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Tuesday, June 26, 2012

Middle Out Economics

Over the last several days Barack Obama has pushed a notion that we need to have bottom up economics. Without mincing words, I think he is a little off. He does talk about the middle class, but the middle class isn't the bottom. It is the middle. The problem is that it is shrinking.

Trickle Down or Bottom Up, these are both notions of Democrats. Neither is a sustainable economic theory. They are just simple slogans. What we have to do is reinvigorate the Middle Class. There is really only one way to do that. We need to regain the sovereignty of our nation by putting corporations back in their box.

Currently, we don't have a Capitalist system. There is a notion pushed by Democrats that we do. The Bail Outs have sheared the vestiges of capitalism back to nothing. Capitalism is an idea and ideas don't die, but the system that is currently in place is a Corporate centered Neo-Feudalistic model.

The Neo-Feudalistic model basically centers itself around having no middle class. There will be an elite class who control the Mega-Corporations and include those who revolve in and out of the government and then there will be the peasant class.

In Romney's latest commercial, the ad says that he wants to cut taxes to create jobs. Well, we've had taxes cut and stimulus ad nauseum. The plan has been very successful and created millions of jobs. The problem is that those jobs have been created in China and other third world countries. Last week I spoke with associates about our need to push back Free For All trade. They said that we need to work on issues that we can influence. The problem that I have is that any issues we work on are irrelevant until we address the 800 pound guerrilla in the room.

So you want to grow the economy, then you are going to have to get the real middle class back on track. How do we do this? By investing money in our nation's physical infrastructure. Where does this money come from? By getting Wall Street back under control with a tax on high frequency algorithm computer trading  and bringing labor price parity into the Free Trade equation.

Will there be unintended consequences? Yes, we can't avoid consequences whether we act upon this or not. Will increased domestic labor costs cause prices to rise? Yes, but people will have jobs and without this prices will rise anyway, but there will be a continued deterioration of our job market. Without people having money, then there is no marketplace and that is where we are steaming towards. We have fundamental flaws in the marketplace/economy.

So the political contenders can continue bobbing and weaving on the real issues and ducking and dodging the real questions, but at the core of this lack of growth in our economy is the issue of job growth (both capacity and wages). Without good paying jobs, we will not have a middle class. Competing against people making pennies to our dollars is not going to grow wages. Wages have not kept up with costs. People have less and spend less and the economy naturally shrinks.

What has the average American gotten out of this current system? The Wealthy class isn't assuming the risk they did in the past. If they fail, then one of their set up cronies will be along shortly to bail them out. If they succeed, then they get millions in stock options and other benefits that aren't afforded to the working class. And while this continues, our nation's future outlook continues to deteriorate.

20 years down the road, please tell me how this Free Trade World is working?

The Race to the Bottom


1 comment:

Silence DoGood said...

A couple of highlights, if I may add to this monograph. I did find reference concerning ‘Trickle Down’ economics dating back to the 1890’s associated with William Jennings Bryan. Bryan was a Democrat running for office. And Will Rogers did make reference to the theory again in the 1920’s, making reference to Republican policy. And then we had ‘Supply Side’ economics doing business as ‘Trickle Down’ economics. So by the 1920’s, it had been embraced by Republicans and is most infamously associated with Reagan’s tax policies. Economist Thomas Sowell even argues that no economist has ever advocated for Trickle Down theory; it is a political dogma. I don’t disagree with your premise however, bottom up or top down, people in either or both tend to cling tenaciously to what they have at the extreme ends of the spectrum.

Neo-Feudalism, Corptocracy, exchangeable terms in a world where you’re 100% correct; the middle class is eroding. Rampant consumerism and the consumerist structure is fueled by a viable middle class. That means making enough to pay for essentials and having surplus disposable income to pay for amenities. Those in power knew that 3rd world economies had discount labor compared to the US when the Free World Trade agreement was negotiated and eventually signed. The fact that it was negotiated and finalized by one President and signed by another only serves to highlight the hypocricy of National Politics and how both parties have served themselves first.

In my mind, the marginal tax rate on the upper income bracket needs to go back to 70%. Not remain at 28% which is where it is now. That is going to take care of the ratio of wealth amassed at the top over the last 30 years. Draining income and resources from the middle and up the syphon. Frankly, I think wages need to be proportional to what the job is, not just based on what the market will bear. Given the importance of labor and employment, there also needs to be property interest in jobs, not ‘at will’. Who’s will? Optimally, it works to the benefit of both factions, employer and employee. And yes, wages have not kept up with costs. Companies profit from lower labor costs, but that doesn’t seem to be a pass through. Everything increases in over time, except wages.

The current paradigm in 20 years? If it continues on the same path its traveling, we both know where we will be. There will be no protection forthcoming from the CEO Overlord. And their management teams will implore you to make do with what you have and live within your means, since there is no credit line available at the company store. Of course, you don’t have anything, so that simplifies things. You are dependent on the Company for everything and all you get are more tasks to complete. I certainly hope I’m proven wrong.