Happy Days Are Here Again?
A recent poll showed Democrats with a gaping 16-point lead over Republicans this fall. Seizing on the issues of corruption and incompetence, the party might even take back the House or the Senate -- or both.
Conventional wisdom in Washington that the Democrats have no idea what they stand for has recently been put to the test in persuasive ways. In the May issue of The Washington Monthly, Amy Sullivan demonstrates that the Democrats have in fact become a disciplined and effective opposition party. Strarting with their Social Security victory to George W. Bush’s backing down on his post-Katrina changes to the Davis-Bacon law to the Dubai ports deal, the Democrats have dealt the administration a series of defeats. In addition to that the Democrats do have ideas; it’s just that no one in the media bothers to cover them. The party has developed discipline and a more than respectable roster of policy proposals waiting for debate should Democrats win a majority in the November elections. This is very different from three years ago when the Democrats were fresh out of ideas and tactics.
The most important thing that the Democrats should remember is their own past. They should not become the complacent party that they were from the 1930's to the late 80's. They will need to continue to make government more efficient, while providing the needs for a society to have the mobility necessary to compete in the modern world. The real challenges facing our government will be the War in Iraq, the reimergence of the Taliban in Afgnanistan, the lack of new manufacturing plants and good paying jobs in the U.S., our rising healthcare and education costs and our rising poverty levels.
One thing that we know for sure, which ever party wins in November will certainly have it's work cut out.
posted by Van at 9:38 AM
12 Comments:
Van!
The Dubai Ports deal was scuttled by wrong-headed Conservatives, like NY's Pete King and company.
The UAE trains Iraqi policemen and Military troops, they service and refuel our Naval vessels and inspect cargo headed into the U.S. from foreign ports. The UAE, along with Kuwait and Qutar are our best allies in the Mid-East in the war against Islamo-nazism.
That was a huge mistake on our parts, especially considering that Port Security was NOT a part of that contract, DPW was merely going to buy POSN Co., a British firm and run it, using the very same people already in place.
The scuttling of the only real attempt to save Social Security made over the last twenty years, was certainly a partisan Democratic move.
Polls tend to show that folks like me are in the majortiy, folks who say, "Do anything EXCEPT RAISE TAXES to save Social Security." So far, my health is good, I hope to keep on working, and I'll have a great pension form my first job, so I really don't care much about Social Security. I DO care about FICA taxes being raised...we can't have that, they're too damned high already.
As for Davies-Bacon, it's kind of funny, in an ironic sought of way, to see the likes of Ted Kennedy now lauding Davies-Bacon, an Act passed during Reconstruction when many Southern freed slaves fled north and would often undercut the Irish, Jewish, Italian and German labor up north. The Yankees screamed and Rep. Robert L. Bacon (R-LI) "whose pet issue was protecting America’s racial "homogeneity" - initially introduced what became the Davies-Bacon Act in 1927 after a contractor employed African-American workers from Alabama to build a Veteran’s Bureau hospital in his district. The "neighboring community," Bacon reported, was "very upset," as were local unions. The legislative history of Davies-Bacon reflects a desire by Congress to reserve jobs on federal projects for local, union workers, at the expense especially of itinerant black workers."
The idea behind suspending Davies-Bacon was to draw workers to the Gulf Coast post-Katrina, in an economy where there is now an unemployment rate under 5%, at the same time NYC's welfare rolls (a good indicator of real poverty) have DECREASED to 402,008, the lowest since 1964!
You're 100% right that whoever gets control of the government in 2008 will certainly have their work cut out.
I doubt Iraq will be on the board. It will either be self-governing or partioned into three separate regions by then, though Iran WILL BE in play, as part of a long and protracted (no end in sight) war against global Islamo-nazism.
Energy will still be HUGE and a windfall profits tax will certainly signal investors and speculators to bet on INCREASING energy prices (that would scuttle my current prediction of declining energy prices three to five years out)...a Democratic support for a windfall profits tax and an adherance to our current and inane environ agenda, that has kept us from developing domestic oil sources, would make incredibly high....possibly even cripplingly high energy prices far more likely. Couple that with higher interest rates and higher taxes and the stage could be set for Stagflation II...and the worst thing is that Democrats would try and blame that all on the current occupant of the WH.
