Tag Archives: NAFTA

Channeling Elizabeth Warren: What an Uncensored Liz Might Say About the Hillary Clinton Announcement

What was Elizabeth Warren thinking as Hillary Clinton formally announced her candidacy for President?   What would Liz be saying if she was not a realistic and committed Democrat?  Let’s channel the more aggressive, less practical side of the Massachusetts Senator, imagining what she might tweet.  On the Sunday morning talk shows, Liz says she too is “ready for Hillary.”   Perhaps she really is!  The line that stood out most from Hillary’s announcement yesterday was: “the deck is still stacked in favor of those at the top.” That’s vintage Warren.

Nonetheless, here are five imaginary, edgy Warren tweets that were never sent. And won’t be.

1. Over more than two decades, the Clintons advanced and accelerated fundamental policies which have helped America edge closer to oligarchy than it’s been in more than a 100 years.

[Ed. Note: This process began well before the Clintons arrived on the scene. The U.S. is perhaps at a quarter to twelve on that clock; not yet mid night].

2. Bill and Hillary drank a lot of the post 1970s De-regulation Kool-Aid, some of which was sound and needed; but overall (in its zealotry) harmed a lot of average people.

[Ed.Note: The post 1970s De-regulation Movement, reversed a lot of Progressive era and New Deal policies aimed at (harmful) concentrations of wealth and power and protections for consumers and labor. While some deregulation fostered more competition, a good (rhetorical question) looms: “Is there a single example of consumer prices going down and market competition increasing after deregulation of a U.S. industry?”]

3. Speaking of deregulation, the Clintons were totally on board to gut decades old financial regulations in 1999 which had protected average people’s money from being squandered in risky big bank investments.

[Ed. Note: In 1999, Democrats led by Bill Clinton and Republicans by Senator Phil Gramm, repealed the Glass-Steagall Act, which had (among other things), separated commercial and investment banking. That enabled big banks to use the money of average people and (barely) middle class home buyers to make risky investments. The ensuing crash decimated the wealth in the middle.  Repeal of Glass-Steagall was of course not the only reason for the crash, but it played a big part].

4. The Clintons have been gung-ho NAFTA style free traders, and brought a lot of other Democrats with them. The form of free trade they supported helped decimate the wages and benefits of U.S. workers.

[Ed. Note: For U.S. multinational companies, in particular, NAFTA has been a way to keep a lid on worker wages and benefits, and avoid thorny regulations (which presumably restrain trade).  This is not your father’s, nor David Ricardo and Adam Smith, Classic Free Trade. There is evidence that trade pacts help nations avoid conflict. That’s good. But that has costs which need to be borne by all of society, not just average people].

5. Clintonian Welfare Reform left many poor people with no work or low wage, subsistence jobs. Democrats’ support for “welfare reform” helped feed Republican ideology around “free-loading” and Romney’s 47 percent theory.

[Ed. Note: New Deal and Great Society welfare (public assistance) needed to be reformed. But Clinton policies were long on getting people off welfare rolls (and maybe into work), and short on providing the right training (or apprenticeships) to find decent paying jobs. These are the main criticisms of Clinton welfare reform.  Arguments that trumpet the policy’s success are represented here].

Channeling Elizabeth Warren’s aggressive side as it might view the Clinton presidential candidacy was a revelation.  It was soon clear that most of the words pouring out didn’t do a very good job of separating Hillary from Bill. Is that sexist?  And unfair?  Perhaps both,  though surely not intentionally.

The problem is that we don’t know very much about Hillary’s position on wage stagnation, inequality, financial sector regulation, free trade, the condition of the middle class, and many  other core and defining financial and economic issues of our time.

That’s partly because Hillary dealt mostly in foreign affairs during the years these issues have been front and center.  But she has also avoided saying much about them, beyond high level generalities.  She won’t be able to continue doing that much longer.

If she watched the video announcing Hillary’s presidential run, am sure that Warren appreciated her saying “the deck is still stacked in favor of those at the top.”  That is, indeed, vintage Warren!   But it still falls in the platitudinous category.  It will be fascinating to see how the cross word puzzle is filled-in over the next twenty months.

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OK, So We All Agree Inequality Has Gotten Out of Hand: What Next?

