Incomes drop most in 20 years

[mocgator]

As we all go furthur into debt with less savings. Hope and change baby!

http://www.bloomberg.com/news/2013-03-01/consumer-spending-in-u-s-climbs-even-as-taxes-hurt-incomes.html


Consumer spending in the U.S. rose in January even as incomes dropped by the most in 20 years, showing households were weathering the payroll-tax increase by socking away less money in the bank.

Incomes slumped 3.6 percent, sending the saving rate down to the lowest level since November 2007.

Feroli added that “it’s probably going to be a tough couple months” ahead for consumer spending. “The downside is taxes and gas.”

The saving rate dropped to 2.4 percent from 6.4 percent. Disposable income, or the money left over after taxes, dropped 4 percent after adjusting for inflation, the biggest plunge since monthly records began in 1959.

[108]

wtf is with you with "hope and change"

the payroll tax cut was temporary help during the great recession, but im guessing, like the Bush Tax Cuts, you just wanted them to go forever even though they were going straight to the debt...

you want to reduce the debt, but criticize any measures taken to start doing that

damned if you do, damned if you don't

[PSGator66]

I love the agrument about tax cuts going on forever but why don't you mention the frivolous spending that is really the root of our nation's debt. It is like the workers/tax payers are the problem because we don't give enough to those who pay none.

[jimgata]

Please explain how tax increase will reduce the debt. Tax increases stall growth, the economy s shrinks, tax revenue decreases due to slow economy. Any monetary problem this country has could easily be solved by a growing economy and this administration seems to want to slow growth of the economy. WHY?
I an sure the left will bring Clinton's name up as an example, however the tech boom contributed heavily to the economy at that time, which by the way did collapse, before increasing later.

[fredsanford]

Please explain how tax increase will reduce the debt.

The tax increase that affected everyone was the removal of the temporary SS cut. Since this cut was coming out of SS, removing it reduces the debt SS causes or may cause.

[jimgata]

If removal of the ss tax cuts cause the economy to slow and gdp to be lower, the net result of removal of the ss tax cut will be little or nothing for tax revenue, emphazing the results of tax increases.

[gatordowneast]

To give money to someone, government must take money from someone else. Tax hikes, in any way, shape, form or description, do not grow anything.

Will be easy for the next POTUS to get our economy humming again. Just reverse every Obama regulation or policy and we will be kicking butt and taking names and some thumbsuckers, slackers and mooches will be kicked off these public assistance scams and have to get their asses to work. And the public assistance programs will then return to what they were intended for....A SAFETY NET...NOT A FRICKIN LIFESTYLE.

[ThePlayer]

Obama is leading America into 3rd world country status.

Of course, saying Obama 'leads' anything is an overreach.

[austingtr]

forward!

[mdgator05]

If removal of the ss tax cuts cause the economy to slow and gdp to be lower, the net result of removal of the ss tax cut will be little or nothing for tax revenue, emphazing the results of tax increases.

How very Keynesian of you. Keeping spending high and taxes low during periods of economic decline in order to spur growth. Sort of like the stimulus, which temporarily cut taxes and increased spending. Of course, as we have been growing, we have to start increasing taxes and lowering spending. Basic counter-cyclical macroeconomics.

[jimgata]

HUH? Nothing was even mentioned to increase spending. Where did that come from? The point was that increasing taxes does not necessarily add to revenue.

[GatorAbe7]

Feroli added that “it’s probably going to be a tough couple months” ahead for consumer spending. “The downside is taxes and gas.”

[/B]


Finally a projection that isn't ignoring the rising gas $$$ burden on family incomes. These "predictions," past and present, have neglected accounting for gas, and come every quarter Bernanke and the rest of the experts are left "surprised."

With the rising gas costs California can expect to be paying it's highest rates all-time, over $5 a gallon this summer. And in typical California fashion their Democrat super-majorities have this week increased the gas tax to the nations highest levels. 75-cents on the gallon is what I heard on the radio last night.

