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ECONOMIC GROWTH AND JOBS

 

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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TRUMP AND THE 25th

TRUMP AND THE 25th

My followers know that I have suggested using the 25th Amendment in the past to remove Trump from office for his many offenses, but I only made such a suggestion a few times idly and with no fevered demand for his removal from office. My suggestion was more of a recommendation than a demand.

Events of the past few days have persuaded me that it is time to demand that Trump be removed from office. When his press secretary tells us that the president’s views can be based on non-facts; when Trump imports ultra-right wing hate for Muslims from an English conspiracy theory manufacturer to incite hate in this country; when he denies that he confessed to sexual predation (when we have it on tape); when he uses a racial slur in the presence of Navajo WW II heroes, when he calls neo-Nazis nice guys, and when he in general ignores truth in favor of false facts he manufactures in his otherworld to fit his narrative of reality (Obama was born in Kenya), it is time to remove this ailing president from office. He is mentally unfit to hold the highest office in the land and we can and must do better.

I have written several times that Trump lives in two worlds, one which he shares with Narcissus in admiring his visage in the pool, and one in our real world. His mind flits between one and the other and frequently his decisions made while under the influence of narcissism in his otherworld are presented to us in our real world as good policy positions when they are anything but by any reasonable standard. He also changes his mind on proposed policy positions willy-nilly within five minutes of one another so that we don’t know what or who he will favor or disfavor tomorrow. It’s time to end this charade.

Trump’s word is definitely not his bond and so his promises made to anyone about anything are at least questionable if not worthless. For instance, why would the North Korean dictator Kim negotiate with him about peace when he knows Trump has no regard for truth and his promises are subject to change in five minutes? Why indeed would anyone believe a word that comes out of his mouth as he retreats from our world to his otherworld for narcissistic solace, for self-praise and adulation, a world where truth is optional and alternative facts can be manufactured to fit already decided conclusions.

Much has been made about how he got this way. Is he mentally ill? Is he scared for his future given Mueller’s investigation of his Russian ties, multiple claims of sexual predation by some 16 women, money laundering, collusion with Putin in the last election, or is he simply an evil, selfish, classless, uncaring and uncompassionate human being fixated on making money, bullying anyone in his way, oblivious to the consequences of his actions or failures to act?

I think it is time to stop worrying about his problems and start worrying about ours. We have an unstable dictator armed with atomic missiles  in North Korea, we have a tax bill which if passed will (in my opinion) give us a recession next year or 2019 at the latest, we have the economic cancer of chronic wage inequality which continues to be unaddressed, swastikas in the street etc. Not only our democracy but our very existence is at stake and much of the reason why is sitting in the Oval Office.

I therefore demand that we dust off the 25th Amendment, remove Trump from office, abolish government by tweet, and save ourselves and our democracy. It’s time.    GERALD       E

 

 

THE DEMISE OF THE SHERMAN ANTI-TRUST ACT(PART II)

THE DEMISE OF THE SHERMAN ANTI-TRUST ACT (PART II)

Some two weeks ago I promised my followers a Part II to the demise of the titled act but am tardy in producing it what with intervening disasters in New York and Texas and an election which has national consequences. With my apologies for the delay, following is Part II of the essay.

I inferentially suggested to my followers that I would discuss in Part II some of the unbelievable tactics used by the first Gilded Age captains of industry and commerce and how we are in a second Gilded Age today, how the Sherman Anti-Trust Act is all but dead from lack of enforcement, and the price we pay for such failure to contain monopolies and their anti-competitive practices, including excessive prices charged by such large corporations or combinations who gain market power via political power such monopolists buy with campaign contributions, hordes of lawyers and lobbyists etc.

Surprisingly (by today’s standards since the Republican Party has sold its soul to big business monopolists), the reformers in the first Gilded Age were Republicans, though there was widespread bipartisan support for an anti-trust act. John Sherman, a Republican senator from Ohio, introduced his namesake anti-trust bill and it passed the Senate with only one dissenting vote and passed the House with no dissenting votes, rendering it veto-proof. It was signed into law by then President Benjamin Harrison on July 2, 1890.

