Author Topic: The Not So "Infinite" Pie  (Read 13946 times)

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_JS

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The Not So "Infinite" Pie
« on: February 14, 2008, 02:58:16 PM »
February 13, 2008
Op-Ed Contributor
Totally Spent
By ROBERT B. REICH
Berkeley, Calif.

WE?RE sliding into recession, or worse, and Washington is turning to the normal remedies for economic downturns. But the normal remedies are not likely to work this time, because this isn?t a normal downturn.

The problem lies deeper. It is the culmination of three decades during which American consumers have spent beyond their means. That era is now coming to an end. Consumers have run out of ways to keep the spending binge going.

The only lasting remedy, other than for Americans to accept a lower standard of living and for businesses to adjust to a smaller economy, is to give middle- and lower-income Americans more buying power ? and not just temporarily.

Much of the current debate is irrelevant. Even with more tax breaks for business like accelerated depreciation, companies won?t invest in more factories or equipment when demand is dropping for products and services across the board, as it is now. And temporary fixes like a stimulus package that would give households a one-time cash infusion won?t get consumers back to the malls, because consumers know the assistance is temporary. The problems most consumers face are permanent, so they are likely to pocket the extra money instead of spending it.

Another Fed rate cut might unfreeze credit markets and give consumers access to somewhat cheaper loans, but there?s no going back to the easy money of a few years ago. Lenders and borrowers have been badly burned, and the values of houses and other assets are dropping faster than interest rates can be lowered.

The underlying problem has been building for decades. America?s median hourly wage is barely higher than it was 35 years ago, adjusted for inflation. The income of a man in his 30s is now 12 percent below that of a man his age three decades ago. Most of what?s been earned in America since then has gone to the richest 5 percent.

Yet the rich devote a smaller percentage of their earnings to buying things than the rest of us because, after all, they?re rich. They already have most of what they want. Instead of buying, and thus stimulating the American economy, the rich are more likely to invest their earnings wherever around the world they can get the highest return.

The problem has been masked for years as middle- and lower-income Americans found ways to live beyond their paychecks. But now they have run out of ways.

The first way was to send more women into paid work. Most women streamed into the work force in the 1970s less because new professional opportunities opened up to them than because they had to prop up family incomes. The percentage of American working mothers with school-age children has almost doubled since 1970 ? to more than 70 percent. But there?s a limit to how many mothers can maintain paying jobs.

So Americans turned to a second way of spending beyond their hourly wages. They worked more hours. The typical American now works more each year than he or she did three decades ago. Americans became veritable workaholics, putting in 350 more hours a year than the average European, more even than the notoriously industrious Japanese.

But there?s also a limit to how many hours Americans can put into work, so Americans turned to a third way of spending beyond their wages. They began to borrow. With housing prices rising briskly through the 1990s and even faster from 2002 to 2006, they turned their homes into piggy banks by refinancing home mortgages and taking out home-equity loans. But this third strategy also had a built-in limit. With the bursting of the housing bubble, the piggy banks are closing.

The binge seems to be over. We?re finally reaping the whirlwind of widening inequality and ever more concentrated wealth.

The only way to keep the economy going over the long run is to increase the wages of the bottom two-thirds of Americans. The answer is not to protect jobs through trade protection. That would only drive up the prices of everything purchased from abroad. Most routine jobs are being automated anyway.

A larger earned-income tax credit, financed by a higher marginal income tax on top earners, is required. The tax credit functions like a reverse income tax. Enlarging it would mean giving workers at the bottom a bigger wage supplement, as well as phasing it out at a higher wage. The current supplement for a worker with two children who earns up to $16,000 a year is about $5,000. That amount declines as earnings increase and is eliminated at about $38,000. It should be increased to, say, $8,000 at the low end and phased out at an income of $46,000.

We also need stronger unions, especially in the local service sector that?s sheltered from global competition. Employees should be able to form a union without the current protracted certification process that gives employers too much opportunity to intimidate or coerce them. Workers should be able to decide whether to form a union with a simple majority vote.

And employers who fire workers for trying to organize should have to pay substantial fines. Right now, the typical penalty is back pay for the worker, plus interest ? a slap on the wrist.

Over the longer term, inequality can be reversed only through better schools for children in lower- and moderate-income communities. This will require, at the least, good preschools, fewer students per classroom and better pay for teachers in such schools, in order to attract the teaching talent these students need.

These measures are necessary to give Americans enough buying power to keep the American economy going. They are also needed to overcome widening inequality, and thereby keep America in one piece.


Robert B. Reich, a professor of public policy at the University of California, Berkeley, is the author, most recently, of ?Supercapitalism.?

