Relative Relevancy

When there’s nothing to add to the conversation, because everything’s so damned obvious, it’s probably best to just point and shrug. Yes, the mayor they have up there in Toronto is a thug and a drug-addled bully and a fool – but they’ll work things out, and it’s unclear what damage has been done to the city, if any, and that’s Canada anyway. There are no implications for anyone down here, or even out in Moose Jaw, Saskatchewan. This is fodder for comedians, not news, although Canadians having anything to be ashamed for, other than Celine Dion, is news in a way – but that’s it. Let it pass, along with the new Cheney Family Feud – the nasty straight sister, who wants to be the next senator from Wyoming, for some reason, is fighting with her gay sister, happily married to another woman, over the innate evil or libertarian good of gay marriage, and the irritated father, who was the nastiest vice president we ever had, is trying to keep the peace, and no one will be getting together for Christmas this year. Who cares? Liz Cheney isn’t going to take that senate seat away from the guy who has it now – she’s fifty or so points behind him now – so none of this matters much. It’s just embarrassing.

Both items are embarrassing, and yes, George Zimmerman was just arrested for pulling a gun on his girlfriend – a few months after he was arrested for pulling a gun on his estranged wife – but everyone knew he was a ticking time-bomb. When he gets upset, or even uneasy, he pulls a gun. Sometimes he shoots. That’s why Treyvon Marin is dead. If everyone should be allowed to carry a gun, anywhere, and perhaps should carry a loaded gun everywhere – to keep us all safe, as the National Rifle Association contends – we really do need to figure out how to deal with such people. Fox News can figure that out, or continue to say George Zimmerman is a misunderstood real American hero. Check back with them periodically. Otherwise, there’s no news here.

There’s no news with Obamacare either. The Obamacare website still sucks, but it won’t always suck, and some of the state websites are working just fine, so those whose plans have been discontinued will be able to find good plans, maybe cheaper plans, maybe not, but they’ll be real insurance plans. Republicans are still screaming, but adding nothing new, and Bush’s former speechwriter, David Frum, suggests they give it up:

Obamacare is a fact – a malfunctioning fact, like so much of the rest of the American healthcare system, yet a fact all the same. Its beneficiaries are rapidly coalescing into a vested interest, as the pharmaceutical companies and hospital insurance corporations and other providers are vested interests. Policy cannot realistically be made by dismissing such interests. They have gained something they will think is worth protecting. They will have the votes to protect it. If reform is needed, and it is, they will have to be offered something better.

They’ve got nothing better. They offer noise. That keeps the media busy – because they’re supposed to be busy, to justify themselves. Obamacare is, in fact, a fact, perhaps a sad fact, but it’s not going anywhere, and not going away. It shouldn’t be a fact! It shouldn’t be a fact! We really do need to figure out how to deal with such people. They feel the same way about most of science too. It’s a bother, but there’s no news here.

The real news is that the economy still stinks, when it really shouldn’t. Wages are stagnant, or dropping, as they have for a decade or more, but the stock market keeps hitting record highs almost every day, and corporate profits are at all-time highs too – so the economy had recovered from its near-total collapse at the end of Bush’s second term. It just hasn’t recovered for wage-earners. If you own capital, the means of production – or even a bit of it in shares of this and that – you’re sitting pretty – but most of that stock in this and that is owned by maybe ten percent of all of us, or less than ten percent of us. Everyone else is hurting, and the news is that this is finally news:

A Walmart in northeast Ohio is holding a holiday canned food drive – for its own underpaid employees. “Please Donate Food Items here, so Associates in Need Can Enjoy Thanksgiving Dinner,” a sign reads in the employee lounge of a Canton-area Walmart.

Kory Lundberg, a Walmart spokesman, says the drive is a positive thing. “This is part of the company’s culture to rally around associates and take care of them when they face extreme hardships,” he said. Indeed, Lundberg is correct that it’s commendable to make an effort to help out those who are in need, especially during the holidays.