Of course, we saw how well that worked for Bush when he actually did inherit a recession (the NASDAQ imploded in the Spring of 2000, with the former occupant in the WH), but the folks largely blamed Bush.
He was fortunate to have had a GOP Congress that approved his tax cuts or the 2000 recession, deepened by the Dow's fall through 2001 and the Enron and Arthur Anderson scandals of Summer 2001 and, of course, by 9/11/01, might still have the country mired in economic morass.
The next administration will certainly have an interesting set of new challenges.
The Dubai Ports - I didn't have a problem with the deal in terms of security, it was the fact that we are selling our ports that bothers me.
Why? Because our Trade Deficits are so high that the world is flush with the dollar, and naturally they want hard assets. Who can blame them? It's our own fault.
Unfortunately I think that the only way that we will save Social Security is to raise taxes on the high earners again.
But the Social Security trust fund is solvent until 2040; we really should be looking a Medicare - that has a lifespan of 11 years or so.
Davis-Bacon - The Perez dropped the ball here. Yes, we have a low unemployment rate, but there were many stories of people not being able to find work in their own communities after Katrina. Why, the contractors were importing cheap labor. Suspending Davis Bacon did not help this problem, it accelerated it. It was a move perceived as helping the big contractors earn more. Even if this is not true, that was the perception.
I think that it is terrific that the welfare rate in NY is decreasing, but we should be careful that we are not creating another working poor underclass - which is why welfare was created in the first place.
It's in our best economic interest to help as many escape from poverty as possible.
I'm not so sure that the tax cuts have stimulated the economy in anything more than a superficial way.
We still have less good paying jobs than we did in 2000, isn't that the point of economic stimulus? To create jobs, which creates consumers, which creates incentive for investment -- Demand?
Maybe I have it backwards, but as I've said before - if we do not have money to spend on goods than there is no need for investment and nobody wins.
Two points you just made, make me curious;
You say, "I didn't have a problem with the deal in terms of security, it was the fact that we are selling our ports that bothers me."
Our ports were ALREADY sold...and way before the DPW deal! Dubai Ports World (DPW) bought a BRITISH Company, Penninsula, Orient & Steamship Navigation Co. (POSN).
POSN got that contract because NO American firms bid on it, just as no American firms sought to buy POSN when it became available...not enough of a profit margin for American companies.
"I'm not so sure that the tax cuts have stimulated the economy in anything more than a superficial way."
Tax cuts are the ONLY way to stimulate the economy. Rising incomes for workers only spurs inflation, that's why the Fed wisely raises interest rates any time that average national income increases by more than a few tenths of 1%.
Tax cuts spur investment and investment creates jobs.
Moreover tax hikes ALWAYS decrease tax revenues and that SHOULD be obvious to anyone who thinks about it. Tax hikes are invariably targeted at higher income earners and those people invariably can and do divert more of their money into tax deferred investments when tax rates rise.
It's actually a very "American" thing to do. I laud those who do that for the same reason that I always obey the signs at the zoos that say "DON'T FEED THE ANIMALS," when it comes to bureaucracy I say, "DON'T FEED THE GOVERNMENT," it really is a very bad thing to do.
There's no question about that. For instance, when government raises welfare benefits it directly harms people like me, who used to rely on hiring crews for $100/day each, in cash, no benefits to bang nails all day.
When government provides a certain floor, or "safety net," what it's really doing is giving poorer people an option to say, "I don't feel like doing that amount of hard work for that relatively short amount of money."
They shouldn't HAVE that option, because THAT option not only harms industrious folks like myself, but it raises prices on things like roofing, deck building, landscaping, etc. It hurts everyone all around. It's a classic LOSE-LOSE proposition.
Thankfully, some of the pressures that our "safety net" put on such jobs has been alleviated by government looking the other way as many employers in these areas have turned to hiring illegal/undocumented workers over the last decade or so.
When you look at the Constitution there is absolutely no justification for ANY of the myriad social programs our government is now engaged in...the Military and Police matters, YES, but these social welfare programs are completely Unconstitutional as that document is clear in that it bars the government OR "The people" themselves seeking to help some people ("victims") at the expense of others.