NY Times Editorial
I smell something burning, hope it's just my brains.
They're only dropping peppermints and daisy-chains
   So stuff my nose with garlic
   Coat my eyes with butter
   Fill my ears with silver
   Stick my legs in plaster
   Tell me lies about Vietnam.

BT

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Re: The Not So "Infinite" Pie
« Reply #1 on: February 14, 2008, 03:11:52 PM »
So Reichs solution to binge buying by the middle and lower classes is to supply them with the equivalent someone else's alcohol?

Here is a better solution.

Live within your means.



Rich

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Re: The Not So "Infinite" Pie
« Reply #2 on: February 14, 2008, 03:26:20 PM »
>>It is the culmination of three decades during which American consumers have spent beyond their means.<<

If I had a dollar for evey time I heard this, I'd end this imaginary recession by myself.

_JS

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Re: The Not So "Infinite" Pie
« Reply #3 on: February 14, 2008, 03:28:03 PM »
What is more interesting to me is the fact that the wonderful standard of living in the US is primarily a fraud. The efforts of capitalism have not brought anything but stagnation to most classes and continued poverty to the poor. It is the wealthiest who have been served the best, as always. If American capitalism cannot eveen serve crass consumerism and materialism - its greatest progeny - then what use is it except as a tool for the wealthiest to continue to grow wealthier and widen the gap between elite and the rest?

If everyone lived within their means then a good portion of the financial sector would have no function. Lending companies don't want people to go bankrupt, but they need people to go into debt. They don't market heavily on college campuses for nothing. They have loans for vacations, don't you know. Many small businesses and investors take risks through financing debt.
I smell something burning, hope it's just my brains.
They're only dropping peppermints and daisy-chains
   So stuff my nose with garlic
   Coat my eyes with butter
   Fill my ears with silver
   Stick my legs in plaster
   Tell me lies about Vietnam.

Amianthus

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Re: The Not So "Infinite" Pie
« Reply #4 on: February 14, 2008, 03:33:39 PM »
Living within your means does not mean that you do not borrow or use credit.

It means that you do not exceed a level of debt that you can afford.
Do not anticipate trouble, or worry about what may never happen. Keep in the sunlight. (Benjamin Franklin)

kimba1

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Re: The Not So "Infinite" Pie
« Reply #5 on: February 14, 2008, 03:35:00 PM »
loans for vacations?

seriously,I didn`t know about this

It sounds crazy
the thought of getting more into debt for vaction sounds like downer and pointless to do
like taking a loan for a wedding
starting life together in debt ,just doesn`t sound like a good foundation for marriage.

sirs

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Re: The Not So "Infinite" Pie
« Reply #6 on: February 14, 2008, 03:43:41 PM »
You do recognize the irony of your statement here, right Js.  You're describing, to a tee, the efforts of an ever pervasive wonderful Federal government, and its means for power.  By continuing to delve into areas it has no business, claiming problems it needs to fix, perpetuates more and more power maintained in DC.  Without "the problems", there's no need for so much government

And before you twist my point into claiming how I think poverty isn't a problem, or poor working conditions isn't a problem, the point is how Politicians will consistently point to a problem/crisis, and promise to fix it, if you simply elect them.  Problem never actually gets fixed, but the politician gets his power base, and keeps pertuating the status quo, in order to maintain and even grow that power.

Bt & Fatman were making good references to that in an earlier thread.
"The worst form of inequality is to try to make unequal things equal." -- Aristotle

Rich

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Re: The Not So "Infinite" Pie
« Reply #7 on: February 14, 2008, 03:46:33 PM »
>>The efforts of capitalism have not brought anything but stagnation to most classes and continued poverty to the poor.<<

Right.

As apposed to what Communism has brought the poor:



Xavier_Onassis

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Re: The Not So "Infinite" Pie
« Reply #8 on: February 14, 2008, 05:28:04 PM »
It is a spurious argument to say that because communism has failed, somehow this means that capitalism has not failed as well.
Showing photos from the 1930's does not discredit something written in 2008 in any way.
"Time flies like an arrow; fruit flies like a banana."

Rich

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Re: The Not So "Infinite" Pie
« Reply #9 on: February 14, 2008, 05:32:19 PM »
<chuckle>

Sure it doesn't.

Xavier_Onassis

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Re: The Not So "Infinite" Pie
« Reply #10 on: February 14, 2008, 05:35:30 PM »
If you think it does, it just explains that you don't understand diddly-squat. I doubt that you could persuade a cat to try catnip.
"Time flies like an arrow; fruit flies like a banana."