[mdgator05]

HUH? Nothing was even mentioned to increase spending. Where did that come from? The point was that increasing taxes does not necessarily add to revenue.

Which is the same argument for why you can't decrease spending during times of economic trouble in Keynesian economics.

[gatorman_07732]

Which is the same argument for why you can't decrease spending during times of economic trouble in Keynesian economics.

Your completely out of your mind, if we could have spent our way into good times it would have already happened.

[mdgator05]

Your completely out of your mind, if we could have spent our way into good times it would have already happened.

"If you think we can cut taxes into good times, it would have already happened."

In reality, we have structural issues with the labor market that nobody wants to even discuss. As long as we continue to try to have government intervene so heavily in the labor market through immigration laws while staying out of capital markets in the form of free trade, you will have firms engaging in skimming behavior, which will serve to push down wages and increase unemployment for semi-skilled and unskilled labor. And not everybody is suited to high-skilled labor, so we have to decide whether we want to push closer to free market equilibrium by getting rid of major government interventions in the labor market, such as immigration laws, re-nationalizing capital markets, or attempting to deal with the structural problems.

This structural issue has existed for years now. Each of the bubbles has papered over it, but that shouldn't be the goal.

[gatorman_07732]

"If you think we can cut taxes into good times, it would have already happened."

In reality, we have structural issues with the labor market that nobody wants to even discuss. As long as we continue to try to have government intervene so heavily in the labor market through immigration laws while staying out of capital markets in the form of free trade, you will have firms engaging in skimming behavior, which will serve to push down wages and increase unemployment for semi-skilled and unskilled labor. And not everybody is suited to high-skilled labor, so we have to decide whether we want to push closer to free market equilibrium by getting rid of major government interventions in the labor market, such as immigration laws, re-nationalizing capital markets, or attempting to deal with the structural problems.

This structural issue has existed for years now. Each of the bubbles has papered over it, but that shouldn't be the goal.

Uh, no one person or group has had there taxes cut with the exception of that silly temporary payroll tax cut. In fact we have had a net tax increase. :yes:

[mdgator05]

Uh, no one person or group has had there taxes cut with the exception of that silly temporary payroll tax cut. In fact we have had a net tax increase. :yes:

Yah with the exception of those tax cuts, nobody has had their taxes cut. We are talking about an economy stretching back to the 1990s. Are you really going to claim nobody has had their taxes cut since the 1990s?

[Matthanuf06]

Which is the same argument for why you can't decrease spending during times of economic trouble in Keynesian economics.

The Keynesian model isn't meant for economies with such enormous debt loads though.

[gatorman_07732]

Yah with the exception of those tax cuts, nobody has had their taxes cut. We are talking about an economy stretching back to the 1990s. Are you really going to claim nobody has had their taxes cut since the 1990s?

We all know Bush cut taxes

[mdgator05]

We all know Bush cut taxes

And outside of a bubble in the mid-2000s, we have only really seen growth in corporate profits due to the structural issues. This growth is still continuing.

So if you think cutting taxes would be some sort of a magic elixir for the entire economy, without dealing with the structural problems, you would be wrong, as we have tried that.

Neither party wants to deal with the structural issues. Republicans don't want to deal with it because it involves them opening up immigration, admitting that they don't really want free markets, or designing programs with the recognition that allowing corporations to skim cheaper labor has negative consequences in order to mitigate the damage done to lower and mid income workers.

Democrats don't want to engage in policies that will naturally lead to lower unionization, don't want to restrict immigration in a draconian way, and are afraid of being seen as being too pro-government spending.

So on we go arguing on the margins and blaming the other party for a structural problem, while avoiding the problem and pretending that if only we cut taxes more, it wouldn't exist.

[T3goalie]

Tax cuts are a false starter to the discussion. The questions are revenue and spending.

[gatorman_07732]

And outside of a bubble in the mid-2000s, we have only really seen growth in corporate profits due to the structural issues. This growth is still continuing.

