Framed: Economic Policy

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Economic Policy

The following phrases are recalled until further notice:

  • Free trade
  • Layoff
  • Healthy labor market
  • Full employment
  • Global economy
  • Rising consumer optimism
  • Economic recovery or economic growth

DO NOT USE ANY OF THESE PHRASES IN CONNECTION WITH ECONOMIC POLICY.

If you or someone you know is currently using one of these phrases in connection with economic policy, please go immediately to Forward Framing for repairs.

Example of use (don’t emulate):

Signs of a healthy labor market and rising consumer optimism in June were tempered by weakness in stock prices and real estate, a research group said Thursday, suggesting slow to moderate near-term economic growth.-- Brad Foss for AP, 20 July 2006

This “healthy labor market” has had the worst rate of job creation in 40 years. (See Economic Talking Points For Democratic Leaders.) As for consumer optimism, “Worries about rising oil prices and a cooling housing market may be crimping consumer spending…” according to Rachel Beck of AP, 21 July 2006.

Note that these optimistic statements about the economy belie some uncomfortable truths about the direction the George Bush administration has led the economy.

  • According to a study by Global Insight, the top 10 areas of job creation for the years 2003-2005 pay on average $9000/year less than the top ten areas of jobs lost in 2001-2003.
  • According to Louis Uchitelle, in The Disposable American: Layoffs and Their Consequences, about 3 out of every 4 jobs that a person finds after being “laid off” earn them less money. (Uchitelle: “Out of a hundred laid-off workers, then, twenty-seven are making their old salary again, or more, and seventy-three are making less, or are not working at all.” Page 69.)
  • The U.S. does not have a majority of high-paying jobs. (Uchitelle: “From the spring of 2003 to the spring of 2004, for example, more than 55 percent of the hiring was at wages of $13.50 an hour or less.” Pages 66-67.)
  • The cost of the Iraq and Afghanistan wars were over $900 billion as of FY 2009 (source: HR. 5136, Section 1223) and will probably cost well in excess of $1 trillion altogether.
  • Much of the U.S. government borrowing is supported by the Chinese.
  • Domestic supplies of oil are forecast to run out (at current price levels) in about ten years.

The Problem

The U.S. economy may look good from a strictly financial perspective, but the fundamentals are seriously weakened. To see this, we have to look at how wealth is created, and at how the global shifting of wealth creation is affecting the security outlook of the country.

Generally, wealth comes either from extraction or from the application of technology to input materials. A mine creates wealth by extracting an ore from the ground and selling it. A steel plant creates wealth by taking raw and recycled materials and turning them into steel plate, tubing, sheets, etc. Some industries use information to make the extraction and/or processing of materials more efficient. For example, the financial markets use computers to track resources (usually denominated in dollars, euros or other currency) and direct their sale and transfer so that they are used as efficiently as possible.

The United States used to control many of the major industries that supplied our domestic markets (with much left over for the rest of the world). When we did this, we were able to use this increase in wealth to increase our standard of living. As long as technological information and its application grew faster than the population then this created an increase in the standard of living, leading to the highest one in the world.

Two substantive changes happened in the last forty years to alter this picture. One is that corporations became increasingly global, diluting American ownership in those companies and thus making more of the profits available to those outside the U.S. The other is that increasing numbers of jobs were outsourced from this country while consumption remained here. This is particularly noticeable in valuable manufacturing jobs, which have dropped by about a quarter from a high of 19.4 million in 1979 to 14.3 million in 2005. (Uchitelle, page 139.)

This is a security problem. A country that is not manufacturing its own goods cannot depend on them in time of crisis or war. Recently, the military has found it increasingly difficult to find certain goods manufactured in the U.S. Where are the PCs used by the military currently manufactured? Well, where did your computer come from?

There’s also a monetary problem. We paid for the balance of trade deficit largely by borrowing. That borrowing is already affecting exchange rates. The euro started at a price about equal to a dollar when it was created in 2001, but is now in the range of $1.25 per euro. If the dollar loses its status as the “world’s currency” then there will be a precipitous drop in the standard of living here.

Restoring Economic Fundamentals

The long-term cure for our economic ills is to reverse certain current policies.

We need to move manufacturing jobs back to the United States. We can do this in two ways. One way is to make consumers aware of the full price they pay for shipping imported goods. Consumers are paying for a military that guards the shipping lanes, but that cost isn’t reflected in the price of goods. We are also paying in global warming for the extra carbon put into the air by all those oil-burning ships. A national sales tax to help pay for carbon reduction might help get the point across.

The second way is to end the wage subsidy for laborers outside our borders. That would mean requiring manufacturers to pay our minimum wage for all labor going into goods sold here. (We'd have to phase this in so that industry has time to respond. We didn't ship all manufacturing jobs to China overnight and we won't bring them home in one year.) In addition, we need to press countries supplying us to treat their workers like we treat ours and to set the same environmental standards. (Of course, we’d also have to catch up to the Chinese on emission standards for cars.)

In addition, we can ease the problem by producing more technology. How? By investing in education for children, by increasing funding for research at universities, and by supporting research by the business community in their own research centers.

It would help if we would remove stumbling blocks to science, such as the ban on stem cell research and the governmental interference in scientific findings that this administration seems so fond of.

