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The first thing you need to realize is that the PBP wing of the GOP views wage stagnation is something to be desired, not abhorred.  That is why they talk about growth rates, not wages or inequality.

To the (limited) extent that the other candidates have an interest in this issue, their response is to say that tax cuts on capital and deregulation are the solution.  The notion that we can help working people by cutting taxes on capital is, shall we say, counter-intuitive.  If you tease it out, the argument goes something like this:

1. Tax cuts on capital will lead to additional business investment.
2. Business investment will mean new jobs.
3. The new jobs will result in a tightening of the labor market, which will cause wages to rise.

The problems with this approach are:

1. Tax cuts for the rich don’t necessarily result in productive investment and new jobs.  The beneficiaries of the cuts may just invest it in government bonds (now that’s what I call recycling!), or overseas, or in real estate.  Depositing the money in the bank or putting in the market just moves the issue from one set of hands to another; it doesn’t change it.
2. The size of the labor market has to be viewed in light of globalization.  If the nature of the individual business is such that management can credibly threaten the workers with off-shoring, it is unlikely that wages will rise.  As I stated yesterday, I think this threat will diminish over time, but it certainly still exists today.

The bottom line is that the GOP approach to what most Americans view as a serious problem will not work, and in many cases is not even intended to work.

As anyone who reads this blog knows, I think Trump would make a wretched President.  Hard as it is to imagine, however, I think Carson would be even worse.  As a result, here is some unsolicited advice for The Donald as to how to deal with Big Ben at the next debate:

1. Don’t attack him personally.  It doesn’t work with this audience.

2. Don’t comment on his lack of energy, because it is obvious to everyone.  Given the vast difference in the two personalities, the best analogy that I can come up with is watching John McEnroe and Bjorn Borg play tennis.

3. Don’t say anything about his religion, because that is a fight you are going to lose.

4. Do point out how incoherent his positions are on entitlement programs and taxes.

5. Do make it clear that your qualifications for the office, while negligible, are better than his, which are non-existent.

6. Do continue to tap into the anger of your constituents.  It is the fuel that runs your campaign.

 

In yesterday’s post, I indicated that the principal reasons for wage stagnation were globalization, technological improvements, and the decline of unions, but I also suggested that conditions could and would change in the foreseeable future.  Here is my thinking:

1.  The off-shoring of American manufacturing has gone about as far as it can.   While labor costs are obviously a big concern to American manufacturers, they also worry about transportation and energy costs, the adequacy of infrastructure, political stability, and their ability to react quickly to changes in their markets.  Many of these factors are starting to turn in favor of production at home.  Companies seeking lower labor costs in the future will probably be moving from China to some other location in Southeast Asia or Africa, not from the US to another country.  If American workers lose their fear of foreign competition, wage increases should be the result.

2.  Demographic changes favor workers.  The size of the workforce is declining as a result of baby boomer retirements.  This is the principal (if unspoken) reason the GOP candidates for President are all determined to raise the retirement age.  A smaller workforce should drive up wages.

3.  Technological change is a wild card.  No one really knows what impact technological change will have on employment in the future.  History tells us we should be optimistic about this, but this is a “known unknown.”  It is likely to vary wildly from job to job.

There once was a doctor named Ben.

The right really loved him, so then

He climbed in the polls.

Will his gaffes take their toll?

The question is not if, but when.

These are three related, but different, phenomena that call for different governmental responses.  I will try to tease them out there.

Rising Inequality

While a few right-wing economists maintain that inequality is not, in fact, rising, they are outliers; all of the credible evidence suggests that it is–not just in the US, but throughout the world.  The principal drivers of  increased inequality are globalization and technological change, but it has been exacerbated by government policies on taxing and spending, particularly in this country.

Is the average American really upset about this state of affairs?  I would say not, because, to the average American, the super-rich are sports and media stars, not hedge fund managers, and the nexus between their work and their compensation is obvious.  It is true that LeBron James, for example, is not typical of the average plutocrat, who is much more likely to be a CEO or a financial honcho, but I don’t think the American public views it that way.  In any event, people are more likely to view inequality in the context of people they know, and the lifestyle of a typical CEO is not something with which average people are familiar.

Rising inequality is both a political and an economic problem.  It is an economic problem because the shrinking of the middle class leads to a smaller base of consumers and, therefore, increased instability; the political problem, in the age of Citizens United, obviously is an unfair degree of access to politicians and regulators.  That said, I don’t think inequality by itself is the source of the widespread unhappiness with the political system that has manifested itself both on the left and the right.

