With good jobs going away, middle class downsizes

[trvlr]

Originally Posted by Pete

Taxes come off the top - Companies do not pay taxes - the cost is passed on to the consumer in the price of the product or made up for in fired/layed off workers.

Agreed. Which is why I asked if anyone was able to find any positive effects in that regard; due to President Bush's tax cuts. It would in theory, have a very positive effect. I heard it time and time again during voting season, but I haven't seen any conclusive evidence from anywhere yet.

[rdret1]

http://www.theatlantic.com/business/...tax-cut/61023/

This is an interesting sorta non-explanation of the whole mess. Read the article and you will see why I used the description that I did.

[nmap]

I suspect there are several underlying issues.

The notion of free trade was created circa 1815, and popularized by David Ricardo in 1817. Is free trade really the best approach? I wonder. This is not to say it isn't - but it tends to approach religion in the fervor it generates. There tend to be lots of strong assertions - but I haven't seen much real data.

So - the U.S. and much of the world has embraced free trade. But we didn't start out that way. We protect our industries. Perhaps those more adept with history than I would care to expand on that.

Presently, global wage arbitrage puts the U.S. at a grave disadvantage. It's cheap to hire foreign workers and expensive to hire U.S. workers. So employers have an incentive to do so. With public companies, they are expected to not only maintain earnings, but to increase them - thus creating still more pressure to choose the lower-cost option.

In addition, U.S. consumers tend to want cheap goods. To create goods at the lowest prices, manufacturers must trim wherever they can.

No doubt there are other issues as well. Perhaps diplomacy plays a part, too.

Our national problem is that we have a price structure - and, worse, a debt structure - based on an elevated price/wage level. When we sink to a lower price/wage level...and we will, due to the downward pull of the world labor market....the existing debt will be unservicable. Perhaps we see part of that now?

Will the bond market, particularly the municipal bond market, experience increased risks of default during this structural readjustment? I suspect so.

Bottom line, I think that the embrace of free trade has set off events that were positive for a time, but at the price of subsequent problems. We'll experience those problems for decades to come until global wages come into some sort of equilibrium - or, alternatively, some alternative to free trade asserts itself.

All MOO, YMMV.

[GratefulCitizen]

Economic cycles happen.
http://scottgrannis.blogspot.com/201...s-exports.html

No long-term good can come from constant government interference and tinkering.
Governments can't keep their own fiscal house in order.
What makes them qualified to engage in large-scale meddling with the entire economy?

[nmap]

Well, Broadsword, let's look at this a bit:

Moving to shield battered domestic manufacturers from foreign imports, Indonesia is slapping restrictions on at least 500 products this month, demanding special licenses and new fees on imports. Russia is hiking tariffs on imported cars, poultry and pork. France is launching a state fund to protect French companies from foreign takeovers. Officials in Argentina and Brazil are seeking to raise tariffs on products from imported wine and textiles to leather goods and peaches, according to the World Trade Organization.

LINK

OK, this is a 2008 article - but notice Brazil on the list of trade-protected countries. My understanding is that China also has trade protection policies. Each has rapid growth.

But here's the problem. I'm not saying that free trade, as currently practiced by the U.S., is necessarily good or bad. I am troubled by the lack of analysis. People simply say "Free trade is good!" Is it? Is it always?

Keep in mind the tendency of wages I mentioned previously. As pressure on wages increases, the ability to service debt (mortgages, for example) declines.

A Google search on Paul Craig Roberts, Assistant Secretary of the Treasury in the Reagan administration, produces articles with quite a different perspective. Which, again, is not to say he's right or wrong, just that there isn't as much depth of understanding of the policy implications as might be appropriate.

Grateful, you mention house sizes. But is that due to free trade entirely? Or are there other factors? Which factors predominate? I suggest that we don't know. So...maybe we as a nation should try to find out before we commit ourselves to that free trade policy.

[GratefulCitizen]

Originally Posted by nmap

Grateful, you mention house sizes. But is that due to free trade entirely? Or are there other factors? Which factors predominate? I suggest that we don't know. So...maybe we as a nation should try to find out before we commit ourselves to that free trade policy.

My point was that standards of living keep increasing.

