Our Long National Nightmare: Just Beginning?
Richard Cohen has a piece in the National Journal on the prospects of a Dem takeover of the House and their “grand hopes of reviving a liberal activism that has been stifled for a dozen years” that is horrifying in its feel-good banality:
The two party leaders, Rep. Nancy Pelosi, D-Calif., and Sen. Harry Reid, D-Nev., are promoting a six-prong “New Direction for America” agenda — their so-called “Six for ’06.” Pelosi has also promised that within 100 hours after taking control of the House on January 3, Democrats will pass legislation to increase the minimum wage, mandate the negotiation of Medicare prescription drug prices, fully implement the recommendations of the 9/11 commission, and repeal tax benefits for big oil companies.
And that would be only the start. Other Democrats — especially prospective committee chairmen eager to gain, or regain, control of the gavels — are bubbling over with possible initiatives across the public policy spectrum. In this package, National Journal looks at the Democrats’ specific plans in more than a dozen key issue areas.
For instance, Sen. Barbara Boxer, D-Calif., in line to chair the Senate Environment and Public Works Committee, wants to push legislation to reduce greenhouse gases, while Sen. Edward Kennedy, D-Mass., who may lead the Senate Health, Education, Labor, and Pensions Committee, is looking to cut interest rates on student loans. On the other side of the Capitol, Rep. Charles Rangel, D-N.Y., the prospective House Ways and Means Committee chairman, wants a more bipartisan policy on international trade, including better protections for U.S. workers.
Oh, dear God: student loans? Meddling in international trade? Going after the oil companies?
This is the compelling agenda that awaits us? I’m all a-tingle with excitement…
Great post on a subject that will be under-examined (See: McCain-Feingold).
I would add, the impeachment factor. I see at least one, and possibly three impeachments of President Bush in a dem majority House. Possibly one for being divisive.
Sounds like Bush will be dropping the V-bomb a bit more if they win.
You know what? Let’s have at it. Let them make their case, such as it is described here, to the American people and let’s see where the votes fall. Let’s find out if all those Great Society ideas still have electing power 40 years of failure later. International trade? Minimum wage? Oil company profits? Yeah, let’s talk about all that feel good but useless stuff and when the Democrats lose again let’s take joy in their whining that they just didn’t do a good job of communicating their messge.
Hold your ground, hold your ground. Sons of Reagan, of Buckley, my brothers. I see in your eyes the same fear that would take the heart of me. An election may come when the courage of men fails, when we forsake our friends and break all bonds of fellowship, but it is not this election. An hour of wolves and shattered shields, when the age of conservatism comes crashing down, but it is not this election. This election we fight! By all that you hold dear on this good Earth, I bid you “stand, Men of the integrity!”
Well done – but gee, that sounds familiar!…
First the Democrats were criticized for purportedly not having agenda, and now they are criticized for having them.
The minimum wage is at its lowest level (in real dollars) in decades. Lowering the cost of Medicare drug prices helps us all (except the pharmaceutical industry, which is to the Republicans what trial lawyers are to Democrats). The members of the 9/11 Commission gave poor grades to the Bush administration on executing their suggestions. The global warming issue has been avoided by the current administration – this may be the most important agendum of them all. Enhancing American education and competitiveness by reducing student loan rates doesn’t sound like a bad idea. I’m not sure what a “more bipartisan policy on international trade” is, but you may recall that the Clinton administration tilted heavily towards free trade (which even the Wall Street Journal editorial board applauded).
Perhaps it makes sense for the government to do the things which it does well, such as establish a minimum value for human labor, negotiating with pharmaceutical companies on behalf of the taxpayer, protecting the environment, and so forth. I shudder to think what would happen if competency were returned to government.
What the government does well – set a minimum value on human labor?
Puh-lease…I’ll take my economy capitalistic, please – the market determines wages efficiently, when the government gets out of the way….(more often than not, at any rate)…
I disagree. There are legitimate reasons for the government to regulate the relationship between labor and capital. This is because the government has the obligation to protect its citizens, and unrestrained capitalism can lead to the exploitation of workers. For example, few would dispute that the government has the right to enact child labor laws, workplace safety laws, and anti-discrimination laws. These are all instances of the government intervening in the labor markets to protect the labor force.
