The Real Economic Crisis Ties the GOP in Knots

When it comes to the economy, the GOP has a real problem that pollsters and message-massagers can't wave away. After three decades of the rich getting richer and the middle class being crushed and closed, Americans are very suspicious of the super-rich and corporate CEOs, and are looking for real evidence that politicians understand their plight. Two issues in the Republican primaries have spotlighted the internal troubles that economic reality causes for the GOP.

The issue that has received the most attention is the aggressive attack by Gingrich on Romney's record as a financial (aka "vulture") capitalist, shutting down factories and shipping jobs overseas to make himself and his cronies richer. When the Gingrich super PAC put real money behind that message in South Carolina, Romney tanked at the polls. But in a rare show of unity, both the Republican mainstream and right-wing howled at Gingrich for daring to challenge the free market.

The other issue that is confounding Republicans is the minimum wage, where Romney has taken a shellacking from the same forces that defended his record as a corporate raider. Romney, clearly aware that he needs to support some policies that show him sympathetic to struggling families, has broken with free-market orthodoxy by supporting indexing the minimum wage to inflation. For this he was loudly attacked by Fox News, The Wall Street Journal, and Rush Limbaugh, among others. Andrew McCarthy's post in the National Review captured the mood with the headline, "See Mitt Pander."

Romney isn't the only leading Republican candidate who may be flummoxed by the conflict between the public -- which overwhelmingly supports increasing the minimum wage -- and free-market orthodoxy. When Rick Santorum attacked Romney for giving the thumbs up to indexing the minimum wage, the former Pennsylvania Senator revealed that he too is willing to support the government establishing a minimum wage. Santorum said,

That is a very bad idea. Oh, absolutely. You can't do that. You want to talk about driving wage inflation? That's a very bad idea. When -- when the minimum wage drops below a certain level -- and it's usually a floor of about 7 percent of wages at minimum wage, I've supported, you know, increasing it back up to make sure that it stays above that level, so there is, in fact, a minimum wage. But when you index it, you're not talking about a minimum wage. You're talking about an index that's going to drive wage inflation.

You can bet that if Santorum becomes the nominee, that attempt to be seen as appeasing both sides will appeal to nobody.

While Republicans may be tied in knots, you can bet that President Obama will have a field day pointing out the differences between the eventual Republican nominee's professed concern about hard-pressed Americans and the reality of their policy positions. On the minimum wage, neither Santorum nor Romney points a way out of even basic poverty for Americans who work full-time. Keeping the minimum wage where it is now and indexing it to inflation, as Romney proposes, would lock Americans who work full-time at the minimum wage into poverty. The minimum wage would need to be raised from its current rate of $7.25 to $9.30 to bring a family of three with a full-time worker out of poverty.

Santorum's proposal, based on an economic workforce indicator, has no relation to what matters to a family: whether their hourly earnings keep them out of poverty. In a study conducted for the National Employment Law Project, the Economic Policy Institute calculated his proposal would result in a wage of $8 an hour, well below that minimal test. If the minimum wage had been indexed to inflation in 1968 it would be more than $10.30 today, but Congress has raised the minimum wage only three times in the last 30 years.

This year, Democrats around the country are beginning to see that raising the minimum wage is a timely and powerful issue. The legislative leadership in Connecticut, New York, and New Jersey are each pushing to raise their state minimum wage and then index it to inflation. Similar proposals are pending in Delaware, Illinois, Massachusetts, Hawaii, and California. Activists in Missouri and San Jose, California are gathering signatures to put measures to increase the minimum wage on the ballot in November. Currently 18 states and the District of Columbia have raised their minimum wage above the federal level of $7.25. Ten states annually index their minimum wage to inflation to keep up with the rising cost of living. One sour note on this list is Governor Andrew Cuomo of New York, who has raised typical Republican reservations to the proposal, saying that "We'll look at it, we'll study it."

When Obama, ran for president in 2008 he endorsed raising the minimum wage to $9.50 in 2011 and then indexing it to inflation. Now would be a good time for the president to reaffirm that position and for Democrats in Congress to press for its enactment, if only to continue to highlight the huge contradiction between Republicans' alleged concern for working families and their deeper allegiance to free market theology.

Cross-posted from New Deal 2.0.

 

Comments

[sobe123]

01:37 PM on 02/21/2012

Through the wonders of reality tv and the Internet Americans have been exposed to how out of touch the super rich can be, particularly when they are born into it. Take Paris Hilton for example.

So when they start to run for the highest office in our land our antenna should be going up. Does someone like Romney really understand what life is like for 80% of Americans. Will be feel undue obligation to take care of his peers before he worries about other Americans.