So if you think cutting taxes would be some sort of a magic elixir for the entire economy, without dealing with the structural problems, you would be wrong, as we have tried that.

Neither party wants to deal with the structural issues. Republicans don't want to deal with it because it involves them opening up immigration, admitting that they don't really want free markets, or designing programs with the recognition that allowing corporations to skim cheaper labor has negative consequences in order to mitigate the damage done to lower and mid income workers.

Democrats don't want to engage in policies that will naturally lead to lower unionization, don't want to restrict immigration in a draconian way, and are afraid of being seen as being too pro-government spending.

So on we go arguing on the margins and blaming the other party for a structural problem, while avoiding the problem and pretending that if only we cut taxes more, it wouldn't exist.

I think you're lost or disingenuous. For some reaon I doubt this conversation is worth my time

[mdgator05]

I think you're lost or disingenuous. For some reaon I doubt this conversation is worth my time

As I said, Republicans don't want to talk about it...

[madgator]

Both sides are proving that they have no interest in cutting spending on any level

[gatorman_07732]

As I said, Republicans don't want to talk about it...

I got news for you, Obama is making things worse with his policies and by 2016 we may be in a hole we can't get out. Heavier tax burdens and regulatory policies are not going to spur growth.

[mdgator05]

I got news for you, Obama is making things worse with his policies and by 2016 we may be in a hole we can't get out. Heavier tax burdens and regulatory policies are not going to spur growth.

Nor are lighter tax policies. If I can pay somebody $0.25 to make my t-shirt and $0.50 to ship it, why would I make it in America just because you lowered my taxes? You can't undercut the labor costs unless you're willing to pay me subsidies to keep me in the US.

Unless you are willing to have a free labor market, which no Republican I have seen is willing to do (free meaning the ability for anybody to apply for a job anyplace, regardless of country in which that job is located), then you are going to end up with a group of low-skilled people stuck in a place without low-skilled jobs due to the high costs of living (the entire US is high cost of living by world standards).

You can't have free capital movement across national borders combined with no free labor movement across national borders and expect there not to be huge structural issues in the labor market.

And simply lowering taxes will do nothing to solve that problem. We have three options for solving that problem:

1. The Free Market solution: opening up international labor markets in the same way that international capital markets have been opened. Free immigration and emigration.

2. The government control solution: restricting capital markets in the same manner as we restrict labor markets, meaning it requires a lot of work to import goods in the same way that it requires a lot of work to immigrate here. Tariffs and continued immigration controls.

3. Maintain the current system but deal with the consequences of a trapped low-skilled labor population with too little work to do by attempting to increase skill where possible (education and training programs) and engaging in redistribution where it is not, either publicly through government or privately through charitable work. If this system is worth enough money to the skilled population (due to the lower cost goods combined with maintaining a high standard of living), this shouldn't be a huge issue.

Because no matter how much you cut taxes and decrease worker safety, increase air and water pollution, etc, you just can't compete with places that already have that lack of safety/environmental regulations and a cost of labor that would not be possible in the US due to the price of living in this country.

[mastoidbone]

The problem is BOTH dems and pubs have won while americans have lost.
Pubs have won in driving overall REVENUE to below historic norms as a % of GDP

DEMS have won with their drunken sailor spending---which has us at moder high spending as a % of GDP.


The result???
RECORD deficits and debt.

The solution???
RAISE TAXES---especially in a logical way that ensures stable revenue to pay down debt---a VAT makes the most sense.

SLASH spending---end pensions for govt workers, cut their pay 10%, slash defense 5% a year for 5 years, ration medicare, end easy disability.

Result???
A recession for a while for sure----but a better future for america---since we have been the ones to benefit from low taxes and ridiculous spending habits---we should pay the price not our kids.

[mdgator05]

The problem is BOTH dems and pubs have won while americans have lost.
Pubs have won in driving overall REVENUE to below historic norms as a % of GDP

DEMS have won with their drunken sailor spending---which has us at moder high spending as a % of GDP.


The result???
RECORD deficits and debt.

