A Reality Check on NAFTA

Over the years, NAFTA has become the boogie man of U.S. economics. But it's not that simple as Froma Harrop of RealClearPolitics explains. The deal (and other such deals with nations in the Americas, like CAFTA) is not to blame for our shuttered factories and has, on the whole, been quite good for our continent.

If there is one main cause of our manufacturing downturn, it's cheap Asian labor. Bashing NAFTA not only misses the point but distracts us from addressing the real challenges.

Jolting the Economy

Robert Reich explains why this recession may be a bad one. Looks like our spending power is all tapped out.

The first way [we increased spending power] was to send more women into paid work. Most women streamed into the work force in the 1970s less because new professional opportunities opened up to them than because they had to prop up family incomes. The percentage of American working mothers with school-age children has almost doubled since 1970 — to more than 70 percent. But there’s a limit to how many mothers can maintain paying jobs.

So Americans turned to a second way of spending beyond their hourly wages. They worked more hours. The typical American now works more each year than he or she did three decades ago. Americans became veritable workaholics, putting in 350 more hours a year than the average European, more even than the notoriously industrious Japanese.

But there’s also a limit to how many hours Americans can put into work, so Americans turned to a third way of spending beyond their wages. They began to borrow. With housing prices rising briskly through the 1990s and even faster from 2002 to 2006, they turned their homes into piggy banks by refinancing home mortgages and taking out home-equity loans. But this third strategy also had a built-in limit. With the bursting of the housing bubble, the piggy banks are closing.

So, to summarize, we’re all working, we’re all working our asses off and we’re all drowning in debt. We’re screwed unless something changes. Reich suggests, in the short term, we need to dramatically lower taxes on the lowest earners with the collection shortfall offset by raising taxes on the top earners. Since the highest earners are spending large amounts of their wealth on global investments outside the country (trickling down money to China and the like), their diminished spending power will not impact our economy. However, the middle and lower-middle class earners who receive the giant tax breaks will almost certainly spend the extra money within our economy (it’s trickle-up economics).

I can see the logic in this argument, although using the tax code as such a blunt instrument can have plenty of unintended consequences. Who does Reich mean when he talks about raising taxes on the wealthy? The top 5%? Not all of the top 5% of earners are happily throwing their money into foreign hedge funds. Many are running small businesses. Others are hard-at-work professionals who may own a Lexus and a plasma TV but are not blessed with an exceptional amount of expendable income. Over taxing these people may be more than just unfair, it might poison the top portions of the economy in a devastating manner.

Obviously, sitting back and just waiting out the economic turmoil is not the perfect solution (particularly if we’re as screwed as Reich argues), but I’m not sure fiddling with the tax code is a magic bullet, even as a short-term solution. A complete overhaul would be more useful but decidedly impractical at this point. To me, the most obvious and achievable stimulus would be infrastructure investment, a plan championed by Mike Huckabee during the debates and supported by plenty of others. (In all fairness, I heard Robert Reich himself promote infrastructure investment on an NPR segment I can’t find a link to).

Our infrastructure is in need of repair. Our economy is in need of an extended jolt. Rather than making tax law changes with undeterminable effects, why don’t we invest in projects which we know will create jobs and provide long-term advantages. There may be a better action to take but, if there is, I haven’t heard it.

The Failed Arguments of John Edwards

Another presidential campaign, another also-ran badge for John Edwards. Only this time he won’t even get the VP consolation prize.

Edwards got lost this year amidst the Clinton v. Obama rumble. You could say a rich, middle-aged white guy simply had no shot in a year when historic firsts beckoned the party. But, really, I think voters just weren’t convinced that this patrician with the Southern drawl as meticulously maintained as his hair would really change America for the better.

Oh, sure, he had that speech, the one members of the media fawned over four years ago. The one that sounded so stilted and contrived at the convention in 2004. Two Americas. One for those slimy rich jerks, one for us poor oppressed masses. The fact that Edwards himself is filthy rich was apparently a sign that he knew what he was talking about – rather than an indication that he might be clueless.

Those on the right often accused Edwards of waging class warfare. Maybe in some people’s definition. But, really, he’s just a typical 20th century era liberal who believes people have little hope of a good life without the government assuring them one. That’s not to say he believes in an endless welfare state. He truly loves the virtues of hard work and believes a good day’s labor should earn a good day’s pay. In a perfect world, it should, yes. In this world, the rise of the service economy has left us with lots of jobs whose labor is worth little so that the products we buy might cost less.

