I read the following
quote in an article on Bloomberg last week. “President Barack Obama, setting
out a theme that he’ll pursue in the final years of his presidency, said
growing income disparity in the U.S. is the “defining challenge or our time”
and Washington must confront it.
And
then I remembered why I started this blog – to drink more JD. Geez Mary, what
is our President trying to say? Let’s try some possibilities:
1. I discovered recently that income
disparity is growing and we need to get together and do something about it.
2. I have spent the last six years
focused on nothing but income disparity and only got this Boehner T-shirt
3. I have spent my life devoted to
correcting income disparity and have not succeeded so I am going to use the
last years of my Presidency to doing more of the same.
The
good thing is that this president is loyal to his goal of income
redistribution. The bad thing is that he doesn’t have a clue about how to go
about getting what he wants. Even if he waived a magic wand and turned all the
Republicans into card-carrying liberal democrats, he would not get what he wants.
How
can I support such an outrageous statement? Let me count the ways? First, the
bull in the China shop is right in front of him but he doesn’t see it. Is he
going to switch gears to income distribution before he is finished with
employment? I mean which way is it? Which is his main goal? Some of what he
hopes to get with reducing income disparity comes when the economy is growing again and
employing more people. Did he relegate economic growth and employment to
position #2? Or #3? Is that really the way to help people with low incomes catch up?
Second,
he already made headway on policies to redistribute income. If Obamacare does
not redistribute money to the poor, I don’t know what it does? But that’s not
enough. He raised taxes on the rich in the last “kick the can down the road”
exercise, increased spending and participation
in most social programs, plans to reduce what the government pays to doctors, medical
device companies, etc. Even with all that the data seems to show little to no improvement
in the lot of people with lower incomes. Maybe he should go back to point 1
above – fix the economy.
Third,
as it relates to income redistribution his plan is a
repeat of very old dogma that got us to where we are now. There is not one new
trick in this deck of dog-eared cards. Increase social spending, increase the
minimum wage, raise taxes on the rich, have the government spend more on
infrastructure, and so on. Come on! We did all that for 50 years and we have
more poor people now than ever. And more rich people too. And guess what? While
there are ways to measure the successes of some government programs it is not
going to be easy to repeat those successes again starting tomorrow.
The
infrastructure idea sounds nice but it will take decades to impact income
distribution. Remember all those shovel-ready jobs of a few years ago? The
problem Mr. President is not that we need to spend more on social programs or
infrastructure. It is that we need to create an environment of short-term
expansion and long-term economic growth. I already discussed the former above,
now let’s think about the long-run.
Why
hasn’t the economy snapped back and resumed normal economic and job growth?
Answer: because there is stuff wrong with the economy. If there is stuff wrong
with the economy then you fix it. Don’t push the blood back into the bullet
hole – sew the hole shut! A guy walks into an emergency room after being run
over by a cement truck and has multiple injuries and asks if he can bum a cigarette
and a few band-aids. What’s a good doctor to do? Surely not give the guy what he is asking for.
I
doubt I will be exhaustive but consider what needs to be attended to:
Demographics mean labor force growth
is much lower than it used to be subtracting close to 1% per year from
economic growth
Financial reform and regulation remains
incomplete some five years after the recession providing an aura of uncertainty
Housing reforms remain incomplete. Banks still do not know the
definition of a qualified mortgage.
Global competition from countries
that have lower wages eat away at low and middle skills jobs
As more and more jobs are growing in
highly technical fields, US education cannot produce graduates that place
better than the median in world
comparisons of 15 year-olds
Reams of pages of new regulations on firms
Reams of pages of new regulations on firms
National debt is 100% of GDP
Okay
I must have left something out. I know, I left Obamacare out on purpose. But do you really think we should be spending
our precious time the next two years debating emotionally and heatedly about
adding or not adding a few points to tack onto the tax
bill of rich doctors and lawyers? Let me say this as loudly as I can – I
TOTALLY AGREE THAT WE NEED TO BOLDLY FACE INCOME DISTRIBUTION PROBLEMS. I totally agree that income disparity is very
wrong both economically and morally. But there are ways to do this that will
work and other ways that won’t work.