[OldTulsan]

01:43 AM on 02/21/2012

Workers' share of national income has been declining at least since 2001, per this 2006 article:

http://www.nytimes.com/2006/08/28/business/28wages.html
Real Wages Fail to Match a Rise in Productivity - New York Times

"...In another recent report on the boom in profits, economists at Goldman Sachs wrote, “The most important contributor to higher profit margins over the past five years has been a decline in labor’s share of national income.” ..."

Now U.S. workers' share of national income is at an all-time low:

http://research.stlouisfed.org/fred2/series/PRS85006173
FRED« Nonfarm Business Sector: Labor Share

While corporate profits are increasing:

http://research.stlouisfed.org/fred2/series/CP
FRED« Corporate Profits After Tax

Mainly because of reduced wages and benefits:

"JPMorgan’s July 11 “Eye on the Market” newsletter put it, “Reductions in wages and benefits explain the majority of the net improvement in [profit] margins… US labor compensation is now at a 50-year low relative to both company sales and US GDP.”

In 2004, the Bush administra­tion stated that the offshoring of blue-colla­r AND white-coll­ar jobs would enrich the U.S. Link available upon request.

In 2011, the Obama administra­tion selected Jeff "I'm a nut on China" Immelt, GE's CEO, a high priest of the offshoring cult, to be the jobs czar.

[PROGRESSISGOOD]

04:31 PM on 02/20/2012

Gingrich accused Romney of being a "vulture" capitalist. Is there any other kind?

[HelloWerld]

03:56 PM on 02/20/2012

They're backing themselves into corners they can't get out of. My favorite example is: anti immigration law in AL that was so strict that all of the undocumented workers who work for the huge farms left. The farms, which are big business, who'd normally vote for Republicans watched helplessly as millions of $$$ of crops rotted. UH OH! Another one: siding with all things religion (Christian and I guess Mormon!?!) except not extending unemployment is denounced by religious leaders across the country AND the pope supports nationalized healthcare. UH OH. All the lying to pretend to care about anything other than making the very rich richer is catching up with them.

[Kenneth Alton]

01:19 PM on 02/20/2012

Watching the primary debates, the GOP is counting on enough voters turning out for miraculous tax cuts, stopping contraception and abortion and gay marriage, or getting the black/muslim/foreign guy out of the White House. I'd laugh at the ridiculousness of such an electoral strategy if I did not fear it had a chance of actually working.

:-(

[drkazmd65]

01:45 AM on 02/20/2012

I worked minimum wage jobs back in the early 1980s when working Summers while helping pay for my College education. Back then I think it was $3.35/hour.

The ONLY reason that was any money at all even at that time was that I was still living Summers with my Parents, an in-need student could still get grant money, a reasonable quantity of work study, and subsidized loans (I, for the record, had all 3 to help me get through).

Minimum wage jobs at least used to be a 'first step' a new unskilled worker could take to get into the job market and get their foot in the door. Now, for many, the minimum wage has become the only thing that they can find. No more stepping stone - now it is what you can get.

Indexing the minimum wage for inflation is a stop-gap, half-solution to the problem.

[PROGRESSISGOOD]

04:33 PM on 02/20/2012

A stop-gap half solution is better than the solution the conservatives want to enact, to eliminate minimum wage and child labor laws all together.

[tjlatwork]

12:03 AM on 02/20/2012

And yet the poor, conservative right wing will vote against themselves, and vote republican, because they'd rather see gays not get married than feed their family of four.

[killarneytim]

07:39 PM on 02/19/2012

If increasing the minimum wage will help the working poor, then why not raise it to $45 per hour.? So the question becomes , what is the optimal minimum wage? If we raise it too high, will we drive more jobs off shore? If we keep it too low, the working poor will suffer, but more may have jobs. Which is preferable? It is not an easy answer.

[PROGRESSISGOOD]

04:36 PM on 02/20/2012

If the first minimum wage had been indexed to inflation, minimum wage would now be about $20 per hour.

Just think how much all you $20 and $25 per hour men and women would be earning today if minimum wages had been allowed to maintain pace with inflation?

[SoylentGreenIsPeople]

05:42 PM on 02/19/2012

Economists may be a little slow to observe the real world around them since they mathematical models are more comforting and seemingly more objective than reality. However, the proof is in the pudding and the economic decline of America for all but the investment and executive management classes has gotten their attention. When your head is stuck in a box it can take a fire under your butt to get your head out of that box, but the fire has been lit now. The notion that you can extrapolate the finance and service model of our economy absurdly to the point that we produce nothing in tangible goods but the money we print, begs the question how far back that we must go for it to not be absurd? Common sense, somewhere hidden under all of that economics math, tells us that it is unsustainable to consume more than you produce, although you can get by with it for a while using the money illusion before the currency debasement implodes.

