Monday, October 26, 2015

One Big Catch 22

Laurie and I were discussing income inequality, tax policy and consumer choice over here. G2A Mad Mad World  However I thought this simple question deserved it's own post.
  1. The American people on the whole want the best value when they buy products or services. (ie cost, quality, features, performance, etc)
  2. The American investor wants the best returns on the 401K, IRA, College Saving Accounts, etc.
  3. The American workers want higher wages than the rest of the world, so they can have nicer cars, bigger houses, better electronics, etc than the typical citizens of other countries.
Therefore the American Consumers are happy to buy the lowest cost, coolest most reliable products from where ever.  The American Investor will remove their money from any company or mutual funds with less than average returns. In essence the typical American Consumers and Investors are big time Capitalists. They want to get the most for their money and time.

However the typical American Worker still wants that bigger pay check and those nicer things.  And the Liberal folks want to use the government policies to mandate higher wages and benefits in this country than those received by workers in the countries that our consumers happily support.  Which of course will increase the costs of doing business in the USA.

Which leads to the Catch 22:
  • We want more better stuff for less money and better returns....
  • We want higher wages and better benefits....
Of course the Liberal's answer is to take more money from the Investor class, and redistribute it to the Free Loaders and Workers.  At which time the Free Loaders and Workers will spend it on more high foreign content goods and services.  This is all very confusing...


jerrye92002 said...

So, capitalism and free trade are working just as they are supposed to, with one big exception-- the heavy hand of government prevents American companies and workers from competing fairly. I've seen it myself. A company I once worked for decided to outsource manufacturing of a core component to the Phillipines, where we could pay workers 5 cents an hour, rather than the $20/hour we paid here. The problem was, the Phillipine worker, by hand, could produce roughly 40 units/hour, while the American, with his huge capital equipment, could produce 20 units/SECOND. American workers and capitalism can compete with anybody, but government won't allow it.

John said...

Please expand on the details of this statement.

"government won't allow it"

Though I do agree that that some regulations are over the top, and that the bureaucracy to support them adds some expense. I certainly wouldn't agree with your statement.

My point is that though some things can be automated / made by robots and usually American companies do this whenever they can. (ie no one wants a logistics chain to China unless they need it) The reality is that most products require manual labor somewhere in the process.

At which time a $15/hour + benefits + payroll taxes + etc starts to look real expensive.

John said...

I mean those 1,000,000+ FoxConn employees are not just sitting on their thumbs over there.

Or those 500,000+ Samsung workers. (250,000 in electronics alone)

Anonymous said...

Of course the Liberal's answer is to take more money from the Investor class, and redistribute it to the Free Loaders and Workers.

Keep in mind that the "investor class" doesn't actually invest in anything. Microsoft, for example, doesn't benefit from the purchase of a share of Microsoft, because the company itself sold it a long time ago. So when you make a share of Microsoft less valuable because you change the way it's treated for tax purposes, you aren't hurting Microsoft because it doesn't own the share. More broadly, you see the effect of this in the fact that the bull market in stocks hasn't really helped the economy much.


John said...

Hiram, Time for some studying up... Though you are somewhat correct, you are somewhat incorrect.


John said...

One more
Book vs Market Value

Laurie said...

maybe capitalism should be saved for the many not the few

since you ignore expert ideas from Dean Baker I thought I'd link a different liberal economist. Maybe you should read his book. I think if you donate to you can get a free copy or better yet check your local library.

Laurie said...

After Company Raises Minimum Salary To $70,000, Revenue And Profits Double

John said...

Your Economists are all Keynsian Economists... Of course they think tax and spend is the solution... And if you do not remember, we are still deficit spending. That is why the national debt is still growing.

Laurie said...

those economists go well beyond tax and spend as policy proposals, but that is all you are able to focus on and I don't care to comment on this topic anymore.

Here is a link that is related to the book I am currently reading:

No More Pencils, No More Books - Artificially intelligent software is replacing the textbook—and reshaping American education.

education will being changing very significantly in the coming years.

John said...

The conclusion from the Baker piece.