But the need for a food drive illustrates how difficult it is for Walmart workers to get by on its notoriously low pay. The company has long been plagued by charges that it doesn’t pay its employees a real living wage. In fact, Walmart’s President and CEO, Bill Simon, recently estimated that the majority of its one million associates make less than $25,000 per year, just above the federal poverty line of $23,550 for a family of four. When the Washington DC city council passed a living wage bill requiring Walmart to pay workers a minimum of $12.50 per hour, the chain threatened to shut down its new stores if Mayor Vincent Gray didn’t veto the bill. Gray vetoed the bill.

A lot of Walmart employees are on food stamps too, so maybe this is Walmart trying to be nice to all the taxpayers who have been helping their employees survive, with a food drive so any of their employees with a few extra cans of green beans can help out their fellow employees with next to nothing in the cupboard, so those unlucky sods won’t have to use as many food stamps. That would be Walmart doing good things for the American taxpayer, but it’s just a sad business:

Even if the canned food drive successfully gathers enough to help out the Canton store’s low-income workers, many of them might not even be able to have the food on Thanksgiving. That’s because Walmart is one of a group of retailers that will open its stores for Black Friday sales beginning at 6 p.m. on Thanksgiving afternoon.

It’s going to get even trickier if the Republicans in Congress have their way and cut forty billion from the food stamp program, effectively ending it. Walmart employees will be dropping in the aisles, which is a little embarrassing, even if the goods are cheap and the Walton family keeps making even more money for themselves and their shareholders each quarter. And for the record – collectively, the Walton family is worth a combined total of one hundred fifty billion dollars, making them one of the wealthiest family in the world. In 2011, six members of the Walton family had the same net worth as the bottom thirty percent of American families combined. Good things happen when you keep wages low.

Matthew Yglesias wonders about that quite common strategy:

That’s about as solid an indicator you could imagine of the economy-wide problem that economy-wide wages are too low. Look at it from Walmart’s perspective? Suppose low-skilled workers in this country on the whole made somewhat more money. What would they do? Well, as Walmart indicates with this sign, one thing they’d do is buy more groceries. And where would they buy the groceries? Well, many of them would buy them at Walmart – America’s leading grocer.

Of course any particular company can improve its own bottom line by cutting compensation to the bone. But corporate America as a whole has been so successful in squeezing the labor share of national income lower and lower that it’s become a substantial constraint to businesses’ ability to sell things to people. The cycle of low wages, low demand, weak hiring, and weak bargaining power, just keeps grinding on.

That may be more important to most of us than the colorful mayor up in Toronto or Liz Cheney throwing her own sister under the bus, to win a senate seat she can’t win anyway. The cycle of low wages, low demand, weak hiring, and weak bargaining power, is of more immediate concern. Why is it grinding on? Has something fundamentally changed in America? Is this Walmart story the canary in the coal mine? Do we have a new country? This is puzzling, as David Atkins notes:

More record highs for the stock market today, boosted by record corporate profits – this, even as many major economists are talking about a permanent mild-depression economy.

This is very confusing to conservatives. They don’t understand how it’s possible for corporations and rich people to be doing so well, and yet the real economy remains so bad. Progressives are not confused. It just means everything conservatives believe about the economy and growth is dead wrong.

In a normal and sane world, the evidence might lead people to question whether giving all the money to rich people and boosting asset values at all cost might not be the best policy to help the economy.

But then, we don’t live in a normal or sane world.

We have never lived in a normal or sane world – our species is what it is – but now we may be living in a permanent mild-depression economy. Major economists are saying that, as one of them, Paul Krugman, reports here:

Spend any time around monetary officials and one word you’ll hear a lot is “normalization.” Most though not all such officials accept that now is no time to be tightfisted, that for the time being credit must be easy and interest rates low. Still, the men in dark suits look forward eagerly to the day when they can go back to their usual job, snatching away the punch bowl whenever the party gets going.