[laura r]

01:47 PM on 02/19/2012

How the 1% Destroys Jobs and the Real Heroes are Everyday People

For three decades, we have been told that “trickle-down” economics that benefit the wealthy is the key to creating jobs. But that's baloney. The evidence shows that ordinary people, not the rich, are the real job creators.

Who Really Creates Wealth and Jobs?

Let’s start with the first contention – that capital and entrepreneurship are all you need to create wealth. At best, this is a half or quarter truth. Capital and entrepreneurship are certainly factors in the creation of goods and services in our economy, along with labor, resources, technology and social capital, among others. But they are by no means the most important factors. The most important factor in the whole list is labor – the human beings who create products or offer services and are paid in wages.

And remember, creating goods and services is just half the story in producing wealth. Right now, businesses are far less worried about a lack of cash than a lack of confidence that consumer demand will pick up in the future. Unless there is consumer demand, there is no production and no wealth at all. No one is going to make a new MP3 player unless people want to buy it and have the money to make purchases

http://www.alternet.org/economy/154153/how_the_1_destroys_jobs_and_the_real_heroes_are_everyday_people

[Bart DePalma]

03:59 PM on 02/18/2012

"While Republicans may be tied in knots, you can bet that President Obama will have a field day pointing out the differences between the eventual Republican nominee's professed concern about hard-pressed Americans and the reality of their policy positions. On the minimum wage, neither Santorum nor Romney points a way out of even basic poverty for Americans who work full-time. Keeping the minimum wage where it is now and indexing it to inflation, as Romney proposes, would lock Americans who work full-time at the minimum wage into poverty. The minimum wage would need to be raised from its current rate of $7.25 to $9.30 to bring a family of three with a full-time worker out of poverty."

The GOP should not fear this argument.

Government imposed minimum wages and an increasing array of other mandates raising the cost of labor have caused the highest unemployment rate in our history for unskilled or minimally skilled young folks, dooming them to immediate poverty and a hobbled economic future.

[Serio420]

11:47 PM on 02/18/2012

They also failed to mention that it's the government the causes inflation by printing money, which dooms people to poverty. And then it uses that very same printed money to fund welfare programs, which causes the people doomed by the government to then depend on the government.

"Oh thank you wonderful government for raising the minimum wage, even though you were the ones who caused my money to lose its power."

[Skyglider9]

10:20 AM on 02/18/2012

Law abiding, hard working Americans have lost almost everything in this current economy. These are people who believe in paying their own way, who have worked hard and worked within the system to fulfill not only their dreams, but their responsibilities as well.

Now the economic system has failed and these people are faced with heart breaking choices. Do I pay for food and shelter or pay credit card debt?

People must meet their most basic needs of food and shelter before they can accomplish ANYTHING else.

A petition has been started on moveon.org to prevent the return of debtor’s prison in the USA. Once enough signatures are obtained, it will go to the US Congress and President Obama.

To sign the petition go to

http://signon.org/sign/outlaw-the-return-of

[Si1ver1ock]

07:12 PM on 02/20/2012

They got it wrong. Reform bankrupcty. Take the recovery period down fro 8 years to 3 years and make student loans dischargable under bankruptcy. It might only be a temporary adjustment, but it would recycle consumers much faster.

[nothingchanges]

10:03 AM on 02/18/2012

Both major parties are funded by Corporate special interests.

The GOP's biggest problem is that they brag about it.

Trickle down economics has come close to destroying this country.

When will Republicans be held accountable for that?

[frank1946]

06:18 AM on 02/18/2012

Investors do not expect stability in the USA which creates desire to look for more business friendly
geography and markets.

DEMS hate the Rich and Business................so go someplace else where they get it !

Obama and DEMS only love self-pity and higher Taxes in those who are productive.

Reminds me of my 1st Wife.

[TheoRealist]

10:19 AM on 02/19/2012

You sound like the crotchety old man, with the shorts and sock garters, yelling at kids to stay off the lawn...

[nofriendofrepublicans]

06:07 PM on 02/19/2012

And yet they're the first ones to ask for a bail out when their business ventures fail. Privatized profits, socialized losses. Corporate greed dream.

[frank1946]

11:49 PM on 02/17/2012

America is worth about 50 % of it's value ten years ago.

Will decline another 50 % if DEBT is factored in.

Robust Growth is a Memory now !

[nofriendofrepublicans]

06:08 PM on 02/19/2012

Thanks to the stench of unchecked corporate greed.