Strengthening Constitutional Self-Government

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Economy at 5.6%

"The Economy sprang out of a year-end rut and zipped ahead in the opening quarter of this year at a 5.6 percent pace, the fastest in 2 1/2 years and even stronger than previously thought."

Discussions - 20 Comments

And Bush probably won’t get much credit for it because it’s not broad-based growth. We have to start asking questions about how all this wealth generation seeps down to those people who really need it. You can only own so many Acuras and McMansions, and of course all that investment (sent to China, etc.) doesn’t do Joe Q. Voter much good.

The United States is currently below the natural rate of unemployment and has the highest home ownership ever. Sounds pretty broad-based to me. Who is "dain" really? A socialist troll?

People don’t "own" those houses...the banks do. As for employment, as I’ve said before, people around the world work, they don’t have much choice. It doesn’t indicate a thing about their welfare.

And I don’t snipe, I comment (unlike you). You are now on my troll list (Dan, Craig, Phil...whoever you are).

More Americans own automobiles, air conditioners, televisions, etc., etc., than ever before. In fact, as this report from the Federal Reserve Bank of Dallas shows, the average real cost of everything from food to clothing to housing has steadily declined over the past hundred years (granted, some things, like health care, are far more expensive now than they were). One of the leading social problems among America’s poor is obesity! Yet Dain continues to insist that the average person is living in misery.

No, John, I never said anything about poverty or misery. I’m talking about sustainability and politics. The politics of grievance isn’t about absolute standards of living, but about relative standards of living. Moreover, while it is true that the price of some things have declines, this is certainly not true for things like housing, medicine, and education. And I’ve even heard some experts frame obesity as a disease of impoverishment (I guess rich folks have the ability to avoid the fatty, sugary staples that the mass production of processed foods have encouraged).

Now, would you like to talk about debt? Would you like to talk about women being forced to work? How about a little more in-depth on income structure? There are MANY indicators that suggest things aren’t as good as the libertarian "happy talk" one hears so often.

For instance,

And it’s important for all to realize that I’m not criticizing capitalism from root to branch...only a brand of market economics that is 1) ahistorical, 2) dependent on unexamined assumptions about human behavior, and 3) dismissive of the non-economic social institutions that make market transactions possible. Libertarians are actually leaning heavily on a simplistic model of capitalist development. If you look at Asia (or even the United States), you quickly figure out just how deeply the state has been involved in economics.

For instance, here’s more historical data. What you’ll notice is that the median income for males has pretty much stagnated since the mid-1970s (make sure to look at the column in constant dollars). Women, due to massive entry into the labor force and the shift to services, have made considerable gains. Bottom line -- any improvements in family income have come from having women in the workforce, and that movement has nearly been exhausted.

I’d really like to see less happy talk (denial) and more market-friendly and conservative proposals to improve our economy. All that is required is to admit that capitalism as a "natural system" isn’t necessarily socially optimal, and that we can do things to improve the situation.

And John, you might be surprised to learn that I own books by Cox and Alm (Myths of Rich and Poor) -- the authors of the report you sight, as well as Moore and Simon’s "It’s Getting better all the Time." Read ’em, and agree with some of it, but most of this is libertarian apologetic. Such accounts aren’t balanced at all, and there’s a good bit of ignoring some evidence and cherry-picking data. Life in America doesn’t suck (yet), but I don’t think the current economic configuration is sustainable.

Good for you. You’re on my troll list too. You’re also on my hippie marxist list.

Women, due to massive entry into the labor force and the shift to services, have made considerable gains. Bottom line -- any improvements in family income have come from having women in the workforce, and that movement has nearly been exhausted.

You’re confusing cause and effect. Average male wages have stagnated because of women’s entry into the workforce. What we’re seeing is the gradual closing of the gap between women’s and men’s average wages. Ever since legal and social barriers to female participation in the workforce have been lifted, that wage gap has made women a more appealing source of labor than men. Once that gap has completely closed I predict that average real wages for men will start rising again.

Is it ever going to be possible for average women’s wages to be equal to men’s wages, especially over a lifetime? I propose that pregnancy and the care of children make that impossible, though wages are pretty "fair" if that fact of life - child-bearing and rearing- is factored out.

