Another Angle on $4 trillion tax cuts for rich -- ditch Detroit

Another angle on $4 trillion in tax cuts for the rich -- the bird for Detroit.

If the rest of us had that $4 trillion in tax cuts to spend (about $400 billion a year -- doable) we might have bought enough cars to keep all, domestic and transplant, auto factories profitable.

BTW, I am reading The Weight of the Yen, by R. Taggart Murphy (1996 -- reputed the best book on the Japanese economy -- by a business man; no graphs). Believe it or not, the giant Japanese stock market and real estate bubbles of the eighties were cold bloodedly provoked by the economic bureaucrats running Japan (out of control of the politicians and everybody else) in order to soak the everyday person for as many yen as possible and use them to build a giant industrial plant. How's that for a subsidy?!

Arbitrary minimum wage? -- 2/3 down to 1/5 of average income!

Before July, last year the federal minimum wage was about 1/5 of the real average wage ($25/hr -- the gov measure, $17/hr, is of limited description and grew only 20% as average income grew 100% over 40 years). Since July this year the federal minimum was about 1/4 of the average wage. Obama wants to make it 1/3.

Under LBJ as president the federal minimum wage was a spectacular 2/3 of the real average wage. Yes, in 1968, at 50% today's average income, the federal minimum wage was raised to an inflation adjusted $9.91/hr (nominally $1.60/hr -- check again in early February 2009 at http://www.minneapolisfed.org/ when the new numbers will nose out today's SF and Santa Fe).

Even under LBJ as senate majority leader the fed min was advanced to 2/3 of the average wage. In 1956, at 40% of today's average income, the federal minimum was raised to $7.93/hr (nominally $1.00/hr).

Doubling today's federal minimum wage to $13/hr would shift $350 billion dollars to the poorest paid 40% of the American labor force (a free stimulus? -- even expecting a phase in could free up buying) while adding only 2 1/2% to the cost of GDP output and presumably to inflation.

Before July, 2007 25% of today's American labor force were earning less than the federal minimum of 40 years before -- and this percentage has probably not much changed. This diabolical income shift amounts to our "great wage depression", our ghettos are our "Hovervilles" and our drug gangs are violating a 21st century prohibition (drugs) to avoid what was, up to June 2007, a literal 1939 minimum wage level (under FDR, $4.65/hr w/no taxes; nominally $.30/hr).

Time to upgrade the federal minimum wage to 21st century standards at a cost to GDP output that equates to about two years normal economic growth. If we all got our inflation raises but did not get any economic productivity raises, the other 60% of us might not even notice it happened (a recession is not a good time to hold back on or cut real wages according to Keynes).

Re: San Francisco street gangs

The Crips and the Bloods could not beat a decent paying Ronald McDonald -- and might be the first to tell you so. Up until July, last year, we literally had a 1939 federal minimum wage ($5.15/hr v. $4.65/hr in 2007 dollars but w/no tax) and we have a prohibition. Upshot: we have drug selling gangs but this time they are not Irish, Italian and Jewish, they are black and Hispanic.

Our ghettos are our Hoovervilles.

As of last year (and probably still unchanged) 25% of America's workforce earned less an hour than LBJ's 1968, $10/hr minimum wage (double the average income later).

Since 1973, 15% of overall income share has shifted from bottom 90 percentile incomes to top 3 percentile incomes -- overwhelmingly to the top 1% (which proves it is not a matter of the more educated getting more pay in a higher tech economy -- the top 3 percentile were always highly educated).

The income share cut is bigger both proportionately and absolutely as you go towards the bottom (IOW, from 90 percentile to 25 percentile there was descendingly less sharing of the growth).

Doubling the federal minimum wage to $13/hr would shift $350 billion to the bottom 40 percentile! -- adding all of 2 1/2% to the cost of GDP output (sound like a solid stimulous?) and presumably to inflation.

Last year the minimum wage was about 1/5 of the average wage ($25/hr -- the gov $17 figure is derived from a limited description and grew 20% over the last 40 years while average income grew 100%). This year it is 1/4. Obama wants to make it a big 1/3. LBJ had it up to an astonishing 2/3 in his administration -- and -- in the Eisenhower administration (1956: $8/hr) when he got it through the Senate as majority leader.
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Time to bring something to the American economy a labor pricing practice that is used all over the modern OECD (not to mention second world, Argentina; not to mention the third world, Indonesia!): sector-wide labor agreements wherein everyone doing the same job in the same geographic locale works by law under a common collectively bargained agreement.

