Thursday, August 11, 2011

30 years of Republicans fulfilling their every voodoo economics wish

30 years of Republicans fulfilling every (last) voodoo economics wish have left America awaiting a second-dip low-demand recession inside a prolonged illiquidity contraction (normal recovery 7-8 years) and US Treasury bonds downgraded and ducking default.

80's Reagan got his 25% across the board income tax cuts -- building unprecedented peacetime debt – his dereg’ing savings and loans crashing the industry. '90's Sen. Gramm and friends tore down the Glass-Steagall Chinese wall between retail and investment banking – not without help from Clinton Democrats -- setting the stage for our much troubled 2000s. '90s Greenspan noted Wall Street partying too hard while failing to remove the punch bowl – the burst bubble end gave us the 2001 recession.

2000's Bush cleared away more financial reg’s -- while smiling on little reg’ed shadow banking's proliferation – converted Clinton budget surpluses into trillions in tax cuts for the better off -- which cuts flooded by now much degreg'ed banks and never much reg'ed non-banks with too much savings to be lent to too many borrowers – inflating an oversize real estate bubble whose burst aftermath left said prolonged illiquidity contraction and said low demand dips -- while trillions of piled up Reagan-Bush debt inhibit routine Keynesian easing of low demand dips with temporary deficit spending.
Decades of de-unionization have left half our hourly wage workforce earning less than what the minimum wage woulda-coulda-shoulda been. Today’s median (not minimum) wage is $15/hr.

LBJ’s 1968 minimum was $10.53/hr ($1.60/hr adjusted). Doubled per capita output since 1968 -- as jet engines, copying machines (put millions of pool typists out or work), computers and improvements in between made us twice as productive per capita – would expect the minimum wage to increase at least 50% -- to $15/hr.

After the “big” $2.10/hr federal minimum wage hike, in early 2007, it remains $3.28/hr below LBJ’s. A $15/hr federal minimum wage would give half of America's hourly wage earners a raise at an easily computed cost of 4% direct inflation. My Chicago neighborhood Mac's traffic seemed to go up with Governor Blagojevich’s $8/hr minimum wage (Ike’s 1956 level!) – mostly in the third world end.

[Bonus: In the essay linked to above, the author (perhaps the strongest voice warning against irresponsible over lending) suggests that moderate inflation -- 4-6% a year -- could quicken our exit from the illiquidity contraction (would clear the real estate market). Would reduce real federal debt too.]
Over the past two-thirds of a century and around the world only one collective bargaining mechanism has proven able to fend off the race to the pay and benefits bottom as well as guarantee representative political forums via labor lobbying power: legally mandated, sector wide labor agreements -- wherein every employee working the same job in the same geographic locale (nationwide for airline workers, etc.) works under a single collectively bargained contract with all employers.

In every OECD economy where sector wide labor agreements is not the bargaining model the average person’s interests have gone bye-bye: in Japan, the lifetime security half of the workforce pays for it with 60 hour weeks, the other half may live more like our illegals; in Australia, unionization has dropped from 40% to 20% over 25 years; in England (did not adopt sector wide postwar; not sure if or how much since), watch TV; in Israel reformers complain of “ 'an economic policy of privatization that leaves the free market without reins…making our daily existence a war for survival to subsist with dignity' ”, read para. 4 & 5 in "What to make of the Israeli movement for social justice." In America, the "Great Wage Depression" prevails (also known as "inequality" to our progressive elite), see above.

American supermarket and airline workers would kill for sector wide agreements – the perfect places to introduce the only fair and balanced labor market model known to contemporary economics (if never, ever heard of from our contemporary progressive economists).

[Bonus: restoring lost income share to segments who would spend (all of) it could ease low-demand dips -- without building federal debt. According to this author of a Wall Street Journal blog post, "Five False Premises about Economic Recovery", top 1% earners share alone grew from 10% to 22.9% between 1979 and 2006 (see #4).


Anonymous said...

It's former Senator Gramm, not Graham. Misspelling doesn't inspire confidence, dude.

Anonymous said...

voodoo economics leads to zombies of the unemployed and trillions in dept