Wednesday, June 23, 2010

From work to welfare

The first thing people must understand about the current jobs crisis with its painful, intractable double-digit unemployment, is that it is not simply a temporary manifestation of the recent recessionary period. Rather, it arguably represents a much deeper set of structural trends within late capitalism that have been taking place over the past three decades or so.

Some of these changes have been orchestrated by elites, i.e. trade policies that have eviscerated America's manufacturing sector, and a financialization of the economy that prioritizes reckless speculation and guides Americans toward amassing crushing levels of debt to make up for flat wages. However, other changes have come about as a result of inevitable technological and economic ‘progress’ – computerization, mechanized production, and the rapid industrial development of competing economies.

Americans have been understandably reluctant to confront the reality that given these changes even the modest middle class existence achieved by the mid-20th Century is simply no longer feasible without accruing shocking levels of personal indebtedness. Yet we are increasingly finding ourselves in agreement with the oft-repeated but nonetheless popularly resonant prediction that future generations can no longer expect to be better off than their parents.

The second thing we must understand about the jobs crisis is that it is far worse than it appears. The government’s official statistics put the unemployment rate at around ten percent. But the problem with the official unemployment rate is the fact that it ignores so-called “discouraged workers” – those who have been unemployed for so long that they have simply given up hope of finding a job.

Some estimates put the number of discouraged workers at between 10 and 15 percent of the population, on top of the ten percent who are officially ‘unemployed’. If not addressed, chronic joblessness and its spillover effects will ripple throughout our entire society. Therefore, the first thing we must do is end the numbers game that artificially deflates the number of people who are actually unemployed. The current formula merely encourages denial and we don't need more of that.

But the denial is not merely limited to those who refuse to face the true dimensions of the crisis. It extends as well to those who believe that we can stimulate our way out of the crisis with a few puny jobs bills.

The Myth of Job Creation

At the political level, the solutions are predictably hackneyed and uninspired – and that’s the best of it. The response from the political right has been downright idiotic. The political elites orchestrate a 700 billion dollar giveaway to Wall Street and the banks, an asset bubble results in hundreds of thousands of home foreclosures and neoliberal trade policies have left us with a ‘real’ unemployment rate of anywhere from 10 to 25 percent. Unsurprisingly, the old cliché still rings true: the rich get richer. Yet amid all of these catastrophic instances of capitalism’s malevolence, the largest and most vocal outcry has come in the form of a deranged populism that enthusiastically enlists itself as shock troops for even more draconian and brutal free market practices.

From the political left we have a disastrously misplaced faith in economic stimulus legislation, and among the more starry-eyed: dreams of a new ‘green economy’. But how many jobs can we actually create with a pathetic stimulus bill that amounts to three or four percent of the GDP? Recall that it was not such spending programs during the New Deal that lifted us out of the Great Depression; in fact it was a different ‘economic stimulus’ plan altogether that did the trick. It was called World War II and government outlays for the war effort amounted to nearly 40% of GDP! The current stimulus plan under discussion could be as small as $150 billion. Any job creation that came about as a result of such a bill would amount to a barely noticeable drop in the bucket.

Claims that a green economy could create a large enough amount of jobs to revive the American economy are well-conceived and tempting to believe – especially considering the fact that we ought to make investments in various forms of green energy anyway, regardless of its job creation prospects. However, hopes of green jobs significantly reshaping America’s economy look more and more like green pipe dreams when held up to the light of scrutiny.

As the U.S. gradually begins to increase its investments in alternative forms of energy (wind power, solar power, geothermal, and increased efficiency) what is to stop other countries from exporting lower-priced, higher-quality supplies to the United States, especially given the fact that European and Asian countries already have an advantage? Even U.S.-based companies that could competitively produce parts for wind turbines and photovoltaic panels, or electric cars for that matter, could do so much more efficiently in other countries like China. Admittedly, there are jobs to be created in the construction industry making sure new and existing structures are LEED compliant; but the number of jobs will surely dwindle once the majority of homes are retrofitted and homeowners and existing contractors become familiar with the practices.