There was genuine concern on both sides of the aisle in that day and age that combinations of concentrated economic power possessed by corporations leading to restraint of trade, anti-competitive practices and excessive pricing posed a threat to government itself, as well there should have been and today as well. Following are some quotes from those on the battlefield of the first Gilded Age per Reich in his book, Saving Capitalism. Teddy Roosevelt, in castigating these “malefactors of great wealth” who were “equally careless of working men, whom they oppress, and of the State, whose existence they imperil,” sued the Harrimans under the Act and later recounted that the lawsuit “served notice on everybody that it was going to be the Government, and not the Harrimans, who govern these United States.”

Henry Demarest Lloyd in his 1894 book, Wealth Against Commonwealth, noted that “Liberty produces wealth, and wealth destroys liberty. The flames of the new economic evolution run around us, and we turn to find that competition has killed competition, that corporations are grown greater than the State. . . and that the naked issue of our time is with property becoming master, instead of servant.”

Mary Lease, populist reformer of that day, charged that “Wall Street owns the country. It is no longer a government of the people, by the people and for the people, but a government of Wall Street, by Wall Street and for Wall Street.” Sound familiar? It should. Look around. Taft broke up the Rockefeller Standard Oil empire in 1911 and Ma Bell was broken up as late as 1984 under terms of the Act, but how many breakups have you seen lately? Try zero; the Act is not enforced. What you see instead are mergers and acquisitions by big corporations with barely a dissent from the deliberately underfunded anti-trust division of the AG’s office, an AG currently under investigation himself, among other members of Trump’s cabinet filled with generals, Wall Streeters and ideologues, hence the onset of a second Gilded Age, one our democracy may not survive as the rich and corporate class is on the verge of literally owning America and its people as proof of the old adage that “He that’s got the gold makes the rules.”

So who were these bad guys and companies who brought on the Sherman Anti-Trust Act to contain their lust for power and money with their monopolistic practices and excessive pricing? Among others, they were the robber barons Andrew Carnegie, John D. Rockefeller and Cornelius Vanderbilt per Reich, “whose steel mills, oil rigs and refineries, and railroads laid the foundations of America’s industrial might,” but “they also squeezed out rivals who threatened their dominant positions and they ran roughshod over democracy. They ran their own slates for office and brazenly bribed public officials, even sending lackeys with sacks of money to be placed on the desks of pliant legislators.” “What do I care about the law,” Vanderbilt infamously growled? “Hain’t I got the power?”

Seventeen years before the enactment of Sherman, in 1873, the Chief Justice of the Wisconsin Supreme Court warned the graduating class of the University of Wisconsin that “The question will arise, and arise in your day, though perhaps not fully in mine, ‘Which shall rule – wealth or man; which shall lead – money or intellect; who shall fill public stations – educated and patriotic free men, or the feudal serfs of corporate capital?’” We have our answer, Mr. Chief Justice. We are well into being owned lock, stock and barrel by corporate power, money and political influence, and are approaching economic and political serfdom and political irrelevancy, collective victims of Big Money.

Present robber barons in our second Gilded Age seek the same unlimited power over America and its economy and its people that the first robber barons sought, but they don’t send in aides with sacks of money anymore for deposit on the desks of those in Congress – now they send in “campaign contributions” (aka bribes) via PACs, some even through tax free shell organizations so that they can take such “contributions” as deductions from their taxes while you and I indirectly contribute by having to make up for such shortfall with our own taxes. Result? You and I are helping today’s robber barons finance our feudal future.

So what’s the difference in not having a law and having one that isn’t enforced? There is no difference, so perhaps we should agitate for repeal of the Sherman Act in order to remove the pretense that we have the protection of an anti-trust act and make the demise of Sherman official. That would make the robber barons’ lawyers and lobbyists unhappy since kicking a dead statutory horse makes for good fees, but with the effects of Dodd-Frank and tax cuts for the coddled rich still extant, they could find other things to do, and, after all, their fees are deductible from the incomes of our latter day robber barons which you and I help share with our taxes, so today’s robber barons get a break while the rest of us get the shaft.