Regarding free trade: if other countries want to tax their own citizens (that's what tariffs are), then fine.
If, in turn, they want to sell us cheap stuff, we will be more than willing to print more dollars to pay for it.

The problems China created for themselves are coming home to roost.
Despite all our dollar printing, China is the place where the inflation threat looms.

Free trade simply means not taxing ourselves for the privilege of having less stuff.

[nmap]

Two points...

First, there does not seem to be a consensus that U.S. standards of living are improving. LINK

A more complete - and, perhaps, more cogent article appears HERE

Now you mention that tariffs or other trade barriers are a form of tax. That certainly seems reasonable. But if we suppose a (government) revenue-neutral mix of taxes, might tariffs be better than some other taxes? For example, if tariffs were high, but income taxes were lowered, would that promote American growth better than does the current mix?

I certainly don't claim to know. But it seems an interesting speculation.

[GratefulCitizen]

Originally Posted by nmap

Two points...

First, there does not seem to be a consensus that U.S. standards of living are improving. LINK

A more complete - and, perhaps, more cogent article appears HERE

Now you mention that tariffs or other trade barriers are a form of tax. That certainly seems reasonable. But if we suppose a (government) revenue-neutral mix of taxes, might tariffs be better than some other taxes? For example, if tariffs were high, but income taxes were lowered, would that promote American growth better than does the current mix?

I certainly don't claim to know. But it seems an interesting speculation.

This is kind of the point I was making.
How many times are relative comparisons made?
Why is nominal income such a big issue?

Again, economic cycles happen.
They don't last forever.

How much does the average person have to labor to get a good or service comparable to what was available 10 years ago?
How much did the average person have to labor 10 years ago to get that same good or service then?

We can always moan and complain about the better deal someone else is getting.
We can always moan and complain about how much faster someone else is climbing.

That doesn't equate to our own situation getting worse.
It's just a case of zero-sum thinking.

The marketplace is competitive.
People have to be willing to change with changing conditions.

If we aren't willing to benefit from cheap goods and services produced elsewhere, another nation will gladly step in and enjoy those benefits.
Granting competitive advantage to some of our citizens, at the expense of other citizens, is just redistribution by another name.

[Sigaba]

Originally Posted by trvlr

Since the majority of them are in business SOLELY for profit, what do they care if they have to pay (random number alert) 6% more per worker due to taxes rather than the (random number alert) 4% it was before.

T--

Your statement assumes that there's a connection between profit and costs. In my experience working for a small division of a multinational consumer and business electronics company, the folks who count the beans and their corporate masters see the two as having a more fluid relationship. That is, production costs undermine profitability and should, therefore, be reduced whenever and however possible.

[GratefulCitizen]

Economic cycles happen.
This is still the most powerful economy on earth.

A few short articles:
http://scottgrannis.blogspot.com/201...covery-is.html
http://scottgrannis.blogspot.com/201...all-again.html

And a longer one:

http://townhall.com/columnists/David...yet/page/full/

A new Allstate/National Journal Heartland Monitor poll -- accompanied by a piece charmingly titled "We're No. 2" -- reports that the attitudes of Americans are about what you'd expect.

Yes, we're a bit pessimistic these days, but let's not get fatalistic. The most troubling aspect of the survey isn't the glumness; it's how willingly we accept myths that threaten our economic future.

Incredibly, only 1 in 5 Americans believes that the U.S. economy is the world's strongest today -- with nearly half of those polled picking China as the strongest power. Only 34 percent of Americans believe that the U.S. will have the world's strongest economy in two decades, and 37 percent believe it will be China.

You don't have to have blind faith in American exceptionalism to know that the U.S. economy, even with the tribulations of the recent years, is still the richest and most productive and innovative power in the world. The private sector isn't collapsing (though we've certainly hit a bump); others just happen to be gaining on us.

We tend to idealize past successes and too easily turn to base isolationist instincts. According to the poll, rather than embrace the immense opportunities of emerging markets, we fear globalization. Guess what? There is no bailout that is going to stop China and India from continued growth, just as there is no tariff that can stop irritating overachievers in Singapore preschools from acing calculus exams.

Other than "college whites," the survey sees most Americans viewing international trade as a bad deal for the United States. Not surprising. We can't go a day without hearing some experts talking about "outsourced" or the equally chilling "You know, we don't make anything anymore."