"In a recession, the government has an important role to play in getting the economy back to full employment. This is not an issue of preferring the government to the private sector, but simply an acknowledgment that in a downturn, especially one as deep as the one from which we are still recovering, the private sector cannot fill the gap. Even if the cost of expanding is cheap because the cost of borrowing is so low, no CEO worth his or her pay (a high bar) is going to add new capacity when no one is buying what the company has to sell. So the government has to step in. This will mean running deficits. By doing so, the government is using savings that the private sector is not to build up infrastructure and address other needs that might not be addressed at other times. The government should also look to employ people, like inner-city youth and the long-term unemployed, who might otherwise have difficulty finding employment. In the last case, a temporary government-subsidized job may provide the opportunity that these workers need to get back in the labor market. The government can also reduce the pain of unemployment by promoting work sharing. A period of underemployment can be difficult for workers, but it is not nearly as devastating as a lengthy period of unemployment. If employers could be persuaded to meet a reduced demand for labor by shortening work hours rather than by laying off workers, and if the government made up a portion of the lost wages (using money it would otherwise spend on unemployment benefits), then virtually all workers could continue working, even during a slowdown, maintain their attachment to the labor market, and continue to practice their skills. Finally, insofar as we get back on a track of healthy gains in productivity – which are shared with workers – we could use our extra efficiency to reward ourselves with the gift we most desire: time. Taking these gains in the form of paid vacations and paid family and sick leave would put us more in line with other wealthy countries, help ensure that labor-saving technologies do not lead to mass unemployment, and create more family friendly workplaces and more environmentally friendly patterns of consumption."

John said...

You are correct that there are other ideas mentioned however they involve a lot of government intervention, and therefore cost. And since the government makes no money of it's own, that means more taxes.

Laurie said...

A great deal of govt spending is spent to benefit large corporations

Getting the Export-Import Bank to Pay Dividends

maybe govt should make policy that benefits workers instead.

Laurie said...

govt can raise the minimum wage without raising taxes at all.

The Minimum Wage: How Much Is Too Much?

this would also benefit workers.

Laurie said...

since it seems highly unlikely that you will read R. Reich's latest book I am going to post an excerpt for you taken from an interview published today:

"Mic: One of the most compelling parts of your book is the way you talk about the myth of the free market, and how it distorts the political conversation. What does it really mean when people in the business or banking world call for a free market or defend the private sector against new government rules?

RR: I have no idea what they mean. I think they've bought into an ideology that has no coherent meaning at all.

It's not possible to have a market without rules, and those rules govern everything, from the very meaning of property and contract to the processes by which people pay their debts, renegotiate their debts, the degree of market power that can be exercised by companies or groups of companies and the enforcement of the entire system.

Unfortunately, we've bought into this completely absurd notion that we have a choice between a free market and government. That ideological debate has kept us from examining exactly what we ought to be discussing: how to make the system work for the vast majority, instead of a very, very few people at the top.

Even introductory courses in economics and other fields have bought into this ideological nonsense. We talk about government "intervention" into the economy. We speak of government "regulating or not regulating" the economy, we talk about "market imperfections." These ideas have no meaning when you understand that it's impossible to have a market without rules that emanate from government. And the central question is who influences the making of these rules.

We've seen the results. The bailout of Wall Street was government intervention at its most explicit and at a humongous scale. The choice was not and has never been a free market in finance or government-run finance. It's always been a question of how government is going to structure the financial system. Once we got rid of the post-1929 organization, we then set ourselves up for a new organization called Too Big to Fail."

so you see congress can have impact in at least slightly diminishing inequality in many ways other than raising taxes.

John said...

Sorry for the delay, I had to run out and meet with a customer in Detroit for a change. I left home at 4:30 AM and returned at 10:30 PM... What a day...

As always, I will read your links in detail when I get some time. However here are some related links in the mean time.
NAM Ex-Im Bank White Paper

Breibart Min Wage is a Tax Increase

Links disagreeing with Reich

jerrye92002 said...

"how much is too much." Laurie, I didn't read the article, but unless it somehow answers that question in ways that years of liberal pontificating have not, I will ask again. Why not $1000 per hour? We could all be rich!

jerrye92002 said...

Laurie, the Ex-Im bank is chump change compared to the vast crony capitalism money spent on, say, "solving" global warming. GE alone rakes in billions from that effort alone. And the amount we "subsidize" individuals through welfare and such make even THAT look like a drop in the bucket.