Kate, your point is a good one--given that most women will not spend as much time in the workforce as men, we’ll probably never see complete wage parity. However, wages will rise until women no longer have a comparative advantage over men.

Kate, it’s not likely that women’s wages will catch up with mens unless men’s occupations continue to deteriorate. The surge of women into the labor force is about over. As you can see from the data, the labor force participation of single women has remained in the 60%-range since the mid-1970s -- no new influx of women there. Because of deindustrialization and the rapid rise of housing and education costs, more and more married women have entered the labor force, but there again growth has plateaued -- between 58% and 61% all through the 1990s. Simply, if men’s wages were being damaged by women’s entry into the labor force, we should have seen substantial improvement before now.

Why haven’t women influenced men’s wages more than they have? Occupational segregation by gender. While men and women share/split certain occupations (like law and some branches of education), for the most part on sex or the other dominates difference occupations. For the most part women have specialized in social service occupations, while men have continued to dominate primary and secondary production, as well as some social services like firefighting, soldiering, policing, and so on. The data are very clear -- for the most part men and women are NOT in competition with one another. Men’s wages have stagnated because we have foolishly allowed international trade to erode the economic base that traditionally sustained men’s wages.

Dain I would agree with you that libertarian theory or perspective on economic issues tends to cherry pick and list feel good statistics, I might even be persuaded to share some of your considerations. On the flip side it seems you neglet the most important of all libertarian contributions to economic thinking...namely a rather comprehensive rejection of macroeconomics and the concept that society can do better than the "natural system". If capitalism is not socially optimal...and I would grant that all economists hold this to be the case on some level...the question is whether it is possible to move towards something that is more socially optimal without in fact creating more problems than one solves. Since I agree with Hayek the answer is largely no. You forget the conservative sentiment concerning rather strange unintended consequences.

If you really want to know why the economy is cooking with gas...the answer is to be found Keynesian theory. Increased Spending and decreased taxes are both fiscal policy multipliers...in fact perhaps the economy growing is at 5.6% is a bad thing.... certainly the Fed thinks so... so the fed will countinue to jack up interest rates...and talk about things like the U.S. being under the natural(non-inflationary rate) of unemployment. The factmaster says these things are "good"...but to the Fed increased home ownership and high employment means that credit is too cheap...In other words this is rather inflationary news...

If the market believes the fed will raise interest rates... markets are likely to react negatively...at least towards the most aggressive firms that have the most debt and depend upon funding for R&D.(R&D almost exclusively drives future increases in productivity.) Good is bad... bad is good...when you are in the position of the Federal Reserve you quickly realizes that every coin has two sides...and you try some sort of ballancing act between growth and inflation...now this is extremely difficult...and requires tremendous prudence...but it is even more difficult if you factor in political factors which want to act to change the landscape...it is as if miracle grow is sometimes good for plants and sometimes poisonous to them...but any changes in landscape basically make calculations as to how much miracle grow has been given close to impossible. In other words Economists have to operate in a world of Ceteris Paribus knowing full well that these are ahistorical and static models. These men have to act...so they do the best they can.

By the way I agree with your analysis concerning why the real wages of men have fallen. But I disagree with your injection of normative content this early into the race. There can be no preference given towards tradition if one wishes to speak of what is optimal...because just because something used to work or used to be optimal doesn’t mean it still does or is... You seem to be imbibing a rather convinient varient of positivism if you find no difficulty in moving from analysis to a sort of blanket judgement based upon the natural inclinations of your readers(I assume they are inclined to believe that it would be best to save the "traditional" economic base of men...but of course you aren’t saying anything about the cost of doing so.)

John, a very reasoned response. I too have read Hayek, and I agree with him that a micro-managed economy will generally prove to be disasterous. All I’d like to see if for Congress to fulfill it’s Constitutional role as a regulator of foreign trade...Hamilton was correct, our nation must first and foremost look after its own people.

