Possibilities for a more robust national economy

Note:  What follows is an attempt to gather a few thoughts that have been shared over the last few years into a more cohesive whole that speaks to what I believe can lead to a stronger American economy.  Do with it as you will.
There is a lot of discomfort over the slow pace of economic recovery, which, nevertheless, has been the longest, steadiest recovery in our history.  Several years ago, as it was just getting underway, I wrote a short piece on my hope that it would be slow paced.  It seemed to me that we needed to position the economy to better resist the cycles of boom and bust that have often characterized its performance.  A slow recovery, I thought, might help because it would give time for entrepreneurs, investors, and corporations to investigate long term opportunities rather than jumping on the next bubble, hoping to bail out before it burst. 
I also hoped that a slow recovery would help Americans begin to recognize that, in an interdependent global economy, we don’t have to be Number One in everything, we don’t have to be the Greatest Nation on Earth, and we don’t have to pretend that we control the ebb and flow of global trade.  We can just get on with the business of being Americans doing the best we can at what we are best at doing, doing well at what we are good at doing, and not obsessing about what we are not good at doing, even if we once were.  Finally, I hoped that the informed public would recognize that a 2 –  3% annual growth rate was a good and sustainable one for a mature economy, and that a return to sustained GDP growth rates above 5% is unlikely.
Not everything has worked the way I had hoped.  It’s hard to tell what the informed public thinks about our economy because I’m not sure we have an informed public of any size worth mentioning.  Most of the small segment of the public I get to talk with seems to think the glory days of some indeterminate prior decade should be the norm.  Otherwise intelligent friends join the chorus calling for the return of manufacturing jobs without any clear idea of what that actually means.  Others seem to be anxious about other countries outperforming the U.S. in this arena or that, in the same way they get anxious about the Broncos outperforming the Seahawks.  When “We’re Number One”, “Make America Great Again”, and “America First” become the rallying cries of the body politic, we sound like spoiled children stomping our feet, demanding attention amidst a global community that is getting very tired of such boorish behavior.  There is serious business to attend to, and such nationalistic childishness not only gets in the way, it diminishes our ability to be taken seriously in negotiations with others.
However, they have a point.  Jobs that were once the foundation of the “American Dream,” offering a dependable path into the middle class, have gone away.  To where?  Are trade and unions the villains, and if so, what can be done?
We live in a global economy that is a different place than it was thirty or forty years ago.  Other nations can manufacture many things cheaper than we can, and manufacturers have located some of their operations in those places, or installed new technology that reduces the need for routine work done by humans.  Those that haven’t have stagnated or gone out of business.  Trade agreements are handy scapegoats, but the flow of jobs to other places would have taken place without them.  If anything, they have done at least a little to open up foreign markets to U.S. goods.  Clearly they have done more to protect the interests of corporations than of employees or the environment, but using that as an excuse to oppose them achieves nothing.  Corporations have also used, with considerable success, the threat to move jobs offshore as a way to fight union organizing and elections.  It’s a lot easier to run a business if you don’t have to deal with a union, especially if the union has taken on the role of belligerent, anti-management foe.  In my opinion the big unions blundered in trying to protect jobs that they could not protect while abdicating a more forceful role in trade agreement negotiations.  
It’s worth noting that American job growth has far exceeded job loss attributed to trade, but the new jobs that could have been filled by former factory workers have been in the low wage service sector, or in far away anti-union states.  Higher paying new jobs have often required education and technical skill beyond the reach of displaced workers, and that brings up a related issue.  What has been the effect of technological improvement in manufacturing processes? How much work, at union scale, that was done by hand is now done by machines?  In the 1950s I visited a number of unionized flour and cereal mills where bags were filled and sewed shut by human operators, puffed cereals were truly shot by guns fired one load at a time, and automation of bulk cargo handling was just being implemented.  Decades later I was in a nickel mine operated by less than a dozen miners, and the adjacent refinery was run by one supervisor who monitored the fully automated processes.  Who got paid the big bucks?  The engineers who knew how to create the system, and the technicians who knew how to keep it running, neither of whom worked for the mining company.  A few years earlier I was in a toy factory, the backbone of a small city, that employed hundreds of assemblers paid good union wages to do boring, repetitive tasks.  They were soon replaced by automated production lines in another country.
None of that is morally good or bad in and of itself.  It’s simply the function of a society where rapid developments in technology combined with rapid economic development throughout the world have resulted in painful dislocations that we, as a country, have not handled well.  What we need to do, say some, is return to the economic vitality we had back in the (insert years of your choice here).  Is that possible?
