Spreading the wealth [u]

Republicans blocked a bill in the Senate to raise the federal minimum wage to $10.10. Can you say ‘filibuster’? Against the measure we have this:

The proposal before the Senate throws cold water on job creation and it adds to the burdens businesses are already facing.

That comes from Wyoming’s Mike Enzi.

Let’s think about that for a moment. How do jobs get created?

I can come up with a better mousetrap that consumers want. So I build a manufacturing center that needs employees. Steve Jobs introduced a smartphone and then the tablet. Both gadgets are gobbled up by millions of customers around the globe and require thousands of people to assemble and market. There is a difference, however, in mousetraps and iPhones. The former is not a new product. It’s an improved version of an already existing category. If I hire workers to build the better mousetrap, we can assume that workers manufacturing the existing ones will get laid off. Have I therefore created jobs? Apple, on the other hand, revealed a brand new product, one that had not previously existed, though it borrowed from existing technologies.

But regardless of whether or not a product is revolutionary or evolutionary, its success in the market depends on people buying it. Which leads us to a thought experiment.

Suppose that there are 10 people. One has 90 percent of the combined wealth of the ten; the other nine share the remaining 10 percent. That one person has enough money to buy hundreds of new iPhones. Yet he needs only one, perhaps two. The bottom nine don’t have enough money to purchase a single iPhone. Their wages are too low.

However, if the bottom nine, or even another five, shared half the combined wealth of the ten, they, too, could afford to buy an iPhone. Instead of Apple selling one or two, it sells as many as ten, shall we say. The company needs more employees to manufacture and sell ten phones than just one phone.

We arrive at a fundamental point. If the incomes of the many increase, more goods and services are purchased. On the other hand, if most of the income flows into the one percent, fewer goods and services are sold.

So, there are both virtuous and vicious cycles. Spreading wealth creates virtuous cycles; concentrating wealth creates vicious cycles.

In the end, it’s all about demand, and our economy—indeed, most of the world’s economies—suffer now from inadequate demand, because an ever increasing share of wealth lands in too few bank accounts. And since the rich can buy only so much, money circulates at a lower rate.

Raising the minimum wage distributes wealth away from those who hoard and toward those who will spend. The increased spending leads to more jobs, and so on—a virtuous cycle.

Inequality, then, stifles job creation.

_______

UPDATE (April 30, 2014):

Then there is this from the New York Times article linked above:

“So let’s talk about the 800-pound gorilla here in the Senate chamber,” Senator John Cornyn of Texas, the Republican whip, said Wednesday morning. “This is all about politics. This is all about trying to make this side of the aisle look bad and hardhearted.”

One needn’t try very hard. Charles Pierce, writing for Esquire:

Can we just drop the pretense now and admit that one of our two major political parties is perfectly fine with pauperizing the American middle-class in order to “redistribute” wealth upwards? Can we please lay the myth of the Republican moderate to rest, at least on this issue? The only Republican to vote to open debate was Bob Corker. Susan Collins of Maine, still terrified that some alderman from Aroostook in a flannel shirt and three-corner hat will primary her, voted to let the increase die. Naturally, the dimmer bulbs in the chandelier struggled to shine.

Backpedaling

It should have occurred to me when I wrote “we may be excused on occasion for believing the pabulum we learned from our teachers” that my wife, a recently retired educator, would read my post. She began her justifiable complaint with a comment about juxtaposition, the defense of teachers here and my apparent criticism here. Good point. So, Mr. Blogger, how do you reconcile the two?

My first defense is that I had in mind high school teachers, those who may get around to introducing their students to history and civics, to which I was exposed as a teenager, though I don’t know if there’s room in the curriculum these days, given the obsession with testing and data-collection. My wife taught elementary school, so she’s excused from my offhanded remark.

Second, the pabulum I had in mind comes from my own experience. It takes the form of America being described by these alleged virtues:

  • the best system of governance
  • that good people win and bad people lose (justice, you know)
  • that everyone has an equal opportunity to succeed
  • that all our wars are virtuous

I could go on, but the short list approximates my recollection of what I learned in (high) school back in the early 60s. We did not learn about widespread racism, overt in the South. We did not learn that our involvement in Southeast Asia was based on a falsehood. We did not learn that industrial activities were polluting the water we drink and the air we breathe. We did not learn that there was more to politics than simply casting a ballot. We did not learn that we do not always elect “the finest men”; that many are corrupt and corruptible.

Of course, it is entirely wrong to accuse all high school teachers, back in my day or at present. Besides, few are able or willing to step outside the straitjacket imposed by “the institutional press,” the administrators, school boards, and state governments that strive to keep young minds within a constricted intellectual box. Most educators have every right to be scared for their jobs, given the wholesale attacks on teachers and their unions.

And one more thing. My wife pointed out what should have been obvious to me: teachers spend only a fraction of the day with children. They have no control over the child’s home, parents, or neighborhood.

For the children [u]

The Seattle Times editorial board—which I liken to the Wall Street Journal‘s for its tone deafness, on one hand, and its fervent ideological stances, on the other—again attacked Washington state’s teachers union for its “bellicosity,” in this case, about its refusal to use results of students’ standardized test in teacher evaluations. The editors have essentially blamed the union for shortchanging children.

Give me a break.