No one said anything last night about black smith wages

No one said anything last night about black smith wages

Almost everybody now agrees we have an acute problem (in the U.S. and in most advanced economies) around income inequality, wage stagnation, and the disappearance of the middle class.  President Obama made these issues the centerpiece of yesterday’s State of the Union message. The other day, the President’s 2008 opponent, Mitt Romney, said he may run for President again because he wants to help the poor, the disadvantaged, workers, and the beleaguered middle class.  Mitt was a “severe conservative” before he became a severe liberal.  Go Mitt!

Here is the best single chart — heretofore called, “The Chart” —  I’ve seen depicting the inequality and wage stagnation problem.  (Thank you to my friend and colleague Kurt Lightfoot for sharing  this).

Workers’ Hourly Compensation Versus Productivity

The upper line tracks “productivity” in the U.S. economy since 1948.  Productivity represents the combined effects of technology and harder/better work to (potentially) raise prosperity and the standard of living.  The lower line shows the trend in the compensation of workers. The two lines tracked perfectly from the end of World War II to the mid 1970s. Since then, workers haven’t shared in the prosperity.  You can see full analysis and discussion here.

So, what might Mitt do if he becomes President?  Am afraid the things which need to be done are anathema to Mr. Romney’s party and even to many (a majority?) of Americans, at this point in time.  Mitt and his party will support their usual remedies for greater prosperity (and for any other ailment):  lower taxes on the rich and corporations, less regulation, and more “freedom” for all. Of course, not all of that is bad. But is there any evidence it works?  Maybe giving lip service to wage stagnation is a step forward; but it can just as easily be a bait and switch.

Obama’s State of the Union address proposed other remedies, which could help move the lower line on The Chart a little higher, like a raise in the minimum wage and better access to education, but those won’t (and really can’t) by themselves get us back to the trend of shared prosperity.

If we want compensation to track closely again with productivity, It will take reviving organized labor (with reforms), tempering the effects of “free trade,” genuinely repairing an unfair tax system, and seriously containing health care costs (so that some of employers’ premium costs can move to the wage column).

Regarding “free trade,” the President last night championed the Trans Pacific Trade Agreement (some call it NAFTA on steroids). Those agreements, which Democrats supported as heartily as Republicans, have contributed greatly to the dismal trend in wages.

As this blog has voiced many times, we need a new paradigm and intellectual basis for “free trade” agreements,  which doesn’t make them bobsled vehicles for race to the bottom.  That said, this blog doesn’t champion “protectionism,” nor yearn for Smoot-Hawley II.

“Why Turn Health Care System Topsy Turvy and Raise Costs for All, Just to Help 15% of the People?”

critterThe question in the blog post title is now being asked even by Obamacare/ACA supporters, including some Democrats, like the erstwhile Senator Charles Schumer, from New York, who thinks health care reform distracted his party from taking care of the middle class.

But, the premises of the question are all wrong.

In the same vein, Republican Mike Huckabee was even more to the point than Schumer about the “irrelevance of health care reform” to average Americans. Here is what Huckabee, soon to be a presidential candidate, had to say in an interview:

Q: What about ObamaCare? Is reaching those 30 million uninsured people a priority?

HUCKABEE: It ought to be a priority. But the priority should have been to deal with the 15% of people who didn’t have insurance rather than disrupt the system for the 85% who did and who were largely satisfied with insurance…..

It still matters what the facts are, even if that’s become a quaint concept.  Let’s start with the “15% uninsured” fact-let that’s implanted in Huckabee’s and everyone else’s brain. It’s very misleading. It persists because the true picture is harder to explain.

The “15% percent uninsured”  figure is a snapshot, taken at a point in time.  Over a materially longer period – more than six months, to one, two, or ten years – anywhere from 25% to 50% of Americans experience a significant spell without individual or family coverage.  That’s very large.  It’s a lot more than just “the poor.”

An even higher number of people are in perpetual fear of losing health care coverage, which keeps them in dead end jobs and contributes to  the “dead wood” we complain about in the next cubicle.    None of that may be disturbing to Huckabee or Schumer, who probably have never had to think about going without health insurance for their families, even for a few months; and haven’t worked in a cubicle for decades.

The much better count of how many people have lacked health insurance in the U.S. is documented here and here, by the non partisan Congressional Budget Office and by career analysts at the U.S. Treasury Department.

What about Mr. Huckabee’s point that Obamacare turns the health care system upside down?   Many would say, “If only it were so.”  The ACA went way out of its way to preserve the main pillars of the old health care system – private insurers, pharmaceutical companies, hospitals, and other private providers in a $3 trillion dollar system,  which leads the world in cost per client, but with worse health outcomes.  Whether you like it or not, ACA falls well short of turning the health care system upside down.

