Six Reasons Why Both Political Parties Are "Econitwits"

How are we going to get unemployed Americans back to work? The GOP wants to lower taxes and decrease regulation because it thinks we're stifling innovation. The Dems want to spend tax dollars on infrastructure and other public works projects.
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How are we going to get unemployed Americans back to work? The GOP wants to lower taxes and decrease regulation because it thinks we're stifling innovation. The Dems want to spend tax dollars on infrastructure and other public works projects.

The Republican strategy is absurd because if corporations are hurting, why the hell are they sitting on $2 trillion? The Dems are in denial because stimulus plans aimed at boosting blue collar jobs are not only temporary but they do nothing to remedy the outsourcing of blue AND white collar jobs.

1. The Recession Started Thirty, not Three, Years Ago

In the past several decades the world has been flattened by globalization and automation. When I was a kid in the 1950s and 1960s, everything Americans wore, ate and drove was manufactured in the U.S.A. and people actually made a living as telephone operators, toll collectors and checkout clerks. We also spent less. At most, parents bought their kids toys twice a year--on their kids' birthdays and at Christmas -- not every other time you drove past Toys R Us. So we made more money, relatively speaking AND saved more of it.

I'd contend that most of the prosperity of the last 30 years is based on unsustainable consumer debt -- or "living on leverage" as I point out in my book. While American appear to be affluent when you see McMansions and upscale mall parking lots crowded with high-end SUVs, this is happening when the median wage isn't just stagnant, it's declining when you factor in inflation. According to the Milken Institute, the median earnings of men ages 25 to 64 declined 28% between 1969 and 2009 and by 47% for those without a college education. What's more, the percentage of working-age men with full-time jobs fell to 66% between 1960 and 2009.

2. We Can't Recover Until We Make Better Machines

Former Labor Secretary Robert Reich attributes the malaise to shrinking working class paychecks and says that we need to raise taxes on the rich and pay blue collar workers as generously as they do in Germany, where unemployment is low and taxes are high. But maybe workers in Germany, as well as Japan, are doing better not because of their wage/tax structure but because there is a labor-management partnership that produces cars and appliances that don't break down. Millions of Americans switched to Toyotas, Hondas and Volkswagen Beetles in the 1970s and 1980s because the U.S. auto industry failed to switch from a gas-guzzling game plan to a fuel efficient one with the result that Toyota recently surpassed GM as the top car maker. Many others switched to German-made appliance like Bosch and Bunn because they last longer. I've only lived in my current house for eleven years but I've already had to replace my defective oven, dishwasher and refrigerator; I don't remember my parents ever having to replace theirs.

3. We've Got to Reverse Job Losses Due to Outsourcing, Offshoring

According to the Wall Street Journal, Fortune 100 companies alone have killed 2.9 million American jobs in the past decade while adding 2.4 million abroad. If we assume that the other 400 of the Fortune 500 is also outsourcing that accounts for a significant chunk of the 14 million people who are currently unemployed.

Overseas jobs have increased because it's cost-effective to assemble cars in the country where customer growth is. While GM sold a little over one million light vehicles in China in 2000, 10 years later the number skyrocketed to 16.6 million -- surpassing the 11.6 million cars sold in the U.S.

But the other driver of overseas job growth, cheap wages, is causing very little outrage compared to a decade ago. Remember all the hoopla in the 1990s over the poor working conditions at the Asian shoe factories that made Nike sneakers or at the Honduras factory that produced Kathie Lee Gifford's clothing line? I see no outrage over the workplace practices of China-based Foxconn, which assembles products for Apple,, Intel, Cisco, Hewlett-Packard, Dell, Nintendo, Nokia, Microsoft and Sony Ericsson. As op-ed columnist Harold Meyerson observed, while journalists have compared Apple's Steve Jobs with Henry Ford, at least Ford paid his workers a then-unheard of $5 a day so that they could afford the cars they helped assemble, compared to Foxconn's factories, where people work 60-hour weeks making 50 cents an hour and more than a dozen workers have committed suicide.

4. We've Got to Factor in Automation When Considering Job Losses

I've seen few, if any, economists weigh in on automation's effect on jobs.
The U.S. Post Office's failure has less to do with ineptitude and more to do with the fact that email and online bill payment have replaced snail-mail. As Global Macro Monitor put it, "The Schumpeterian "creative destruction" of one sector is not being equally and instantaneously offset by job creation in sectors benefiting from technology."

For that reason, even workers in low-wage countries can't assume that their competitive wages guarantee lifetime employment. Scores of Foxconn's 1.2 million employees may see their jobs from hell transformed into no jobs at all three years from now when Foxconn is planning to "hire" one million robots to do the assembly, according to the Economist.

5. We've Can't Be Fooled by Economic Recoveries That Are Bubble-Driven or Bubba-Driven

While Slick Willie Clinton is trying to burnish his legacy with the Clinton Global Initiative, that's not going to cancel out his shameful economic legacy while President. The most preposterous spin on his record is a recent op-ed in the Washington Post contending that he demonstrated "intellectual integrity and the courage to take on the outdated orthodoxies of your own party."

Right. Or, as the book The Great American Stickup more accurately characterized his legacy, "What Clinton did... is open the floodgates for an unprecedented soaking of the poor (resulting in) predatory lending practices (and) charging exceptionally high interest rates and fees." Clinton's Secretary of Labor, Robert Reich added, "Clinton made a deal with (former Fed Chairman Alan) Greenspan... that if the Fed kept interest rates low, the president would reciprocate with financial market deregulation." So we had a housing bubble that led to temporary jobs, which essentially burst. Like a Ponzi scheme, it works for awhile until it can't be sustained.

6. We Need a "Light Blue Collar" Coalition to Defeat the Tea Party and Rally for Real Pensions

Lewis Black famously said that the Republicans are the party of bad ideas and the Democrats of no ideas. In the same fashion that consumers should have considered refusing to buy iPads unless they were manufactured in the U.S,. white and blue collar workers should have teamed up to save pensions, or make 401(k) plans walk, talk and quack like them. If unions had reached out to white-collar workers to jointly pressure Congress to enact legislation resulting in retirement security, the Tea Party wouldn't have been able to channel white-collar anger at the frequently too-generous retirement plans for the public sector. The fact that most Americans in the private sector can't afford to retire is the biggest reason why this recession will probably turn into a Depression.

Unfortunately, as former SEIU President Andy Stern pointed out in his book, A Country That Works, too many "Democrat In Name Only" business leaders are perfectly happy to heap hefty paychecks on executives while sticking it to the rank and file. Stern cites a nursing home owner who attended a Clinton fundraiser who had been quoted as saying "unions have no place.... in the health care industry." As Stern observed "the money spent on that opening night gala would have gone far in paying for those workers to gain the health care coverage they were seeking".

Democrats of all collars need to get off their collective butts and work together to save the economy. The future of the country is at stake.

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