You said you worked in the IT field. Well, that field is vibrant ONLY because it's been relatively unregulated and thus more open than most other fields today.
We, as Americans, have no real business fighting for job security, we should want the marketplace to be chaotic and cut-throat competitive, with new companies continually eradicating older companies and killing off all those old company jobs in the process. New jobs will ultimately crop up.
The marketplace is very much like a forrest. a certain amount of fire is good, as it burns off the underbrush and keeps the real devastating wildfires from devouring most of the forrest.
I fully understand why many people don't relish the insecurities inherant in a freer market, but I don't sympathize all that much, because that kind of "security" results in a far less dynamic economy, with far less innovation and ultimately fewer opportunities.
The entire "New Economy" - the "Internet Economy" of the late 1990s was a mirage. Not only was it artificially created by margin rates rules changes and more lax IPO regs, but that "New Economy" created few real jobs...it was, in fact, a cruel hoax.
One of the things that got me out of the stock market back then was the idiotic phrase, "We're witnessing a New Economy, one not based primarily on profit."
I knew that only an idiot would think that's a good thing. Profit is the lifeblood of ALL commerce, without profit, there is neither means, nor motive for exchange.
Acturally today's economy is much healthier than 2000's in EVERY way! The Dow is up near 12,000 (an all time high) and that's with the anchor of Oxley-Sarbannes holding it back. It's been said that minums the costs of Oxley-Sarbannes, we'd be looking at a 14,000 to 15,000 Dow! The 1st quarter numbers for 2006 are 4.8% GDP (MONSTER) and unemployment is still under 5% (with welfare rolls across the country at near record lows) and interest rates are still around 6% (very good).
Yes housing prices are sky-high, but that's a great thing, as it shows there's still demand despite those escalating prices and obviously many, many people can still afford those prices.
Energy prices are high too, and that's not too good, BUT it IS all our own fault. We're currently suffering from an artificial domestic shortage due to policies that have kept new refineries offline, created too many different blends of gasoline, scuttled nuclear power and kept us from drilling off our coast lines and in ANWA.
We CAN remedy all that with the mere stroke of a pen.
Ok, ok - Boy, you've got me working today - loll
The UAE ports deal is just a sign of things to come. Foreign governments have dollars that they need to turn in to hard assets; this is because they sell more than they purchase.
It doesn't matter to me if they are British or Dubai, I do not like the root cause - too many dollars outside of our borders.
You wrote:
"Tax cuts are the ONLY way to stimulate the economy. Rising incomes for workers only spurs inflation, that's why the Fed wisely raises interest rates any time that average national income increases by more than a few tenths of 1%."
I guess that we differ here on theory. I see the demand or aggregate demand as being more important than investment. You seem to side with the Austrian or Supply Side school.
I'm not so sure that adjusting the interest rates to keep inflation down is the best model for us, and as we've seen in the past dampening down the growth of aggregate demand decreases investment, employment and GDP.
Second, capital investment does not necessarily mean more jobs. There are no new factories being opened in the U.S., and no new manufacturing job categories. Yet companies are making fortunes selling their products in our market. Meanwhile our standard of living is dropping, or as some say "leveling" with the third world.
You wrote:
"Moreover tax hikes ALWAYS decrease tax revenues and that SHOULD be obvious to anyone who thinks about it. Tax hikes are invariably targeted at higher income earners and those people invariably can and do divert more of their money into tax deferred investments when tax rates rise."
Yes this is true, but what drives the economy? - We fundamentally disagree here.
Again, if there is no demand for products, then there is no need for investment.
Without money (from a job) they’ll be no demand.
Too Keynesian?
You wrote:
"They shouldn't HAVE that option, because THAT option not only harms industrious folks like myself, but it raises prices on things like roofing, deck building, landscaping, etc. It hurts everyone all around. It's a classic LOSE-LOSE proposition."
I could not disagree more with you on this point. This would be true if labor were the only element to producing a product, it's not.
So you would raise your prices to compensate for the hike in labor, then the laborer would spend more, which creates demand, which increases investment.
It's really a win win situation.
