The vast majority of the cost of living oriented jobs are mass production jobs. Canneries, Agriculture and automated harvesting, bakeries, and most durable goods are also straight from automated systems. This means that raising the minimum wage, is not going impact the economy in so much of a negative manner as a result of inflation. Psychologically, if the people don't have a real explanation, you can count on a negative impact resulting from inflation. But, when canning machine whips out 150 cans a minute, that's 9,000 can's filled in one hour. If that individual is paid 20 dollars an hour more tomorrow, that adds a whole 0.0022 cents to the cost of filling that can, and that person is in a whole new tax bracket.
http://www.washingtonmonthly.com/archives/individual/2005_05/006282.php
(This was written in 2005, way before this mess)
REPUBLICANS vs. DEMOCRATS ON THE ECONOMY....Did you know that Democratic presidents are better for the economy than Republicans? Sure you did. I pointed this out two years ago, back when my readership numbered in the dozens, and more recently Michael Kinsley ran the numbers in the LA Times and came to the same conclusion.
The results are simple: Democratic presidents have consistently higher economic growth and consistently lower unemployment than Republican presidents. If you add in a time lag, you get the same result. If you eliminate the best and worst presidents, you get the same result. If you take a look at other economic indicators, you get the same result. There's just no way around it: Democratic administrations are better for the economy than Republican administrations.
Skeptics offer two arguments: first, that presidents don't control the economy; second, that there are too few data points to draw any firm conclusions. Neither argument is convincing. It's true that presidents don't control the economy, but they do influence it — as everyone tacitly acknowledges by fighting like crazed banshees over every facet of fiscal policy ever offered up by a president.
The second argument doesn't hold water either. The dataset that delivers these results now covers more than 50 years, 10 administrations, and half a dozen different measures. That's a fair amount of data, and the results are awesomely consistent: Democrats do better no matter what you measure, how you measure it, or how you fiddle with the data.
But it turns out there's more to this. Via Brendan Nyhan, I recently read a paper by Princeton's Larry Bartels that adds some fascinating details to this picture.
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The first thing Bartels did was break down economic performance by income class. The unsurprising result is shown in the chart on the right.
Under Democratic presidents, every income class did well but the poorest did best. The bottom 20% had average pretax income growth of 2.63% per year while the top 5% showed pretax income growth of 2.11% per year.
Republicans were polar opposites. Not only was their overall performance worse than Democrats, but it was wildly tilted toward the well off. The bottom 20% saw pretax income growth of only .6% per year while the top 5% enjoyed pretax income growth of 2.09% per year. (What's more, the trendline is pretty clear: if the chart were extended to show the really rich — the top 1% and the top .1% — the Republican growth numbers for them would be higher than the Democratic numbers.)
In other words, Republican presidents produce poor economic performance because they're obsessed with helping the well off. Their focus is on the wealthiest 5%, and the numbers show it. At least 95% of the country does better under Democrats.
But this raises an interesting question: if 95% of the country does better under Democrats, and if economic performance is the most important factor in most presidential elections, then how do Republicans ever get elected? The most common hypothesis — spelled out in detail in last year's What's The Matter With Kansas? — is that cultural issues often override economic considerations. But Bartels proposes a surprising alternative explanation illustrated in the two charts below. The top chart shows income growth during non-election years, and it displays the usual characteristics: under Democrats, income growth is strong overall and the poor do a bit better than the well off. Under Republicans, income growth is weak overall and is tilted heavily in favor of the already prosperous.
But now look at the bottom chart. It shows economic performance during election years and it's a mirror image of the top chart: Republicans produce better overall performance, and they produce especially stupendous performance for the well off. Democrats not only produce poor overall performance, they produce disastrous performance for the well off, who actually have negative income growth.
In other words, voters aren't necessarily ignoring economic issues in favor of cultural issues. Rather, Republicans produce great economic growth for all income classes in election years, and that's all that voters remember. They really are voting their pocketbooks.
