Forum Post: Overlooking the obvious argument of entitlements. Demand =< Wages
Posted 12 years ago on Aug. 14, 2012, 11:44 a.m. EST by richardkentgates
(3269)
This content is user submitted and not an official statement
I cannot post this in the form in a way that does justice to the overall point. You'll just have to see the blog entry.
http://blog.richardkentgates.com
Maybe the reason economies continue failing regardless of time or geography is because politicians and bankers have fooled themselves into thinking money can be made by simply shifting paper.
Demand creates jobs, not tax breaks. A weak citizenry is a weak country with a weak economy. You are right, Richard.
hi bw, I know you saw this but he makes the case well:
http://www.youtube.com/watch?v=bBx2Y5HhplI
He does a good job of making the complicated, simple.
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I believe more people need to understand what Nick Hanauer is explaining. Instead of the word demand, I use the word customer, because I'm directly involved with them.
Customers don't have enough money! If gas prices go up, sales in my store go down. Sales are up at the first of the month when the customers get money, and down at the end of the month when they're out of money.
I wasn't aware of this until I changed businesses, which was at the beginning of the Great Recession. Many people don't have or need bank accounts, they spend every penny they have to survive. I pay my employees weekly and they go to the grocery store on pay day.
Money in the hands of the poor would be spent and spur demand, which would then and only then cause businesses to hire employees. Is it that simple?
Further, an increase in wages could be covered by a modest increase across the totality of your products. Whether that is an average of 10 or 25 cents per product depends on your ratio of employee to product turnover. Let's say the average product price increase is 20 cents. You may need to make this kind of increase just from rising energy cost but when this is due to increase wages by 20% you can see that such an increase is a major boost to the purchasing power of the worker. Because a minimum wage increase would effect all businesses, you would not experience an unbalancing of competition, it would all remain relative except for the purchasing power if the worker would increase.
I agree completely however there are other factors at this level. Many are now paying employees illegally to avoid payroll costs. Take a good look at Greece and what happened when the average person finally understood that because the leaders were cheating, they then justified their own cheating. It's a difficult spiral to stop.
Revolution is thrust on us and the corporatists must be overthrown asap to prevent society from ruin.
A lot of the corner cutting is because non labor overhead has outpaced labor costs, creating a downward spiral. With higher wages comes more flexibility in pricing because people can afford the price increase. Nobody can afford to pay an extra 30 cents for a can of soup so the product price remains the same while energy, insurance, basically every bit of operating cost continues to climb. Price flexibility comes from adequate demand and the consumers ability to adjust to that fluctuation. Right now, no room for fluctuation.
Calm your anger. You don't fix a flat tire by tearing off the entire wheel.
I believe the problem is worse than a flat tire.
Then the media has done it's job. So many problems you don't know where to start, nobody talking facts about the how what why, just on who said what and why every solution is impossible. The working class is the solution man. They want to use you as a political prop and a pity party in the media but if they went beyond that they wouldn't be able to dominate the playground. This is nothing more than good old fashion oppression bud. They are using capitalism to do it so it looks neat clean and lagit but it's bull shit. They took all our toys and now they are breaking them. Fix the wages and you will empower the working class to fix all the other problems. Including education, entitlements, county budgets. The country is broke because we are broke and we are the country. If the 1% admits that, they would no longer be the 1%, there would be no 1%.
I think fixing the wages and empowering the working class would indeed solve most other problems. How do we empower the working class? How do we get the 1% to admit it? Everything seems to be going in the opposite direction from your solution.
A slow and methodical campaign of taking over the conversation. One tweeter, one forum post, one facebook post at a time. The working class just needs to see that the economy depends on them. Our government and entitlements depend on them. They need to shake the artificial shame that the media has placed on them. We all experience the power of the cool crowd in school. What was their power over everyone? Why the influence? By shaming anyone not in their cool kid crowd. Bullying. So as adults, the trend of abuse continues. Shed the shame, make them realize the system and the 1% is dependent on them, and they will begin helping to take back the conversation.