The solution???
RAISE TAXES---especially in a logical way that ensures stable revenue to pay down debt---a VAT makes the most sense.

SLASH spending---end pensions for govt workers, cut their pay 10%, slash defense 5% a year for 5 years, ration medicare, end easy disability.

Result???
A recession for a while for sure----but a better future for america---since we have been the ones to benefit from low taxes and ridiculous spending habits---we should pay the price not our kids.

And at the end, we will still have major structural unemployment. Because all of that slashing of spending and consumption (which will have a multiplier effect on the decrease in the economy) will not solve the structural labor problems. So we will have much higher unemployment for a few years, so that we can return to basically the same level of income/unemployment a few years later. This is going to continue to be the case until we deal with the structural issues. In fact, as technologies improve, it is likely to get worse over time, not better.

As long as we have low skilled labor trapped in this country along with the free movement of capital, we will have high levels of unemployment on the low-skilled portion of the economy.

[gatorman_07732]

Nor are lighter tax policies. If I can pay somebody $0.25 to make my t-shirt and $0.50 to ship it, why would I make it in America just because you lowered my taxes? You can't undercut the labor costs unless you're willing to pay me subsidies to keep me in the US.

Unless you are willing to have a free labor market, which no Republican I have seen is willing to do (free meaning the ability for anybody to apply for a job anyplace, regardless of country in which that job is located), then you are going to end up with a group of low-skilled people stuck in a place without low-skilled jobs due to the high costs of living (the entire US is high cost of living by world standards).

You can't have free capital movement across national borders combined with no free labor movement across national borders and expect there not to be huge structural issues in the labor market.

And simply lowering taxes will do nothing to solve that problem. We have three options for solving that problem:

1. The Free Market solution: opening up international labor markets in the same way that international capital markets have been opened. Free immigration and emigration.

2. The government control solution: restricting capital markets in the same manner as we restrict labor markets, meaning it requires a lot of work to import goods in the same way that it requires a lot of work to immigrate here. Tariffs and continued immigration controls.

3. Maintain the current system but deal with the consequences of a trapped low-skilled labor population with too little work to do by attempting to increase skill where possible (education and training programs) and engaging in redistribution where it is not, either publicly through government or privately through charitable work. If this system is worth enough money to the skilled population (due to the lower cost goods combined with maintaining a high standard of living), this shouldn't be a huge issue.

Because no matter how much you cut taxes and decrease worker safety, increase air and water pollution, etc, you just can't compete with places that already have that lack of safety/environmental regulations and a cost of labor that would not be possible in the US due to the price of living in this country.

What lighter tax policies? Paul Ryans solution was eliminating tax loopholes and making the code less complex. Obama raised taxes but also gave selective tax breaks for some very wealthy people. They guy is a complete walking oxymoron. The first priority next to be increasing growth and jobs and the government will get more money coming in. One thing the left has never understood is when you tax something you get less of it.

[mdgator05]

What lighter tax policies? Paul Ryans solution was eliminating tax loopholes and making the code less complex. Obama raised taxes but also gave selective tax breaks for some very wealthy people. They guy is a complete walking oxymoron. The first priority next to be increasing growth and jobs and the government will get more money coming in. One thing the left has never understood is when you tax something you get less of it.

Paul Ryan on tax cuts:

WALLACE: OK, but let’s assume it doesn’t. The question is, what’s more important to Romney? Would he scale back on the 20 percent tax cut for the wealthy? Would he scale back and say, OK, you know, we’re going to have to raise taxes for the middle class?

I guess the question is what’s most important to him in his tax reform plan?

RYAN: Keeping tax rates down. By lowering tax rates, people keep more of the next dollar that they earn. That matters. That is incentives. That’s pro-growth policy. That creates 7 million jobs. And what should go first...

No it won't do that. Because our problem with job growth isn't taxes. It is the structural unemployment caused by the free movement of capital combined with the government controlled movement of labor.