Bartels doesn't essay an explanation for this. Do Republican presidents deliberately try to time economic growth spurts — and are Democratic presidents too lame to do the same? Is it just luck? Or is the difference somehow inherent in the different ways that Democrats and Republicans approach the economy (with Democrats typically focusing on employment and Republicans on inflation)? At this point, your guess is as good as anyone's.
Bottom line: if you're well off, vote for Republicans. But if you make less than $150,000 a year, Republicans are your friends only one year in four. Caveat emptor.
This is a great review of the economic crisis. It explains the situation in a manner unmatched by any report I have heard thus for. If you have about an hour you should check it out.
http://audio.thisamericanlife.org/player/CPRadio_player.php?podcast=http://www.thisamericanlife.org/xmlfeeds/365.xml&proxyloc=http://audio.thisamericanlife.org/player/customproxy.php
“House Republicans also welcomed a decision Tuesday by the Securities and Exchange Commission to ease rules that force companies to devalue assets on their balance sheets to reflect the price they can get on the market.” MSNBC House to revisit bailout after Senate passes plan October 2, 2008.
Does this not scare the hell out of you? The suppose bail out is covering Wall Street and Banks for doing just the same thing. That would mean the computer my parents bought decades ago would still be the same price. How can they say the value of something is always worth the same amount? Granted then we could say the housing market will never go down. Republicans (rich) want to make sure ‘BY LAW’ they will always have their money, no matter what happens to the economy.
Again I stand by my statement,. GOLDEN RULE: The ones with the gold will make or BREAK rules to keep the gold.
Merlin Magers
Thank goodness the rescue package failed. Let us hope it keeps failing until it gets to the top and bottom ends of the problem rather than taking the expedient, and expensive, route of pouring good money after bad.
The current crisis has two causes: the common people (you) being unable to afford your mortgages and the rich people being too greedy, as a result the banks are running out of money.
Before getting to a solution lets kill a myth – there’s a lot of fretting about house prices and share prices. House prices are irrelevant, unless you’re selling or buying. Even then it only matters to the extent that you need to be able to afford your mortgage repayments. If you brought at house at $250k, have a $200k mortgage and today your house is worth only $175k it doesn’t matter so long as you can afford the mortgage because at some point house prices will pick-up. Similarly with share prices it only matters if you’re selling, no doubt if you know what you are doing you can pick-up some bargains, otherwise if sit tight until the market recovers. For many firms their share price currently has no relation to the strength of the company because at the moment prices are being driven by panic rather than a rational assessment of corporate vitality.
So, what’s the solution?
(i) The Government pays off a portion of everyone’s mortgage subject to an upper limit on the total mortgage and the mortgage companies reschedule every mortgage so that the remaining balance becomes the new mortgage value with repayments assessed against this.
The benefit of this approach is that it reduces the stress on the typical family by reducing mortgage payments whilst putting money into the banks to keep them solvent. It will also reduce negative equity (i.e. the difference between house value and mortgage). With reduced mortgage payments many people will find themselves with slightly increased cash in the pocket, which they will inevitably spend thus stimulating the economy. The great advantage of spending by the average people like you and I is that it goes on goods and services that in turn keep other people employed rather than clever investments favoured by the rich that keep few employed and have caused this crisis in the first place. The upper limit on mortgages (which may have to be State by State) ensures that the common people benefit and not the rich in their luxury homes, plus there should be a restriction of one mortgage per family to rule out investment property.
(ii) Impose new rules for financial dealings starting with a complete ban on short-trading that relies upon share prices falling so that someone can make a profit and place restrictions on hedge funds to reduce speculation. Follow this up with restrictions on loans so that people are not lured into debt and make sure that if a bank has to repossess your home that’s it your debt is paid. And, throw in some rules on salaries and bonuses for directors and key staff so that their rewards are based upon long-term gains.
There are some principles at stake here that this proposal seeks to address. Firstly, profits should only come from adding value not reducing it, therefore short-trading cannot be allowed and serves no beneficial purpose in the real economy. Secondly, if a company makes a loan it should accept the risk that the loan may not be paid back, this principle will make loan companies take more care in assessing who they loan to and how much (with exceptions for fraud of course). Note that the proposal that banks should insure themselves is a fallacy, this will just transfer the risk not change irresponsible behaviour. Thirdly, successful companies are in business for the long-term, therefore rewards to directors and key staff should be based-upon longetivity rather than vast short-term profits.
