Brent Nyitray
Fairlington Blade
Let the mutherfuker burn!
jnc4p
Kevin S. Willis
Michigoose
lmsinca
markinaustin
Arcanaut
novahockey
quarterback
ScottC
yellojktI read this piece this morning and thought it had quite a few interesting points to make. Since I began blogging about three years ago (I know, I was a little slow) one of the things I’ve been harping on is the reversal of fortune or stagnation of the middle class. I think a lot of it has to do with the high cost of health care, which this piece doesn’t explore, but I’ve also blamed our free trade policies which have created a large trade deficit, out sourcing jobs with no consequences for the out sourcers, lack of quality investment in education and being stuck in a couple of wars and fossil fuel reliance. I don’t believe either party has done a very good job in the last several decades of addressing issues that would encourage or train our people for the 21st. Century. We’ll give them a little in the way of a safety net, which is always at risk, when what people really want are jobs and a decent life to pass on to their children. I understand that our first commitment at the Federal level is National Security and we could probably get rid of some Federal agencies and combine others but in the meantime our leaders have shirked their duty, a strong word I know, in providing opportunity to our citizens. That’s my opinion anyway. Think how much money we’d save if people didn’t need to rely on the safety net so thoroughly or how much more tax revenue we’d have at current levels of taxation if more people had decent paying jobs. Most of the innovation of the last couple of decades has come from the financial industry, which just seems weird to me, not that we don’t need financial services but the balance has skewed too far away from industry and innovation, again, in my opinion. Here are several excerpts from this rather long piece.
In recent months, Federal Reserve Board Chairman Ben Bernanke and President Obama have sounded increasingly urgent alarms about the staggering number of long-term unemployed. And they are right to do so: 42.4 percent of the nation’s 13.9 million unemployed workers have been out of a job for more than six months. That’s by far the highest share of long-term unemployed since the government started keeping records a half-century ago.
What Bernanke and others rarely mention, though, is that this trend has been building for at least three decades. The share of left-behinds has generally ratcheted up with every economic downturn since the early 1980s. And today, even two years after the Great Recession technically ended in June 2009, the number of long-term jobless has continued to climb to record levels. It shot up from 29.3 percent of total unemployed workers in June 2009 and peaked at 44.6 percent as recently as September.
Washington, dominated by a free-market consensus ever since President Reagan’s era, has ignored that 30-year pattern. Partly as a result, reams of data show that America’s middle class has been shrinking. Among the few who has long second-guessed the Washington mind-set is Frank Levy, an economist at the Massachusetts Institute of Technology who coauthored a much-cited 2007 paper concluding that labor began losing the fight to capital in the late 1970s.
“I’m not sure how much better we could have done in preserving the middle class,” he says. “But I know that, with a few exceptions like the earned income tax credit, we didn’t really try.”
There can be little question that the middle class, or what’s left of it, is less and less able to cope. Adjusted for inflation, average hourly wages declined by 1 percent from 1970 to 2009. Meanwhile, home prices increased 97 percent, gas prices went up 18 percent, health costs rose 50 percent, and the price tag for public college spiked a whopping 80 percent after adjusting both wages and costs for inflation, according to figures compiled by the Senate Health, Education, Labor, and Pensions Committee. The average family of four needs an annual income of $68,000 just to cover basic costs, but in 2010, half of all jobs paid less than $33,840. The number of Americans living below the poverty line—46.2 million—is the highest in the 52 years that the Census Bureau has been tallying figures.
The bleak numbers raise obvious questions about the dominant economic paradigm of our time. For more than a generation, we have thought of the spread of free markets and globalization were pretty much inevitable. Economists, trade experts, and policymakers, including both Republican and Democratic presidents, have told us, in effect, that we could do little about the brutal displacement of old industries and jobs, and that we might as well just get used to it. Indeed, we were told, the U.S. must lead this charge: Free trade in the West helped to win the Cold War, after all, and the United States emerged as the sole superpower. It created to a strange blend of false fatalism and American hubris. Somehow, the champions of hands-off economic policy insisted, we would come out on top in the end.
