An hour ago I was driving back from Jackson listening to a segment on NPR entitled”Barely getting by”, dealing with the issues of low wage employment. The figure that caught my attention was since the 1970’s, wages corrected for inflation have fallen 20%. I had previously read that real wages since the 80’s have remained stagnant. Another figure given was that the 20 years since 1950 saw real wages rise over 60%. After about 1980 wage disparity between the folks at the top and the bottom widened such that the US now ranks last among the Group of 20 nations in income disparity. I notice from the latest Newsweek ranking the US #11 in a ranking of 100 countries for livability. These are disturbing trends which bode ill for the future of a country which was undeniably the dominant country after WW2 for ideas, manufacturing prowess and economic power. I will not try to debate when the US economy derailed because by some metrics like GDP and productivity, all seemed well. But about 30 years ago President Reagan began running huge fiscal budget deficits and promoting deregulation of many industries under the neoclassical economic banner of a curious theory called “trickle down” economics and getting government off the back of big business. This doctrine began under a republican administration but was expanded under the Clinton and Bush administrations, actively promoted and cheer leaded by the Delphic Chair of the Federal Reserve, Allan Greenspan, who aggressively advanced the Finance industry while ignoring and demeaning the manufacturing sector. This was to be a new economy of ideas, of information, which came to mean digital information with the advent of ever more powerful computers.
When the depression era Glass-Steagall Act segregating investment from conventional banking activities was repealed in the late 90’s, our fate as a nation was sealed, although few people in government besides CFTC Head Brooksley Born commented about the repeal at the time. The large multinational companies and the expanding banking sector began the movement to Globalization which included secretive changes to the tax system written by and beneficial to them. These changes allowed deferment of taxes on earnings overseas and in some cases like a leasing business, virtually permanent deferment. If you were the CEO of a company like GE, what was there not to like? You could close a US factory and deduct all the costs as well as the costs of setting up a foreign subsidiary. You could dump all those expensive increasingly obese US workers with their underfunded pensions and increasingly expensive health care costs. Thus began the job arbitrage warned about by Ross Perot in his famous “sucking sound” of jobs disappearing south of the border under the newly adopted NAFTA legislation. But the corporate bean counters quickly realized that there were countries with a lot cheaper workers than Mexicans . The new corporate friendly environment of Asia, primarily China seemed just the ticket. Again what was there not to like? The US tax system practically invited the move to China: a young dynamic labor force willing to work for slave wages, no environmental, safety work rules or legal oversight, no pensions or health care worries. And so so it went. Outsourcing of manufacturing exploded overseas and the share of US GDP devoted to the making of things went into a steady decline to where it is a minuscule 10% today. The government also encourages and enables companies to add robots both here and in China to perform manufacturing formerly done by human beings. For every dollar you spend on a US manufactured good, you spend almost $4.00 for one of Chinese origin, this whole pathetic process is of course worsened by the undervalued yuan which of course is in the long time interest of those corporations and the Chinese government.
Jobs previously performed by US workers are “gone” and even VP Biden has told us “They are never coming back.” This administration and previous administrations are blindingly, stupefyingly stupid making such dangerous remarks. They do not seem to understand that a formerly working public who has lost everything and has nothing left to lose might, just maybe, be a mob who might be capable of taking vengeance upon a clueless ruling class who they perceive has sold their future to a sweatshop slave culture and left them nothing left to lose.
The solutions crafted by Obama and Biden’s dream team are the same as previous administrations: tax incentives, R&D tax credits, job creation credits, tax deferments and so forth. These tired recycled ideas using yet more borrowed money have never worked because they are subsidies as a substitute for real job creation and they add yet more tangled skeins to an already hopelessly complex business tax system. I have previously said to lower the corporate taxes from 35% to something between 15 and 25% but make it a flat tax, no deductions for anything. Goldman Sachs wouldn’t be able to deduct the enormous salaries to top executives and the $15.9 Billion in year end bonuses awarded last year even as they received over $16 Billion from Joe Taxpayer. Nor would GE be able to move its leasing business overseas and never pay taxes on profits. If you are an American company doing business here, you will have your headquarters here. Not in the Persian Gulf like Dick Cheney’s Halliburton or to an offshore Mailbox like Stanley Tools a few years back. I would favor a large readable label stating where the product was manufactured. Let the costs speak for themselves.
Eventually as energy costs rise, trans ocean shipping costs will doom a lot of trade, especially heavy or bulky items. But we in the US NEED JOBS NOW The government needs to tell the large corporations that they will no longer be able to arbitrage their labor force to low wage countries hop scotching to the lowest cost producer courtesy of the US tax system which subsidize their game.
The point I would like to emphasize in this final paragraph is that this globalized wage arbitrage represents a monumental long and short term security and economic threat to the United States. It baffles me that the media and politicians have ignored the risk that off shoring of manufacturing poses to US security and defense. You simply cannot lose the skills of our machinists and skilled craft persons arbitraged to China which will certainly be the economic and military rival to the US in this century. Every dollar handed to the Chinese communist government to increase its manufacturing and engineering and technological prowess represents one more nail in the coffin representing America’s economic future. We enable their success while condemning our own. The only beneficiaries of such a suicidal policy are the large multinational corporations. Changing tax policy to favor domestic manufacturing can be implemented immediately with the stoke of a pen and does not need to be phased in. It is time we build factories in this country and begin the process of rebuilding out manufacturing base by eliminating tax advantages favoring overseas production. The time is now to rebuild our skilled job base.
Rendezvous Mountain Farm 