John Edwards wanted to fix that, which is a positive mission. But he wasn’t advocating the removal of hurdles that make it difficult for individuals to compete in the free market or lowering the barriers that make it hard for small businesses to prosper. He believed in more regulations, more restrictions, more government that would artificially elevate wages, close off trade and try to hold back the inevitable transition to a global economy. He wanted to protect us from the big, scary free market, not help us operate in it.

A lot of us would love more opportunity to lift ourselves up, but, apparently (thankfully), not many think Edwards’ brand of protectionism is the answer. What Edwards got wrong is that there are not two Americas. It’s not so simple. There are hundreds of Americas. Thousands. And each state, each city, each neighborhood and each person doesn’t need governmental coddling. We need freedom. We need the federal government to cut away the layers of unfairness not add more layers for us to navigate. It’s not even about smaller government. Just smarter government, more focused on creating opportunity than trying to create some unreachable ideal of classlessness.

Edwards’ ideas live on within the Democratic party. Hopefully, his failure will help temper the party’s more protectionist instincts. There’s nothing wrong with wanting to help the less fortunate – in fact, the impulse is noble. But some solutions are far better than others.

Cross posted at PoliGazette.

A Real Stimulus Package

This could very well help the average family far more than anything the government will do. Free markets ... gotta love 'em.

Stimulus? More Like Wealth Redistribution

In a display of political showmanship and fiscal irresponsibility, congress and the president have agreed to the terms of an economic stimulus package. First, from CNN, the details:

Sources on Capitol Hill and at the Treasury Department said the plan would send checks of $600 to individuals and $1,200 to couples who paid income tax and who filed jointly.

People who did not pay federal income taxes but who had earned income of more than $3,000 would get checks of $300 per individual or $600 per couple.

A Democratic aide and Republican aide said there will be an additional amount per child, which could be in the neighborhood of $300.

Those who earn up to $75,000 individually or up to $150,000 as a couple will be eligible for the payments, said Republican and Democratic sources familiar with the tentative deal.

What we have here is a nice little wealth redistribution plan. If these kinds of tax rebates actually stimulate the economy, then we could debate the appropriateness of excluding wealthier households. But the problem is, rebates don’t work. Historically, people use the rebates to pay down personal debt or they put the money into savings. They don’t put the funds back into the economy. That means, by limiting who gets money from the stimulus package, our government is taking money away from a small group to help a large group pay off their credit cards.

If the point of this legislation is to infuse the economy with money, what does it matter how much you make? Are people who make over $75,000 a year less likely to spend a rebate? Certainly not. Would giving a rebate to these households (they make up just 5% of U.S. households) significantly increase the expense? No. But these people are “rich” or at least “not poor” so I suppose it would be unseemly for the government to be padding their wallets.

And yet, $300 checks are going out to those who pay no taxes at all. On one end of the income scale we have a full-on handout and on the other end we have what amounts to a tax penalty. All I can figure is that President Bush was so desperate to get this showpiece of a bill passed that he let the Democrats dictate the terms. And Democrats are too often more interested in symbolic shows of supporting the less fortunate (and marginalizing the well off) than they are in making substantive reforms.

Of course, I’m not turning down my check. It’ll help pay off some debt. That will help my finances but not the economy.

Tax Rebates...

...don't stimulate the economy.

Ending Economic Recklessness

I do not believe the U.S. president can significantly affect the economy. But I do believe the president’s priorities can lay the framework for a healthy economic environment.

The Bush administration has failed to control spending, letting Congress binge like a drunken sailor, filling budgets with an embarrassing amount of pork and borrowing money with reckless abandon. It’s no surprise that one of the largest loan crises in American history has occurred at the same time as our government’s unhinged escalation of the national debt.

Bush and Congress have promoted an “easy money” culture. Whether they are simply following a larger cultural trend or whether they’re actively creating this irresponsible attitude, our government’s disastrous money management must bare a solid portion of the blame for our current economic woes.

We will rally past this slowdown because we Americans are an industrious people. But since it’s an election year, we should use this experience as a chance to elect a new president who can correct the economic mistakes of Bush and company.

Almost every candidate gives lip service to balancing the budget, but it’s not so much about desire as it is will. We have to determine who actually has the canjones to stand up to congress and curtail spending. Who will actually make balancing the budget and reducing the national debt a priority? Who will lay the framework for an economic environment of financial responsibility?

I’ll be listening. And I hope a lot of other people will be too.

The Recession Cometh (Maybe)

The Stock Market is not doing well and recession fears are mounting. Is this just the media needing a good story or should we all be worried about the economy?

