Obama To Detroit City; Drop Dead

[firstandten]

King Rex this is portions of a post I made in the non-detroit thread


"Having said that I do believe in the premiss that Dr. Batra and others believe that we are in economic trouble because of the

productively - wage gap
[[supply) [[demand)

My understanding is that real wages have not kept up with productively over the last 20 or so years namely because of the economic policies that were heavily laissez-faire.

Knowing that supply and demand seeks equilibrium but supply because of globalization, outsourcing and degulation was increasing, but real wages were decreasing, debt was the method used as in consumer debt mortgage debt etc. to try and regain the equilibrium between supply and demand or lessen the productively wage gap. Of course debt was used because the republicans don't want to increase real wages.

So in my opinion we have a demand problem , but Obama has a problem,we have given away our manufacturing base. we have been losing jobs at a rate of half a mill for the last few months and to go back on all our trade agreements, establish tariffs or otherwise institute trade policies that will isolate us will be a disaster for our foreign policy and will hurt us in the long run.

I think the only option Obama had was to spend a lot on infrastucture to substain demand until other forms of industry can come in and employ people at substainable wages.

So to me equilibrium looks like this

Productively = wages + government spending

The deficit this would create could eventually be addressed by taxes received once your are closer to full employment and at some point a middle class tax hike and of course tax the rich at higher than the 39% Obama wants."




Too many products chasing too few dollars is what causes economic depressions
At this point arguing about the best way to institute taxation is not going get our economy to where it needs to be. be it a production or consumption tax. Also how can we tax production since so much of it is foreign unless you start tinkering with our trade policies. If you tax consumption you're hurting main street even more than they already are. An unfortunate by-product of doing this is that you are going to run a deficit, but Obama is hoping that eventually the wage gap will lessen to the extent that the deficit can start to be paid off.

[lilpup]

I don't know who this Dr. Batra is, but the "productivity-wage gap" isn't the cause of our current problems.

Productivity does not equal wages plus government spending, because government spending does not create anything new. To get the money to spend in the first place, government has to take it out of the wealth creation system via either taxes or inflation.

You're missing the broader picture. The productivity-wage gap is a problem => it's consolidation of wealth at the top instead of paying the workers. When the workers have insufficient funds to spend there's an insufficient market for products.

What government spending attempts to do is redistribute some wealth back down to the workers by spending tax dollars paid by the better off, but if the productivity-wage gap is too large [[as it is now) a lot of the government spending merely filters its way back up to the wealthy.

The only way to correct the productivity-wage gap problem is to 1) correct regulatory and tax structures so that wealth stays widely distributed and is more difficult to consolidate and 2) address the foreign trade issues that are driving down domestic wages while draining the nation's assets via the trade deficit.

[firstandten]

I don't know who this Dr. Batra is, but the "productivity-wage gap" isn't the cause of our current problems.

Productivity does not equal wages plus government spending, because government spending does not create anything new. To get the money to spend in the first place, government has to take it out of the wealth creation system via either taxes or inflation.

Dr.Ravi Batra is a respected professor of economics at SMU. He nailed Greenspans policy frauds in his book which I believe made the NY Times best seller list.

I believe that Krugman who is more known to people will pretty much tell you the same thing.

I added the gov't spending so please don't attribute that statement to them.

http://www.ravibatra.com/

[lilpup]

No, you're missing the broader picture. Wealth distribution does not lead to wealth CREATION. We need more production, more wealth creation right now. We don't need to focus on moving the chairs around on the deck of the sinking boat.

Here's another few paragraphs from an economist who's been one of the few to see the bubble for what it was and accurately predict the current bust, Peter Shiff. Make sure you read this all the way through, and preferably read his entire article before commenting. I don't want to read any comments along the lines of "Yeah, but he oversimplifies it, we don't have a barter economy."



The rest is here: http://www.lewrockwell.com/orig9/schiff5.html

This doesn't reflect your argument at all. This is about the use of credit, not wealth creation and production. Why didn't the candlemaker make his candles in the first place so that he could have paid outright? Was it because he didn't have the funds to purchase the necessary materials?

[firstandten]

Here's another few paragraphs from an economist who's been one of the few to see the bubble for what it was and accurately predict the current bust, Peter Shiff. Make sure you read this all the way through, and preferably read his entire article before commenting. I don't want to read any comments along the lines of "Yeah, but he oversimplifies it, we don't have a barter economy."

Mr. Shiff is an outstanding economist and he along with Dr. Batra and others accurately predicted this current situation and very he is quotable, however he comes from that Austrian/Libertarian school of economics which believes in Laissez-faire economics which I reject totally.

If I can get answers to the basic concerns in this quote I would re-assess my position in regards to Laissez-faire economics.

"we can start to draw some conclusions about whether a pure laissez-faire capitalism will actually benefit working people. The United States has a small public sector by international standards and in many ways it is the closest large industrial nation to the unknown ideal of pure capitalism. It is also interesting to note that it is also number one, or close to it, in the following areas [Richard Du Boff, Accumulation and Power, pp. 183-4]:

lowest level of job security for workers, with greatest chance of being dismissed without notice or reason.
greatest chance for a worker to become unemployed without adequate unemployment and medical insurance.
less leisure time for workers, such as holiday time.
one of the most lopsided income distribution profiles.
lowest ratio of female to male earnings, in 1987 64% of the male wage.
highest incidence of poverty in the industrial world.
among the worse rankings of all advanced industrial nations for pollutant emissions into the air.
highest murder rates.
worse ranking for life expectancy and infant morality.

It seems strange that the more laissez-faire system has the worse job security, least leisure time, highest poverty and inequality if laissez-faire will especially benefit the poor or working people. In fact, we find the more free market the regime, the worse it is for the workers. Americans have longer hours and shorter holidays than Western Europeans and more people live in poverty. 22% of American children grow up in poverty, which means that it ranks 22nd out of the 23 industrialised nations, ahead of only Mexico and behind all 15 of the pre-2004 EU countries.
morality"


Thats why I'm of the belief that we have a demand problem, that capitalism with restraints or the path Obama is taking is our best chance for success.