Following WWII America had the only industrial economy in the world that had not been bombed into rubble.  It’s not surprising that we dominated manufacturing and world trade.  We were the only game in town.  Economic resuscitation, aided by American equipment, was well underway in Europe and Japan by the 1950s, and continued for almost thirty years.  Then came the rapid industrialization of nations such as China, India,  South Korea, Vietnam, Taiwan, Brazil, Argentina, and Chile, and others.  It’s likely that in not too many years to come we will see the same happening in Africa.   It is a global market place – an interdependent global market place – in which large corporations try to play in which ever country is most advantageous to them, and without regard for the people and communities they leave behind.  How dramatic has the change been?  Different sources vary in the numbers they offer, but the point is that in the aftermath of the war, the U.S. accounted for half of the entire world’s income.  Now it’s in the vicinity of 20% and declining, as is natural in a global economy where others are growing into renewed or first time prosperity.  
So what should we do?  The first thing is to stop trying to recreate a world that is dead and gone.  Get over it!  We need to be creative about the new world we are in, but there are some policy changes that might help.  
  • Raise the minimum wage and index it.  
  • Invest heavily in education at every level.  
  • Invest heavily in rebuilding the nation’s infrastructure.
  • Repeal anti-union laws.  
  • Reimagine unions as agents of helpful change rather than combatants in cage matches with management.  
  • Clarify and simplify corporate governance and tax laws to keep them globally competitive and ethically accountable.  
  • Get it through our collective heads that taxes are our investment in the good life now and yet to come.
It would also help to acquire a new national ethos in which corporations value employees as human beings and not commodities, super salaries are signs of moral irresponsibility, and commitments to communities in which they are located are taken seriously.  A revitalized national ethos would reject tea party thinking in its totality, and it would hold governments at all levels accountable for fair, efficient, and just provision of services.  Governments, in like measure, would consider themselves to be in the business of customer service instead of regulatory enforcement.   It could happen.
One way to help it happen would be to dramatically increase the the marginal tax rate on very high levels of income, treating most income as earned.  The current federal income tax system has three categories of tax payers: single, joint, and head of household.  Each is treated in a slightly different way, so for the purpose of argument, let’s stick with joint filers and rough estimates in order to make a point.  Everyone pays 10% on the first $19,000 of income, minus some standard deductions.  The rate on the next $56,000 is 15%.  Then it’s 25% on the next $74,000; 28% on the next $80,000, and so forth until it’s 39% on everything above $460,000.  Given the ability to maximize deductions, or take advantage of special gimmicks such as “carried interest,” top income earners can often pay much less.  What I want to suggest is a gradual increase in the top marginal rates to 60% or 70%  for annual incomes in the millions.  
It will not increase revenue to the government by much.  It’s a crude tool at best, but it would create a disincentive to pay astronomical salaries to just a few people.  There’s no point in giving multi-million dollar raises or bonuses if most of it will be taxed away.  A national policy that says super salaries are essentially unethical would also encourage corporate rethinking about how to more fairly distribute monies available for wages and salaries. 
Over the last several decades major corporations in every industry improved productivity and the bottom line by eliminating jobs and forcing down rates of pay for employees other than those at the top.  At the same time, the American economy has been driven partly by unthinking consumer spending spurred by sophisticated marketing techniques.  The current, and no doubt brief, joy over modest improvements in GDP growth rates is the result of increased consumer spending while consumer income and levels of unemployment have remained stagnant.  A nation cannot simultaneously force middle and lower incomes to remain stagnant (or decline) while encouraging greater savings, paying down on consumer debt and building a revitalized economy on consumer spending.  
An unnamed wire service reporter wrote in a recent article that, “Economists believe that growth in consumer spending, which accounts for about 70 percent of economic activity, will be restrained until incomes start growing at healthier levels.  That is unlikely until hiring picks up.”  At the same time, Census Bureau data show that between 1979 and 2007 the top 1 percent of households saw their incomes rise 273 percent while middle income households saw theirs go up 40 percent and low income households 18 percent.  The buying power of increase at the middle and lower income levels actually decreased.  It’s a systemic problem, and, as argued above, it’s also an ethical problem that lies squarely in the laps of business leaders and government legislators. 
The sooner Congress and state legislatures can rid themselves of tea party type intransigence, the sooner our legislative processes can begin to work again for the benefit of the whole.  Mindless anti-tax and small government voices need to be exposed for the frauds that they are.  We don’t need small government, we need good government run as efficiently as our democratic processes allow.  We need government committed to creating and maintaining the social and physical community infrastructure needed to establish the most equitable pathways to opportunity for all persons that we are capable of doing.  We need to see taxes as investments, not burdens.  And we need to recognize that we can do all of that while encouraging individual responsibility, and without jeopardizing our constitutional freedoms. 

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