For similar reasons, I believe that the government is entirely justified in setting a minimum hourly wage to prevent companies from driving the price of labor below a humane level. I would like to think that the concept of fairness is one which is enshrined in American values, and ensuring that workers receive fair compensation for their efforts is a legitimate and necessary part of governing.
Well, we fundamentally disagree on this issue; Adam Smith’s invisible hand will always prevail in my view…
That is why I am a Democrat and you are a Republican — I believe that the government has the obligation to protect the weakest members of society, and the laisser-faire approach favored by the GOP will inherently protect those who need no protection –
sorry, laissez-faire
“I disagree. There are legitimate reasons for the government to regulate the relationship between labor and capital.”
That’s what John Maynard Keynes said, and everyone but a few “loons” believed him. Then stagflation hit.
“That is why I am a Democrat and you are a Republican — I believe that the government has the obligation to protect the weakest members of society”
No; you are a Democrat because you don’t understand enough economics to realize that laissez-faire helps the weakest in society.
I don’t understand the reference to Keynes or how it involves stagflation.
As for the second remark: actually I have a very firm understanding of economics. The fact that you disagree with me does not indicate an ignorance of economics on my part.
I also used to live in perhaps the most laissez faire economy of all (Hong Kong before 1997). I can tell you from first hand experience that the weakest members of HK society were far from being served — if they didn’t work, they starved. They were subject to the vicissitudes of an economy and suffered or benefitted accordingly. If they were infirm or unable to work, they were indigent. There is a permanent underclass there and a large Mafia-type organization. There are many things which are praiseworthy about Hong Kong and its (pre-1997) government, but protection of the weak is not among them.
Your admitted lack of understanding of Keynesianism and stagflation disproves the notion that you have a firm understanding of economics.
One of the basic elements of Keynsian economics was (and I suppose still is for the few that cling to his debunked theories) counter-current spending. During a boom, the government should save money, and during a recession it should spend. Overall Keynesianism was heavy on government interventionism into economics. Practically everyone believed this theory until the Carter Administration. There was a recession; Carter spent money (as Keynsian economics dictated) and, instead of producing more jobs, it caused inflation to sky-rocket. Keynsianism dictated that rising inflation and rising unemployment at the same time are impossible.
Think about what would happen if the Federal gov’t raised the minimum wage to $7.50 or $8.00. People who make minimum wage would take home about $30-$50 more per week. I worked at a Jack-in-the-Box over the past three summers and made $6.50. If they had to start paying me (and the other 15-20 people who worked there) 1 dollar more per hour, that would be about $800-$1000 more per week (after all, people who already made $7.50 before the wage hike would be expecting a raise also). And that would only be one store. There are forty in the Nashville, TN area alone, so the corporate office would be out c. $30,000/week in just one moderately-sized city. They would have to, in turn, raise prices. As would practically every other industry whose employees make minimum wage (that means virtually all retail, fast food chains, and grocery stores). So prices at Kroger’s increase as well (and so do those at the gas station), so my extra $30/week isn’t going very much farther, now is it? In fact, I may have been better off making less money and paying lower prices. This does assume that the company will choose to raise everyone’s pay, instead of just fire people and close down stores — that’ll be good for the weakest in society, won’t it? If you’re arguing that there’s strength in numbers, then the weakest will be come much stronger (simply by being more numerous).
Furthermore, a rise in prices throughout the US market would essentially mean that the US dollar is not as worth as much as it used to be (ever heard of the Big Mac Index?). Purchasing Power Parity of the US dollar against the Euro, the Pound, and the Yen would decline. Imports become more expensive. And a declining value in currency is called inflation. So, not only am I now making a bigger paycheck that I can’t use to buy as much as I could the smaller one, the money that I have in the bank isn’t worth as much as it used to be either. The way to combat inflation is by raising interest rates, so now if I am in debt (which I am not, thank God) my car and/or house payments are increasing.
In short, as F. A. Hayek said, the socialist argument is simple and emotional (it is made by people who don’t think much about the consequences); the free market capitalist argument is thougtful and subtle.
