Employment in the communications equipment industry is down 43% since 2000. Semiconductor employment is off 30%. Electrical equipment has shed one quarter of its industry's jobs. Textiles, off 40%. These are the high-wage jobs on which the American middle class""the American standard of living""once rested. Replacing them with jobs for waitresses and bartenders, home health care workers, fast food servers, and greeters at Wal-Mart doesn't begin to sustain consumer purchasing power.
But that is the overwhelming nature of the employment picture under the Bush administration. The economy has needed seven million new jobs just to keep pace with population growth since 2000. However, it has added just over three million, virtually all of them in low-paid domestic service sectors. This evisceration of labor and labor-based income comes at a time when corporate profits are at their highest level as a percent of national income since 1947 while labor's share is at its lowest level since 1946. The rich are getting richer and everyone else is getting dramatically poorer.
The Core Of What We Must Understand
These reversals did not spring into being by themselves. They are the intended outcomes of two and a half decades of government policy designed to increase the returns to capital while reducing the bargaining power of labor. The policy began with Reagan's Supply Side Economics, which cut the marginal tax rate on the highest incomes from 75% to 38%. It is bookended by Bush's unending tax cuts for the wealthiest, from income taxes, to taxes on interest, dividends, capital gains, and, if he gets his way, to taxes the estates of multi-millionaires. All these cuts favor the very wealthiest of Americans at the expense of everybody else.
In this environment, with median incomes falling for decades, the only way to maintain the American family lifestyle is to borrow against the house. And when that is still not enough to keep the economy afloat, the government must step in and borrow against Americans' future earnings. But rising interest rates are already killing off the tenuous housing-based recovery. And as prices rise with them, consumers are left with even less money to spend. The imperative for more and still more government borrowing becomes overwhelming.
So here is Treasury Secretary Paulson's inescapable dilemma. If he wants to continue the Republicans' policy of shifting the nation's wealth to those who are already the most wealthy, AND sustain the illusion of broad-based prosperity, he has no choice but to increase deficit spending (and therefore borrowing) at a greater and ever-greater rate. To be sure, the higher interest rates that result are an unquestioned boon to Paulson's coupon-clipping friends. But they are a death sentence for the Real economy.
As onerous as they are, the deficits described above constitute only a small fraction of the total indebtedness of the U.S. economy. The official "national debt"- is approaching $9 trillion -- a substantial figure to be sure. But the government's "unfunded liabilities"-"" obligations it has committed to pay but for which there is no known source "" are estimated at an incomprehensible $58 trillion. Add in revolving consumer debt, mortgage debt, and corporate debt, and the nation's total obligations (indebtedness) exceed $90 trillion, more than seven times GDP. Bear in mind that at the time of the 1929 stock market crash, total debt stood at two times GDP. Conclusion: Our current obligations (indebtedness) will never be paid.
The reason is that the job drain from the U.S., while it looks like a torrent now, is still only a trickle. Though the U.S. won the Cold War, it is rapidly losing the Cold Peace, which began when China ended its communist isolation and joined the world market. The average wage in China is 57 cents per hour. China has more than half a billion workers, which means that the flow of good jobs from the U.S. to China can go on indefinitely""and will. Alan Blinder, a Princeton economist and former Governor of the Federal Reserve Board, has estimated that as many as 56 million U.S. jobs are susceptible to outsourcing of the sort that has already dealt such damage to U.S. incomes.
And this is exactly what Bush and Paulson and their fellow "conservatives"- intend. This is the magic of "globalization,"- that the Heraldic voices of Thomas Friedman and others eulogize as inevitable.
Globalization means liberating capital from all obligations to national well being, freeing it to pursue only the highest returns it can find, no matter where they may lie. That means seeking out the lowest paid labor and shifting all possible jobs there. That means China, India, or Vietnam. (Vietnam's average hourly wage is something like 25 cents.)
The U.S. worker and the U.S. economy will be left to their own devices. All social safety net systems must and will be dismantled. Why? Given the colossal debt, they can no longer be afforded. I'm talking about social safety net systems such as welfare, unemployment and disability insurance, pensions, health care, Medicare, Social Security, job retraining, and eventually, education. The U.S. is a high cost economy in a world where, when capital is perfectly mobile, low cost wins. If capital is to be honored, then the U.S. must be ballasted, and then abandoned, in the way the British economy was in the aftermath of World War II. It will be milked of its remaining assets""that is what the huge run-up in debt is intended to do""and then thrown away.
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