If you are taking such a strict interpretation of the constitution then you may as well get rid of it.
It is a living document, it changes - that's the root of our democracy, that's why we have amendments. The Supreme Court upheld the 40 hour work week and child labor laws in 1935. But prior to that the very same laws were struck down by the same court. Why? The court tends to rule by the will of the people. We've seen this trend throughout our history, of course there are exceptions.
Your ideas about jobs cropping up in the free market seems to require as much faith as believing that Pan Am will make a comeback. There is not much proof for this theory.
I believe that fighting for your livelihood, especially since education is so expensive, is worthwhile. That's what Unions are for, and as we continue down the lasse-fair road, there will be more unions. People will inherently defend their own self interests over the interests of proponents of a faith based economic system. A system where each time you enter a new industry the jobs are offshore, insourced or eliminated for higher profits.
I seriously doubt that Americans will stand for a permanent re-education society.
"because that kind of "security" results in a far less dynamic economy, with far less innovation and ultimately fewer opportunities."
How can you believe that? When we had protections through Unions we produced the wealthiest middle-class in our history, American made was the best in the world and we were a lender nation, not a deficit driven nation.
Yet now, since lasse-fair has made an ugly comeback, we have high underemployment, lower wages, less compenstion, and even more production.
I don't know JMK - I think I like a world where there is at least some security.
OK, I certainly do understand your fears about too many dollars going abroad, but any economist will tell you that that's not a bad thing at all.
Thay'll say that what it proves is that Americans are getting bargains in the form of cheaper products from overseas.
The more invested other nations are in America, the more stake they have in our maintaining a good economy.
I don't know if you remember when the Japanese were "buying America" back in the mid-1980s (they even bought Rockefeller Center), but there were lots of pro and con articles back then, many calling our focus on the Japs "racist" because the Canadians and Brits owned more of America than the Japanese did.
Anyway, we all know how that turned out, right?
The 1989 Dow drop (black Tuesday) and real estate prices began to free fall. The Japanese wound up selling back Rockefeller Center for pennies on the dollar.
What I'm saying is that foreign investment is generally a very good thing...it's a lot like "consumer confidence." Just like customers like Walmart, the world's investors love America.
Here's the thing about Keynesianism, Van, we fought these battles back in the late 1970s and early 1980s - Keynesian policies led to the Carter debacle (STAGFLATION, or double digit unemployment, interest rates and inflation).
Reagan turned that around by switching us over to a more Supply Side approach. Alan Greenspan was onboard with that his entire tenure and it's worked and kept us out of the trouble that the failed Keynesian policies of LBJ, Nixon, Ford and Carter got us into.
You're RIGHT about the fact that "no new factories are being opened in the U.S." - and there won't be.
We're NOT a manufacturing nation anymore. We're at the end of the transition from an industrial economy to an information based one.
So, while there are "no new factories being built in America," there are indeed tens of thousands of new businesses being built here each year!
As far as demand goes, there is ALWAYS demand, Van.
There are many products that people simply NEED, so there is always a certain level of demand.
What you seem to be arguing is that a more equitable distribution of income would broaden that demand and actually increase it, but that's not necessarily so.
There is, right now, a heavy demand for houses in the NY metro area in the $500K to $800K range.
Now it's true that many people cannot afford these houses, but many more can and we already have a strong demand for that housing stock, so there is really no need to attempt to artifically broaden that demand. In fact, it's more than likely that any attempt at "redistributing" wealth and income in that region would actually reduce demand for that housing stock.
Ultimately, people will be paid what their skills are worth. A CPA with knowledge of the intricacies of Oxley-Sarbannes will be worth well into the six figures, a patent lawyer, ditto, even a Hazardous Materials Specialist will be worth big bucks in the burgoning economy, and there will ALWAYS be demand and good pay for tradesmen (electricians, plumbers, carpenters, etc), but landscape workers, produce pickers, restaurant workers and other menial and low-skilled labor will probably continue to go down in price as supply rises.
What welfare and our "safety net" does is undermine the work ethic by reducing desperation. We NEED that work done and we NEED that work done for LOW COST, otherwise homeowners are going to put things off, or do them themselves and put people who run those kinds of businesses out of business.