I agree that the working class could have this power but it doesn't appear that it is happening. Again, everything seems to me to be going in the opposite direction of what you describe.
That really doesn't make any sense to me. You've said it twice now. If this were the bar for reality, we would still be living in caves. Everything that people do, was once not being done. People once didn't drive cars. So because things were not going the way of a full blow auto industry Henry Ford should have not opened shop? I don't understand your point.
A slow and methodical campaign of taking over the conversation and you apparently feel this is happening now and will progress. I don't see the progress! We live in a Police State where organized crime type corps are allowed to plunder huge amounts, with no fear or risk because our Gov is controlled by them.
I hope for the working class to feel the empowerment we've been discussing, but it is not a certainty. In fact, (for the third time), it appears that we are going in the opposite direction of more working class empowerment.
Well, if you feel this is an impossible task, maybe you don't have it bad enough yet to motivate you. There are plenty of people looking for exactly this type of thing to perk them up and give them direction. In fact, this narrative is the only one I see on the web or the media that has direction. It will eventually catch on and it will have the desired outcome. I called the fraud of the recovery almost a year before anyone admitted, we aren't actually recovering. Wall Street isn't making record profits either, they're shifting and laundering the money steadily pumping out of the fed. All things in due time.
Good morning fellow working class.
There is no Social Security account. It's part of the overall budget. The only thing you have to contrast entitlements against is how much is going out over a budget period vs how much will you collect from individuals for that purpose under the same budget period. You can also look at it over the long term but your comparison is still output v input. Not what it will cost vs some fixed number or an account that doesn't exist.
The inbalance between what is being paid to entitlement and what is being collected on behalf of entitlements is rooted in our declining wages. As the economy moves with inflation, the only part of the economy that doesn't get to adjust for inflation every quarter is wages so as a result wages fail to keep pace with inflation. What you pay into entitlements is based on what you earn and since the value of those earnings have dropped against the rest of the economy there isn't enough being collected from payroll deductions to cover the cost that grows with inflation. When wages keep pace with inflation, input to entitlements will be able to keep pace with output.
TED provides very good arguments. However, 10,000 average, workers/consumers, will not be able to bring to bear the immense capital needed to open a business if they don't have it. Nor will they be able to open and operate an assembly line of chemical factory or anything for that matter if no one amid that group has the brains or know-how to conquer the engineering, chemistry, etc that is required to bring an operation to bear. What I am trying to say is consumers are a vital part of the economy, but they do not necessarily create jobs. Some do, sure, but as a group they cannot operate or open a business without the brains and capital of individuals.
Government cannot create jobs. Or, rather, the jobs they create are much more expensive than jobs created in the private sector. In the context of a zero-deduction, flat rate tax code it is individuals coming together on their own accord in the pursuit of the dollar that creates jobs.
Ya kinda contradicted your self.
10,000 average, workers/consumers, will not be able to bring to bear the immense capital needed to open a business if they don't have it. Nor will they be able to open and operate an assembly line
it is individuals coming together on their own accord in the pursuit of the dollar that creates jobs.
The 1st and 2nd groups in your comments are individuals. Each group of individuals coming together to form a business. The 1st group are the individuals who would be running the business that they came together to create, the 2nd group being people with money who want others ( the workers in the new business ) to make them more money.
You contradicted yourself in one sentence in order to have it both ways. Where is the graph showing demand outpacing wages?
True (The government should not be running a skeleton crew nor a surplus of employees so this should not be considered an adjustable factor.)
No, it gives them the potential to provide supply for a demand. Lets not put the cart before the horse.
(Demand=<Wages)
I should apologize for making the argument too simplistic. There is historical precedence for a demand providing the opportunity for a supply to meet that demand. There is also precedent for an enterprising inventor to come up with a product that the consumer will discover and see that they need - a supplier creating a demand. Both groups are vital and one should not be neglected for the sake of the other.
