of course, he also assuming that the unemployed can find a lower paying job. Not necessarily a given. Mr. Reich seems to think fondly of the following: "In the decades after World War II, legislation like the G.I. Bill, a vast expansion of public higher education and civil rights and voting rights laws further reduced economic inequality. Much of this was paid for with a 70 percent to 90 percent marginal income tax on the highest incomes. And as Americas middle class shared more of the economys gains, it was able to buy more of the goods and services the economy could provide. The result: rapid growth and more jobs. " A 70-90% marginal income tax on the highest incomes? While not exactly calling for that now, it doesn't seem like he's not averse to the idea. He even admits that the rich have many options in how to spend their money. They would flee so damn quick that it wouldn't be funny. I wonder if he'd like this starting at 250k? One of the biggest problems in the 2000's was the availability of credit to those who should not have qualified. The continued issuance of credit to those who could not pay it back was bound to cause a problem. His article did not mention people taking responsibility for their actions by controlling their spending. He seems to actually celebrate the bad consumer habits that dominated the first half of the decade instead of encouraging thrift and saving in order to make big purchases. He just takes aim at the progressive whipping boy, the rich. Seems like another crackpot progressive economist to me. J - No man's life, liberty, or property is safe while the legislature is in session. - Mark Twain The artificial aristocracy is a mischievous ingredient in government, and provisions should be made to prevent its ascendancy. - Thomas Jefferson On Sat, Sep 4, 2010 at 1:30 PM, Vivec <[email protected]> wrote: > > > http://www.nytimes.com/2010/09/03/opinion/03reich.html?_r=2&ref=opinion&pagewanted=all > > Great article in the Ny Times about what must be done to end the great > recession. > > It mentions the true cause of the recession as the growing disparity > between the ultra wealthy, and everyone else. > > The first fact it points out: > > "Even if nearly everyone was employed, the vast middle class still > wouldnt have enough money to buy what the economy is capable of > producing. " > > The next question would be Why. > > The answer is because the economic gains did not go back to the middle > class and the general folk, the economic gains went primarily to the > ultra wealthy. > > "In the late 1970s, the richest 1 percent of American families took in > about 9 percent of the nations total income; by 2007, the top 1 > percent took in 23.5 percent of total income. " > > So what is the problem with the rich getting more money? > > "The rich spend a much smaller proportion of their incomes than the > rest of us. So when they get a disproportionate share of total income, > the economy is robbed of the demand it needs to keep growing and > creating jobs. " > > What is the end result of all this? What is the solution? > > "THE Great Depression and its aftermath demonstrate that there is only > one way back to full recovery: through more widely shared prosperity. > " > > And as we all know, that is not going to happen. > So it seems that we're screwed. > > This article focuses on America, but it is true for the Caribbean, and > the larger countries in South America as well. The toxicity of the > American economy and the lack of ability for consumers to pay will > also invariably affect Europe and the rest of the world as well. > > Of course, the article also assumes that the economic system that we > created is to be maintained, and does not delve into alternate > economic metrics which do not involve a Consumerist driven system of > constantly purchasing new goods and services for surviva > > ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~| Order the Adobe Coldfusion Anthology now! http://www.amazon.com/Adobe-Coldfusion-Anthology-Michael-Dinowitz/dp/1430272155/?tag=houseoffusion Archive: http://www.houseoffusion.com/groups/cf-community/message.cfm/messageid:326925 Subscription: http://www.houseoffusion.com/groups/cf-community/subscribe.cfm Unsubscribe: http://www.houseoffusion.com/groups/cf-community/unsubscribe.cfm