It may not be an accident that the growth of long-term unemployment, starting in the 1980s, coincided with what MIT’s Levy calls the end of the “Treaty of Detroit”—a consensus that supported high minimum wages, progressive taxes, and other New Deal policies. Scott agrees. “Looking at wage trends, they all shift dramatically for the worse since then. The peak was really 1979. That’s the point at which three trends came together: the process of globalization, de-unionization, and deregulation. The fundamental guiding philosophy was, ‘markets know best.’ ”
Today, as a result, a deeper sense of alienation haunts American society than anyone can remember. “The sense that were all in this together as one nation, a common society and a common policy, has been disrupted by globalization,” Rodrik says. “Now, there is a greater realization that the benefits of globalization accrued disproportionately to the professional classes, the higher skilled, the ones who had the mobility and access to capital.” “And what strikes me is how unperturbed and unaffected and apparently insulated the winners have been in this whole process…. The costs are heavily concentrated among the youth, the high school dropouts, those with little education, the blacks in the urban areas. The rest of us effectively have been insulated.”
The solution for the United States may be a smarter combination of more-intensive training and education programs that turn industry and academia into partners, and a savvier policy of subsidizing crucial industries. Whatever the budget constraints, American workers need a lot more money for education and training. Total federal spending for job training adds up to a mere $15 billion annually, or one-tenth of 1 percent of gross domestic product, far less than any other major country. It may be too late for today’s displaced workers. But the children and grandchildren of displaced workers mired in these lost communities need to know that jobs exist for those willing to leave home and get trained and that education does not require on ruinous debts.
Nor should industrial policy be about the government “picking winners,” as the debacle over Solyndra, the bankrupt solar-panel company, made clear. Instead, the government can more subtly prod strategic industries along by, say, taxing fossil fuels to encourage investment in green technologies. For anything like such a comprehensive change to happen, of course, politicians in Washington will have to agree on the nature of the malady they helped to create over the past 30 years. And there is little sign of that happening yet.
Filed under: education, free markets, innovation | Tagged: NAFTA |
All Things in Moderation 
Excellent article. Thanks for sharing it. We need to better educate our workforce and reward it with a living wage.
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You may have heard WMR surround yet another issue this morning – free trade.He claims he will get tough with China at every campaign event, but he wrote an op-ed about how the BHO Admin tariffs on Chinese tires were a gift to the unions and would hurt free trade.In fact, the tariffs on tires were not struck by WTO b/c they were justified and our homebuilt tire industry has experienced a rebound.WMR – on every side of every issue, seriatum.
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I wonder how that would play out if he were president.There's a possibility his multiple views could be beneficial in getting Congress to reach compromise.On the other, if I were a Congresscritter, I wouldn't trust him as far as I could throw him.He strikes me as a person well-suited for business, where money is the key barometer, but not for national/global government, where there are multiple barometers that play off each other.
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I can say in all honesty that I have not been impressed with WMR's fluctuations on every subject under the sun. It's going to be a long election season. I'll just try to stay focused on the issues and attempt to find the odd candidate that agrees with me…………lolIt's so funny to me, or perhaps I should say nonsensical, that for every single policy proposed by either side there are dire consequences for someone else and so no one is willing to pick winners or losers. And yet, we clearly know who has lost already.
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Romney – All Things To All People All The TimeThink that'll fit on a bumper sticker?
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God? The shorter version.
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Articles like this tend to ignore who benefits from free trade – the consumer. In free trade, the victims are much more visible than the beneficiaries. Also, the beneficiaries are much more numerous (everybody) than blue collar workers.Authors like this talk about how we could do this or that to protect workers, but they hide the fact that "protect workers" typically means "raise costs" and "restrict options" for consumers and employers. Are parents ready for eschew cheap "Old Navy" school clothes for their kids? Is globalization really optional? Probably not, and the only way we can maintain our standard of living is through increased productivity. Which doesn't bode well for the people mentioned in this article.It is a happy co-incidence that the states most affected by the decline of the rust belt also have enormous amounts of shale gas. In keeping with my "cheap energy" theme, natural gas extraction will probably pick up the slack that manufacturing has left.
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I don't Brent as both a consumer and an American manufacturer, who also exports and imports, I still tend to think lower wages and lost opportunity has had more of a negative impact on the middle class than the positive rewards of cheap goods.I do agree on the energy issue though. As someone who has a daughter going into the industry she picked the right time and place to begin a new career. There was no funding for water research so she did an about face and will ride that wave to the bank and still enjoy the science along the way. Most of her friends think she's sold out………….lol.
