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ECONOMIC GROWTH AND JOBS

December 8, 2017

 

ECONOMIC GROWTH AND JOBS

A lady professor blogged a critique today of the Republican so-called “tax cuts and jobs act” in re its promise of higher employment and asked for commentary. I offered the following observations, slightly edited, noting that in essence it didn’t matter if more jobs were created so long as we have chronic and unaddressed wage inequality (as we have had for some forty years) since economic growth is wholly dependent on aggregate demand and not the Dow, employment numbers etc. >

Speaking of Republican propaganda in re job creation, the Labor Department has just announced this morning that 228,000 new jobs were added to the economy in November, and along with breathless reports by the business press of the historic rise in the Dow, they tell us that the economy is headed up, up, up. But just as when the Lone Ranger and Tonto were trapped in a box canyon by 3,000 Sioux warriors and the Lone Ranger said “We’re in real trouble this time, Tonto,” and Tonto replied “What do you mean We, Paleface?” – just “who” and “what” are benefitted by such statistics which are designed to suggest that a boom is just around the corner? To wax poetic – a boom for whom?

I have written dozens of times elsewhere that it doesn’t matter if every man, woman and child were employed until we solve the four-decade and ongoing problem of wage inequality. Real economic growth (not stock market froth) depends solely upon aggregate demand, and it doesn’t matter how many people are working or how much Wall Street is  stuffing in Swiss banks and here’s why: Without substantial increases in the rate of wages paid (as we experienced during the WW II postwar boom when wages rose in tandem with the Dow), demand will increase only marginally if at all as adjusted for inflation as the rich and corporate class continues to hijack worker productivity gains to its bottom line(s) and pay slave wages to its workers and our massive trade deficit roars on unabated, thus deflating demand irrespective of how many people have jobs. Much of the current demand is financed not by wages but rather (and speaking of highs), historic credit card debt. Such aggregate demand increases stemming from credit (at interest) are in my view a downer rather than an upper since the billions in interest and fees paid to banks on credit cards are dead monies – they are rent paid for the use of money and deflationary in that they buy nothing in the real economy.

About the only good thing that can come out of totally full employment (an impossibility because of so-called frictional unemployment caused by change of jobs, incarceration, illness etc.) is that social costs are reduced. However, with our provision of food stamps to people who have jobs such as millions of underpaid employees of WalMart and others (including even the military), that is a marginal savings and has little to do with demand and a lot to do with current budgeting (as Republicans kick the can down the road to add to our national debt of some twenty trillion dollars – shortly to be some 22 trillion with passage of the so-called “tax reform” bill). I often write that wage inequality is our biggest domestic issue (aside, of course, from Trump-Bannon neo-Nazism), and the foregoing may tell the reader why. It all comes down to an Econ 101 proposition, i.e., if you want economic growth in the real economy as exclusively defined by aggregate demand, provide more wherewithal in the hands of consumers. Raise wages. Substantially.    GERALD        E

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