Monday, December 20, 2010

Five things to do to fix economy

The root and solution to the problems with the US economy aren't really that murky or even that difficult to envision a way to fix. The first thing you have to do is understand the root, the second is understand what is feasible or even reasonable to do about it. Instituting a 75% tax on incomes above $3M wouldn't fix it because it would never get passed. Likewise, cutting public sector benefits and pay, while likely necessary, is simply admitting we're running on empty, and worsening the overall problem of too little money in the hands of workers. Because THAT is the overall problem, the buying power and negotiating position (which go hand in hand) of labor has drastically eroded over the past 30 years, especially over the last 10.

This has happened for two key reasons. First, organized labor is effectively disappearing from the US landscape, making the power of labor near meaningless. Second, the tax cuts of the 80's and 2000's incented the wealthy to do everything possible to direct profits to themselves, rather than to workers, investment, infrastructure, or anything else. The primary cause of the erosion of labor has been an uncontrolled, unplanned exposure of the US (and European) labor markets to effectively free labor in China and India. The key differences in the responses (between Europe and the US) to that exposure has pointed out precisely what we did wrong, and what they did right. We didn't enforce our labor laws, and we DID allow our "captains of industry" to direct our governmental policies to do little (or worse) to plan and control the effects of offshoring.

So, in short order - some solutions are:

1. Enforce the Fair Labor Standards Practices Act - this act initially required employers to pay overtime for anyone not in management (in a direct hiring role). This would need to include the enforcement of the ACTUAL union organizing rules. Probably the most necessary thing in the United States at this point is the ability of labor to demand a fair split of profits. The split has roughly reversed in the last 30 years, and with it, vast shifts in wealth have occurred.

2. Require any company off-shoring any jobs to pay a wage off-shore not less than 70% of the wage they pay on-shore. Yes, it will cause inflation in those economies, but I suppose when you look at how off-shoring has devastated our economy, it certainly doesn't seem either India or China much care.

3. Move this nation toward a small, renewable energy manufacturing. Included in that should be a movement toward renewable energy within the United States (i.e. creating our own demand for this product).

4. Reduce public sector employee pension obligations. While I abhor this, it clearly is necessary at this time given the risk of default by so many states and municipalities on their public bond debt. If you think 1929 was bad, you have no idea how bad it would be if this happens - unemployment might top 40%, maybe more. We'd risk open violence in the streets and the election of an authoritarian regime.

5. Publicly fund campaigns. Remove the ability of corporations to buy votes in Washington.

Notice, I didn't say anything about Wall Street or banks, quite simply because Wall Street is a symptom. Too much money had too few good investments on shore in the 2000's, too much of our economy rested on bond/mortgage/currency speculation and manipulation as well. If you fix the jobs/manufacturing question, Wall Street will/should (must?) go back to what it is supposed to be, a place to raise capital for expansion and to secure high quality investments and return.

Oh, there are more drastic measures of course, and those likely will come if we don't act to begin a course correction now. WE must insist on reduced spending by the government propping up private companies, but if we are to do that, we have to create living wage level jobs on shore. The wealthiest Americans didn't think their focus on keeping more for themselves would ever land us where we are, but that is exactly what has happened. Our economy, and our nation, are teetering on the brink of becoming a second tier economy, with poor futures for our children, certainly much poorer than we had. If the Republicans in Congress think 2010 was a watershed for them, they've seen nothing like what 2012 or 2014 could be like if things keep going as they are, but most importantly, if we chose to make a new way, we've got to begin planning for sustainable manufacturing and protecting our own jobs, our own children, our own retirements, our own futures because it is certainly the case that the Chinese aren't, nor are the wealthiest among us because their futures are (they think) already secured.

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