French Canada, right next door, uses a "lite" version: non-unionized firms must by law operate under contract terms worked out by unionized firms. Wal-Mart just pulled 88 big boxes out of Germany ("heavy" version) because it could not compete for German customers on skill and it could not compensate by paying lower wages and benefits.

Our Republican Senators just inadvertently pointed out the sector-wide approach over the auto bailout even -- if their version was stuck in reverse: paying organized labor the same as unorganized!

Prices are set in an unregulated labor market is all about power -- not utility. Ownership's default bargaining position is that of indispensable "last lot" seller and the default position of labor is that desperate "fire sale" seller. This is automatic; it is all about relative numbers of bargainers -- if there were 10 times as many employers as employees the power equation would work the other way 'round -- just eight grade math, no class struggle.

Unionization and an as high as practicable minimum wage are necessary to reset the bargaining position of labor as equally indispensable last lot seller. And sector-wide contracts are the only answer to the race to the bottom (as supermarket workers could appreciate).
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Hell of a time getting MALE geeks to discuss the most obvious, clear, abstract answer to American labor's impoverishment: sector-wide.

Females are gatherers, scooping up and sorting from many sources -- and they seem more willing to consider complete new (to Americans) ideas too.

Males are hunters -- desperate to catch one piece of meat today -- reach some small consensus TODAY; will NOT focus their discussions on anything completely new (to us) which could take months or years to come to any common conclusion on. Also males wont entertain any new ideas while on the hunt -- new ideas are for before or after, as they interlock the minds and instinctively cooperate with the rest of the hunting group. Problem is: male geeks are ALWAYS on the hunt (even alone in the library at one in the morning).

It seems almost impossible to get male geeks to consider the most obvious answer to labor's mess: sector-wide labor agreements. Meanwhile airline and supermarket workers would kill for sector-wide legislation. While we are on the topic: if the transplant auto factories supposedly turn out better cars then Detroit they should have no problem at all making a good living paying the same wages as Detroit.

My candidates for a presidential pardon: border agents Ramos and Compean

My candidates for a presidential pardon are border agents Ramos and Compean who are doing 11 years (in solitary) for firing on a fleeing suspect whom they had reasonable cause to believe represented a mortal danger to them — to wit:

The excuse for trying these border agents under the civil rights act was the Supreme Court decision taking away the discretion to shot a fleeing suspect if the officer is not certain the suspect had a gun — which the border agents were honest enough to admit.

But this ruling was in answer to the wide spread practice of the era to give the police officer complete discretion to shot any fleeing suspect. Up until 1968 it was the RULE in (liberal) New York State to shot to kill EVERY fleeing suspect after firing a warning shot (saw this practice enacted recently in a 1961 episode of the Naked City TV series).

But a MEXICAN (maybe not an Irishman — no kidding here) who abandons a van and violently assaults an officer to escape is 99.9% certain to be in fear of doing 20 years for major drug trafficking and just as certain to be carrying a gun (otherwise Mexicans, even coyotes, NEVER assault border agents — for those from parts of the country who are not familiar).

The totality of circumstances in the border guards case is not that of a 16 year old burglary suspect climbing over a fence with his back turned as in the high court precedent. There was no question of the mortal danger for the officers here — meaning the discretion to shot could not sensibly be denied — meaning there was no grounds for the civil rights case.

Precedents have to evolve in accordance with circumstances. Sufficient mortal danger to the officers = discretion to use deadly force cannot be categorically denied = no excuse to bring a civil rights charge.
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Until 1968 the rule in (liberal) New York State was to fire a warning shot over the head of EVERY fleeing suspect and then, if he did not stop, shot to kill. I recently watched a fictional reenactment of this typical for the era policy on a 1961 Naked City TV rerun.

This easy shooting policy was the target of the US Supreme Court precedent (Tennessee v. Garner, 471 US 1, 1985) that protected fleeing suspects from indiscriminate shooting.

Believe it or not (I can hardly believe it myself but I was there and it was a big story) in 1968 New York State changed its deadly force rule to:
A police officer may not draw his gun even upon entering the scene of a reported armed robbery, even if the suspect has drawn his gun — unless — the suspect points his gun at the officer. Which new rule quickly got a police officer killed in Queens, New York; leading a quick legislative reversal.

If — when? — a border patrol agent gets killed because he or she was afraid to use deadly force because of what happened to Ramos and Compean then maybe their conviction will be reversed or pardoned. You should try to report as many close calls as possible to get them released first.