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I don't=I don't know
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Brent – US, Canada, UK, Europe, Japan, Australia, NZ, Taiwan, and SK can have free trade. Probably some others. But the weakness in WTO is that it does not incorporate the UN International Labor Organization rules, except for no slave labor. These rules include enforced wage and hour laws, enforced child labor laws, and the right to collective bargaining.China violates all the ILO rules while the countries I named do not. Collective bargaining is absolutely not tolerated there. We incorporate ILO rules in all of our trade agreements and so do Europe and Canada and Japan, etc.But by inviting China into WTO, we gave it the power to sanction any tariff without the framework of ILO. I think the developed nations that follow ILO rules should abandon WTO for their own free trade association. BTW, we are constantly griping at MX for not enforcing its own wage and hours laws.
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LMS, interesting post. Free trade is more a symptom or bogeyman that being the actual problem. Over the referenced timespan, I'd say the problem is one of short term thinking over long term planning. Politicians focus on the next election – or now on just 'winning the day.' Corporate executives focus on today's stock price & this quarter's results, rather than long term growth. In the housing bubble, 'flipping' homes for a quick buck became rather popular. Our debt-fueled economy was built on the idea of buy now, pay later; from individuals borrowing against home equity to the fed gov't, which cut taxes while boosting spending. The gov't still refuses to pay the piper, as demonstrated by the supercommittee's failure to reach a deal. Everybody wants something for nothing.
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bsimonFree Trade or China's acceptance into the WTO are only a part of the piece but I agree with you re short term vs long term growth as a disease of sorts. Most of the families and small businesses that have survived this horrible recession are the ones who didn't think short term although they have also suffered from the loss of opportunity and low demand. I just think that neither party has done a very good job of providing the education or training needed to engage our workforce and it shows. AFAIC a lot of things can be left to the states to deal with but an overall growth projection and how to accomplish it should be a huge part of any country, business or even families. We spend entirely too much time disagreeing over personal issues and not enough time making sure our people have the tools they need to keep up with the rest of the world, and I include access to decent health care as one of those tools. If we're afraid to pick winners and losers I think we should at least confirm a commitment to the US being one of the winners. I think most people agree with that sentiment but no longer know how to do it or have the political will to do it.
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"If we're afraid to pick winners and losers I think we should at least confirm a commitment to the US being one of the winners. I think most people agree with that sentiment but no longer know how to do it or have the political will to do it. "A couple of links worth reposting on this topic."The right response to these challenges would be for the president this week to laud China for the success of its economic policies and announce that the administration will begin forthwith to apply each and every one of them to Chinese exports into the United States. Subsidies and directed credit for local companies, buy-American provisions for government agencies and government contractors, currency manipulation, the rules on "conditional market access" and "indigenous innovation" – surely China could hardly complain if we were to pay them the highest compliment by embracing their economic model."Chinese follow same old script (and they get the punch line)"The underlying problem isn't simply lower Asian costs. It's our own misplaced faith in the power of startups to create U.S. jobs. Americans love the idea of the guys in the garage inventing something that changes the world. New York Times columnist Thomas L. Friedman recently encapsulated this view in a piece called "Start-Ups, Not Bailouts." His argument: Let tired old companies that do commodity manufacturing die if they have to. If Washington really wants to create jobs, he wrote, it should back startups.Friedman is wrong. Startups are a wonderful thing, but they cannot by themselves increase tech employment. Equally important is what comes after that mythical moment of creation in the garage, as technology goes from prototype to mass production. This is the phase where companies scale up. They work out design details, figure out how to make things affordably, build factories, and hire people by the thousands. Scaling is hard work but necessary to make innovation matter.The scaling process is no longer happening in the U.S. And as long as that's the case, plowing capital into young companies that build their factories elsewhere will continue to yield a bad return in terms of American jobs."Andy Grove: How America Can Create JobsI believe President Obama would have been much better served to have picked Andy Grove over Jeffrey Immelt as chairman of the Council on Jobs and Competitiveness.
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Good post on Ezra's blog about the latest round of health insurance premium increases.Can an 18% premium hike be reasonable? Regulators say yes.
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