As for your last quote, that is simply not true. The first derivative, the effect of the change in tax code on revenues, is often positive although it can be negative. The second derivative, the acceleration of the effect of taxes on revenues is typically negative. But it is pure fantasy to claim that the empirical evidence has backed the first derivative is always negative. If that were true, the revenue maximizing tax rate would by to pick an asymptotically close to 0 percentage for taxes. That is simply absurd.

[gatorman_07732]

Paul Ryan on tax cuts:



No it won't do that. Because our problem with job growth isn't taxes. It is the structural unemployment caused by the free movement of capital combined with the government controlled movement of labor.

As for your last quote, that is simply not true. The first derivative, the effect of the change in tax code on revenues, is often positive although it can be negative. The second derivative, the acceleration of the effect of taxes on revenues is typically negative. But it is pure fantasy to claim that the empirical evidence has backed the first derivative is always negative. If that were true, the revenue maximizing tax rate would by to pick an asymptotically close to 0 percentage for taxes. That is simply absurd.

What is so hard to understand to understand about getting more people to work and of the gov udder will increase revenue? This is so simple it's stupid. I do think liberals get this and it is their overwhelming desire to Ereopeanize this country and destroy it.

[mdgator05]

What is so hard to understand to understand about getting more people to work and of the gov udder will increase revenue? This is so simple it's stupid. I do think liberals get this and it is their overwhelming desire to Ereopeanize this country and destroy it.

What is so hard to understand that you don't have a plan that will actually do that? You can cut taxes, but that will not have firms bringing low skill labor back into the US.

We do not have a problem of high skilled labor finding a job. The unemployment rate for those with a college degree is very low. High skilled labor can easily find work. So why can high skilled labor so easily find work while low skilled labor is having so much trouble? If the issue was taxes and regulations, why would that affect the low skilled labor pool more than the high skilled labor pool.

As I said, there are only three solutions to the issues dealing with the labor market: the free market solution (which allows people free immigration and emigration), the government control solution (an end to the free trade agreements with economies with significantly different costs of labor), or the status quo solution (deal with the issues of the structural labor problems through the use of redistributive programs in order to ensure maintenance of the benefits of free capital markets without dealing with the issues of free labor markets).

The status quo solution relies on the proposition that the labor market will not be able to develop into some form of purely wage-based equilibrium due to cultural issues and language in the free market solution and that those at the top of the income distribution benefit from their own jobs being relatively secure while they also pay lower prices for a variety of goods due to lower labor costs.

However, if you would like to advocate for the government control solution, as that will likely lead us to the closest to full employment, I would be willing to listen to a good argument for that solution. Just seems odd coming from a conservative.

If you think that this can all be solved by boiler-plate Republican talking point solutions, you are very sadly mistaken.

[busigator96]

It should continue as long as the true unemloyment rate remains low.

Human labor for repetitive and mundane tasks will diminish even faster as technology replaces it.

[gatorman_07732]

What is so hard to understand that you don't have a plan that will actually do that? You can cut taxes, but that will not have firms bringing low skill labor back into the US.

We do not have a problem of high skilled labor finding a job. The unemployment rate for those with a college degree is very low. High skilled labor can easily find work. So why can high skilled labor so easily find work while low skilled labor is having so much trouble? If the issue was taxes and regulations, why would that affect the low skilled labor pool more than the high skilled labor pool.

As I said, there are only three solutions to the issues dealing with the labor market: the free market solution (which allows people free immigration and emigration), the government control solution (an end to the free trade agreements with economies with significantly different costs of labor), or the status quo solution (deal with the issues of the structural labor problems through the use of redistributive programs in order to ensure maintenance of the benefits of free capital markets without dealing with the issues of free labor markets).

The status quo solution relies on the proposition that the labor market will not be able to develop into some form of purely wage-based equilibrium due to cultural issues and language in the free market solution and that those at the top of the income distribution benefit from their own jobs being relatively secure while they also pay lower prices for a variety of goods due to lower labor costs.