The
next ten years will not be like the last five. They will not be like your
grandfather’s business cycle. We have a mess of problems that hurt lower
income people. Some problems are short-run oriented related to the recession.
Others have more to do with negative longer-term trends playing out. Raising
the minimum wage or taxing the rich takes the eye off the ball. The term is
worn out but we have a perfect storm affecting lower income people. The usual
life vests are not going to be enough. We need to focus on what it takes to
generate a decade or two of stronger economic growth.
Dear LSD. Obummer no longer surprises—from day one he was an empty suit and the emperor still has no clothes. He said Bush drove the economy into a ditch and he’s not getting the keys back (chuckle, chuckle), but the joke is now on Obummer because he doesn’t know how to start the engine. He keeps flooding the engine with stimulants that don’t ignite. A community organizer with no meaningful track record remains a community organizer with no meaningful track record. It’s obvious—or should be at this stage—he was and still is the wrong person for POTUS. He’s a failure in all aspects of the job and even his slick-willy sliver-tongued rhetoric is getting in the way—can’t even keep his lies straight. Gotta imagine his tongue is tied knottily.
ReplyDeleteYeah, fix income disparity—right. Yer kerrect that the tax increase on the rich hasn’t done much to close the gap, and of course, it was never meant to be the magic bullet—‘cept it was good populist propaganda that made Libs and Regressives feel really moral and virtuous. Yer kerrect that the fix is more complex, complicated, and long-term. Just handing out deflated $$$ to the lower-income won’t do—gotta git those folks yobs that pay a decent wage. But those decent-paying yobs require skills and education those folks don’t possess. So, if we redefine the income gap deficiency as a skills/education deficiency we’ll start to solve the problem. Educators need to get away from feel-good edukation to learning edukation commensurate with the skills/edukation requirements of the yobs of the future—ah-h-h-h-h-h, those demanding reading, ‘riting, and ‘rithmatic—what a radical thought!
Obummer’s latest laser-thrust to solve the income gap problem by demanding a $10.10 minimum wage is further testament to his lack of understanding of the problem and economics, to his grand fecklessness, and incompetence. Once an empty suit always an empty suit. Nothing there but air. No surprise.
Thanks Tuna!
ReplyDeleteTo repeat an old song, the poverty level is at least the same as it was in '64 when LBJ instituted the Great Society. There's something about continuing to do something over and over to see if you get the same result. Income redistribution/disparity/inequality all comes from the same magic shop.
ReplyDeleteLSD
ReplyDelete"Global competition from countries that have lower wages eat away at low and middle skills jobs"
Of all the points in your article the above quote is the most important. All things being equal why would or should industry pay more for labor than they have to? Maybe patriotism. The way I see it until it cost more to manufacture in foreign countries the jobs won't come home.
Dear Harley, I doubt many business people want to risk their capital for patriotism. But many do support charities and some pay a lot of taxes to support the country. But that's another topic. The issue of this century is that developing/emerging market countries will end developing and emerging and will join the rich industrial club. As they do, the industrial nations will need to learn how to compete. The old competitive advantages will dilute if not disappear. Jobs will grow in this country because US firms will win customers both at home and abroad. The more our policy gets in the way of this transformation the more it will lead to social and economic problems. People often scorn the idea of "trickle down" but the truth is that working people and poor people will benefit the most when they "share" in the process of winning markets.
ReplyDeleteHarley Lets try Mr. Yamaha or Mr. FJR either is much better than Harley.
DeleteAha -- you have given yourself away! I miss my FJR!
DeleteLSD ..you stirred up a hornet's nest. Great dialog. My cartoon says it all. A small bucket to bail out in a perfect storm does not work but the President cannot use other tools because they offend his supporters. . After all what is the name of the short term game....get his supporters elected? The causes and the solutions are much too complicated to address in a blog...problem is that nobody is addressing them. Not only does the emperor have no clothes but there is no emperor. We need leadership not BS but we need voters to get educated and quit think all is happy happy.
ReplyDeleteThanks Hoot!
Delete