As is the ideologue’s want, the editors have engaged in their own act of refusal. They blatantly ignore the psychology of learning and turn a blind eye to the legislation that led to the state’s being the first to lose its waiver.  The No Child Left Behind law, fortified by Obama’s Race to the Top, was lousy when it was championed by G.W.Bush. It has now morphed into a top-down, federally manipulated education agenda that creates and sustains markets for cash-trollers instead of developing life-long learners. The White House message to students is unequivocal: you will learn x, y, and z—or else. Oh, and we, the federal government, shall determine the x,y, and z through the Common Core curriculum and liberal use of test data. Constitutionalists should be outraged.

If the Times‘ editors were sincere in their advocacy for children, they would be rebuking the centrist Democrats and whacko Republicans in Olympia who have squeezed education budgets for years, denying students and teachers decent school buildings, adequate materials, and smaller class sizes. Besides, why shouldn’t all children have the same education opportunities as the offspring of Bill and Melinda Gates, who are busy undermining public schools in the name of reform? Now that’s a nice place to start, editors.

UPDATE (April 28, 2014):

I recommend this piece by Anthony Cody on the Gates Foundation’s reform efforts.

SCOTUS’s agenda

We may be excused on occasion for believing the pabulum we learned from our teachers, the kind of stuff parodied by Tom Paxton in his song “What Did You Learn in School Today?” Among the priceless lines:

Our leaders are the finest men, and so we elect them again and again.

The government was designed by men of property who feared the rabble more than concentrated wealth. But their system of checks and balances, especially the three independent branches, ensured that the former fear was unfounded and the latter guaranteed. While the legislative branch often prevents the executive from accomplishing anything of significance, the resulting stalemate, such as we witness today, grants the judicial branch authority and power over the other two.

The Roberts Court is dominated by conservative ideologues who pay only lip service to representative democracy. Their true purpose, as evinced by their most recent rulings in particular, is to cement the dominance of the few over the aspirations of the many.

They are hardly naive in their judgments. Rather, they are tendentious, more crass and callous than nuanced and sympathetic. As such, they have no more claim to our esteem than the hungry fox expects from penned chickens.

I inherited a two-volume work from my grandfather: The People Shall Judge.

Bullshit.

Shrinking middle class

The sheen is definitely wearing off the triumph of America’s prosperity. Since WWII the incomes of those in the middle and below have consistently stayed above their counterparts in Europe and Canada. But we’re slipping, as the New York Times reported here.

Although economic growth in the United States continues to be as strong as in many other countries, or stronger, a small percentage of American households is fully benefiting from it. Median income in Canada pulled into a tie with median United States income in 2010 and has most likely surpassed it since then. Median incomes in Western European countries still trail those in the United States, but the gap in several — including Britain, the Netherlands and Sweden — is much smaller than it was a decade ago.

Well, we know that statistics can deceive, especially about median and average wages. We’re familiar with the joke about Bill Gates walking into a bar, thereby lifting the average income of the assembled drinkers. The effect is writ large in the overall economy, with Gates et al. extracting the lion’s share of economic output, while the Rest of Us have seen our wages stagnate or even decline.

Economist Dean Baker suggests that the inequities between countries are worse than the Times would have us believe. It seems that our European and Canadian brothers and sisters are working fewer hours than Americans. Baker:

This shrinking of the average work year corresponds to the increase in vacation time in other countries, with workers in many countries now enjoying 5-6 weeks a year of paid vacation. Workers in other wealthy countries can also count on paid sick days and paid family leave when they have children or a sick family member in need of care.

These guarantees and additional leisure translate into real improvements in living standards in which workers in the United States largely did not share. In 1980 workers in the United States worked somewhat less than the average for OECD countries. In 2012, they worked somewhat more.

The NYT piece emphasized that low and moderate income workers in other countries now typically have more after-tax income than their counterparts in the United States. However they also have an institutional structure that allow them to better manage the demands of work and family. And, they enjoy more leisure.

How low can you go?

In Kansas you won’t find a lot of dams. The terrain is flat, with no rivers coursing down mountains. The Pacific Northwest is a different picture, with lots of both—combined with snow and rain, in case you haven’t noticed the latter. Thus, hydropower makes sense here but no so much on the Midwest plains.

While I have my doubts that a Grand Coulee could be built today, given currently strong opposition to new hydro projects, we should nevertheless appreciate the tremendous value of the New Deal mega-structure, which provides much of the electricity that we consume today

It is this opposition, coupled with the political influence of the wind power industry, that ignored new hydro projects in the language of Initiative 937, narrowly passed by Washington state voters. It’s a measure that I supported, though I lobbied for different wording. I preferred this simple text:

Utilities will meet all load growth through cost-effective conservation, first, then by renewable resources.

As the language now stands, utilities may not count new hydro projects in complying with the initiative’s mandate. However, the law does not prohibit utilities from building such projects, as some people have mistakenly contended.

The principal reason that I support conservation and renewables is my concern for climate change, a subject on which I’ve commented frequently. Both are either zero- or low-carbon electricity resources. If not having to produce a kilowatt-hour of electricity (a “negawatt”) is the least carbon intensive resource, how do other resources compare?

The Intergovernmental Panel on Climate Change (IPCC) has issued several reports over the years, including numerous technical appendices. The Panel answered the above question here. I’ve prepared this graphic based on their data (pg. 982):

Carbon intensity

Though it’s never easy to be green, readers should acknowledge that we have lots of water in the region and much of it flows down hill. We don’t have to rely on coal and gas plants, which is a very good thing if you share my concern about global warming.