1) “Your admitted lack of understanding of Keynesianism and stagflation disproves the notion that you have a firm understanding of economics:” I didn’t admit any lack of understanding. I only wrote that the connection between Keynes and stagflation is not an obvious one. It is still not obvious (see 2 & 3 below).
2) Your second paragraph has nothing to do with your contention that a laissez-faire economy benefits the weak. Rather, it refers to how much government should spend (and, if you want to get deeper into Keynes, whether the government should run a surplus or a deficit). A government can run a deficit (or surplus) and be either laissez-faire or managed — the two variables are independent of each other.
3) “Carter spent money (as Keynsian economics dictated) and, instead of producing more jobs, it caused inflation to sky-rocket:” so I guess an oil embargo and record high oil prices had nothing to do with it? Systemic inflation inherited from the Nixon and Ford administrations had nothing to do with it? (Remember Nixon’s wage and price controls and Ford’s WIN buttons? And did they run big deficits?) Paul Volcker pushing the prime rate up to the high teens had nothing to do with inflation?
4) The minimum wage is currently $5.15. At your $6.50 hourly wage you were over 20% above it. So the minimum wage would have to rise significantly to have any effect at all on the burger flippers of the world.
5) The highest minimum wage in current dollars was $9.12 in 1968 — or about 40% higher than it is today. The economy was strong in the late sixties and unemployment was at low levels. So your theory is not backed up by history.
6) The example of Nashville fast food references ignores the effect of increased income and tax revenue produced by increased hourly wages. As an expert in economics, surely you are familiar with the stimulative effects of the growth of marginal income.
7) “Ever heard of the Big Mac Index?” Yes. I’ve been a subscriber to the Economist since you were pre-natal.
To quote Keynes in another context: “the market can remain irrational longer than you can remain solvent.” If you want to insist on your economic theories, you will be neither rational nor solvent.
“Your second paragraph has nothing to do with your contention that a laissez-faire economy benefits the weak.”
I thought I should explain the connection between Keynesian economics and stagflation for you, background information and all.
“I guess an oil embargo and record high oil prices had nothing to do with it? Systemic inflation inherited from the Nixon and Ford administrations had nothing to do with it? (Remember Nixon’s wage and price controls and Ford’s WIN buttons? And did they run big deficits?)”
They all influenced stagflation; it did not manifest itself until the Carter administration. I did not blame Carter for stagflation, simply stated that it manifested itself under his administration. Nixon himself once said, “We are all Keynesians now.” The fact that stagflation occured under Carter means nothing against Carter; it means everything against Keynes, on whose theories Carter was acting. And the very existence of stagflation proves Keynes wrong; his theories stated that rising inflation and rising unemployment cannot occur simultaneously.
Volcker’s rate hikes under the Reagan administration helped to end stagflation.
“4) The minimum wage is currently $5.15. At your $6.50 hourly wage you were over 20% above it. So the minimum wage would have to rise significantly to have any effect at all on the burger flippers of the world.”
The Democrats are proposing an increase to $7.50. The fact that I, as a burger-flipper — a low-skill low-value-added labor position, was paid 20% over the minimum wage also indicates that the markets are at work, setting their own “natural” minimum wage.
“5) The highest minimum wage in current dollars was $9.12 in 1968 — or about 40% higher than it is today. The economy was strong in the late sixties and unemployment was at low levels. So your theory is not backed up by history.”
Was that immediately after a 50% minimum wage increase, as the Democrats are proposing?
“6) The example of Nashville fast food references ignores the effect of increased income and tax revenue produced by increased hourly wages. As an expert in economics, surely you are familiar with the stimulative effects of the growth of marginal income.”
Thirty bucks a week is a drop in the hat (as you previously noted — 4), especially if everything costs more.
“The value of the dollar relative to foreign currencies is a function of many variables, including fiscal policy . . .”
The Democrats are planning on doing a bang-up job on that, too, aren’t they? Increasing spending on every kind of social welfare program under the sun; there’s some responsible fiscal management for you. I suppose it’s okay since they’re also planning on raising taxes on people with high incomes, stifling investment, causing both unemployment to increase and government revenues to decline.