Declining Opportunity

There is also plenty of evidence that American society is becoming more oligarchical as a result of the convergence of a knowledge-based economy and the propensity of well-educated people to marry and cluster together in similar communities.  There isn’t a whole lot the government can do about this;  to the extent that it does have some power, it involves changes to the educational system that will have to work themselves out over decades.  I don’t think this explains popular concern about the economy, either.

Stagnant Wages

If wages were rising at a historically high rate, but profits were increasing at an even higher rate, would working people be complaining?  I doubt it.  Wage stagnation, not inequality, is the principal source of frustration with the system.

All of the evidence I have seen indicates that stagnating wages have been a problem since the late 1970’s.  The principal reasons for stagnating wages are globalization and technological change, and how they are perceived by working people.  If you believe that your job is under threat every day by a machine or someone in India, labor militancy is probably not in your future.  The withering away of unions is also a factor, although the ongoing relevance of unions in an economy in which the means of production are frequently laptop computers is debatable at best.

Is this state of affairs immutable?  No, for reasons I will discuss in a subsequent post.

Several moderate center-right pundits, most notably David Brooks, breathed a sigh of relief after the last debate, because they now view Marco, a supposed responsible establishment candidate, as the front-runner.  It has to be said, however, that some center-left pundits have fallen under his spell, as well;  I suppose that is no surprise, since Marco’s youth, back story, and occasional lucidity make him look more like a Democrat than a Republican.  In other words, when the other GOP candidates bash him for looking like a new Obama, that only endears him to the left.  But does the medium coincide with the message?

No.  Consider the following:

1. Marco indicated in the first debate that he supported a total ban on abortion, with no exceptions.
2. His tax plan, memorably described as “puppies and rainbows” by Josh Barro, is heavily weighted towards the extremely wealthy.
3. His energy plan can be described succinctly as “Drill, baby, drill.”
4. He is not prepared to take any steps to ameliorate climate change.
5. Other than Lindsey Graham, who is in a class by himself, he is the most hawkish of the GOP candidates.
6. He has collaborated with Ted Cruz to try to shut down the government.
7. His Obamacare replacement plan is intended to move workers out of employer plans and into individual policies.  There is a case to be made for that, but it can’t be denied that it would be a major change.

Does that sound like a “moderate” to you?

We Didn’t Come From Nothing

White noise from my TV.

Days of fear and rage.

Walls are rising everywhere.

It’s not a golden age.

 

Gridlock all around us.

Thinking white and black.

Today the road of progress

Looks like a cul-de-sac.

 

Hamilton and Jefferson

Lincoln/Douglas, too.

FDR and GOP

Conflict’s nothing new.

 

We didn’t come from nothing.

We’ve been through it before.

You don’t need to be cynical

If you know the score.

Green Mountain Socialist

Bernie’s from the city

But his fame came from Vermont.

Land of farms and verdant hills

All the ice cream you could want.

 

The people of that pristine state

Like to keep things small.

Chain stores are disfavored;

No billboards at all.

 

In light of this, it really shouldn’t

Come as a surprise

That Bernie’d break up the big banks.

They’re evil in his eyes.

 

He’s called upon the populace

To rise up and assist him.

The financiers are ready, too.

They’ll certainly resist him.

 

Can he prevail?  I doubt it, too.

Beware the Golden Rule.

The odds are stacked against him

But Bernie’s not a fool.

 

Two additional observations:

1.  Sanders isn’t really a socialist.  A socialist would want to nationalize the banks, not break them up.
2.  You can think of Vermont as the anti-Texas (both of them were independent republics at one time, but Texas is about change and being big, and Vermont is about preserving an idealized polity of small farms) or the American Switzerland.

The policy undoubtedly made some sense when China was a Malthusian wasteland, but those days are long gone.  Now the country is facing a demographic time bomb that, among other things, has even caused some economists to muse about men “sharing” wives.  Will the change help?  Yes, but only in the long run, and only if it is combined with other reforms that make having children in urban areas more financially feasible.

The Communist Party doesn’t exactly like to admit its fallibility, but it has effectively done so here.  How will the people react?  We’ll see.

You can supply the music.

                            Hey Carly!

Your dad was still at Duke

When you and I were friends.

You claim you came from nothing.

The lies just never end.