_JS

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Re: The Not So "Infinite" Pie
« Reply #11 on: February 14, 2008, 06:17:27 PM »
Obviously photos from the My Lai massacre, Pinochet's torture chambers, South Africa's apartheid state, or modern Israel could be shown as a counterpoint to whatever vague notion Rich has invented. I'm not sure I see the point though.

I'll just reiterate what capitalism has done for Americans:

1. America's median hourly wage is barely higher than it was 35 years ago, adjusted for inflation.
2. The income of a man in his 30s is now 12 percent below that of a man his age three decades ago.
3. Most women streamed into the work force in the 1970s less because new professional opportunities opened up to them than because they had to prop up family incomes.
4. The typical American now works more each year than he or she did three decades ago. Americans became veritable workaholics, putting in 350 more hours a year than the average European, more even than the notoriously industrious Japanese.


It should be pointed out that #3 and #4 have done nothing but destroy the families of this country. And why? To keep up with the real wages from the early 1970's. Nice.

Look at this report on education by UNICEF. Notice Figure 1.3c Percentage of children age 15 reporting less than 10 books in the home. And then look at the combined table in Figure 1.3. Notice how well Sweden, Denmark, Norway, and Finland do. Notice how poorly the U.S. does.

Look at Figure 2.0 the Health and Safety of children and notice the top 5 are: Sweden, Iceland, Netherlands, Finland, and Denmark. The United States is last. The factors are infant mortality, low birth weights, immunizations, and accidental deaths.

In actual education achievement, once again the U.S. is firmly behind Denmark, Sweden, Finland, Norway, Canada, Germany, Ireland, Poland, and Belgium.

The entire report makes for an interesting read and one can see just one of the areas where the United States is falling way behind and has been for years. But...as long as the top 5% gets wealthier, that's all that matters - right?
I smell something burning, hope it's just my brains.
They're only dropping peppermints and daisy-chains
   So stuff my nose with garlic
   Coat my eyes with butter
   Fill my ears with silver
   Stick my legs in plaster
   Tell me lies about Vietnam.

sirs

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Re: The Not So "Infinite" Pie
« Reply #12 on: February 14, 2008, 06:20:03 PM »
Yep, yep.......and just think, things could be so much worse, if we adopted a Socialist economy/government/agenda

whew.....dodged one there
"The worst form of inequality is to try to make unequal things equal." -- Aristotle

_JS

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Re: The Not So "Infinite" Pie
« Reply #13 on: February 14, 2008, 06:21:31 PM »
You do recognize the irony of your statement here, right Js.  You're describing, to a tee, the efforts of an ever pervasive wonderful Federal government, and its means for power.  By continuing to delve into areas it has no business, claiming problems it needs to fix, perpetuates more and more power maintained in DC.  Without "the problems", there's no need for so much government

And before you twist my point into claiming how I think poverty isn't a problem, or poor working conditions isn't a problem, the point is how Politicians will consistently point to a problem/crisis, and promise to fix it, if you simply elect them.  Problem never actually gets fixed, but the politician gets his power base, and keeps pertuating the status quo, in order to maintain and even grow that power.

Bt & Fatman were making good references to that in an earlier thread.

I'm not describing that at all. Capitalism is what it is. What would making it more free do? We've seen it in the Southern Cone and it only made for an even wider gap between the wealthy and the poor, with nearly no middle class. I'll grant that the federal government is often stumbling and sometimes just a partner in corporate corruption, but I don't see the solution as turning everything loose.

If a dam has flaws and you've got the wrong people making decisions for controlling the operations of the dam, the best decision is not to simply destroy the entire dam and flood the homes below.
I smell something burning, hope it's just my brains.
They're only dropping peppermints and daisy-chains
   So stuff my nose with garlic
   Coat my eyes with butter
   Fill my ears with silver
   Stick my legs in plaster
   Tell me lies about Vietnam.

kimba1

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Re: The Not So "Infinite" Pie
« Reply #14 on: February 14, 2008, 06:22:47 PM »
Living within your means does not mean that you do not borrow or use credit.

It means that you do not exceed a level of debt that you can afford.

_______________________________________________________________-

I think it`s great we`re talking about this
I tried many times ,but it never goes anywhere
what i focus on is that`s it`s part of our culture to not worry about debt.
ex. ifi say I can`t buy that now I`m broke
the most common answer WILL be "charge it"
very few will back off .
hopefully now people will stop saying charge it.
I still use a real computer monitor
people bug me for not using flat screen
folks think it crazy for me to wait for something to break to replace than when it`s fashionable