So is the process rigged? Does the sun come up in the east? Of course!    GERALD      E

TRUMP’S ECONOMIC NONSENSE

TRUMP’S ECONOMIC NONSENSE

Trump is dismissing yesterday’s Republican electoral losses by throwing the “losers” under the bus, a classic case of ultimate bullying, i.e., kicking the losers while they are down, even fellow Republicans. He tells us that they lost because they did not fully embrace his policies. Yeah, right. Trouble is, he has no policies with his shoot from the hip idiocy, and even if he professes to have one, five minutes later it can become obsolete as he retreats from our world to his narcissistic otherworld and its intermixture of reality and fantasy.

Trump sees government through the lens of “The Apprentice,” where everything and everybody are in competition with one another and the substantive results of how and why you won are not important – only whether you “win.” Thus he is not particularly interested in the contents of his tax bill or any other bill (other than how the tax bill might add to his personal coffers); he is rather only interested in “having a win” so that he can bask in coming out on top. Example > In a speech given just hours ago in South Korea in the shadow of a belligerent atomic power, he bragged about having won his election. Given the time and place and grave environment, I can hardly think of a more inappropriate observation, but it does give us a glimpse into the mindset of an ill, ignorant and oblivious man, one who sits in the Oval Office and in his otherworld, flitting from one to the other as perceived occasion demands.

To the topic of his economic nonsense > The fact that the tax bill hurriedly passed by the House is now undergoing Senate scrutiny and that Senate tax writers have indicated they are going to write in a one-year delay in the corporate tax reduction and make a few other minor loophole changes is instructive. The Senate Republican majority is less than that in the House and if the Democrats stand together and can secure only a few Republican votes (as they did in the health care fiasco), the tax bill will fail, hence the proposed delay in the harsh House version based upon the old movie that “A little bit of sugar makes the medicine go down.”  Again, trouble is, no sugar is promised a year from now by the Senate, when we have to take our “medicine” via funding of corporate shareholders and executives.

My major motivation is writing this essay is that when Trump was throwing the Republican “losers” under the bus just hours ago he simultaneously bragged about how well the economy is doing under his leadership as demonstrated by increases in the Dow, thus equating stock market values with Wall Street assessment of future corporate performance while ignoring effects of real world austerity economics.

So hello, Mr. Trump. Answer these questions > How well is the economy doing for whom, sir? Is the economy doing well for those whose median wages (adjusted for inflation) have not moved for almost four decades as the Dow has exploded? Does it really make any difference (other than to a select few) what Wall Street thinks? Johnnie Lunch Bucket can’t eat dividends and capital gains; he and his can only eat well if their wages move in rough tandem with corporate profits (as they did from FDR to Reagan) when the middle class exploded and economic growth was in the stratosphere.

Instead Johnnie now finds his worker productivity gains not in his paychecks but hijacked to the Dow; he finds the ultimate arbiter of economic growth (aggregate demand) missing in the marketplace due to his lack of wherewithal, a result of chronic and subsisting wage inequality; he finds encouragement of monopoly (and thus lack of competitive pricing) by government rather than restrictions on mergers, acquisitions and price-fixing under the Sherman Anti-Trust Act; he finds his job underpaid but subject to outsourcing if he complains etc. etc. etc. In short, he is at the mercy of runaway greed mongers who have bought our politics, a purchase greatly at odds with whatever economic security he once had, and all the while living under the threat of corporate ownership of America and whatever is left of our democracy. Tell me how well millions of similarly-situated Americans are doing under your leadership, Mr. Trump, and without the usual imprecations aimed at Hillary and Obama.

I have blogged many times that wage inequality is our greatest domestic issue, and that unless we correct this lopsided return to favored capital over labor that aggregate demand will remain tepid and economic growth will stagnate with occasional ups and downs and recessions between and even during business cycles. Thus the argument that we currently hear that unemployment is at a low is relatively meaningless, as is the argument that median wages are nudging up, since any such miniscule increases are gobbled up by inflation.