Not to mention the turmoil they plan on unleashing on the Middle East and thus the oil market by abandoning Iraq to civil war and/or Islamist rule. Even if you think it was a mistake to go in in the first place, you must, at the very least agree with Vladimir Putin that pulling out now would be the second mistake.
And if MacDonald’s has to charge more USD for a Big Mac to compensate for being forced to pay higher wages, then PPP of USD will decrease.
The fact of the matter is that there is virtually no socialist country in the world whose economy performs as well as a capitalist one. When you first said (in post #10) that only Democrats cared about the weakest in society, I assumed you were referring to those who make minimum wage as that was what the story references. Judging by post #13, you seemed to mean that the unemployed are the weakest, which is probably right. If you propose that a socialist economy is better for these people than a capitalist one, then I absolutely agree with you. I would much rather be unemployed in a European country than unemployed in the US. In fact, being unemployed in Europe is so good, most European countries have a double-digit unemployment rate, as opposed to the ~5% that the US usually has. Now, if you are talking about decreasing the number of people in the “weakest” category, then a free market economy is the way to go.
1) By correctly recognizing that “They all influenced stagflation” you are contradicting your post 14.
2) “it did not manifest itself until the Carter administration.” Stagflation started two adminstrations before Carter:
“Stagflation occurred in the economies of the United Kingdom in the 1960s and 1970s and the United States in the Nixon administration of the early 1970s as reported by various news and financial sites.” Some would trace the origin of stagflation to Nixon’s imposition of wage and price controls — others would say that the controls were a response to stagflation.
http://en.wikipedia.org/wiki/Stagflation
3) Paul Volcker served under both Presidents Carter and Reagan.
4) I don’t dispute that the “the markets are at work, setting their own ‘natural’ minimum wage.” My point is not whether the markets are working, but whether they are fair.
5) The Democrats are proposing a minimum wage which is roughly half way between today’s historically low level and 1968′s historically high level. Whether $7.50 is the correct number, I have no idea. However, you ignored my point, which is that minimum wages have been consistently higher than they are today for decades, with no discernable effect on the economy. If high minimum wages did not wreck the economy before, there is no reason why median minumum wages should affect it now.
Moreover, economic predictions — even those which seem intuitively obvious — are often dead wrong. I recommend that you read the front page article in today’s Journal which shows how all of the economic predictions made after 9/11 (paralyzed economy, diminution of trade through our ports, higher security costs for businesses, etc.) turned out to be wrong. Theory is one thing, but practice is quite another. If you want to make the point that higher minimum wages impede economic development, then show me times when this occured.
6) I’m not here to bang a drum for Democrats, as I vote for people I like regardless of party. However blaming Democrats for wishing to increase “spending on every kind of social welfare program under the sun” is paradoxical considering the current GOP administration and Congress have increased spending at the fastest rate in forty years.
7) Re “raising taxes on people with high incomes, stifling investment, causing both unemployment to increase and government revenues to decline:” Your daisy chain simply does not hold true. Consider the connection of the following two facts. Marginal tax rates on high income earners are at a historically high level. Worker productivity has increased over the past six years but the median income is at the lowest level in years. Now tell me that current tax policy is equitable or economically efficient.
9) “if MacDonald’s (sic) has to charge more USD for a Big Mac to compensate for being forced to pay higher wages, then PPP of USD will decrease.” Well, no. Inflation is only one factor among many in the value of the dollar. See above.
10) “there is virtually no socialist country in the world whose economy performs as well as a capitalist one.” Who said anything about socialism? I’m not a socialist and I think that capitalism is a great thing. However, I believe that unrestrained capitalism is not always a good thing, and there are reasonable limits which the state can and should impose on the free markets. Child labor laws, worker safety, and anti-discrimination laws are examples. So is a minimum wage.
11) I didn’t say that “only Democrats cared about the weakest in society.” I’m sure that Republicans care about them plenty. The difference is that Democrats are more inclined to use the power and wealth of the state to redress the imbalance.
Sorry, meant to write “Marginal tax rates on high income earners are at a historically LOW level.”
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