Inventions often replace existing technology and have a labor eliminating nature. Very rare is the case that you invent something completely new. The Phonograph to the Ipod. Snail Mail to Email.
A larger labor force available for newer technologies and economic endeavors. Steam engine to fossil fuels. Large scale manufacturing of the 60s and 70s to information and service. Preservation of a labor force at the expense of moving ahead sounds a little too socialist for my comfort
You're rambling.
I am not smart enough to make this up. The historical and economic precedent is evident
Manhattan project
Does private companies build roads
So the Internet invented itself
Manhattan project
Grand coulee dam
The government didn't invent it. The government cannot invent it. People did. What government program did not go over budget and over schedule? Am I wrong? then perhaps the Obama stimulus program should have created more jobs than it did. A business with a vested interest interest in profit and success will make better use of that money than the government. The government does have a role, however, and that is through well thought out and monitored private contracts.
Wall Street is once again at record highs. Whatever their interest is and will be, has not reduced unemployment nor has it increased wages. Whatever it's doing, has no bearing on the remaining 99%. So it's arguable that what they do and will do with that vested interest is a better use.
Point to RKG...........the match continues.....
Oh come on, a little sympathy point my way!!
A complex argument for sure. Perhaps Frank-Dodd could be replaced with something a little less punitive. In an economy this poor and this stagnant, an investor will most likely make a bigger profit in some other venture than growth of business.
If a more business-friendly administration were in place, then perhaps capital investment would be more profitable than hording it away
Businesses lack demand. It is never the case that high demand for a product exists and a president prevents the supply from meeting that demand. How could he? How is the president stopping any business from providing supply to demand? Dod-Frank also does not step in the way of providing supply to demand. If you're looking for sympathy or you think the economy makes money by shifting paper, you've lost your mind. Money is not made unless a service is rendered or product/asset sold. And that requires the demand that you think Obama is stopping businesses from providing a supply for.
I do not fault Obama (OK, maybe I do), I fault the 30-35% corporate tax rate.
Bring the rate down, streamline government services, and let the private sector work
So taxes are stopping businesses from providing supply to demand? I only get to keep 20% net profit for sitting on my ass and doing nothing so I'm not going to provide supply to this demand? Instead I'll be petulant and take 0? That doesn't explain the record profits on Wall Street very well.
Did I mention I have a bridge for sale?
If Wall Street is cashing in on TARP, then that is wrong. If a company is taking no government bailout money, then they should be free to use the money as they see fit.
I am not an economist. But if a bigger profit is to be made from business investment than offshore investment, then why is more money not being invested here?
Wall Street is at record highs. There does not seem to be a lack of investors. Maybe you cannot find an investor because you cannot prove adequate demand.
"A business with a vested interest interest in profit and success will make better use of that money than the government. "
As I was reading today "The Great College Rip-Off" Rolling Stone Aug 30 2012, by Tim Dickensen: For-profit colleges are ripping off students, veterans and taxpayers while top executives get rich. They rip off students. Now they are a business. Why can't they run their business more ethically than public universities?
Also, I was reading in Time August 28, 2012 it argues the decision to invest in Solyndra was right. Yes, More Solyndras for Clean Energy
http://business.time.com/2012/08/09/yes-more-solyndras-for-clean-energy/
There's a nice article on globalization/localization. http://www.time.com/time/magazine/article/0,9171,2121661,00.html The Economy's New Rules: Go Glocal
People crave governments and services, and these cost.
There are many instances of waste, which should be recoverable by law.
Tarp was a mixed bag, but stopped panic or meltdown. http://www.nytimes.com/2009/12/10/business/economy/10audit.html
The Congressional Oversight Panel, which issued the report, was created in October 2008 by the same law that established the $700 billion Troubled Asset Relief Program. The panel has often been critical of the Treasury Department’s management of the bailout operation, especially at its start in the Bush administration but also under the Obama administration.