But what if the world we’ve been living in for the past five years is the new normal? What if depression-like conditions are on track to persist, not for another year or two, but for decades?

You might imagine that speculations along these lines are the province of a radical fringe. And they are indeed radical; but fringe, not so much. A number of economists have been flirting with such thoughts for a while. And now they’ve moved into the mainstream. In fact, the case for “secular stagnation” — a persistent state in which a depressed economy is the norm, with episodes of full employment few and far between – was made forcefully recently at the most ultra-respectable of venues, the IMF’s big annual research conference. And the person making that case was none other than Larry Summers. Yes, that Larry Summers.

Krugman was surprised:

Summers began with a point that should be obvious but is often missed: The financial crisis that started the Great Recession is now far behind us. Indeed, by most measures it ended more than four years ago. Yet our economy remains depressed.

He then made a related point: Before the crisis we had a huge housing and debt bubble. Yet even with this huge bubble boosting spending, the overall economy was only so-so – the job market was okay, but not great, and the boom was never powerful enough to produce significant inflationary pressure.

Summers went on to draw a remarkable moral: We have, he suggested, an economy whose normal condition is one of inadequate demand – of at least mild depression – and which only gets anywhere close to full employment when it is being buoyed by bubbles.

Krugman sees that too:

Look at household debt relative to income. That ratio was roughly stable from 1960 to 1985, but rose rapidly and inexorably from 1985 to 2007, when crisis struck. Yet even with households going ever deeper into debt, the economy’s performance over the period as a whole was mediocre at best, and demand showed no sign of running ahead of supply. Looking forward, we obviously can’t go back to the days of ever-rising debt. Yet that means weaker consumer demand – and without that demand, how are we supposed to return to full employment?

Again, the evidence suggests that we have become an economy whose normal state is one of mild depression, whose brief episodes of prosperity occur only thanks to bubbles and unsustainable borrowing.

That’s it? Yes, that’s it, and we’d better get used to it:

If our economy has a persistent tendency toward depression, we’re going to be living under the looking-glass rules of depression economics – in which virtue is vice and prudence is folly, in which attempts to save more (including attempts to reduce budget deficits) make everyone worse off – for a long time.

I know that many people just hate this kind of talk. It offends their sense of rightness, indeed their sense of morality. Economics is supposed to be about making hard choices (at other people’s expense, naturally). It’s not supposed to be about persuading people to spend more.

But as Mr. Summers said, the crisis “is not over until it is over” – and economic reality is what it is. And what that reality appears to be right now is one in which depression rules will apply for a very long time.

Other than internal food drives at Walmart, where the working poor help the working poor, while the rich stand hidden in the shadows and count their money, where does this lead?

David Atkins has one answer:

The history of middle class societies that lose their footing in an age of mass inequality and labor destabilization suggests that a more progressive social contract will emerge under the threat of revolution. The other, only slightly less likely possibility is a fascist regime that attempts to lay all the blame on the “Other.” A slow, comfortable descent into class-based Social Darwinism seems less likely than either option, though it’s certainly possible.

But these are indeed the questions we will be compelled to answer. The fact that we will have to confront this decision, one way or another, makes it hard to take seriously the massive fights over, say, Obamacare. In 15 years a natural unemployment rate of 15% accompanied by unimaginable devastation due to climate change will necessitate the sorts of programs, solutions and political turmoil that will render most of today’s arguments utterly obsolete.

The news is that revolution or fascism may be in the air, or that comfortable descent into class-based Social Darwinism, which doesn’t sound all that comfortable, really. That’s what Tyler Cowen suggests in a long item in Politico – what Atkins calls a future in which a few technically skilled “economic winners” in cities will “lord it over a mass of rubes” left behind in an era of mass mechanization. Atkins isn’t a fan of the idea. Cowen says that’s inevitable.

Reihan Salam, thoughtful conservative, sees it this way:

One of the scariest notions about America’s sluggish labor-market recovery is that it doesn’t represent an aberration, but rather a new reality in which good jobs are few and far between, particularly for those with limited skills. It is certainly possible that the future will be brighter than we think, and that we will soon enter a new economic Golden Age in which people with low education levels will flourish as employers clamor for their services at ever-higher wages.

