Open thread Nov. 17, 2015 Dan Crawford | November 17, 2015 8:42 am Tags: open thread Comments (4) | Digg Facebook Twitter |
Re: Printing Money A radical solution to the current economic malaise.
By John Cassidy The New Yorker — November 23, 2015 Issue
Need more demand to get the economy moving — without causing a debt buildup? Top 1% incomes amounting to 20+% of all income cause a demand log jam because you can only spend so much. Put two and two together: tax income of say more than $2 million a year at a 90% rate (take me back to 1950s) to put more cash behind demand — with no debt.
Need more demand because the bottom 50% are woefully underpaid? Make union busting a felony — just like any other form of important market distortion. No market is more important than the labor market.
Why labor unions are de rigueur (if only for social content):
Employees judge their economic well being — and therefore their economic content/discontent — by how they are doing RELATIVE to the economy of their time and place; not by any absolute expectations.
Employee collective bargaining interfaces the three sides of the free market, labor (indirectly), owners and consumers (the ultimate arbiters of price) in an equal power setting: tending to mutual satisfaction/dissatisfaction with the results. (Centralized bargaining may be necessary for fair results against Walmart type, race-to-the-bottom wage competition.) Labor is content knowing it is working for the most it can reasonably expect from its market — not because it has reached any absolute goal.
Lack of collective bargaining tosses labor into what I call a subsistence-plus, cul-de-sac market where labor’s price is disconnected from what the ultimate consumer would have been willing to pay — but paid instead in gradual increments more depending on how much ownership wants out of labor compared to other labor. Labor under subsistence-plus is discontent in the knowledge it could get a lot more out of the ultimate consumer — not because of any absolute money goal.
As the bottom segment of the labor economy generates less demand many folks simultaneously sink into or are forced into dysfunctional lives and neighborhoods which produce less productive and even more dependent citizens.
But, today we are talking about secular stagnation — and how to bring back demand from lost PROPENSITY to spend at the top to lost ABILITY to spend at the bottom.
Rebuilding he latter wouldn’t take much. Pay Chicago taxi drivers $750 a week instead of $500 and you would get a lot more American born drivers out there (a measure of rebounding wage scale). Pay the lowest job $600 a week instead of $400 and most lower paying jobs $800 a week instead of $400 — that would get a lot more American born workers back in virtually outsourced to Mexico/India fast food jobs and a lot more adults-with-responsibility workers back in supermarket and other retail jobs (again a measure of wages rebounding to the level where people are actually willing to show up).
Not to mention 100,000 Chicago drug dealing gang members. My experience decades back in NYCs badlands is that every new generation (and every new kid) wants to grow up straight. Gangies are not that old and given the huge number (half of young minority males?) cannot be too wedded to that life style — more like trapped.
50 years after LBJ, double the per capita income later the war on poverty is being lost more everyday. How to reset wages in our labor market to the max the consumer is willing to pay labor (not just ownership) — thereby fixing the bottom end of secular stagnation? M-A-K-E U-N-I-O-N B-U-S-T-I-N-G A F-E-L-O-N-Y (automatically backed by RICO prosecution for persistent abuse)! !!!!!!
And let the truly free market sort things out.
Denis – I like your post directionally but feel unions and taxes are not needed. Government, in times like these, should simply purchase enough excess labor (excess unemployment) at decent wages – thus pushing wages up across the board and increase demand across the board. No need to change tax rates or union rules. And this could be done through infrastructure spending – which we need badly. And yes, it can be done by “printing” money or deficit spending. The latter is a form of printing money. The idea is not new, just a polemic topic based on the misunderstanding of how sovereign currencies work, personal political beliefs, and the fallacy of consumption (household budget is same as federal government).
Yes even Milton Friedman proposed this. Also Thomas Edison, and Henry Ford with Muscle Shoals:
“In December 1921, the American industrialist Henry Ford and the inventor Thomas Edison visited the Muscle Shoals nitrate and water power projects near Florence, Alabama. They used the opportunity to articulate at length upon their alternative money theories, which were published in 2 reports which appeared in The New York Times on December 4, 1921 and December 6, 1921.
Objecting to the fact that the Government planned, as usual, to raise the money by issuing bonds which would be bought by the banking and non-banking sector — which would then have to be paid back with money raised from taxes, and with interest added — they proposed instead that the Government simply create the currency it required and spend it into society through this public project.”
The danger is inflation through the process, but you don’t automatically get inflation through the process. Also I don’t even feel some inflation would be all that bad say 4% for a year or two. I hope we all agree that with a growing population, the money supply needs to increase, and there are only a few ways to accomplish this.
I’ll keep it simple, since I’m the same one note tune on nearly everything. We don’t need to change the union rules (well, centralized bargaining would be nice; we’ll get there too) — we need to enforce the rules we have now. We the people (the great majority of) desperately need to make labor market muscling a crime just like every other form of market warping or bending in favor of one side.
Will Madame Secretary promise not to cut Social Security benefits? The question comes up in this worthwhile Nation article by William Greider. http://www.thenation.com/article/the-big-idea-that-could-bring-disaffected-voters-back-to-the-polls/