Million employee march to support card check if needed?

If Obama is not serious about card check legislation FREEING labor to organize (half of government employees are organized precisely because they are EXEMPT from the run-the-gauntlet process of organizing as prescribed by US labor law), then, someone ought to organize a million employee march on Washington to make drive home our need to Congress.

Get me Martin Luther King. Get me Lyndon Johnson who told the Senate that nothing else was going to happen until they passed the civil rights bill enfranchising African Americans to vote. LBJ held out for 83 days to get it.

American labor has an economic right to to vote for union representation -- not the current catch-22 you can only get an election the way you cannot get an election (if management does not so desire) legislation. Maybe right to organize legislation ought to be packaged as ACTUAL right to vote union representation legislation.

The S.S. Trust Fund explained -- in one sentence

If we want to keep the FICA rate at the same 12% for 60 years even though covering retirements requires only 6% at the start and will need 18% (under worst growth assumptions) at the end -- you can use a trust fund to shift tax revenue from what it is supposed to cover to what it is not supposed to cover by pretending to, first, put money into the fund and by pretending, afterward, to take money out.

Unfortunately, the starting tax payers -- who will have lower per capita incomes (pre 60 years of economic growth) -- will pay a more regressive overall rate to cover on budget items, while the ending taxpayers -- with the highest per capita incomes (post 60 years of economic growth) -- will pay a more regressive rate to cover S.S. retirements.

Thanks, again, Alan Greenspan (with a tip of the hat to Pat Moynihan).

Current labor law violates the right to COMMERCIAL assembly?

As much as I thought I was aware of the poor state of unions in the USA I was surprised to read in the last chapter of Thomas Geoghegan's book, Which Side Are You On, that blocking unionization is a simple, standardized process, performed by hired hands who get away with breaking the law (the core of the blocking process) -- automatically.

At any whisper of a certification campaign by employees and management simply fires the leaders (never more than 1, or at most 2, out of 20). Said leaders then automatically file for reinstatement which is automatically granted them -- 4 years later! -- with back pay which is automatically granted -- minus any wages they earned anywhere else! -- after which 80% are fired again -- for "legal" reasons this time! -- within a year.

IOW, there is no effective right to organize labor under US law -- only the right to ask for your employer's permission to organize.

I would argue that the current legally prescribed labor organizing process violates the First Amendment right to assembly.

This is tricky. Commercial speech is protected but less so than political speech (e.g., advertising)? I can see the right to organize for the purpose of wage bargaining as as being recognized as protected commercial assembly (would be a new concept) which is protected even if less so than political assembly.

This gets trickier. The current legally prescribed organizing process does not directly prohibit organizing -- but steers all organizing activity into a narrow channel which is impossible to navigate against simple, standardized technique practiced by the opposite commercial interest.

It is not as if labor has any other forum or venue in which to pursue organzing. The law prescribes ONE path and one path only -- and it is IMPOSSIBLE to negotiate said path if the opposite interest desires not.

Repbulican UPSIDE-DOWN sector-wide labor contracts

Insistence that GM's autoworkers reduce their pay to the level of foreign brand workers sounds like UPSIDE-DOWN sector-wide labor agreements to me. Under sector-wide as practiced in normal first-world labor markets and even many second and some third world markets, NON-unionized employees work under contract conditions negotiated at unionize firms.

Didn't Keynes say that a recession is not the time to reduce wages?

Better we use the GM troubles to introduce the concept of "traditional" sector-wide contracts here (at last!). If we had it all along GM would not be in much of the trouble it is in. Honda and BMW will gladly pay full UAW wages to manufacture here -- the more especially if people really prefer their products. (Potential UAW givebacks on benefits would still be whatever they are going to be.)

Trillions for tax cuts -- not one billion for millions of jobs

"They're in favor of trillion dollar tax cuts for the rich, but $15 billion [loans] to save American jobs is just too much for them." – thank you Avant Guard. http://advantguard.blogspot.com/2008/12/last-days-of-gm.html

Watching a “Mean Green Machine” TV runoff between a hybrid Chevy Tahoe a gas powered Chevy Silverado I was struck by what desirable machines both were – inside and out – must be some reason folks ante up so much cash for them. The hybrid and gas competitors ran neck and neck in all categories but one: pulling a 6000 pound tractor 100 yards across a field. There the battery hybrid left the all gas in the grass: 51 v. 67 seconds.