Cheap labor is a real good thing...especially cheap low-skilled labor.
There are few things more destructive or corrosive than high cost (highly paid) low-skilled labor...it raises prices fundamentally and it drives down both demand and ultimately supply as well, as higher paid, low-skill workers often choose to do less of that hard labor, choosing more leisure time or rest instead.
You seem to disagree with the view that new jobs are created naturally, based on your own "faith."
The fact is that new technologies ALWAY create new jobs and the only thing in the way of new and emerging technologies are (1) established enterprises that don't want their niche taken away and (2) a responsive government that takes on the concerns of these established enterprises, all too often to the detriment of the consumer.
Yes, an open and freer economy would be far LESS secure, but it would also be far more dynamic and fraught with at least as many opportunities as risks.
Fighting for complete "security" is like the guy fighting to save buggy whip-making jobs as the automobile displaces the horse-drawn carriage.
In a more open economy, many new alternative fuels would've been already developped and car makers would be striving to make vehicles that ran on multiple fuels.
Yes, tens of thousands of jobs would ultimately be lost in the Oil and Gas industries, but many thousands of new ones would be created elsewhere...not probably, but definitely.
Would there be a "lag time?"
Probably so.
Would there be some degree, maybe even a large degree of worker displacement?
Very possibly, but there'd also be business people wiped out, left & right as well....but that is the cost of real opportunity and innovation.
Sure, we'd all prefer some security, at least more security for ourselves, that's quite natural.
What most of us overlook and happily so, is the cost of that security, in terms of new opportunities and new innovations that would move the world forward much faster.
Right now we have a Corporatist economy. It is certainly and without question far more dynamic than the more statist economies of Western Europe, we can tell this by the fact that more of the world invests in America than in Europe.
Still our economy is less free than it once was. Less free and more secure.
Here's where we may really disagree, I don't want us to get any less free, or any MORE European than we already are. I'd prefer the Europeans to come to THEIR senses and Germany and other nations ARE.
I don't think our current economy requires any more "redistribution" than already exists, nor any more government involvement...in fact, I'm quite certain we could do with at least a little bit less.
Since we both have such strong opinions, just a couple of points, then maybe we should move on - this is becoming a little circular.
Well, Stagflation actually began under Nixon; Carter inherited the crisis of 7% inflation and 1% growth.
The root of stagflation was the Fed's loose policy of printing money to counter the crippling cost of oil (fuel). Most experts believed that the problem would have worked itself out, had we not intervened by printing money.
The truth is that supply shock, such as our current oil dilemma, can cause stagflation in a lasse-fair or Keynesian economy. During the late 80's - early 90's, we had a very bad recession, similar to stagflation.
Economies are not immune to rising inflation and low GDP and job growth.
Keynesian or "mixed economy" values have done well to produce one of the strongest middle-class nations on earth. Since we've abandon the mix of investment and government intervention, we've lost ground on our standards of living.
Yes, I do remember the frenzy caused by the Japanese purchasing many of our hard assets. However, there was a fundamental difference between then and now. We exported a lot more goods then - which in turn means that our deficits were lower and our GDP was higher.
I did not feel threatened by the Japanese, because I knew that our export, combined with the falling dollar would balance the difference. Now, well, I'm not so sure. In order for the United States to have a balanced trade deficit, our dollar will need to make a significant drop in value, much more than our current level.
This is likely to happen soon, as the Euro and Yin and Canadian dollar grow in strength.
Many of the economists that I read are suggesting a major recession in our future, mostly facilitated by the growing Federal and Trade deficit.
Let's hope that they are wrong, and the Supply Side guys are right. Let's hope that the world does not loose interest in the dollar - according to a report on Market Place yesterday, this is already happening though.
A weak dollar can be good, providing we still make things that the world wants to purchase. But a weak dollar coupled by little export - that spells disaster.
Which leads me to my next point. I believe that there are some industries that must be protected by high tariffs. I think you agree with me on this, but I likely have a larger list of industries than you would.
For instance:
1. The computer component industry - we should not need to import parts from china and Taiwan to build missiles, computers, and circuit boards.