However, if you would like to advocate for the government control solution, as that will likely lead us to the closest to full employment, I would be willing to listen to a good argument for that solution. Just seems odd coming from a conservative.

If you think that this can all be solved by boiler-plate Republican talking point solutions, you are very sadly mistaken.

It's been done over and over again and it's called supply side economics.

[Dreamliner]

Bush's fault until further notice.

[mdgator05]

It's been done over and over again and it's called supply side economics.

So if I am a firm and can get my supply at 50% the cost for a low skilled production process in a foreign country compared to the US, due to free trade, why would I care if you reduced my taxes to 0%? I would still need to act in an economically irrational way to produce that product in the US.

[gatorman_07732]

So if I am a firm and can get my supply at 50% the cost for a low skilled production process in a foreign country compared to the US, due to free trade, why would I care if you reduced my taxes to 0%? I would still need to act in an economically irrational way to produce that product in the US.

But not everybody does that do they? It happens yes but we also adjust, but somehow you think this is somehow exclusive to Obama. After the dot com recession and 9/11 we still managed to get down to the natural rate of unemployment. With Obama's policies it will be impossible.

[mdgator05]

But not everybody does that do they? It happens yes but we also adjust, but somehow you think this is somehow exclusive to Obama. After the dot com recession and 9/11 we still managed to get down to the natural rate of unemployment. With Obama's policies it will be impossible.

To answer your first question: outside of a few niche producers and industries in which shipping is harder due to the size of products (which have limited export capabilities), yes just about everybody does that. Even high end producers, some of whom have remained in the US, are importing the components needed for their products that only require unskilled labor.

If you are producing mass market manufactured goods that rely on low skilled labor, and you are not producing in other countries, you are going to be out of business very quickly. And with free capital markets, there really isn't much that can be done about that short of offering subsidies.

As to your second point, yes, after the recession in 2000-2001, we formed a bubble of unskilled and semi-skilled labor in housing, an industry that was impossible to outsource. It was unsustainable and had major economic implications going forward. I guess we could try that again, but it doesn't seem like it would be a smart idea, given what happened when it ended in 2008-2009.

[gatorman_07732]

To answer your first question: outside of a few niche producers and industries in which shipping is harder due to the size of products (which have limited export capabilities), yes just about everybody does that. Even high end producers, some of whom have remained in the US, are importing the components needed for their products that only require unskilled labor.

If you are producing mass market manufactured goods that rely on low skilled labor, and you are not producing in other countries, you are going to be out of business very quickly. And with free capital markets, there really isn't much that can be done about that short of offering subsidies.

As to your second point, yes, after the recession in 2000-2001, we formed a bubble of unskilled and semi-skilled labor in housing, an industry that was impossible to outsource. It was unsustainable and had major economic implications going forward. I guess we could try that again, but it doesn't seem like it would be a smart idea, given what happened when it ended in 2008-2009.

More and more companies are setting up operations globally which allows them to function at optimum levels. It's a matter of thinking outside the box to stay competitive. People in the U.S. adjust and move on, but there are the vocal few that whine and complain because of the loss of their manufacturing job.
You think the dot com bust was semi-skilled labor? I don't know where you were back then but you're flat wrong, I was there and almost lost a business. That comment tells me you're not completely in tune with what actually happened as the IT sector among other high tech sectors were decimated.

[mdgator05]

More and more companies are setting up operations globally which allows them to function at optimum levels. It's a matter of thinking outside the box to stay competitive. People in the U.S. adjust and move on, but there are the vocal few that whine and complain because of the loss of their manufacturing job.
You think the dot com bust was semi-skilled labor? I don't know where you were back then but you're flat wrong, I was there and almost lost a business. That comment tells me you're not completely in tune with what actually happened as the IT sector among other high tech sectors were decimated.

You are right about corporations setting up globally to remain competitive, since we have designed the economy with free capital markets. However, workers do not have the same option, as there has been nowhere near the push for making free labor markets, through the end of immigration and emigration controls.