Americans don’t want to buy GM cars? Americans will always desire a substantial enough number GM cars at some price point to keep a enough GM factories open to sustain the corporation – I am sure there is an stay-open equilibrium point somewhere there in non-recession times even for the last generation of liquid fuel vehicles.

Hybrids are about to embark the world on a entirely different era of auto manufacturing –as different as tube and flat screen TV making – Chevy’s Volt leading the way.

Right now the expense of a lithium ion battery brings the Volt in at $10,000 more than an equivalent sedan. (I once noticed the USA could save $10,000 per vehicle life on imported oil via a switch to hybrids – if the switch cut our then 10 million bbl/day appetite for foreign oil to 5 million bbl/day – and if that lower demand could in turn cut the then price of $60/bbl to $30/bbl.)

Lithium ion batteries with multiples of today’s charge holding capacity (10X expected eventually) are about four years away according to Stanford U. researchers. That could mean batteries that cost 1/10 as much as they would otherwise (prices will drop somewhat whatever). 10X may also insure that the world does not run out of lithium before it runs out of oil.

Theoretically there should be nothing easier to manufacture than electric cars – that’s why all kinds of boutique manufactures can jump into it who could never climb the high ground of automotive technology: engines and transmissions. Electric motors are as reliable as turbine (jet) engines– just on big spinning part – but instead of a collection of super sophisticated turbine blades, they just take some windings around an armature (anybody want to help me assemble an electric motor – so simple a caveman or a robot can do it).

Millions of America auto customers – and millions of Americans who are simply sane enough (not subject to yuppie exceptionalism) to value our core industries – will feel devastated should the big 3 go into the dustbin of business history – and just when the Volt was about to lead the whole business, foreign and domestic, in the right manufacturing direction. I know what Ronald Reagan would do.

LINKS -- 12/12/08

"They're in favor of trillion dollar tax cuts for the rich, but $15 billion [loans] to save American jobs is just too much for them." -- from Avant Guard

http://advantguard.blogspot.com/2008/12/last-days-of-gm.html

Dentists double fees w/o cause -- using medical increases for cover?

About 12 years ago I had a root canal done at a downtown Chicago office for $500 --- about $750 in today's money. This spring I needed another one -- this time the going rate all over the country ran closer to $1400!

All I can guess is that dentists watched the average person's annual MEDICAL costs double -- due to new procedures and machines (e.g., MRIs) and figured they could double their fees also and no one would would notice or question the dental increases in the overall atmosphere of medical increases.

Or could it be that today's adults who had better dental care as kids plus fluoride in their water just don't need as much treatment -- tempting dentists and oral surgeons to up prices to make up for lower traffic (using the same overall medical price hikes for cover)?

So much for the perfect matrix of prices measuring utility in the unfettered free marke that the naive Chicago Boys economists would have us believe (example 1001).

LINKS -- 12/07

"In Defense of American Cars" -- Daniel Snow

http://www.forbes.com/opinions/2008/12/03/american-automakers-bailout-oped-cx_ds_1203snow.html

Will the world run out of lithium before it runs out oil?

According to the paper listed below, the world could run out of lithium in about 40 years.

My question is: will the silicon nano wire technology that promises to multiply charge holding capacity by 10X need to use (10X?) more lithium to produce that power. Doesn't seem likely; 10X bigger lap top battery: why bother? If multiplying charge holding wont take much more lithium that could stretch supply to as much as 400 years.

A more important question is whether the 10 times more powerful lithium ion batteries will cost 10 times less per KW? Nobody may know the answer at this point. If nano wire tech reduces cost per KW by even half and normal economies of scale reduce battery price in half again, then, lithium ion battery prices may not be so forbidding by early next decade.

http://tyler.blogware.com/lithium_shortage.pdf

http://news-service.stanford.edu/news/2008/january9/nanowire-010908.html
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$500 lithium ion auto battery? If a 10X power battery is ready to go commercially (5 years according to its Stanford U. developer) would that mean that you could choose a 40 mile range battery at 1/10th the price? It is worth looking into. A Wikipedia article states that a 10X power battery would cost the same or less per watt hour, but the Stanford article did not suggest that a 20 hour notebook battery would cost an arm and a leg. If watt hour price drops with the power increase and higher mass production advantages reduce costs it is conceivable you could choose a 40 hour battery for $500 in the not too distant future.

http://en.wikipedia.org/wiki/Nanowire_battery