I need to do a little summarizing at this point because Ive put out quite a bit of hard information lately. The trade deficit we have requires us to have negative savings in either the private sector, the government sector, or both, of equal amount. The amount is somewhere between $650 billion to $800 billion annually at this point in time. This is an accounting identity; it is always true. If we were to run a trade surplus, wed be running an equal surplus of savings either in government, the private sector, or both. This means if we were to actually produce a balanced government budget, without reducing the trade deficit, the entire negative deficit of savings would be in the private sector. And that means wed have continued high unemployment. This high unemployment, with a trade deficit and a balanced government budget, is not a choice. It is a fact of life. Inevitable. Another feature of our rubbish economy is that we have had decent increases in productivity per capita in the US over the past 35 years or so, but a huge majority of working people have not seen their incomes increase in proportion. Put it another way, this huge majority has produced the increases but not been paid more for their efforts. If they had been paid in proportion, the median family income would be just north of $90,000 today, as opposed to being half that amount. Had the minimum wage increased in proportion, it would be about $20 per hour today. This would not have produced inflation because the productivity per capita has increased proportionally. Meanwhile, the top 1% have seen their incomes increase in greater proportion than the increase in productivity per capita! How did this mal-distribution (income inequality) of income happen? Simple. Our tax code has been reformed so that almost all income increases resulting from better productivity go straight to the 1% at the top of the income pyramid. Everyone else is forced to pay proportionally higher taxes, helping to cause their net incomes to make little or no progress. Is there a connection between chronic trade deficits and high income inequality? Yes. One of them is that the private sector has difficulty saving, because their incomes have not kept pace with their better productivity--because the trade deficits produce negative savings. So what do we do to correct this hot mess were in (or at least most of us are in?) You clean up the tax code for one thing. And this is not a revenue neutral clean up either, because the income rewards have not been neutral for 35 years; theres some serious catching up most Americans deserve when it comes to their incomes. Exotic loopholes hiding the incomes of the 1% from taxation need to be closed permanently. This loss of government revenue, in the hundreds of billions of dollars annually, has had to be made up on the backs of the 99%, who have become over taxed as a result. We need obvious pro employment policies. This means no more trade agreements that result in a net loss of domestic jobs and incomes. These are poor trade agreements for most Americans and our economy, benefiting a few people at the top of the income ladder to the detriment of everyone else. We need to reorganize labor, because without organized labor, all the income gains are snatched up by the owners of capital. We need to prohibit beggar they neighbor policies used by states against each other. Not all states are suited for the same mix of employment, after all. Increases in employment and income need to come from policies that produce organic growth based on each states strengths. Another way of looking at this issue is that we need to start competing as a nation, not a confederacy of hodge podge political fiefdoms, as is the case right now. We need to clean up our campaign financing. This is causally related to fixing our tax code. The flood of income gains to the top 1% has been accompanied by Supreme Court decisions that allow this flood of income to also flow into our campaign system. It is corrupting our democracy, and over time, will destroy it. None of these corrective actions can occur under a libertarian political regime. The so-called small government impulse is encouraged by the 1% because the only possible counterweight to their massive gains in wealth and political influence needs to come out of a ballot box. For those who are non-rich but consider the government to be completely useless and inept, it would probably be good for everyone else if you stayed away from the ballot on voting day; you are a tool of the 1%.
Posted on: Thu, 30 Jan 2014 12:05:28 +0000
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