2. The automotive industry
3. The textile industry - we should make our own cloths and shoes
4. We should continue to protect the agriculture industry - as food is necessary
5. Steele, Iron, and other metals
6. Most of the Information Technology industry - the knowledge/service sector of IT.
This is not a comprehensive list, but a good starting point.
I agree with you that protecting an industry that is no longer needed is not in our best interest. But, in our current environment of outsourcing jobs and insourcing cheap labor we cannot sustain many new industries that may be taking the place of older, less useful industries.
In short, the floor is being sold out from under us - the middle-class is sinking.
Here's an example:
The IT industry is flooded with foreign cheap labor, this was much worse during the 90's boom, but still bad today. The Information Technology Association of America created a false worker-paucity scare, and Congress believed Harris Miller's scare tactics (the figure-head ITAA and pied-piper of outsourcing) it’s no coincidence that the multinationals were behind this, in part to flood the labor market and drive down wages.
But there was no shortage, at least not to the degree argued by the ITAA and industry leaders. The shortage could have been filled by qualified American workers with a few months of cross training. The people who worked on outdated systems could have filled this need; we had a huge labor source that only needed some additional training. There was no need to import labor.
But the industry wanted to push the demand for labor down.
In fact, if you were a software engineer, you would know this well.
The industry is flooded with software engineers from India, China, Russia, etc. all here on work visas - most of them work under scale thereby driving down the wages.
On top of that many firms are outsourcing to cheaper foreign labor markets.
So, my question is, where does it end? Where will the limits be drawn to worker saturation and outsourcing? If in fact we are in an information economy, shouldn't we at least try to protect the jobs which are facilitated by that economy?
Software engineering is only one element, one category. The truth is that any information economy job can be outsourced, or insourced.
So, do we wait for a new industry when it becomes too difficult to remain in a certain category? Do we take jobs at Wal-Mart in the meantime - paper or plastic?
The trouble is that the information economy jobs are very expensive to our society - they require years of training and knowledge, unlike manufacturing, an information economy worker must be very well educated.
Again, our people will not tolerate a perpetual state of re-education, nor can our economy afford such a redicilous scheme. Lasse-fair has not and will not work because of this.
Lasse-fair concentrates wealth to a few, and turns the majority into a "worker insecure" society.
People will catch on and begin to move to limit the supply of labor again. It's just a matter of time. If you look at the current immigration debate you can see elements of this reasoning already. People are strongly opposed to a guest worker program and support limiting the supply of labor.
So yes, I am a protectionist. But not to the degree where I think that we should protect an industry that has outlived its usefulness. However, we MUST protect the industries that make us competitive and wealthy.
You wrote:
"What you seem to be arguing is that a more equitable distribution of income would broaden that demand and actually increase it, but that's not necessarily so."
I'm not suggesting that we pay low-skilled labor the same as a CPA. That's socialism and that would destroy our competitive advantage. I am saying that workers have the right to negotiate collectively for higher wages, as any other labor category does.
I am also suggesting that it's in our government's interest to make sure that this is possible, i.e. implement the card count ballots for union elections, and enforce laws against union busting.
I don't know if you've noticed, but since the PATCO / Air Traffic Controller strike was busted, Unions have been on a steady decline, mostly due to fear and intimidation.
Thank you Ronald Reagan....
I don't see this as a good thing, people should earn as much as they possibly can, and should be allowed to collectively bargain without fear of persecution in some way.
Now, you'll likely argue that the PATCO strike was illegal, and it was, but the law that made it illegal, was in fact immoral because it violated the personal rights of the union members - and that violates both Liberal and Libertarian principles.
Also, I realize that there are Unions which may be demand too much. GM is a favorite punching bag here. But GM offered the employees everything that they were given. The contracts were agreed by both parties. If it is the Unions that are killing GM, then it is the fault of the management and the workers - few acknowledge this fact.
However, I would argue that it is not the Unions agreements that is hurting GM. It is the rising cost of healthcare and the inability to create automobiles that Americans want. How many hybrid vehicles does GM sell? Not many but compare that with Toyota and you've got your answer - GM is not innovating, while a used Prius sells for more than retail in some areas. Finally, I'm not actually advocating that we become more "European". I am advocating that we become more protectionists. Sort of like China, Korea, Japan, Taiwan, and India -- our trading partners that protect their industries.