 

You took a job at Lucent

You sold yourself so well.

Some deals turned out badly, but

Your bosses couldn’t tell.

 

Hey Carly!

Why did you leave?

What do you want?

What do you believe?

 

You went to manage HP

Where you were the boss.

You chose to purchase Compaq

Shareholder value lost.

 

The Board told you to move on

You were amply paid

You then ran for the Senate

Were crushed, or so they said.

 

Hey Carly!

Why did you go?

Something out there

Must be better, you know.

 

Now you have decided

That wouldn’t be enough.

You chose to run for President

To stop all the free stuff.

 

Taking on the Donald.

He acts just like a pig.

Maybe this could be the start

Of something really big.

 

Hey Carly!

Why did you run?

Who knew that all this

Could be so much fun?

 

But now it’s all over

The damage has been done.

Your race has finally ended.

You’ve nowhere else to run.

 

Hey Carly!

Why did you lose?

Where will you go next?

What else can you choose?

Up here on the Hill

We impose our will

We make it hard to keep the lights on.

 

We constantly fight

To prove we’re right

We won’t quit until Boehner’s gone.

 

GOP wasteland

It’s only GOP wasteland.

We’re all wasted!

 

Parody of “Baba O’Riley” by The Who

Overall reaction:  The candidates lined up to tell us that huge tax cuts for the wealthy and massive reductions in the size of the federal government were all intended to eliminate inequality and help the average American.  Hey, it worked in the first Gilded Age, didn’t it?

I thought I could hear Carnegie, Rockefeller, and Morgan laughing somewhere in the distance.  The cynicism of it just takes your breath away.

Winners:

Marco Rubio:  Easily fended off inept challenges from the panel and Bush.  Managed to get away with a completely misleading response to a question about his tax plan.

Chris Christie:  Less attention to Trump resulted in more swagger.  Predictably got a positive response with his attacks on the panel.

Ted Cruz:  In this crowd, he doesn’t sound like the extremist that he is.

Losers:

Jeb Bush:  Foolishly telegraphed his punches at Rubio, with the preordained result.  If he didn’t have so much money in the bank, he would be going home already.  At least he’s a winner at fantasy football.

Ben Carson:  Lacked energy as usual, but made plenty of outrageous (albeit low- key) statements about regulations, taxes, and Medicare that will provide ammunition to his opponents in the future.  His tax plan appears to have been drafted on the back of an envelope.

The CNBC panel:  Largely used the same aggressive tactics as the Fox News panel without understanding that the candidates would not show them the same degree of deference.  Failed to follow up appropriately where opportunities presented themselves.

Also-ran

John Kasich:  Started strongly as the voice of sanity in the group, but lost momentum by blathering on about the Ohio miracle.

Donald Trump:  Was the light beer version of himself–the same stuff, but less of it.

Carly Fiorina and Rand Paul:  No memorable moments.

Mike Huckabee:  Polished, but not much air time.

 

There once was a Speaker named Paul.

To the head of the House he was called.

It looked like he’d get

Stuck with raising the debt,

But Boehner took care of it all.

Plenty of ink has been spilled recently over the commanding lead the GOP outsider non-politicians have over the establishment candidates in the polls.  And with good reason–it defies history, if not logic, and it is the single most significant development that has occurred since the race began.  Why has this happened?

In my opinion, there are three reasons for it:

1.  The George W. Bush Administration discredited the GOP establishment.  Bush himself retained a degree of popularity with Reactionaries because he was an evangelical and knew how to speak their language, but his presidency was viewed as a disaster by the right, as well as the left.

2.  The right-wing media have told the public for the last eight years that the apocalypse is here.  This includes media that everyone would agree are part of the establishment–not just a few nut job talk show hosts.  If you continue to tell people that socialism is here and the end is nigh, why should the voters back moderates who did little or nothing to stop it from happening?

3. The politician candidates have done little or nothing to make the case for someone who understands the system.  We live in a system with checks and balances.  If the next GOP president wants to get anything done, he will have to do at least some reaching across the aisle.  Apparently no one wants to admit that, but past success is the best argument in favor of an establishment candidate.  Do you remember Jeb Bush or Chris Christie making that argument forcefully at either of the debates?  Me, neither.

Jeb’s manhood

Carly’s smile

Walker’s Harley

Gone awhile.

 

Trump’s temper

Carson’s spine

Christie’s swagger

Marco’s mind.