From Work to Welfare

The inescapable fact is that in an economy that has perfected the art of eliminating jobs (stock price-boosting layoffs, massive downsizing, outsourcing, computerization, mechanization, etc.), for the government to attempt to ‘create’ jobs is tantamount to trying to sweep the sand off the beach. Rather than squander limited resources on unneeded infrastructure, policy makers and voters must heartily confront the new economy reality of the 21st Century: that there simply are not and will not be jobs for a substantial portion of the population.

Policy makers must redirect their energies and resources accordingly. The situation calls for a dramatic paradigm shift away from traditional Keynesian stimulus economics and toward large-scale welfare spending for it’s own sake. Bold and innovative thinking will be necessary to bring the millions of unemployed Americans under the umbrella of new and existing social welfare programs. Medicare and Medicaid must be dramatically expanded so that they can absorb the coming flood of new applicants. The Aid to Families with Dependent Children program will most likely need to be reconstituted, the food stamp and WIC program will need to be expanded, and new HUD housing projects, particularly massive numbers of dormitory-style SRO facilities, will need to be constructed. Funding must be allocated for things that have intrinsic value to Americans, such as food, housing, healthcare, schools, basic necessities, libraries, cultural resources and gathering halls, etc., not just because they will create a few jobs, but because these are the things that will make life more livable for the majority of Americans.

However, these are only the most basic of spending measures that will need to be undertaken. Policy makers will need to find other more creative ways of allowing the unemployed to both subsist and somehow not turn the U.S. labor market into a nasty race to the bottom. A few things will need to happen. First, the Social Security system will need to be drastically overhauled. Instead of a pay-as-you-go program that requires that people are working to pay into the system, Social Security should be re-envisioned as a retirement/welfare program paid for by steep corporate taxes. This way, rather than raising the retirement age, which would probably be necessary under the current system, we could actually lower the retirement age to about 50 or 55, removing a significant number of people from the labor market and providing them with a longer and better retirement.

Second, we must dramatically increase spending on education at every level all the way up to colleges and universities. Why? American students must be globally competitive when they move abroad to find jobs. We still have a first-rate higher education system in this country and we ought to use it to our advantage. American students should be subsidized all the way through college and graduate school enabling them to earn the necessary advanced graduate degrees to successfully compete in European, South American and Asian job markets. This too will provide a critical relief valve for America’s overcrowded labor market as well as the potential for a better life for young Americans willing to migrate to countries with more opportunities. This could also provide some economic benefit as many will migrate and send money back to family members still living in the United States.

But before you go thinking that all this will be a giveaway to the jobless at the expense of those who are still working, you had better think again. Such a massive welfare system will be just as necessary to prop up the employed as it will be for the unemployed.

Consider the leverage that employers will have in the labor market as increasing throngs are desperately searching for work. With virtually no unions left to speak of, real wages could conceivably plummet dramatically over the next quarter century. This alone will necessitate spending hundreds of billions on welfare programs simply to keep unemployed Americans from becoming the scabs of the 21st Century who undercut whatever remains of the American workforce’s bargaining power.

Obviously, this system can not be financed by taxes on the middle classes. They simply couldn’t bear it. Instead, political elites will have to come to terms with the necessity of levying hefty taxes on the wealthiest of Americans. State and federal income taxes must be raised on the highest incomes, inheritance and estate taxes must be increased and expanded in scope, capital gains taxes must be increased, corporate taxes and penalties for wrongdoing must be heavily increased and most importantly, there must be new taxes that cover the increasingly shadowy financial transactions taking place on Wall Street.

Remember too that prisons and the military will continue to be viable, if not quite humane, options for dealing with a surplus population. However, if we are actually able to provide people with their basic needs we should be able to preempt many of the life choices that necessitate incarceration and joining the military in the first place. De-emphasizing these priorities could potentially be a significant additional source of funding for the above-mentioned programs.