GM's failure has less to do with the cost of labor and more to do with the cost of poor management.
I agree and, in fact, I did mention above that LBJ, Nixon, Ford and Carter were ALL Keynesians, in fact, Richard Nixon (a terrible economic President - Wage & Price Controls, etc) is famous for saying, "We're ALL Keynesians now," a ridiculous statement given that since 1973, virtually every winner of the Nobel Prize in Economics had come from the Free Market or "Austrian School."
LBJ actually began the excessive printing of currency (inflating the money supply) and that continued unabated under Nixon, Ford & Carter.
As for our trade deficit, America DOES "make" many things that others want, from entertainment venues, to financial services, to other forms of intellectual property. One of the problems is that our dollar has been kept artificially inflated on the world market. This benefits our trading partners by making their goods cheaper here...the world's largest market, while making our goods and services more expensive in those countries.
What we don't do much any more is "Old World" or 19th Century manufacturing.
I've often expressed reservations over this, but many great economists insist that there are many such things that are simply no longer viable to be done by American workers in our burgoning information based economy.
Here's an economic reality to consider, LBJ, Nixon, Ford and Carter were ALL devout Keynesians and their policies, beginning in 1964, ruined our economy by 1978.
Reagan, Bush Sr (less so), Bill Clinton (more so) and G W Bush (even more so) have ALL been, to varying degrees, devout Supply Siders. Only Bush Sr was less devout than the others...and there hasn't been a return to STAGFLATION in that intervening quarter century!
Today, we have an unemployment rate under 5%, with welfare rolls in most major cities nearing decades old lows, a very low inflation rate (2.8%) and relatively low interest rates (around 6%) and the first quarter GDP numbers for 2006 are up 4.8%, the Dow is at well over 11,000 and seemingly climbing.
There is no NEED nor REASON to seek to avoid "the economic calamities that Supply Side policies will unleash," without any evidence of those things actually coming to pass.
Since we haven't had a replay of the STAGFLATION brought on by Keynesian policies in over a quarter century, longer than the period LBJ, Nixon, Ford and Carter had to ruin the economy, there seems to be no evidence that any of the purported gloom & doom scenarios that opponents of Supply Side economics have predicted since January of 1981 are likely to occur.
JMK - The downside of Supply Side ecomics has not ben realized yet, and I hope for all of our sakes that the dollar does not crash.
I'm hoping for a steady decline.
Anyway, we'll have to agree to disagree on which economic system is better, since we can both point to good examples of each.
I'll need to do more research on the root of Stagflation before moving forward.
But I will admit that printing money unabated is bad for any economic system.
Also, I seem to remember Greenspan hinting that we should go back to the Gold Standard, this was a couple years ago. Maybe he's right.
Great comments, and a terrific debate - Thank you.
Well, I appreciate your acknowledging, "...I will admit that printing money unabated is bad for any economic system," BUT there's more to it than just that Van.
The economy is NOT a "fixed pie." If it were, then Socialism/Marxism COULD possibly work, given a static amount of wealth/money to be divided up, but that's not how any economy works. There is NOT a fixed pie or set amount of wealth to go around. Wealth is created by new ideas being brought to market and increasing commerce, so the wealth in an economy expands and can contract and the money supply must naturally be increased as the economy grows...and America's economy grew more between 1981 and 2006 than it had in the seventy-five years previous to that!
Can an economy be skewed too much onto investment and too little on worker wage rates?
Certainly and I've argued that our insane immigration policy ("Let'em all in") has been disastrous precisely because it's allowed cheap labor to flood the U.S. and put a tremendous and persistent downward pressure on all wage rates, only starting with wages for low-skilled work.
Some have argued that we should put MORE of the tax burden on corporations and take much of it OFF of workers, but that's also a canard, because every "business tax" is actually a sneaky, or round-about "consumption tax" as businesses must pass along every single operating expense (including taxes paid) to the consumer.
In short, individual wage earners pay all the taxes anyway.