Economist and columnist Walter Williams provides the best historical rejoinder to this myth. In 1790, he explains, farmers made up 90 percent of the U.S. labor force, yet by 1900, they made up only 41 percent. By 2008, fewer than 3 percent of Americans worked in agriculture. Yet today we have more food than ever -- at cheaper prices.

William Strauss at the Federal Reserve Bank of Chicago recently explained that the number of Americans working in the manufacturing sector -- about 14 million -- is about the same as it was in 1950. Yet there has been a 600 percent increase in output. That's good news.
It makes no sense for government to prop up nonproductive manufacturing jobs any more than it makes economic sense to artificially prop up farmers. (Oh, I know, we try.) We need far fewer people to work those jobs, but it doesn't mean we don't make anything. But as Williams succinctly points out, "if the U.S. manufacturing sector were a separate economy, with its own GDP, it would be tied with Germany as the world's fourth-richest economy."

Eighty percent of Americans told the National Journal that manufacturing is "extremely or very important to U.S. economic growth over the next five to 10 years." (What do they mean? Manufacturing what?) Sixty-two percent believe it is important for government to help advanced manufacturing industries with "tax incentives and funding."

How many price-fixing fiascos does government have to engage in for us to understand that Washington shouldn't be picking winners in the marketplace? How many wasted dollars will we need to pump into subsidies to understand that the market doesn't care what we think, that it cares what we buy?

Instead of blaming reality and resisting change -- as the new isolationists continue to do -- we have to start owning both.

[Sigaba]

Originally Posted by GratefulCitizen

Entire post.

Walter Williams's take on the "labor force" in late eighteenth century America raises a question.

How is it possible that 90% of the American work force were "farmers" when about 17.831152638% of the population were slaves?

[nmap]

Originally Posted by GratefulCitizen

Only 34 percent of Americans believe that the U.S. will have the world's strongest economy in two decades, and 37 percent believe it will be China.

The original author mentions these items, then seemingly dismisses them with a wave of his complacent hand. He does not, however, provide anything to refute those opinions.

[GratefulCitizen]

Originally Posted by nmap

The original author mentions these items, then seemingly dismisses them with a wave of his complacent hand. He does not, however, provide anything to refute those opinions.

In absolute size, China's economy may well surpass the US.
In power, not likely.

The Chinese will have their hands full tending to their own demographic implosion.
They are on borrowed time.

Yes, they have lots of IOUs.
Those IOUs will change in value if they try to use them.

National debt and personal debt are totally different creatures.
Money and wealth are not the same thing.

Best analogy I can come up with for money vs. wealth:
Wealth is like a power plant, money is the electrical grid.

The electrical grid makes the power plant more useful, but it does not make any power.
Hanging more wires (or stretching them across the Pacific) will not produce more power, nor guarantee the direction of flow.

<edit>
Scott's latest:
http://scottgrannis.blogspot.com/201...n-october.html

<break>

Originally Posted by Sigaba

Walter Williams's take on the "labor force" in late eighteenth century America raises a question.

How is it possible that 90% of the American work force were "farmers" when about 17.831152638% of the population were slaves?

I have to assume that means that someone was partway through the birth canal during the 1790 census, given that there were 3,929,214 people.
17.831152638% * 3,929,214 = 700,624.146

[Sigaba]

Originally Posted by GratefulCitizen

I have to assume that means that someone was partway through the birth canal during the 1790 census, given that there were 3,929,214 people.
17.831152638% * 3,929,214 = 700,624.146

IMO, Mr. Williams is either careless or he subscribes (intentionally or otherwise) to the least sustainable aspects of Ulrich Bonnell Phillips's scholarship.

[GratefulCitizen]

Originally Posted by Sigaba

IMO, Mr. Williams is either careless or he subscribes (intentionally or otherwise) to the least sustainable aspects of Ulrich Bonnell Phillips's scholarship.

I suspect the former.
His point had to do with output and productivity, so he probably didn't consider those details.

He used the terms "farmers" and "worked in agriculture" in parallel, indicating a focus different from the point you mention.
However, your reference of Phillips's work does provide an interesting context, especially considering the near-slavery which exists in parts of China's economy, and the transistion they are facing.