Thursday, November 29, 2012

An insight to the Obama administration thinking about the economy:

From an interview at the Washington Post: (emp add)
Ezra Klein: My experience is that the very rich are open to higher taxes in the context of a deficit deal....But they don't like the idea that their money should be redistributed simply because they have too much of it....And so that's part of the tension: They don't like why Obama is raising their taxes. And they certainly don't like the lack of admiration he's showing while trying to do it. They see it as punishing their success.

Chrystia Freeland: I completely agree. I think Obama and the economists around him have a very sophisticated understanding of both globalization and the technology revolution and the impact they're having on the world economy and the way they're creating these winner-take-all spirals. The positive scenario, which I think is a bit pollyannaish, is all you need to do is improve the education system and change the skill set and all will be well. And even that takes a lot of investment and a lot of time. But there's actually the possibility that in order to have a healthy middle class, you're going to need to have a more redistributive society, at least for awhile.

If the Obama administration sees globalization contributing to winner-take-all and other pathologies, they are embarking on the wrong approach with redistribution. Their neo-liberal solution is to let the market work pretty much without restraint and at the end of the day provide financial assistance to the economic losers. This can, over time, lead to something called "pity charity liberalism" which is described as "[giving] some sort of ex post compensation for brute bad luck instead of giving workers agency or power". That is very bad politics, unsustainable, and wickedly hard to calculate.

A better approach would include measures to wall-off those elements of globalization that diminish domestic labor's economic power. One is tariffs. That puts the compensation up-front in the process, with industries paying workers higher wages because there is no outsourcing/imports escape hatch.

Regarding the "pollyannish" notion that all this country needs is a better educated workforce, that's been the common refrain for a couple of decades from people like Steve and Cokie Roberts, and has been show to be wildly off the mark as developing nations produce just as many skilled workers with which to compete.


Agreed. We need a massive infrastructure redevelopment project and a tariff program to rebuild our industry. For reasons that have to do with ultimately corruption, the Obama administration has no real interest in either.

By Blogger Mitchell J. Freedman, at 11/30/2012 6:35 AM  

I question whether globalization can be controlled by America to protect its domestic interests with tariffs. Globalization is here to stay, despite the problems it may create short- or long-range; to combat it effectively might lead to isolation, which could of course impact our economy negatively.

As to education, maybe it is oversold here. But this brings to mind Kurt Vonnegut's first novel, published in the early 1950s "Player Piano" that influenced my thinking back in my college/law school days. Without getting into too much detail, the novel addresses a time in the future when with technology advances the goods and services and other needs of Americans could be provided by the managers (MBAs) and engineers, such that the mass of the population was no longer needed for the workforce. Government provided the masses with essential comforts, except jobs. Education focused on future managers and engineers. But there was rebellion, enhanced by a former manager in a loveless, childless marriage who bolted. It was just a novel. But what if it happened?

One thing the novel did not address was globalization, which of course changed the future Vonnegut imagined. Today we continue with high unemployment. But the government is not (yet) providing the essential comforts to enough Americans. The high income .01% don't want redistribution; they want it all. But that's short-sighted, and may lead to rebellion. We cannot afford a Second Gilded Age. Having a job is important. Government can provide jobs in times like the present as preached by Paul Krugman and Keynesianism.

By Blogger Shag from Brookline, at 11/30/2012 6:49 AM  

The debate is a joke.

How much are working americans paying "the 1%" in housing rent and mortgage interest alone?

Mortgage interest is $500B/yr in this country and housing rents are even higher I think.

Then there's our $8000/yr per-capita health costs, $5000 higher than the OECD average and $4000 higher than Canada's. That's more economic rent being extracted by "the 1%" from the masses.

Fuel, telecoms, and other resource scarcities yield monopoly rents and thus high profits, all flowing from the masses to "the 1%".

("1%" is actually top 5-10% but the point is our economy is pulling TRILLIONS from the bottom and redirecting the money upwards)

And on top of this we've got a $40B/mo trade deficit pulling hundreds of billions OUT of our national economy altogether. This is money leaving our paychecks on import purchases and not coming back into our lives (as wages).

If housing costs were knocked back to 1990s levels the 99% would have a helluva lot more money.

shows rents have DOUBLED since 1990. We're not getting twice as good housing!

Even in real terms:

rents are 20% more unaffordable now compared to 1990!

You know how the end game of "Monopoly" sucks?

We're getting there.

By Anonymous Troy, at 11/30/2012 10:18 PM  

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