He says we probably shouldn’t count on that, and work on a Plan B of sorts:

A number of interrelated developments, from automation to organizational innovation to off-shoring, appear to have reduced the willingness of employers to pay middle-income wages to less-skilled workers. That is, the problem is not that there is no wage at which employers will take on less-skilled workers. If this were the case, agriculture and hospitality companies wouldn’t be pressing lawmakers for an immigration overhaul that would allow for a large influx of less-skilled workers from abroad.

Rather, the problem we face is that employers are only willing to employ less-skilled workers at very low wages, including wages that the voting public considers unacceptably low. Public support for raising the federal minimum wage, now at $7.25, is overwhelming. A Gallup survey released on Monday finds that 76 percent of voters favor a $9 per hour minimum wage, and one assumes that support for an even higher minimum wage would be almost as robust.

He would not raise the minimum wage, for the usual conservative reasons – that this would distort market incentives and may do no good and all the rest – but he does think something should be done:

The usual way around this dilemma is for policymakers to back wage subsidies and other social supports. If employers aren’t willing to pay wages high enough to allow less-skilled workers to achieve an acceptable standard of living, one response is to provide these workers with a suite of benefits, from in-kind transfers like food stamps (or SNAP) and Medicaid, to cash transfers like the earned-income tax credit (EITC). Scott Winship, a scholar at the right-of-center Manhattan Institute, has carefully documented the extent to which transfers have helped increase the incomes of poor families. According to Winship, households at the 20th percentile — those earning higher incomes than one-fifth of U.S. households, but lower incomes than four-fifths of U.S. households – saw their market income increase by a mere 12 percent from 1979 to 2007, but factoring in taxes and transfers saw their incomes increase by 28 percent to 46 percent, depending on how we value publicly-financed health insurance benefits. Though it’s certainly possible that without transfers, we might have seen social and economic changes that would have increased market incomes, but it looks as though rising transfers made a huge difference in cushioning low-income households from an unfavorable economic environment.

Yes, he said cash transfers. Just hand them money:

University of Arizona sociologist Lane Kenworthy, author of the forthcoming Social Democratic America, has called for an expanded employment-conditional earnings subsidy that would rise in sync with economic growth. And in Switzerland, a coalition of activists are campaigning for a basic income, an idea that has been championed by left-libertarians, egalitarian socialists, and even a number of pro-market conservatives who see it as a less bureaucratic, more straightforward alternative to the welfare state. This basic income would not be employment-conditional, which raises the danger that it would encourage people to exit the workforce… but some still find the idea compelling.

In the New York Times, Annie Lowrey explains the real-life example:

This fall, a truck dumped eight million coins outside the Parliament building in Bern, one for every Swiss citizen. It was a publicity stunt for advocates of an audacious social policy that just might become reality in the tiny, rich country. Along with the coins, activists delivered 125,000 signatures – enough to trigger a Swiss public referendum, this time on providing a monthly income to every citizen, no strings attached. Every month, every Swiss person would receive a check from the government, no matter how rich or poor, how hardworking or lazy, how old or young. Poverty would disappear. Economists, needless to say, are sharply divided on what would reappear in its place – and whether such a basic-income scheme might have some appeal for other, less socialist countries too.

The proposal is, in part, the brainchild of a German-born artist named Enno Schmidt, a leader in the basic-income movement. He knows it sounds a bit crazy. He thought the same when someone first described the policy to him, too. “I tell people not to think about it for others, but think about it for themselves,” Schmidt told me. “What would you do if you had that income? What if you were taking care of a child or an elderly person?” Schmidt said that the basic income would provide some dignity and security to the poor, especially Europe’s underemployed and unemployed. It would also, he said, help unleash creativity and entrepreneurialism: Switzerland’s workers would feel empowered to work the way they wanted to, rather than the way they had to just to get by. He even went so far as to compare it to a civil rights movement, like women’s suffrage or ending slavery.