As a final act someone should simplify the income tax system. Fewer exemptions that favour the rich, higher taxes for the rich and redistribution to the less well-off through lower taxes and/or improved Government services such as health and education will make most people feel better if not better off and stimulate the economy.
Now is the time to think outside the box and show vision (which is not the same as being the maverick the other guy wants to be) – Go Obama, be brave let’s take a different approach to the economic crisis!
When little farmers were run out of business because of industry, it was said times were changing and it would be better for the economy. Big business capitalized, relished in their profits and kept their money. When the rich companies RISKED their money and lost it, they created panic and fear. A smoke screen to have the consumer give up their EARNED money to take the RISK out of risky business.
GOLDEN RULE: The ones with the gold will make or BREAK rules to keep the gold.
The low income and average people will survive, why, because we have for decades.
I've created 8 economic solutions that I would like to see adopted in this legislation to solve America's financial crisis. Please contact your senators and representatives, governors, and mayors, etc. Let me know what you think:
Please consider the following suggestions to help solve the economic crisis:
1. END THE WAR IN IRAQ - Use the money saved to create emergency jobs for Americans to reduce our dependence on foreign oil through green energy expansion AND
2. IMPROVE EDUCATION THROUGH INNOVATION- setting up a cabinet position that finds new fields of study ahead of the curve, increases apprenticeships for high school, etc.
3. ESTABLISH A TRUE LIVING WAGE SCALE- rewarding corporations for providing a living wage, full health care benefits, matching retirement funds, family/wellness/sickness leave plans with healthy tax cuts.
4. REGULATE ALL MORTGAGES - PROVIDE A FIXED RATE OF 3-4% to all Americans as an emergency stimulus package, temporarily reducing our output until income catches up to expense inflation.
5. CREATE A NEW HOMESTEAD ACT - providing homes and jobs for all American's through Ameri-Corp, cleaning up America, improving our infra-structure.
6. FREEZE FORECLOSURES - get people back in homes they have lost through #5 above.
7. CREATE REGULATORY LEGISLATION from bottom up working with global economists thus allowing the American people [and eventually global workers] to earn a living wage now and in the future by eliminating possiblities for CEO's to make up to 400 times the amount of their average worker, sell risky speculative financial products that end up harming the average American, and reducing the consumer's and the country's dependence on credit.
8. BROKER A DEAL WITH AMERICA'S WEALTHIEST to buy out the failing Wall St. giants and let them govern it's recovery with their experience and new regulatory controls.
Saving the Habitat of Fairy Shrimp, is Pork Barrel Spending. Running a Fairy Shrimp Hatchery that feeds into a river, stream or tributary of a major river is not. We should be careful about what is defined as Pork Barrel Spending, and what is worth while project, research and spending.
Do NOT give in and pass this senseless $700,000,000,000.00 bail out package. Please don’t give in to this administration again as we did with the Iraq war. They are just trying to sweep these problems under the table before they leave office. Don’t let the American people foot the bill for this obscene injustice created by the financial industry. This country will heal better and quicker if we allow the selfish and greedy people on Wall Street to go down with their ships.
Yes, the American people are all going to suffer but why should our children and grand children have to pay for the mistakes of the selfish baby boom generation? These brilliant people are/were making multi million dollar salaries and bonuses to run their companies into bankruptcy. Yes, it would be great to keep people in their homes seeing as of April, 2008 there were over 18,000,000 million vacant homes in the United States. However, the “FREE” markets need to work this out on their own.
If the government steps in to bail out these multi millionaires what kind of message does that send to the hard working people of this country who are making less than $100,000??? It is far time we stepped up for them, DO NOT approve this bail out…let the markets drop or plunge. This is a problem that needs SERIOUS investigation of wrong doing, to rush in and bail them out will cover up the REAL crimes against the American public.
We NEED Obama/Biden in 2008!