Not all services are profit driven, such as schools.
The health care model of business would argue against some of these efficiencies, because health is a necessity.
Private contracts can be messed up too: when jails and prisons are privatized, their may be cheating, and false billing to the government.
Often businesses go out of business.
If they're always so awesome, why is that?
In a perfect setting (yeah right), a private contractor has to be accountable. And this may appear to contradict my stance, but if the government hires out to fulfill a need, then the government is the company's customer and should be treated like any other customer withouth the graft and corruption.
A contractor, after a profit obtained legally, will gain nothing by going over budget or schedule
As I've said before, the existing system is toast.
The problem with entitlements has to do with scale problems. Despite any philosophical issues I may have with GOV entitlement programs, I'll set that aside for now. All human systems break. The goal must be in any system in which people depend on them is to make the failure tolerable. Mega High-Scale systems, when they break, break catastrophically. The solution is to have distributed, redundant, and local systems, so if there is a failure, everyone doesn't suffer.
We're in for a really rough storm. Depending on government action and the capture that has occurred by the banks, we may have a serious humanitarian crisis in the near future. Prepare for that. Try to help your neighbors and community.
Those are some talking points which could be debated. Maybe you could show your work a little, then we would have something to debate.
Sure, no problem. Start with this:
http://fooledbyrandomness.com/ForeignAffairs.pdf
Then this goes into the detail and work is shown:
http://www.fooledbyrandomness.com/errors.pdf
Those are unrelated to any specific talking point you raised. You will need to either place these in context or provide info on your initial talking points.
You didn't even have time to read them. They provide the context.
The central idea is the nature of complex systems and Structured Criticality: https://en.wikipedia.org/wiki/Structured_criticality It's extremely important to understand this concept.
The US government finances, and the banks are more highly leveraged now and more fragile than they were in 2008. There have been several books on the subject of hyperinflation, and one of the best empirical studies is by a Swiss, Peter Bernholz: http://www.goldonomic.com/Monetary_regimes_and_inflation.pdf
The United States is clearly past the event horizon of systemic financial failure. this: http://seekingalpha.com/article/184644-bill-gross-s-ring-of-fire-deficit and this: "This time is Different, 800 years of financial folly" http://press.princeton.edu/titles/8973.html
What part are you having trouble seeing as related? I'll try to explain.
This has nothing to do with the thread I posted. Off topic.
My point is, there won't be entitlements based on the track we're on. They're going to evaporate to the point of being almost meaningless.
We need to prepare for that, and start thinking about how to take care of people at a more local level.
There is no Social Security account. It's part of the overall budget. The only thing you have to contrast entitlements against is how much is going out over a budget period vs how much will you collect from individuals for that purpose under the same budget period. You can also look at it over the long term but your comparison is still output v input. Not what it will cost vs some fixed number or an account that doesn't exist. Get your facts before talking trash.
The inbalance between what is being paid to entitlement and what is being collected on behalf of entitlements is rooted in our declining wages. As the economy moves with inflation, the only part of the economy that doesn't get to adjust for inflation every quarter is wages so as a result wages fail to keep pace with inflation. What you pay into entitlements is based on what you earn and since the value of those earnings have dropped against the rest of the economy there isn't enough being collected from payroll deductions to cover the cost that grows with inflation. When wages keep pace with inflation, input to entitlements will be able to keep pace with output.
http://blog.richardkentgates.com
This video goes through the budget by an accountant, line by line. I like it because it's non-partisan, just the facts:
http://www.youtube.com/watch?v=EW5IdwltaAc
I'm not talking trash at all. I'm just looking at the data. The entitlement programs will eclipse the entire income ability of the .gov in the next year or two. The US over all of history has never been able to generate revenues above 22% of GDP no matter what the tax rates are set at (the higest was 90% or something for a while). That doesn't account for the funny accounting that goes into the GDP calculation either.
