Friday, December 06, 2013

Krugman On Obama's 'Inequality" Speech

http://www.nytimes.com/2013/12/06/opinion/krugman-obama-gets-real.html?hp&rref=opinion&_r=2&

Here is my spin on the current debate.  By 1977, we had reached the point where labor unions had a lot of power.  Guys were making $70,000 doing manual labor.  The interesting thing for the Republican Party is that many of these folks agreed with the idea that the Democratic Party was "tax and spend" and wasn't going in the right direction.  If you are making $70K and you know you are going to make 5-7% more each year, you want your taxes to be low. 

That pro-union system was destroyed by PATCO, Reagan, foreign cars and foreign steel between 1978 and 1982.  Ever since, wages have not been increasing, the CEOs are taking ridiculous amounts of money compared to the workers, robots and other automation have replaced a lot of low-skill jobs, and so we have a world where there are the rich and there are the poor, but very few people making $70-$200K.

Romney says 47% pay no federal income tax -- certainly true.  A number of those folks are retired and on Social Security, so I suppose we could just limit their SS benefits instead of taxing them.  But even for the working poor, wages and job security are poor.  I go back to the story of my cabbie in Cincinnati who was working three jobs.  The guy wanted to work, was working, and yet he wasn't making what a union member would have made in 1977.

My dad graduated from high school in 1955.  At his 40th high school reunion, he got back together with guys who went from high school to work on the assembly line, worked 40 years, bought company stock, and were retired millionaires at age 58.....with a pension.

I graduated high school in 1982.  I missed my 30th reunion, but I would wager, based upon Facebook interactions, that there are no similar stories from my class.  No one with just a high school degree has a 40-year steady employer and a million dollars and a pension. 

What does that tell us?  That work is no longer valued.  You read the newspaper and see stories of companies "unable to find" welders -- yeah, they are paying $18/hour.  So the guy who swept the floors at Lackwanna Steel in 1977 made way more than a skilled welder can make now.  what happens when you actually pay workers $100,000 a year?  You have situations like The Bakken where guys are driving 300 miles to live 10 to a house and working 100 hour weeks to make cash.  There are plenty of people who want to work, but they just don't want to work for a wage that puts them at just above poverty level (U.S. poverty level is stated to be about $17,000 - imagine you are an adult living on $17,000 a year, good luck).

So while in 1977 the pendulum had swung perhaps too far toward the workers, it has now swung wildly the other way.  I often suggest that if the government wanted to grow jobs that what it could od is go to the CEO of every major company and say, "If you want to pay no taxes this year, add ________ jobs making at least $60,000 a year."  They would do it.  I know it would be a breach of fiduciary duty, but they would call it "marketing" or "public relations" or some such thing.   And you know what?  it would spur job growth -- the CEOs would become REAL "job creators" and we could reward them for it.

Anyway, I am now just rambling, but I guess my point is this -- we need to find a way to head back closer to 1977's labor market than we are right now.  If we don't, we will become more and more like Brazil:  pockets of enormous wealth surrounded by acres of poverty.

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