When those working are working for peanuts, it doesn’t matter if every man, woman and child were employed. Their paychecks will barely nudge the demand meter. Those unemployment numbers now cited were old measures of economic progress when wages rose in tandem (and even sometimes) exceeded the rate of growth in corporate income from FDR to Reagan and have no application today when Wall Street has hogged all of the economy’s wealth and income (and even worker productivity). There is little left to enhance demand, and the present and temporary slight increase in demand comes primarily not from either a low in the unemployed or enhanced wage scales; it is in part attributable to an historic rise in credit card debt.

So is the Dow on the rise because corporate America is more efficient in providing goods and services for the marketplace, gains in productivity due to better automation, or the way to make a better mouse-trap via innovation in marketing techniques (see Amazon) or related activities? Not anymore.

The Dow is up lately because of the promise of “tax relief,” which will go straight to their bottom lines as a gift from ordinary American taxpayers and unrelated to their provision of goods and services. You and I are in effect funding the capital gains of shareholders and the stock options of corporate executives while being asked to pay more taxes and accept an increase of 1.5 trillion dollars in our debt our children and theirs and theirs and theirs will have to pay down the road.

So this is policy in the making designed for the common good or for the paymasters on Wall Street? You decide.     GERALD      E

MURDER IN TEXAS

I wrote the following today in response to a blog seeking commentary and repeat it here.

MURDER IN TEXAS

I see yesterday where a member of our well-regulated militia exercised his right to bear arms by mowing down worshippers in a church. The local sheriff this morning ascribes such an appalling situation to a pattern of conduct of the militiaman indicating mental illness, and in another show of mental illness, a president half a world away tells us the problem is mental illness, not gun laws, as though the two are mutually exclusive. If he wants to stick with that story, which deliberately confuses mental illness with unhampered means to kill, a classic NRA response, then perhaps he can tell us why his proposed budget cuts funding for mental illness in the face of the continuing and accelerated pace of slaughters of innocent Americans.
The idea behind the Second Amendment is found in its language on the right to bear arms as “being necessary to the security of a free state.” The horrid demonstration yesterday does not comport with such language; the victims and their families were neither secure nor free in real world terms under our current judicial language of the meaning of this Amendment. I can’t imagine that Madison and his cohorts envisioned that such as yesterday could ever have happened given what they had in mind when they laid out the language of this Amendment two years after adoption of the Constitution itself.
The Supreme Court got it right in 1939 when they found that militia meant militia, but the court abandoned such a finding later, and here we are > an NRA-sponsored society that demands licensing of beauticians and roof contractors but not terrorists and the psychotic who demand automatic weapons under the mantle of a constitutional right to bear arms which, by the way, is at odds with another constitutional right, to wit: the right to “life, liberty and property.”
Would that Madison could somehow be resurrected for a discussion among the “originalists” on the Supreme Court today as to what he and his fellow “originalists” had in mind when agreeing on the language of the Second Amendment. I am certain that it would not give license to homicidal maniacs to go into schools and churches and country music festivals to kill innocent Americans and then have politicians such as Trump pass it off as a mental health issue. Thus we have people killed by guns every day who are not deranged, like kids who find them in a drawer, people who use them in road rage situations, holdups, accidents while hunting etc. Mental health is not involved in thousands of such horrors every year, and speaking of mental illness, Trump should look in the mirror and apply the old dictum of “Physician, heal thyself.” When will this NRA-fed insanity end?

REFORM OR GIVEAWAY?

REFORM OR GIVEAWAY?

Today, November 4, 2017, I had occasion to answer a blog seeking comment on the Republican tax bill now before the House that was unveiled just 48 hours before by Speaker Ryan, an Ayn Rand devotee. I thought what I had to say might deserve larger circulation since I owe it to children both born and unborn not to add another 1.5 trillion dollars to the already monstrous debt they will be paying to further enrich today’s plutocrats in a world where there is already so much cash around that capitalists have begun to run out of places other than tech to invest. Following is such effort, slightly edited from my original commentary.