That’s a bit much, but folks on this side of the pond are intrigued:

Certain wonks on the libertarian right and liberal left have come to a strange convergence around the idea – some prefer an unconditional “basic” income that would go out to everyone, no strings attached; others a means-tested “minimum” income to supplement the earnings of the poor up to a given level.

The case from the right is one of expediency and efficacy. Let’s say that Congress decided to provide a basic income through the tax code or by expanding the Social Security program. Such a system might work better and be fairer than the current patchwork of programs, including welfare, food stamps and housing vouchers. A single father with two jobs and two children would no longer have to worry about the hassle of visiting a bunch of offices to receive benefits. And giving him a single lump sum might help him use his federal dollars better. Housing vouchers have to be spent on housing, food stamps on food. Those dollars would be more valuable – both to the recipient and the economy at large – if they were fungible.

Even better, conservatives think, such a program could significantly reduce the size of our federal bureaucracy. It could take the place of welfare, food stamps, housing vouchers and hundreds of other programs, all at once: Hello, basic income; goodbye, HUD. …

The left is more concerned with the power of a minimum or basic income as an anti-poverty and pro-mobility tool.

Either way, it’s a winner, and will never happen here. It just sounds too odd – but we’re spending the money anyway – and if Larry Summers and Paul Krugman and all the other economists are right, and we’re in an economy that will now never get better, ever, except for the occasional bubble followed by a ruinous crash, this sure beats food drives at Walmart where the working poor hand cans of green beans, if they have any left, to those working poor who are even poorer. It’s something to consider, other than Rob Ford, the absurd mayor up there in Toronto, or the feuding Cheney sisters, or who George Zimmerman might shoot next. There is news that actually matters, sometimes.

About Alan

The editor is a former systems manager for a large California-based HMO, and a former senior systems manager for Northrop, Hughes-Raytheon, Computer Sciences Corporation, Perot Systems and other such organizations. One position was managing the financial and payroll systems for a large hospital chain. And somewhere in there was a two-year stint in Canada running the systems shop at a General Motors locomotive factory - in London, Ontario. That explains Canadian matters scattered through these pages. Otherwise, think large-scale HR, payroll, financial and manufacturing systems. A résumé is available if you wish. The editor has a graduate degree in Eighteenth-Century British Literature from Duke University where he was a National Woodrow Wilson Fellow, and taught English and music in upstate New York in the seventies, and then in the early eighties moved to California and left teaching. The editor currently resides in Hollywood California, a block north of the Sunset Strip.
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2 Responses to Relative Relevancy

  1. Rick says:

    “Either way, it’s a winner, and will never happen here.”

    Okay, MAYBE it’s a winner, but maybe it’s not, I can’t say for sure, but I certainly doubt that if, every month, everyone in the country “would receive a check from the government, no matter how rich or poor, how hardworking or lazy, how old or young” is a workable idea until somebody explains to me where that money comes from!

    I mean, the only reason anybody was even able to concoct this nonsense in the first place is that there PRESENTLY seems to be plenty of money for the government to spend, although they seem to overlook the fact that the government got this money from taxes being paid by people with WEALTH, much of which was created by WORKING at creating it, and NOT by sitting by their mailboxes, waiting for their monthly check!

    Maybe this plan isn’t as idiotic as it looks, but I doubt it.


    • Alan says:

      This misses the point. We already spend enormous amount of money keeping the unlucky afloat – and these folks are talking about redirecting all that money in a different way – cash payments only – and be done with it. Where does the money come from? The same place – taxpayers. It’s not more money, or less – it’s the same amount, but made completely fungible. Freedom, my friend – freedom! Or something like that. But it’ll never happen. People like to control the unlucky, making sure they do the “right” things. When you know you’re morally superior, you do have the right to shove that in the face of the losers in life. Jesus said so.

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