As for recent U.S. health care costs, the ACA munificently provides an alibi for anyone who raises insurance premium or shifts higher costs onto workers. Insurance companies, hospitals, and employers have been doing that for decades at rates that far outstrip general inflation and growth in worker wages or middle class income.

So, yes, health care costs have been rising, but since the ACA passed, health care inflation has actually slowed down. That is more likely due to the great recession than to ACA; but it’s a lie that health care costs have soared since the passage of ACA.

Let’s close the loop regarding Schumer’s Monday morning quarter-backing about the ACA and the middle class,  Soaring premium costs over decades have been a big factor in wage stagnation and middle class economic woes.  It’s elementary that the more a business pays for worker health insurance, especially when premium costs outpace profits, the less it can pay in wages. At the time Democrats were in control of Congress in 2010, “health insurance for all,” at affordable prices, was the single most effective and practical way of helping American workers and the middle class.

Perhaps Senator Schumer thinks Congress could have more easily attacked the other causes of middle class doldrums?  It would have been a snap to: (1) reverse NAFTA (and maybe block TPTA negotiations, while they were at it); (2) overturn “right to work” laws in about 25 states, (3) restore marginal tax rates to 90% for high income earners; and (4) put the brakes on technological advances which replace workers and lower their value. Maybe they could have done that in six days and rested on the seventh?

I will give Schumer this: The President and supporters of ACA did a horrible job explaining what they were trying to do; while conservatives have been spectacularly effective persuading a lot of middle Americans and small business folks that ACA is the bane of their existence.

Watch for a Donnybrook Over Free Trade: “Lawmakers Unveil ‘Fast Track’ Bill for Trade Pacts”

Boeing Aircaft: The B-17

Boeing Aircraft: The B-17

Check out this story from the January 10th Wall Street Journal,  http://on.wsj.com/1adgua

This story hasn’t been exactly buried, but because it’s not reached the boiling point it, it falls on page two or in the business sections of all media, where its exposure is limited.

This version of the free trade story, published in the Wall Street Journal on January 10th, is about a new trade pact, still in (an advanced state of) negotiations, called the Trans Pacific Trade Agreement (TPTA).  It is a very high priority for the Obama Administration; the stuff of legacy.

Going back to the Clinton era,  free trade measures, like NAFTA, have brought together a coalition of Republicans and Democrats who are true believers in the economic and political benefits of free trade.  The foundation for free trade policies is threefold: (1) The efficiencies of “comparative advantage” among nations, with its roots in Classic Economic theory;  (2) The belief that trade among nations helps avoid war, and promotes peace among the traders;  and  (3) The lore around “Smoot-Hawley” protectionist tariffs causing the Great Depression, passed from one generation to the next.  Pretty powerful obstacles for anyone questioning free trade.

However, recent events, and political developments of the past several years, have dramatically changed the intellectual environment for free trade.  I’m not talking just about the rants of Lou Dobbs and Pat Buchanan.  Or Bernie Sanders attacks from the left. The splits here are different.  

Here are the situations which alter the political environment for TPTA, “fast tracking” (requiring trade agreements to be voted either up or down in congress), and free trade:

1) The face-off between Boeing and the Machinists Union, brought  “race to the bottom” to the fore in recent weeks.   Boeing management has worked for years to lower workers’ compensation and weaken the Machinists Union. It says those actions are necessary for the company to compete internationally.  Boeing won again in this latest round, though it wasn’t quite the rout the Union says it was.   Liberals weren’t the only folks mad about the recent Boeing affair.  Many conservatives are upset by the generous “tax preferences,” not available to all businesses in Washington State, that were given to Boeing, alongside the labor concessions, in order to keep jobs in the state.

2) “Free Trade” (and agreements like NAFTA) are blamed by many labor Democrats and, yes, also by a lot of Tea Party Populists, for stoking, if not inaugurating, the “race to the bottom.”  More economists are also coming to that view.

3) The rise of “income inequality” as a central, defining issue of our time for liberals and left leaning economists, with a boost from the President and the Pope.  Even Republicans, like Marco Rubio, acknowledge its importance, though disagree on how to solve it. 

4) A resurgence of distress over America’s chronic foreign trade deficits, and the role of “currency manipulations” by China and other trading partners in fostering that.   

All of these elements upset the normal collations that have defined politics in Washington for the last five years.  TPTA, and especially the “fast tracking” of trade bills,  will soon shake up Washington politics, along lines and outcomes which are hard to predict.