The Democratic Party needs to lead the way to restoring sensible economic policy based on solid fundamentals. See Framed: White Collar Unemployment for more on helping the middle class, and Framed: International Trade Agreements for information on addressing problems of globalization. (We need frames on education and population to complete this.)

Realigning the Frame

Rebuilding After Bush: The initial message for the next presidential race should be “rebuilding after Bush”, “cleaning up after Bush” or “repairing the damage Bush caused.” This focuses attention on the many problems that Bush either created through incompetence (such as the New Orleans disaster) or allowed to happen and could not adequately respond to (such as the terrorist threat) and sets the stage for a positive Democratic platform that would address all of these problems. Specifically, Bush has “neglected our jobs” and been “asleep at the switch” when it comes to globalization.

As Markos has pointed out elsewhere, we should not let conservatives off the hook by making too much of George Bush’s incompetence as a President. While he is undoubtedly a shock even to conservatives, the fundamental problems will not go away with conservative policies better implemented. The truth is that neoconservative policy is geared toward dissolving the government, not making it more effective, and the corporate conservative policy is geared toward enriching the rich by globalizing markets regardless of the security concerns of the United States. Neither of these groups cares one twit for the U.S. and will sell us down the river for a dime. The average American, regardless of his “values” must see that destroying the country for ideology is not an option. And a weakened America threatens the stability of the world, not something anyone outside the country should consider an advantage.

Smart America: The Democrats must be the first to introduce a follow-on message into the news cycle before Republicans can use their media advantage to capture that advantage. The natural follow-on to rebuilding after Bush is to put forward a series of policy changes that we think will rebuild the U.S. These initiatives should come under the umbrella of “Smart America” because “smart” trumps “strong” every time. Whenever the Republicans play the “we’re strong on . . .” card, Democrats should shake their heads, mutter “there they go again” and talk about how important it is to be smart about the issue rather than wasting money and other resources on it. The specific Smart America initiatives for the economy might include:

  • Smart unemployment response that identifies a new job for each unemployed worker that they can compete for and get training for, while paying their essential bills and keeping them moving forward in their career.
  • Smart corporate tax policy that rewards companies that provide well-paying and respectable jobs for U.S. citizens while rewarding them for simultaneously improving conditions abroad.
  • Smart corporate ethics policies that reward companies for improving professionalism within management ranks and being good corporate citizens.
  • Smart globalization policies that require suitable minimum wages, fair treatment of unions, and adequate environmental protection policies in any countries that want to trade with us without tariff barriers.
  • Smart healthcare policies that make basic health coverage available regardless of where, or whether, the person is employed. Companies should not be able to compete better in the market because they shortchange their employees on healthcare coverage.

The Democrats must introduce new initiatives while the Republicans are still contending with and reacting to the old ones. Democrats must develop and put into action whatever initiatives are necessary to dominate the news cycle.

What Progressives Value and Want

Sustainability. Economic activity should be sustainable indefinitely. This means refraining from exploitation of both humans and the environment. Fairness. Those born to less fortunate circumstances should be provided education allowing them to advance according to how hard they work and jobs that pay a living wage—a wage that is sufficient to support life from birth to natural death including decent retirement, as well as enough to permit the raising of children who will carry on in a sustainable way. Consistency. The rules should not change so quickly as to cause severe disruptions to people’s lives. Major changes should be phased in. When large changes are required, assistance should be provided to those who are in the way of that change.


Responses

  • We want fair trade, not just free trade.
  • Layoffs are really job failures. These are cases where companies have failed to provide stable jobs.
  • The labor market is weaken, not “healthy.”
  • By definition, “full employment” means four percent of the workforce is out of work. This is an archaic definition that pre-dates the Internet job sites. Full employment in the electronic economy is more like two percent. Democrats should try to reduce the unpleasant job lag (time between jobs) that makes it difficult to achieve ideal employment levels.
  • Where is our place in the “global economy”? It is with increased technology, which is the answer to providing prosperous jobs for our citizens.
  • “Rising consumer optimism” will follow addressing the economic fundamentals, which the Republicans have sadly neglected.
  • “Economic recovery” or “economic growth” will also follow addressing the economic fundamentals, the exclusive purview of the Democratic Party.


Potential Ads

TBD


Other Resources to Draw On

Notes

Remember: The Democrats have a positive program for the country. We believe that the economy is performing well for rich people and large businesses, but poorly for the average worker. The minimum wage ($5.15/hour) is far below the living wage (about $13.50/hour for a family of four). Domestic companies have become addicted to quick fixes, such as employing illegal aliens (because they will work for substandard wages in substandard conditions) and layoffs. They have shed pension funds and other environment-enhancing spending (such as training) to cut costs. This has radically increased job insecurity. At the same time, subsidies in the wrong places have led to unrestrained population growth and wasteful use of fossil fuels, resulting in highly-dangerous additions to global warming.

The country is headed toward third-world status for most workers and possibly an ecological meltdown, unless we make fairly radical changes in our economic policies. We have to attend to our economic fundamentals if we are to address this danger. Liberal Democrats believe in a fair wage in decent working conditions, not just here but abroad. The U.S. must provide leadership in this critical area.

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