So, in the next couple years (actual income not deficit) Medicare, medicaid, and SS will eat up all of the income from the government. Every other dollar spent will have to be borrowed to fund all the agencies of the gov, the military, foreign aid, etc.
History is clear that countries eventually are not able to continue borrowing, because eventually interest rates (artificially kept down now) catch up with you. You default, or, if you continue to game the system, you hyperinflate. Both leave you in the same position, extremely high borrowing costs.
Thing 2: The US has artificially stabilized and propped up the value of the dollar through the BIS (bank of international settlements) for 60 years! The artificial high value of the dollar is not going to remain. At some point they're going to lose control, and that process is happening now. Wages may not keep pace with inflation, in fact, they don't now, and it's likely they won't in the future.
Now what do you think the priority is in Washington? To give granny her check so she can buy groceries, or to keep the leviathan running? I suspect, people in power will not allow for the gov to fall on it's sword in the interests of paying entitlements, leading to the conclusion there will be a substantial change in what people get, probably separated by a gap of months (when the adjustment/default/hyperinflation occurs), where the checks are worthless.
All this was clearly documented by the Obama commission for the deficit, Simpson Bowles. Now clearly, those two individuals helped get us into this mess, so you don't have to love them, but the facts in their document are largely correct.
Read the links above. It's all historical fact. To think we will change the laws of physics now is absurd.
So then what you're saying is that wages are not going to go up. Because the GDP is also tied to wages. It's all tied to wages.
Demand =< Wages
You supply side folks really are not capable of rational economic thought. You've all been brainwashed by comic book characters posing as economists.
GDP includes government spending including borrowed spending. I'm not a supply side guy. Government spending is qualitatively different because of the money multiplier in play. Christine Rohmer did some excellent work on this after she left the Obama administration, and Ironically the stimulus was in complete contradiction to her findings. (perhaps why she left).
By taking GDP prima face, you lose the distinction. Even "a broken window stimulates the economy by giving work to the glass man" as Keynes quipped, or as Krugman desperately screams shrillingly from the rooftops. Dollars spent by an individual to, say, start an organic farm to meet a community need, or to especially INNOVATE creates prosperity. Steve Jobs products, automation tooling, reduces labor, and creates surplus. That is true economic growth. Wages are an exchange for labor. Sometimes labor becomes cheap when there is a surplus of it, Japan was a good example in the 1700s. People were used in place of livestock because labor was so cheap. Niall Ferguson's book "Civilization" goes into it in detail.
The reason I said wages may not go up, is largely a monetary phenomenon, from decades of manipulation. Larry Summers made clear unequivocal statements on how they fix the price of the dollar, through taking positions in the gold futures market and the BIS. Globalization became a problem however, because you had the most wealth countries competing for labor at the same time as the poorest countries, and the jobs went to the lowest cost producers. None of this is a secret, It's all in minutes, and speeches, and no reading into it necessary, it's very black and white.
The 1950s fed minutes are extremely interesting and revealing, having to do with the rising inflation into the 60s.
You're absolutely right.
So take wages out of the scenario, what do you have? No economy.
Decrease wages, what do you have? Decreased demand.
Demand is not something you can create any more than you can create jobs. You're still talking with your head in the clouds. Stop placing these goofy ass proprietary ideas on a pedestal as some sort of genius. Keynes also proposed that a drop in labor prices would lead to lower product prices. Sure it will, sure it will. Did I mention I have a bridge for sale?
I think we're talking past each other. I don't think you're understanding what I'm saying, and I'm not understanding how your arguments are relevant to my point. I'll talk to you later.
What I'm saying is all those ideas are positions of proprietary ideas. You are presenting a mix of supply side and demand side economics that don't match. You need to keep it simple. Stick to proven economic math and leave the mysticism of economic philosophy in the garbage where it belongs. All that supposed high minded talk isn't high minded at all unless you consider dazed and confused to be high minded. It's a ruse, a ploy, an excuse, it is the string theory of economics because they have no proven or provable outcome. They are theories just to be theories. I'm not here to debate Keynes who used unprovable concepts as an excuse for notoriety and profit.
