Whoever is elected president on November 4th faces a "honeymoon" so troubled that he may sue for annulment before it's over.
Politicians seldom relish dealing with harsh realities, let alone dire economic straits. More often than not, they make tough choices only grudgingly, like the equivocating character in a Woody Allen short story who "hated reality - but knew it was still the only place to get a good steak sandwich."
The toughest reality the next president may face is rallying the support necessary to advance a national investment strategy that restores the long-lost wage growth of American workers -- especially with both parties still paying lip service to balanced budgets.
Unemployment is rising rapidly, and with output in America's basic industries plummeting, the possibility that it may reach double digits is growing. The most recent statistics from the Philadelphia Federal Reserve reveal the steepest decline in manufacturing output in 20 years.
Many manufacturers' order books are literally bare, a situation one industrial labor leader describes as "disastrous." Layoffs in the steel, auto and tire industries have already begun; more are inevitable.
But there is one statistic, seldom cited, that may say more than any other about what the future portends - and what is needed to improve the nation's prospects. That figure is 70 percent.
Economy's Twin Evils
Of late, 70 percent of America's economy has been dependent on consumer purchasing to sustain economic growth. The portion of workers in America who do not have a college education is also 70 percent.
The relationship between these two statistics is more consequential than coincidental; indeed, the declining purchasing power of the average worker and Washington's failure to develop meaningful employment policies to address the flat lining of real wages are the twin evils of a looming economic decline.
Recent administrations, Republican and Democrat alike, have been complicit in selling the public a bill of goods -- namely that globalization, in the form of unfettered "free" trade, would keep buying power on the rise by lowering the cost of imported goods enough to sustain a middle class increasingly dependent on service sector employment.
The approach of promoting global speculation served two purposes, neither of which has served the public interest of broadly shared income growth.
First, it provided incumbent candidates for federal office with a steady stream of Wall Street contributions to their reelection campaigns. Second, it whitewashed the speculative excesses of these contributors by claiming their global investments were lowering the cost of consumer goods.
Free Trade's Flaw
The flaw in this formula is that the consumer savings -- evident on the sales racks of any department store -- fall short of offsetting the constraint on wages being induced by U.S. corporations systematically exporting the nation's value-added manufacturing base.
As the rising costs of health care, food and energy have outpaced wage gains, personal debt has inevitably been substituted as a source of purchasing power, with unfortunate but predictable results. Today, credit card defaults are rising almost as fast as consumer confidence is heading for the exits - down nearly 20 percent in September - striking evidence of what happens when nearly five million family-supportive jobs, the lion's share of them in manufacturing, are sacrificed to the god of cheaper goods.
Credit card defaults are already on the rise, with some credit card companies charging default rates as high as 31 percent!
The manufacturing workers who are losing their earning power in this maelstrom are by and large among the 70 percent of the workforce without advanced educations and are unlikely to find their way into the elite ranks of knowledge workers alleged to be the nation's "bridge to the future." Thus, by turns, the preoccupation of policy makers with aggrandizing free trade to the detriment of domestic manufacturing is inadvertently paving the way toward an economic Bridge to Nowhere.
Renewing Job Growth
America didn't turn from production to speculation solely because of free trade. Globalization is a fact of contemporary life and couldn't be dismantled without doing serious harm. But the flat-lined incomes of American workers argue for reforms that focus investments on our natural and human resources right here at home, where there's more than enough work to be done and more than enough profit to be garnered investing in it.
The plight of an aging infrastructure and the plague of global warming argue for federal tax strategies that encourage public and private partnerships aimed at rebuilding America by pursuing clean energy economy and, in the process, restoring badly-needed domestic wage growth.
The Apollo Alliance, a coalition of labor, environmental, business and community groups now headed by former California State Treasurer Phil Angelides, has called for just such a strategy: a 10 year, $500 billion, "Make It In America" clean energy plan that the Alliance projects will result in the creation of five million jobs, many of them paying quality wages to the crucial 70 percent of the workforce in need of better earnings.
The advocates of such strategies are not limited to the usual progressive suspects. Presuming an Obama victory, Bill Gross, head of Pimco, the nation's largest bond firm, dismisses the "magical powers" of foreign governments buying Treasuries as a means of restoring the economy and urges, instead, "fiscal spending and lots of it.
"No ordinary Starbucks [stimulus] will do," Gross concludes, "you need a six-pack of Red Bull."