I agree that we need “tax reform” but that is not descriptive of the “tax giveaway” bill Ryan and his fellow Randists are trying to poke down our throats, made even worse with a generous sprinkling of social proposals designed to get social conservatives to support the “tax reform” bill, like, what the heck are abortion and churches and other such social engineering clauses doing in a tax bill? Let’s let them stand alone on their own merits, as should a “clean” tax bill. I would even agree with ridding ourselves of the AMT (alternative minimum tax) if such atrocities as “carried interest” and all other such gifts to the rich (see hedge and equity funds exemptions and redefinitions of ordinary income and corporate buybacks of stock etc) were removed or regulated pursuant to the public interest. I want tax reform, too, but not the Rand variety.

The noise we hear in ads on TV from “committees” bought and paid for by libertarians like the Kochs and Mercers? about reduction of corporate taxes is phony – the average effective rate paid by corporations is far beneath the present topper of some 39 percent and many Subchapter S corporations pay no tax at all with their pass through provisions. At base, and truth be told, the superrich are essentially trying to sell us on the old and discredited “trickledown” theory, you know, give the rich more money and the poor will prosper. Arithmetic and history, anyone?

I could write on the horrid details of this bill forever but will end it here for lack of space and time. Paul Krugman and Sheila (a professor whose blog I answered) are correct in their criticism of this monstrosity in the making, and it occurs to me that Ryan and his Randists have deliberately overshot the mark to leave themselves room to go for amendments, like, O.K., we will agree to take carried interest out of the bill in exchange for a reduction of the corporate tax rate, or fetuses to term or churches free to make political statements while maintaining their tax-free status or whatever Ryan & Co. may judge to keep their social conservatives in tow as a blow to Roe or tax-supported political rants from the pulpit or whatever. I note in passing that it is easy to give up carried interest, which never should have been in the bill in the first place and thus amounts to no more than amendment bait in political give and take.

As for Trump the clueless wonder, he doesn’t know or care what is in the bill – he just wants “a win” to sate his narcissistic need for adulation, especially if such a “win” would add to his coffers, as this bill would. Parenthetically, he is going to the Orient as I write this, and as I have noted elsewhere, I hope that in case he is indicted while gone that he is in a country with whom we have an extradition treaty so that he can be arrested and extradited back here for his bond hearing lest he holes up in some Russian or other embassy somewhere, as others have done in order to beat the extradition rap. Far out thinking,  Gerald? Negative – how can you get too far out with this Trumpnut on the loose?        GERALD        E

AUTOMATION: FRIEND OR FOE?

AUTOMATION: FRIEND OR FOE?

Following is my short response to a blog seeking comment on the crises likely to come with accelerating automation and how we are going to deal with them.

The blunt truth stripped of trade myths and political maneuvering is that automation destroys jobs (or at least jobs primarily those performed by humans). When Trump was running on “I’ll bring good-paying jobs back from China” I was trying to stem this obscuring of fact by citing time and again in my blogs a study which showed that 83% of the jobs he was talking about never left – that they were automated – and that the remaining 17% of the jobs that did “go to China” would, if returned, be of the repetitive sort subject to automation here upon their reappearance. I was trying to blunt his myth-making but to no avail as he narrowly prevailed in a swath of industrial states in our north who bought his blather and elected him.

I think transitions between jobs and a more robust safety net are essential in the perhaps near future if we are to avoid civil commotion and loss of social cohesion, but let’s be honest. Such attempts to meet the ravages of accelerating automation will need many more such initiatives as we redefine capitalism to include human welfare that will make past welfare schemes look medieval by contrast, as in, who owns the fruits of the new economy? Wall Street? How do we distribute the income and wealth resulting from automation? If the people have no wherewithal, what happens to aggregate demand in the marketplace? Can private enterprise survive social crises sure to come? Are “market economies” a thing of the past and, if so, how will a new marketplace assess risk, if any, in this brave new economic world? Will overproduction and underconsumption unless adjusted by government cause permanent deflation a la the Great Depression?

I can think of many more such questions, ones for which I have no answers at this time. I can only hope at this juncture that brilliant economists like Stiglitz and Piketty are giving some attention to the coming conundrum of how this mixture of automation and humans can work for humans. Right now I have only questions and no answers, but those smarter than I (and they are legion) may solve this oncoming riddle before its impact brings about human misery and social upheaval. I sure hope so.    GERALD       E