You have supply and demand. The cycle can begin with labor or assets. It will always end with wages. (Demand =< Wages). Everything between is there only to facilitate the cycle. Right now you and the "leaders" are confusing the facilitation as if it were the cycle.
Well gosh-a-rooties!
That's the (R)epelican't/libe(R)tarian line of BS!
You better got out there and vote for Rock Scott.
He'll make sure The richest survive!!
Yes, there you are again using your COINTELPRO tactics... Good use of FBI technique number 1 and 13! Textbook!
There's a special place in hell for government disinformation agents like you CIA, NSA, FBI, or NYPD, whatever you are. I just wish I could watch.
http://www.zerohedge.com/contributed/2012-08-13/15-rules-web-disruption
Huh???
WTF was that all about?
They actually have been pushing that line for ages.
Were you watching Hannity and missed it?
So this discusses the problem of conservative ideology that cutting taxes for the 1% creates j.obs. It states clearly that that conservative policy is WRONG! I agree.
The real job creators are the 99% consumers. What we mustdo is raise taxes on the wealthy and cut taxes for the 99%.
That would be a progressive policy.
Do you support that? Or not? Which is it.?
Dude I agree with every one of your positions. You are missing my point entirely. Delivery is EVERYTHING.
"delivery is everthing"? WTF does that mean.? Is that more criticism?
If I'm missing your point it's because you ain't makin a point. You are simply criticizing me.
It means your spinning your wheels. No republican will give you beyond one reply before compartmenting you as a liberal nut and then nothing you say matters to them. You're on this forum preaching to the converted, you're in an echo chamber, none of your great ideas are getting thrue to anyone except those who are on your side already. You have good ideas, good. Now go out on the web and spread those ideas. Push the point not the party and they won't shut you down before your point is made. If your point is to simply yell into a bottle, mission accomplished.
I see. Well I prefer discussing issues. I can't pretend these issues aren't delineated in America by progressive, conservative.
I cannot cater to republicans who come to this site. They aren't here to be converted. They are here to annoy and attack. I intend to meet that challenge. And specially when people push the fallacy that the parties are the same. I cannot pretend the parties aren't vastly different. If the discussion is the parties, then I'm gonna talk about the parties.
Perhaps you are better at the conversation, However, you have only criticized me. You don't offer a plan. I do. If republicans don't like my plan so be it. some may be convince based on the issues. And certainly independents can be brought over, in addition the progressives need to hear these progressive positions proudly trumpeted. We should not be ashamed. Or afraid of how the republicans will take it.
What is your plan?
Use social networking to reach out to talk radio hosts, leave fliers around my town pointing people to the #Occupy #OWS twitter tag, using my blog to inform people how the issues tie together and effect the working class then tweet that with #Occupy #OWS #TeaParty, then I facebook it so my conservative relatives get a chance to see information they won't get from Faux news, and Google+ it so my few followers there can glean decent info to add to their talking point arsenal. I develop working class propaganda and information then I disseminate it thrue every outlet at my disposal.
Sounds great. I challenge people I know and meet as best I can. I know I have converted a few but I know I can't really convert many.
OWS has done that better because they are making a big noise. I piggy back off them. Their existence has allow many issues to be conversed in my personal experience.
Your way may be better. May not. But my way does not include criticising your way. So I got dat goin' for me.
Maybe you are a secret progressive. Who knows?. I won't hide my leanings. I KNOW the solution is progressive policies. Can't softsoap it. Can't tailor it. Already did that when I stopped saying democrat, already did that when I stopped saying liberal, already do that when I don't say socialist, anarchist, communist.
Enough already republicans have demonized too many good words. I won't submit. I speak out proudly against the conservative policies that benefit the 1% plutocrats.