Funding infrastructure projects, says Eric Janszen, former venture capitalist and CEO of technology startups, "would enable thousands of new private companies, whether bootstrapped by entrepreneurs or backed by venture capital, to develop new technologies...Such new American technologies would be in demand worldwide, exports would boom, and within ten years the U.S. current-account deficit would reverse.
"Instead of creating new asset bubbles," he said, "the nation that invented the Internet - with the help of the government, one must always remember - would finally invent a New Economy deserving of the name."
Sounds like a real good steak sandwich, doesn't it?
Another problem was the unregulated financial realm, irresponsible borrowing/loaning (The so-called push for homeownership was not the problem since it only rose 2%.) Free trade is elusive and uneven, especially when you pit one workforce or currency against another.
We lack business acumen. The number of MBAs has not led to better business or diversity. There is overdependence on accounting solutions of cutting employees and not enough on the management approach of people as potential.
We talk about "small" businesses taking the risk of enterprise, but we do not take risk on employees. Businesses should receive full tax credit for expanding the labor force domestically and perhaps half credit internationally.
This would also be reflected in taxing investors (one year or longer investment) at one rate, taxing speculators a little higher (one quarter or longer), and gamblers (any investment less than one quarter) even higher. This would reflect the value to the economy and remove the greedy Vegas mentality.
Every government expense would be posted online. Mass transit would be encouraged starting at the high school level. All businesses would have a public safety, turnover, and benefits rating. This would allow potential employees more power to screen employers rather than giving inordinate power to some inept or vindictive HR representative.
I have always been both a Union man and a populist. I have come to the opinion that we must start to inject money into the bottom of our economics in order that we may support our business structure. Free trade, like communism is a fair idea but does not work, as the countries we are buying from, like our own citizens, cannot purchase the products made by these outsourcing giants.
We can best help our country with the immediate start in rebuilding our infrastructure. This alone will not fix all but we can begin to purchase the products in our stores again.
I do not need another 300 dollars or less!
In a short way of explaining my thoughts, we need a bottom up recovery. Not a top down recovery with taxpayers giving obscene amounts to failed business. and financial institutions that have a policy of greed at the expense of the people that buy the products from all over the world.
firms see only a 20% success rate in the firms that they fund. A number of years ago, myself
(an electronics engineer) and one of the best manufacturing engineers I've ever met, were
loaned to a very prominent medical products company to evaluate, from a technical viewpoint, a
medical electronics firm, that a couple of bright MBAs were considering adding to their portfolio.
In one day of analyzing their schematics and manufacturing processes, we were able to tell
the MBAs not to touch this turkey with a 10' pole. My feeling is that getting the success rate to
50% or better, means a lot more job creation
All a President can do is use the power available to him/her to set the gears in the right directions. Congress has to get behind it, and the people need to supply the engine power to make the system run again.
The fact is, fuel is running out, globalization is about to burn itself into the ground. The very idea of revamping our current infrastructure is going to be immense. It's going to be a gigantic and unprecedented transformation of the country and it's going to cost a whole lot of money but we need to brace ourselves for the eventual runout.
Which means: a return to small-scale economies based on fair trade and decent wages. Wow, what a novel concept.
Also: eat it speculators I fund no gamblers with my livelihood.
Any community on this planet right now, be it a city, a township, a village, should be able to sustain itself for at least 30-days! Another novel concept!
This is my list of solutions for those of you still grabbing for some solutions:
1. Ethical Leaders.
2. Sustainability is its own check and balance economic system.
3. Irresponsible Capitalism, Socialism, and/or government breeds CORRUPTION.
4. Education empowers the powerless.
We seem to be taking our eye off the ecological problem and concentrating on the economical crises; and if you think about these two ever looming challenges they both require the same set of solutions; see above... all suggestions and all interpretations are welcome and encouraged.
Second, the notion that we are a nation of bargin hunters masks the true reason for moving everything from manufacturing - to technical support - to engineering off-shore. The true reason for doing this is to increase the profit margins. Of course, when there is a significant enough savings then you can undercut your competion forcing them to move off-shore, too, to stay competitive.
At one time, there was a notion of "a reasonable profit," and businesses were concerned that their suppliers would gouge them. That notion is MIA, and it is the suppliers who are getting squeezed.
Any modern nation that is unable to teach its young people by age 18 what they need to know to get a job that pays a living wage is a nation with dim prospects. There is no reason why our education system should not be able to train young males to be productive workers at age 18. College should be only for those few professions that truly require higher education.
