What if neither presidential candidate really had a shot at spurring anything like near-term job growth or better real wages for average Americans? What if the next American president had absolutely no control over the European debt crisis, China rejects any attempt to be labeled a “currency manipulator” and decides to retaliate by dumping U.S. treasuries at alarmingly low rates, automation and outsourcing continue apace and the growing democratic movements in the Middle East find no real reason to follow Washington’s line? What if tax rates for the rich drop (or remain hideously favorable, particularly that “carried interest” benefit that taxes fund managers at capital gains rates even if they haven’t invested a sou) and they decide in the absence of consumer demand not to hire new workers? What if the global crisis makes it even more difficult for international markets to afford U.S. exports? What if our climate change and horrific water-use policies (including growing expensive corn for cheap ethanol as a gasoline additive) combine with an accelerating drought, decimating farmers West and Mid-West? What if the above reasons and rising demand for food continue to push prices sky high? What if medical costs continue to explode making healthcare too expensive, public or private, for average Americans even as we protect pharmaceutical manufacturers and private insurance from competition?
Note that the above paragraph is a long one, and there are lots of events summarized above to suggest that the next president really can’t make that much of a difference to macro-global economic trends that were laid bare in the recent economic collapse. Oil isn’t going to experience a sudden drop in cost. The concept of “North American” oil independence is more about Canada than the United States, and last I heard, American politicians don’t set global oil prices; the market does. With more cars coming on line, what do you think will happen to gasoline costs?
So what can a president do? The biggest political time bomb is, of course, the deficit… but the raw numbers, as I have blogged before, can be misleading. We love talking about the trillions owed, but the real issue has to balance taking on debt with growth of the gross domestic product (the value of our national output). That ratio is far more important than merely reducing the deficit, because if the measures you take to reduce the deficit are severe austerity programs that also reduce GDP, you have accomplished nothing in true debt reduction, but you will have inflicted massive pain that could take decades to repair. Just look at the impact of severe austerity measures in Greece, Portugal and possibly Spain. Debt goes down; growth goes down more. There is too much zero or negative growth in most of the Eurozone; austerity seems to have worked better for Germany and its ilk than the southern European nations. In truth, it has not worked at all, but there are places where obvious cutting is necessary.
We Americans don’t seem to have come to an understanding of the guns and butter economic paradigm, whereby government waged war without paying for it with higher taxes. Result: a budget surplus became a staggering budget deficit. We’ve quit one war and are leaving another. How many troops should we expect to be cut as a result? Why is anyone talking about spending more? How much of the world’s military budget do you think we need to spend to be “safe”? 25% (three times China), 30%... do you think 41% (our actual spend) is too much? How are other countries “safe” without spending so much? Harsh economic reality: we have no shot of reducing our deficit and creating growth if we don’t get real with our military spending.
If automation and outsourcing are driving jobs away, what can we do about that? Well, for one thing, letting U.S. corporations shelter their foreign income – which they use to hire foreign workers – is plain stupid. We should trade a reduction in the 35% corporate tax rate for a lower rate (25%) but tax global earnings. Why are American taxpayers subsidizing foreign employment by American companies?
But we’re not going to eliminate automation (we should instead encourage it!) or stop global competition from pulling outsource business, so perhaps our workers are simply going to have to provide a higher level of skills (the German model) to justify solid pay. The problem is that we cannot legislate or decree success in our future economics, but we can deal with the root causes of decline and address what we can… a legacy that seem likely absent from much of what so many candidates seem to be saying.
David Leonhardt, writing for the October 23rd New York Times OpEd, sums it up nicely: “The causes of income stagnation are varied and lack the political simplicity of calls to bring down the deficit or avert another Wall Street meltdown. They cannot be quickly remedied through legislation from Washington. The biggest causes, according to interviews with economists over the last several months, are not the issues that dominate the political debate.
“At the top of the list are the digital revolution, which has allowed machines to replace many forms of human labor, and the modern wave of globalization, which has allowed millions of low-wage workers around the world to begin competing with Americans… Not much further down the list is education, probably the country’s most diffuse, localized area of government policy. As skill levels have become even more important for prosperity, the United States has lost its once-large global lead in educational attainment.
“Some of the disconnect between the economy’s problems and the solutions offered by Washington stem from the nature of the current political debate. The presidential campaign has been more focused on Bain Capital and an ‘apology tour’ than on the challenges created by globalization and automation… But economists and other analysts also point to the scale of the problem. No other rich country — not Japan, not any nation in Europe — has figured out exactly how to respond to the challenges. ‘The whole notion of the American dream,’ said Frank Levy, an M.I.T. economist, ‘described a mass upward mobility that is just a lot harder to achieve right now.’” Simply, stop the slogans and apply common sense. Stop denigrating smart, educated people at great institutions of higher learning who are showing us the path.
I’m Peter Dekom, and getting real seems to be the one insurmountable issue facing America today.
Posts
No comments:
Post a Comment