The rest of the trick is??
Mark Thoma says it well on the ‘what comes next’ dilemma facing voters and those making recommendations for policy:
there is supposed to be a “rest of the trick,” but it doesn’t come until later. The idea is that the labor that is freed up from the increased productivity will be used to produce new goods and services thereby increasing the quantity and variety of the nation’s output. In a dynamic, growing economy, even though there’s a delay before the new jobs appear (and hence a need to help workers through the transition), the new jobs are supposed to be even better than the old ones. But as workers look forward, the fear is that that won’t be the case. Workers who have lost jobs face an uncertain future where, if they can get new jobs at all, they are unlikely to pay as well or have the same level of benefits as the jobs they lost. New workers do not appear to have the same opportunities that their parents had, particularly workers without a college degree.
If workers could be assured that rising productivity would translate into better jobs and higher pay, the outlook would be different. But the last several decades of stagnant wages have undermined that promise. The growth that has occurred was not widely shared — it did not trickle down as promised — and the frustrations and uncertainties households have are understandable. It’s a mistake to think that just because the economy starts growing again, all will be well. If the growth that occurs post-recession simply picks up where pre-recession growth left off, i.e. with income gains flowing mainly to the upper classes, and with even more income inequality than we have now, the frustrations and tensions will continue to build and our troubles will not have ended.
Positive economic analysis does not assign responsibility to actors. They are assumed to act in their own best interest. A normative view of economics assigns responsibility to actors. The rhetoric of pundits tends to dance between the two. The wealthy can afford better pundits, so the tendency has been to speak as if those who are best off somehow do great things for the rest – that they are “responsible” for our good fortune – while at the same time arguing that they cannot be expected to perform this grand function if actually held responsible.
Meanwhile, corporations make use of torts on a grand scale, receiving awards in the billions for their court-determined losses, while pundits in the pay of corporations argue that individual citizens should have limited access to relief through the courts, because the current system it too great a burden on business. Corporations walk away from obligations of all kinds when doing so is more profitable than honoring obligations, while pundits in the pay of corporations howl about home ownders walking away from mortgages.
Our current economic arrangements are what they are in part because we have been told that businesses have to be freed of burdens in order to do what’s best, that “flexible” labor markets are good for everybody, that taxing more heavily those with incomes beyond a certain level of wants satisfied will reduce the welfare of all.
The reason there is no “rest of the trick” is that the trick is a scam. While the rubes were being distracted by the flashy sales pitch, their wallets and their futures were emptied.
Op. ed. material here.
Someone should directly address the assertions in MG description. Look, the way the money went to the top is: one off-shoring, outsourcing to cheap labor. Second, the benefits of that off-shoring/outsourcing went to upper management AND the stock market. Yes, there has been efficiency….but how do we account for efficiencies. Certainly offshoring/outsourcing should be strongly in the mix. Why do you think Mexico and China have trade surpluses with the U.S. Why do you think Bernanke started to complain about currency manipulation.
Start thinking, people. Thoma included. And the writers of this blog as well.
Here is my remedy to the situation. It is not perfect, but we need to get away from the failed ideologies of both parties.
1. Invest in your country: That is energy independence for security and jobs. Also a new air traffic control system that will save 12% on fuel. The savings to the airlines can go to build new aircraft. A high speed internet system. Perhaps high speed rail.
2. Invest in your people: That is mandatory vocational training. We live in a globalized world and you can no longer rely on factories. We have to be an educated society.
3. Invest in the future: Federal research grants to be given to universities and business to bring out new technologies. Today there are no new jobs to go to for those unemployed. You need new areas of growth. No playing games with embryonic stem cell research.
4. Fix the antitrust laws that Reagan relaxed. Monopolies and consolidations destroyed jobs.
5. Consider an “American job elimination tax” on companies that move out of the country. These companies do not pay middle class wages, healthcare, pensions, social security, or city and state taxes.
6. Get away from failed ideology. We saw it for 8 years. Tax cuts was used as an ideology. It did not prevent recessions. And did not create prosperity. You still have to solve problems. Ideology does not solve problems.
7. Supporting small business sounds nice and it is heard in Washington, but it does not work in my community as the big business left. That means you cannot have small business as people lost their jobs. Besides, small business will never pay what big business paid in wages.
8. We are losing the middle class. We cannot compete with 2 billion cheap laborers in the world that want our jobs. There are not enough jobs to go around. Competition is good, but it can be harmful also. All we are doing in this country is build the same business environment so that we can knock the other guy out. A person loses his job and has no place to go to. And the reason is that we did not invest in our country, in our people, and in the future.
9. Have commissions to cut government spending. It seems to be the only approach to doing this. Obviously, one side or the other will complain, but something has to be done now.
10. Government appointed jobs and organizations need to be slimmed down. Every 50 to 60 years we need to go through this. There are too many secretaries, deputy-secretaries, under-secretaries, and under-under-secretaries. Information gets loss through the process and government becomes ineffective. The last time this was done was with the Hoover Commission in the late 40’s.
11. Pour money into new drugs and preliminary medical science. Drugs are becoming less resistant to diseases. And potential super bugs are coming.
12. Fix the infrastructure. It is the reflection of our country and to the rest of the world.
13. And if we have not kept up with it, every school should have physical education. Also wash your hands when you come home to prevent viruses and less trips to the doctor. And as we see so often, stop throwing pop cans, etc. outside the car.
14. We need to slow down urban sprawl. Inner cities are being abandoned. As people leave there is no money left to support the inner city. This maybe controversial to some, but at some point we will have to deal with the problem. Sprawl also takes away from farms and spreads cities out too far in a time when you have empty buildings. We cannot have cities in decay. And cities in decay cannot create jobs and small business.
15. Create an hour period each school day for freshmen high school students to study any subject for a month (9 months-9 subjects) that they would have not normally have taken. It may be the hardest of subjects in which students would have been afraid in failing like algebra, geometry, calculus, languages, music, or any other subject including learning sports, like golf, football, baseball, or tennis as examples. There are many retired people who would like to teach what they learned in life. There could be a test at the end of the month, but this would only to see if the student learned anything in that subject and would not count against him in his grade average. The point is to have students learn as much as they can on different subjects and to see if they like a certain subject that they did not anticipate.
16. And finally, I don’t think our electoral political system works anymore. Every candidate is bought off and it takes huge amounts of money to run a campaign. I would suggest a management team or a turn around specialist to be appointed as president for a couple of years or more. And there would be a board of directors who he answers to and for the middle class. The parties are riddled with failed ideologies. We can do better that what we have.
17. One final point. I have […]
Nice list, Woody. Appreciate your thoughts.