The problem is that their simply aren't enough highly skilled jobs for the highly skilled/ educated work force. I know a lot of people with college degrees who work at Starbucks, or other service industry jobs that have nothing to do with their college degree. It seems that most of the jobs today are service industry jobs. While I support education, I think it's dishonest to give students the idea that a four year college degree is going to make them financially secure, especially when you factor in the rising cost of school, and that education is largely funded by student loans.
Young people need good high school educations that prepare them for the real work world they will be entering. Many will need to go to a trade school, or community college to gain specific skills they need for there career. Some will need to get a four year degree, and beyond. But, in the end the jobs have to be there for them, which today is sadly not the case.
"The Joint Tax Committee reports that the bottom 60% of taxpayers with incomes below $50,000 paid less than 1% of the federal income tax in 2006, while the 3.3% with incomes above $200,000 paid more than 58%. Most of Mr. Obama's tax rebates go to the bottom 60%. They can't possibly be financed by shifting an even larger share of the tax burden to the top 3.3%.
Mr. Obama has offered no clue as to how he intends to pay for his health-insurance plans, or doubling foreign aid, or any of the other 175 programs he's promised to expand. Although he may hope to collect an even larger share of loot from the top of the heap, the harsh reality is that this Democrat's quest for hundreds of billions more revenue each year would have to reach deep into the pockets of the people much lower on the economic ladder. Even then he'd come up short."
We're screwed.
http://online.wsj.com/article/SB122480790550265061.html
A lot of small businesses could sprout up quickly, Americans are ready.
Most of us are ready IF we could get a hand-up getting the initial capital to get diffuse wind/solar installed.
In the long run it would definately pay for itself both personally, and nationally. Maybe kick a billion or so dollars into a low-interest loan program to cover the costs over 10 years or so, with an agreement to sell the excess individual power back to the grid at cost?
Cost neutral in the long run would be my guess.
Now is the time to fix what the Bushies and republicans have broken. So if they will just step aside, we will, once again fix the problems that they have created.
If we really wanted to bring back a decent wage in this country, we would be working around the clock to organize workers in unions. People who work in offices don't realize that most blue collar jobs to this day have no accompanying sick time, or in some cases, vacation. So, if you don't work, you don't get paid. PERIOD.
I think college is a great idea for lots of people. I have a degree but do not think it is essential for many jobs. Many people do not have the stomach for four years of college because they are totally uninterested in much of what is taught there. For them, a good 1-yr or 2-yr technical program is best.
Construction workers, mechanics, secretaries and other sectors of the economy could prosper if they had the ability to organize nationally and force wages up, and at least the benefits of common decency - at least a week of sickleave (which could be banked so older workers had enough days to cover the inevitable illness/operation) and at least a week of paid vacation.
In 1963, I passed an exam for the state of California as a highway electrician and since then I was able to rise up through the state's merit system. Why can't we offer something like that to our children? Why does anyone need to go to an expensive school and end up deeply in debt just to get a job with a living wage?
Not that there ever really was. But even the GI bill won't pay your way now.
The article makes good points, but I question why this mess has been going on for months now and this is the first real article I've seen that addresses the fundamental cause of the problem - falling wages.
And another point ... those *elite ranks of knowledge workers alleged to be the nation's "bridge to the future."* They were always a chimera.
Community colleges turned them out by the tons in the 80s & 90s, only to have them shut out of the jobs because "American" companies like IBM & Microsoft could hire software developers a lot cheaper by importing west Asians on H1B visas.
And then the corporations figured out they didn't need the H1B visas; they could could have them "tele-commute" from wherever they were. You can build code modules anywhere.
Those "knowledge worker" jobs are easier to EXPORT than factory jobs. When you export manufacturing jobs, somebody's still got to build a factory SOMEWHERE.
Not so "knowledge" jobs. ANYBODY, anywhere can plug in
One way to spend stimulus money is on a mass transit system. It would employ large numbers of people and create an asset that stays in the US. Operating the finished system would also employ thousands. It would replace the automobile as the transportation paradigm. Americans can no longer afford to go $30K into debt just to get around.
When the system is built it will provide a real service to the average person and all that money spent buying cars and foreign oil will go back into the economy. We could reduce the military because the troublesome middle east would not longer be in the national interest.
The same argument might be made for a new government-backed healthcare system.
High oil prices did work - but these are cyclical and already coming down.
Looks like it will come down to simple affordability. We blew our credit faster than a gambling addict in Las Vegas. Now there is simply not enough money in this society to afford automobiles.
It may take longer, but the credit crisis will have an effect.