In fact, that's one of the reasons I've supported scrapping the income tax in favor of a National Retail Sales Tax (a/k/a "The Fair Tax")....See http://www.fairtax.org/
A 19% NRST (NOT a VAT) would raise all the money the individual and business income taxes do, as well as FICA and other payroll taxes now do, AND it would impact everyone, especially the very wealthy, who spend, by far, the most and who currently skate by, as the vast majority of these folks don't earn much, if any income, as their real wealth is generated via investments, dividend portfolios, various Trusts and other such vehicles taxed at a low flat rate "Capital Gains" rate.
If the issue is really "tax fairness," then how can it be fair that the wealthiest Americans, those with REAL, independent wealth don't pay much in income taxes because they earn most of their money via investment vehicles, rather than through earned income.
During the last Presidential election, much was made of Ms. Heinz-Kerry paying something like 8% in taxes the previous year. There was nothing either mysterious, nor illegal about any of that, like many wealthy people Teresa Heinz-Kerry had huge deductions and very little income, most of her wealth being generated by investments, Trusts, etc.
A NRST would engage these folks in paying more of their own way, as well as taxing the "black market" or "underground economy," as people would pay as they SPEND, not as they EARN.
On Greenspan and the Gold Standard, yes Greenspan did say that and Ron Paul (R-TX) also has pushed for that and Ron Paul is one of the very few stalwart Libertarians in government, a guy who, though I disagree with him on this, has opposed EVERY recent war we've engaged in (from Grenada, through Gulf War I, to the Balkans and Iraq) because he opposes BOTH the "Welfare & Warfare State."
Still, though there's a lot of merit to anchoring our money to gold and our own Constitution actually dictates the value of a U.S. dollar in gold, a return to the Gold Standard would almost certainly result in major DEFLATION and a lot of economic dislocation for an awful lot of people.
I'd be open to hearing that out, but it would be interesting to see how proponents of the Gold Standard would seek to alleviate much of that economic dislocation due to massive deflation.
While I'd like our dollar backed by more than just "the full faith and credit," I'm still skeptical it could be done without massive hardship for an awful lot of regular folks.
The Dubai Ports deal was a "Perfect Storm" of stupidity C.I.R. Deputy.
Some Conservatives (many) reflexivly opposed the deal on the grounds that it was "cooperating with the enemy," when nothing could be further from the truth, given the UAE's incredible level of cooperation with us on the "war on terrorism" post-9/11.
Much of that, at least in my view, is due by the current administration's failure to explain (1) WHO our enemy really is (Islamo-nazism or radicalized Islam and the rogue states that have harbored, sponosred and supported it), (2) WHY this fight is so vital and (3) WHAT our strategy is.
Pre-Dubai, I'd thought that at least one of our major strategies was to divide the Islamic world between the pro-Westerns and the pro-Jihadists, but the Dubai Ports debacle scuttled that.
Sadly, many Democrats, who should've known better (including NY's Schumer) jumped in with King in the hopes of gleaning some short-term partison political advantage.
As though there was nothing wrong with playing "team sports" when our country is at war.
Absurdly enough, the Bush administration offered no real defense, merely some half-hearted bluster, before withdrawing the deal "until a new partner can be found."
To date, so far as I know, there has been no new partner found. DPW now owns POSN and the entire issue has fallen from the media's ADD attention span.
Maybe when they found out that most of America's ports are managed by foreign companies, they decided the entire affair could end up with a lot of embarassing questions for THEM, like "How come you guys didn't know all this already and why, if it's such a big deal now, weren't you on this long before now...back when we began entrusting these vital areas to foeign control?"
We have bungled this decades old war from the start - ignoring it throughout the nineties and now almost certainly deliberately confusing the American public with many mixed messages and contradictory positions - "This is not a war against Islam or all Arabic people," and then acting as though it is exactly that, by alienating one of our few real allies in that region.
It remains a "Perfect Storm" of stupidity.
CIR - thank you for the complement. A book?
Maybe someday when my kid is a little older and I have more free time.
JMK- I couldn't agree with you more. You've coined the perfect phrase - "the perfect storm of stupidity"
You are right about the WH inabiltity to explain who our enemy is too.
Great points.
Post a Comment
<< Home