In business, an Opportunity Cost is the cost or loss associated with doing something OTHER than what you actually do. As Wiki defines it it is, "is the value of the next best alternative forgone as the result of making a decision. ..."
Recently the right has phumpered and yammered about Obama's deficit. There is more than a little merit in the complaint, as Obama is spending profligately to bail out banking and investment house executives, but making little actual change to the way business is conducted either on Wall Street or in Washington.
However, when we talk about deficits it is deceitful, even dishonest to fail to consider the opportunity cost we are paying, every day, for having a country where the middle-class are woefully under-employed. From 2001 to 2006, the estimates provided by the GAO (as I recall) are that 74% of new jobs created paid substantially LESS than the jobs shipped overseas.
The consequence on tax revenue, on housing sales on plummeting home values and with them on investments defined from them such as CDS's (Credit Default Swaps) and derivatives using real estate as a backing source, is nearly inestimable, but it is certainly safe to say it runs into the multiple trillions of dollars. Further, the spending by Obama (or for that matter in the waning days of the Bush Administration) meant to 'deal' with this crisis of under-employment, can be directly related to the business practices of those who promised higher paying jobs if we only deconstructed our manufacturing, computer hardware and computer programming base.
This is opportunity cost, and it will continue to elevate as we suffer the effects of grossly inept business and labor policy. So, while I hold much frustration and disappointment with the Obama administration for selling out to Wall Street in a manner little different from the Bushies, I don't particularly have much angst to vent about current deficits. The middle class of this country can no longer bail Wall Street out of it's problems because Wall Street saw fit to destroy the basic foundation of the middle class, and that is an opportunity cost we may never recover from.
Care for whatever you like, or not, that's hardly the point.
ReplyDeleteDespite misinformation from the right, FDR's jobs programs DID help lessen the effect of the Stock Market Crash and laissez faire capitalism of the Gilded Age.
I don't like the deficits, but I didn't like them in 2002 and 2003 etc.. when it was merely a big tax break to the ultra-wealthy while inlfation in middle-class energy costs MORE than offset the tax "deferments" for the middle-class - making those deferments tantamount to nothing other than a direct subsidy to energy companies for which they got no increase in tangible value.
As regards your first begged question - I put the question to you - how do you solve for the global labor market's impact on the US and Western Europe. So far, all of the promises made by business leaders of jobs here managing jobs there (in sufficient quantity to offset lost jobs here), have been dead, solid, wrong.
So, other than protectionism of some form, which China, Japan, and most of Europe engage in, and of coure undoing NAFTA and MFN status for China - what do you suggest? Do you actually HAVE any ideas about how to solve for this issue specifically?
If you do, congratulations, you'll be the first person to do so (using other than what I've suggested above) from the right that I've heard.
I have some ideas, tie executive pay and ownership stake in profits to on-shore labor and wage base criteria - that's not tarrifs, it's just incentivizing them to employ locally. In the end, it IS about defending the interests of the United States, and econominic health IS a national security interest.
So how about it?
One suggestions I have wished for a long time would be to set a set of tax loopholes that we know all corporations use, and then set them to be plugged whenever a corporation outsources to an off-shore source. For example, if IBM is getting a tax break for a plant in Texas, but then closes it to take the plant overseas, then IBM has to not only forego xx dollars in tax breaks, but the tax breaks that it enjoyed in the past are now due and owing. They are doing that to a company locally here in Kansas. The company promised to employ 15,000 people for up to 10 years, in exchange for millions of dollars in property tax relief. When the company laid off most of those people after 2 years, the company now finds itsself owing the ongoing taxes, plus 2 years of back taxes. A program like this would help, because it would give an incentive for US Businesses to stay in the US, and give them a powerful reason not to leave.
ReplyDeleteOnly some of the people on the right are for completely unrestricted free markets. Ronald Reagan used some heavy tariffs to keep Harley Davidson in business when the Japanese companies tried to take over the market in big motorcycles by selling below cost here. If you read some Pat Buchanan he is also in favor of protecting American industry. What killed most of the steel industry is that all the steel we sent to Japan was taxed by the Japanese government, the money from that was given to the Japanese steel companies so that they could price steel they sold in the US below what the US companies were selling it for. I don't think tariffs are a good thing but you have to level the playing field.
ReplyDeleteK-Rod, Dave Thompson is for unregulated markets. He's far from alone. Many rightie economists talk about letting the market correct it's mistakes in virtually all product areas. I know about Thomspson's opinion because I had a lengthy discussion with him on the subject on day.
ReplyDeleteWhile that may not mean totally unregulated markets in every area, I don't think the points being made to you (and others) were totally unregulated markets in all ares - that's a leap to an extreme that you made, unregulated markets in important areas such as finance, banking, etc.. or even just unrestricted practices in competition, leads to monopoly and eventually higher prices.
I know plenty of people who believe in unrestricted markets in many many areas. The question before you - since you raised it - is what restrictions do you believe in?