As it stands right now, on the low end of the scale, there just aren't enough jobs for all the people who are low skilled that are stuck in the US due to immigration/emigration law and cultural/language barriers. That is why you have a massive structural unemployment.

The Dot-Com bubble was not all semi-skilled labor (there were some definite semi-skilled manufacturing positions that accompanied the boom, but those were not the majority of jobs). I never claimed it was. The recovery from the crash involved forming a semi-skilled and unskilled labor-based bubble in housing. The Dot-Com crash just resulted in reallocation within the same industry, as the successful companies of the Dot-Com boom period consolidated the market (Google, Amazon, eBay, etc.).

However, a former textile worker with a high school education and the skill set of an unskilled laborer, has no such option. While on an individual level we can train some of them, we don't have enough skilled jobs to allow everybody to do this. In addition, some of the people in these positions are not particularly well suited for this form of labor.

[gatorman_07732]

You are right about corporations setting up globally to remain competitive, since we have designed the economy with free capital markets. However, workers do not have the same option, as there has been nowhere near the push for making free labor markets, through the end of immigration and emigration controls.

As it stands right now, on the low end of the scale, there just aren't enough jobs for all the people who are low skilled that are stuck in the US due to immigration/emigration law and cultural/language barriers. That is why you have a massive structural unemployment.

The Dot-Com bubble was not all semi-skilled labor (there were some definite semi-skilled manufacturing positions that accompanied the boom, but those were not the majority of jobs). I never claimed it was. The recovery from the crash involved forming a semi-skilled and unskilled labor-based bubble in housing. The Dot-Com crash just resulted in reallocation within the same industry, as the successful companies of the Dot-Com boom period consolidated the market (Google, Amazon, eBay, etc.).

However, a former textile worker with a high school education and the skill set of an unskilled laborer, has no such option. While on an individual level we can train some of them, we don't have enough skilled jobs to allow everybody to do this. In addition, some of the people in these positions are not particularly well suited for this form of labor.

You're premise of the dot com bust is completely wrong. Hence dot com bust, it was a complete bust of the technology sector and as a result semi-skilled workers got hurt. It was a collection of high tech sectors that lead the way in the shrinking of jobs. Crap ran down hill. I was there and lived it and had 300 employees gone at the drop of a hat and shut down my Tampa office. I do know one of my clients Motorola shipped their production to Spain, but those type of things were a small part of what happened as it filtered down.

[mdgator05]

You're premise of the dot com bust is completely wrong. Hence dot com bust, it was a complete bust of the technology sector and as a result semi-skilled workers got hurt. It was a collection of high tech sectors that lead the way in the shrinking of jobs. Crap ran down hill. I was there and lived it and had 300 employees gone at the drop of a hat and shut down my Tampa office. I do know one of my clients Motorola shipped their production to Spain, but those type of things were a small part of what happened as it filtered down.

Yes some semi-skilled workers got hurt. And then the housing market bubble started, and much of the damage was dissipated for semi-skilled workers.

And much of the technology sector shifted their semi-skilled work overseas. Phone companies, computer manufacturers, etc. It wasn't a huge problem when the housing bubble started, allowing many semi-skilled workers to switch sectors. However, short of starting another bubble in an industry that can't be outsourced, such as the housing market, there is relatively little reason for most firms to setup production in the US, as labor costs for easily substitutable labor are too high here. However, due to government intervention in the labor markets, preventing labor from reallocating efficiently regardless of the country in which the laborers were born, you end up with a structural deficiency in work for certain people when you expand the capital markets into international capital markets.

It is fairly standard classical econ. Government intervention in a market causes structural issues with that market.

[rivergator]

Corporations are doing great, their employees not so much:

As a percentage of national income, corporate profits stood at 14.2 percent in the third quarter of 2012, the largest share at any time since 1950, while the portion of income that went to employees was 61.7 percent, near its lowest point since 1966. In recent years, the shift has accelerated during the slow recovery that followed the financial crisis and ensuing recession of 2008 and 2009, said Dean Maki, chief United States economist at Barclays.