Conclusion: Redistribution or Restitution?

I sincerely hope these recommendations are not read as hyperbole or glib satire. The transition from desperate, pathetic and misguided economic stimulus spending to direct welfare spending must be made out of both societal necessity and a collective striving for decency in a global economic order that has been designed to meet the needs of elites at the expense of the people.

I’m sure many will regard these ideas with disdain and quite possibly hostility. Call it what you like, but do not dare call it “redistribution”. Since the 1970s American wages have stagnated while productivity has risen steadily. The incomes of working Americans have plummeted in an era of runaway corporate profits. Meanwhile, Americans have been forced to turn to consumer debt to finance the lifestyles that they have become accustomed to, essentially borrowing the money they should have been earning but at the usurious interest rates offered by the banks and credit card companies. Tax hikes on the rich that directly fund welfare programs benefiting the vanishing middle class is not and can not be termed “redistribution”. It is nothing more than restitution pure and simple; and it is long overdue - and about the only thing at this point that can bring us back from the cliff.


2Shoes said...

You can't possibly be serious. You are more out of touch with reality than Obama! Why don't you use the phenomenal successes of Greece, Italy and Spain as examples of what you propose? In fact please show a couple of possible REAL examples, and don't say Switzerland. Where do you suppose the money will come from to fund your grandiose scheme? More taxes on the wealthiest of Americans, right? Show me some real numbers that indicate this has a glimmer of hope of success. Jobs are moving out of the US at an alarming rate. What is to prevent the companies themselves from moving out? You just don't get it. The US is 13 Trillion dollars in the hole right now, and the GAO estimates unfunded liabilities at somewhere between 50 and 100 Trillion more. To put that in some sort of perspective, the total value of all publicly traded companies IN THE WORLD is somewhere in the 50 Trillion dollar neighborhood. There simply are not enough assets in the United States to accomplish what you suggest. Wake Up!!
You say: “not redistribution but restitution...” How catchy. Why not simply call it Reparations? Oh, that's what you wanted to say...

Sean said...

It is entirely possible that I am serious.

However, I am not an economist or economic/societal planner. I don't have the technical expertise to determine how best to fund government programs or even to suggest that they can ever be funded.

But I do recognize, and I'm sure you do too, that neither the market or government spending is capable of creating new jobs or even replacing lost jobs.

Therefore, I say we might as well get used to idea of being wards of the state and having all our basic needs provided for by the government.

We already have the necessary programs to do this in place; it's just a matter of expanding them and yes, funding them.

Presumably this would have to be done with some combination of borrowing, printing money, increasing taxes and/or re-evaluating our current spending priorities such as the defense budget.

If what you say is true, and the GAO's estimates are correct, we certainly have a daunting challenge before us.

But then again, abolishing programs like Medicare/Medicaid and Social Security would result in an unacceptable loss of quality of life and healthcare quality and wouldn't even guarantee long-term fiscal stability.

So what then? It honestly seems like our smartest play is to simply splurge and take everything we can get while we can still get it and hope somebody or something unforeseeable comes along and saves us in the future.

What's your solution?

2Shoes said...

Sean. I appreciate the candor of your reply. As suggested in another thread, you may want to reveal that you are not the same person that originally was "Sean", as that is obvious. and is also "a good thing". I reject the idea of being a "ward of the state." My family has lived in this country since the 17th century, and none of us EVER have depended upon the government to take care of our domestic needs. We have been, for the most part, poor, America-loving and God-fearing citizens. America has provided a relatively safe and opportunity-filled environment for us all to do as best we could, and that is all it needs to do, all it should do and all it can ever effectively to do. That is all that I want: get out of the way...get back to the Constitution...
It is obviously not as simple as that, but I'd be happy to just be moving in the right direction.