Essentially what massive offshoring does is to replace our own male labor force with a cheaper one overseas. While that may be good for those men who have jobs that are NOT affected (a shrinking group, by the way), it has a terrible impact on America in general...our communities, our families, and our class structure. Needlessly, in my view...and if it comes to purchases fewer goods at higher prices, is this really such a bad thing? We need stronger and more sustainable communities more than we need that 4th television or that 3rd SUV.

As for taxes, since the bottom 50% of taxpayers pay only 3% of Federal income tax (again, because only the upper middle class can afford it these days), reduction in taxes gives money to people who can buy things. Doesn’t do much for the economic structure...increasingly I suspect that our economy functions on the wants, needs, and buy power of the top two quintiles. Not sustainable, in my view, and far too reminiscent of more primitive economies.

Might I also propose changing grammatical rules so that "it’s" and "its" are made interchangeable. It’s the only possessive that doesn’t have an apostrophe...trips everyone up at times!

and if it comes to purchases fewer goods at higher prices, is this really such a bad thing? We need stronger and more sustainable communities more than we need that 4th television or that 3rd SUV.

So now we really see what drives your protectionism, Dain--it’s not really concern for Joe Sixpack as much as it is your disdain for the bourgeoisie and their SUVs and "McMansions." So if industrial products are too expensive for them to buy, who’s going to buy them? Surely not foreigners, who will undoubtedly respond to American tariff increases by jacking up their own. What exactly is the American working class to be set to work doing, then?

Nope, you are wrong about me, John. I spent years defending conspicuous consumption against people who actually did hate the bourgeoisie. What I have grown to despise is how consumerism has led to indifference about our neighbors and fellow citizens. In all honesty, not long ago I woke up and discovered (much to my own surprise) that I did care very much about "Joe Sixpack." Their denigration concerns me very much, and it is needless...I fear the Right has degenerated into its Leftist stereotype...selfish pricks who don’t give a tinker’s damn about their fellow man. Libertarianism allows selfish people to justify their beliefs and to become smug about it. But there’s much more to the Right than that!

As for who will buy the produces of a revitalized working class, have you never heard of Fordism, John? Maybe if more people could share in American prosperity there’d be a solid market for goods that wasn’t dependent on consumer debt.

Interesting that you mention "Fordism" Dain... American companies right now are looking to capitalize on the arrising Chinese and Indian consumer class... Ironically then...it could be that sending some jobs away to china and india then allows these people to buy up american goods...

Fewer goods at higher prices is a bad thing. Capitalism works because it offers the promise that you can buy as cheap as you can find and sell as dear as you can get. Protectionism completely disrupts the functioning of markets and is one of the few things that is inflationary without also promoting growth. No economist bothers to defend protectionism unless they are argueing that it must be kept on the table as a barganing tool. Signing the petition of the candlemakers against the sun doesn’t help "Joe sixpack"(If poverty leads to being fat then it would be Joe Keg...) it just keeps him in the dark. Sacrificing the 3rd SUV sacrifices Joe Six pack’s job at the Escallade plant...(It is hard to show contempt for evil SUV’s and at the same time rail against foreign Toyota and the evil Prius...perhaps if we all rode bikes...Joe Keg would become Joe Six-pack again and Huffy could move back from Mexico.)

Oh, John, you are wrong about economists. Tariffs are a serious subject of study, and people like Jeffrey Williamson (former chair of Harvard’s Economics Dept.) has even found evidence that, under certain conditions, tariffs are beneficial.

And the Founders, the Whigs, and the early GOP disagreed with you, John, All embraced stiff tariffs, and the country prospered...indeed, our rapid rise as an industrial power is precisely due to protection tariffs, and our Federal government used to rely on revenue tariffs (and land sales) for its money. Now, of course, it has its talons deep into our flesh (the income tax). Why is it the Libertarians always inveigh against tariffs without any empirical validation?

Puhleaze. Tariffs are widely known to be harmful to the country that imposes them. This is so basic that it is rarely questioned by anyone in the profession. When very rare exceptions are found (your caveat "under certain conditions") they don’t apply to real-world situations. Empirical validation? Bush’s steel tariffs cost the U.S. economy more than $800 million. For those of you who are counting, that’s about 20,000 middle-class jobs. And fyi, the rise in industrial power came from technological advances combined with population growth (that’s mostly immigrants, by the way).

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