Corporate earnings have risen at an annualized rate of 20.1 percent since the end of 2008, he said, but disposable income inched ahead by 1.4 percent annually over the same period, after adjusting for inflation.

“There hasn’t been a period in the last 50 years where these trends have been so pronounced,” Mr. Maki said.

At 218,300 employees, United Technologies’ work force is virtually unchanged from seven years ago, even though annual revenue soared to $57.7 billion in 2012 from $42.7 billion in 2005.

The relentless focus on maintaining margins continues, even though profit and revenue have never been higher; four days after the company’s shares soared past $90 to a record high last month, United Technologies confirmed it would eliminate an additional 3,000 workers this year, on top of 4,000 let go in 2012 as part a broader restructuring effort.

link (http://www.nytimes.com/2013/03/04/business/economy/corporate-profits-soar-as-worker-income-limps.html?pagewanted=1&_r=1&hp&adxnnlx=1362398732-TBGo1v1Mb/43p59aUq6q5w)

[mdgator05]

Corporations are doing great, their employees not so much:



link (http://www.nytimes.com/2013/03/04/business/economy/corporate-profits-soar-as-worker-income-limps.html?pagewanted=1&_r=1&hp&adxnnlx=1362398732-TBGo1v1Mb/43p59aUq6q5w)

Yep and that should continue. A corporation is allowed to sell internationally and produce internationally. So they can produce goods for very cheap rates while selling to the widest audience possible.

Workers do not have the same capability. If people truly believe in the free market, they should be screaming loudly for an opening up of the labor markets, so that workers can get in on the advantages of free markets internationally. Having a tariff system for labor, which is essentially what immigration controls are, is probably the largest control the government exerts on the free markets right now.

If somebody truly believes the cultural and language barriers are too much for the free market to overcome in these situations: we could either move back to a control economy on an international level, so that in order to sell in the US, you really need to produce in the US or you could deal with the damage caused to workers by having free international capital movement with highly restricted international labor movement.

Of course, the problem, which can even be seen in this thread, is that this causes both parties' ideology to implode in on themselves. Many Republicans say they want free markets but also have a strong nationalistic bent that tends to forbid them from even discussing a topic like free immigration and emigration. Add on that redistributive programs are a non-starter, and you end up with an ideology unable to deal with this problem. Instead, they hide behind the idea that somehow if you could lower taxes, you can overcome differences in labor costs on the order of 3-10x magnitude, depending on the country. It is a safer idea and keeps them from having to examine their own ideology too deeply.

The Democratic Party is strong in areas making the most money off of the current system, like New York City, Coastal California, Chicago, Seattle, Boston, etc. and in areas like Cleveland and Detroit that have been decimated by this system. I will say that they are closer to being able to talk about it because the status quo system of allowing firms to make huge profits but then redistributing to those that they hurt to maintain that system is not against a central ideological tenant of the Democratic Party. However, Democrats do try to distance themselves from that position in many cases due to the fact that it sounds awful in a political commercial (redistribution is bad, huge corporate profits with no money to workers is bad, maintaining a system with structural unemployment for poorer workers is bad, etc.), which somewhat restricts their ability to talk about the problem. Basically, you are pitting the prosperous liberal areas against the poor liberal areas, which results in the maintenance of the status quo, but with limited redistribution due to Republican positions on that issue.

[gatorman_07732]

Yeah, its a big ole conspiracy. Perhaps they should be owned by the government

[mdgator05]

Yeah, its a big ole conspiracy. Perhaps they should be owned by the government

I am not sure you know what a conspiracy is if you took what I said as a conspiracy. Conspiracies require people to...conspire. Nobody needs to conspire about this. The unwillingness to talk about this is very individual. It is a bunch of people in government acting in an individually optimal manner based on the behavioral motivation to avoid any issues that cut across their constituencies. It isn't a conspiracy...it is basic behavioral econ with a major macroeconomic and labor market consequence.

[corpgator]

MD, you're wasting your time.