I don’t know but, like any blogger worth his weight, I have an opinion. As many of you know, I’m a freelance writer working in advertising and marketing. When companies face hard times, the first thing they cut is their advertising budget (i.e. Hyundai’s decision to pull its Super Bowl ads). The first thing advertising agencies cut is the amount of work given out to freelancers. Thus, when economic times turn rough, advertising freelancers often face the first blow.

Think of me as a canary in the mine. And guys, I’m not doing so well.

My regular sources of work have dried up and I’m struggling to find new opportunities. Maybe this is just an individual problem and not indicative of larger economic ills. But when I hear we’re headed for a recession my first thought is: hell, I’m already in one.

Are Wedge Issues a Result of Our Prosperity?

There’s a new Census Bureau report out that measures everything from television ownership to how safe we Americans feel in our homes. The news? Exceedingly good.

The vast number of Americans not only have numerous conveniences (98.8% have a television, 84.7% have a washing machine, 84.6% have air conditioning, 63.1% have a computer) but a great number of us feel pretty safe (92.8% of us feel safe in our homes). Across regions and income levels and ethnicities, Americans have a greater sense of wellbeing now than they did when the study was last conducted in 1992.

Is this why so-called wedge issues play so well these days? Think about it. If most of us are living a pretty good life, what do we want our government to change? We’re not focused on getting food on the table or even getting a television set in our living room. So we focus on more abstract pursuits—matters of morality and culture and what kind of nation we wish to be.

As divisive as abortion or gay marriage may be, they are matters only a well-fed nation would take up passionately. Even the protests over the Iraq war, as deadly serious as that conflict is, are only possible because most of us don’t have to worry about issues closer to home. After all, without a draft or even so much as a wartime tax increase, the Iraq war does not affect many of us on a personal level. Protest of that war is primarily a matter of morality. The anti-war crowd, just like the anti-abortion crowd, wants America to adopt a different ethical course.

This isn’t to say there aren’t closer-to-home issues that need addressing. Our dysfunctional healthcare system weighs heavily on us all. Our convoluted tax code is a national nightmare. Our educational system is not adequately geared for the challenges of the future. But those are deeply complex matters that ignite more headaches than they do anger. There is no simplicity there. No “marriage is between a man and a woman” or “no blood for oil” rhetoric that’s available.

The fact that we as a people are so well off is something to be celebrated. And the fact that we are using our free time to pursue issues of national character and morality is not a bad thing. But eventually we need marshal our collective energies to do more than bicker in blacks and whites. We need some time spent tackling those deeply grey problems.

A nation this well off is certainly capable of anything.

The Challenge of YouTube

I’ve been wondering when some big media company was going to sue YouTube. Now, Viacom is seeking $1 billion for what it considers YouTube’s willful copyright infringement of everything from The Daily Show with Jon Stewart to Sponge Bob Square Pants.

Anytime I visit YouTube, I’m amazed at the breadth of content available from the site. Ostensibly, YouTube is for sharing homemade videos. But much of the site is comprised of clips extracted from professionally produced material. And that’s the problem.

As thrilling as it is to see an obscure recording of a 40s musician playing live, that clip is owned by a company and the artist is possibly owed royalties for any re-airing. But YouTube allows users to circumvent commerce – even subverts it. This may be liberating for the user but is it fair or sustainable?

Our system of entertainment is profit-oriented. If content producers cannot profit from their work, there will be no work. I don’t know about y’all, but I’d like more choices than the conspiracy theory documentaries and college-students-being-stupid video clips that make-up much of the user-generated content on YouTube. I like my network television and studio movies and I’m not ashamed to say so.

That said, I’m not convinced YouTube is significantly affecting entertainment profits—not currently at least. Their success has much more to do with the streaming-video innovations they’ve made than it does with all the Jon Stewart uploads. Viacom has a lot to prove if they want to win their case.

Most likely, the lawsuit will serve as a kind of warning shot, a notice to YouTube that they’re being monitored closely. As music downloads have proven, once a technology exists, it’s impossible to stop people from using it. Networks and studios will have to wage a two-front war: one against the sites illegally posting their content and one inside their own companies where these new technologies must be harnessed and used to create an advantage.

Many networks have already made agreements with YouTube to carry free content. But this is just the beginning. Creating a workable profit stream is the next challenge. And I’m sure YouTube will play along – after all, if there wasn’t lots of money to be made, why did Google buy the company?

In Defense of Procrastination

When it comes to work, I’m just as likely to be reading ESPN.com as I am to be typing away at a brochure. I have a whole slew of procrastination techniques that begin with my obsessive following of the NFL and proceed through blogging, reading blogs, on-line word games and even taking long walks. Before the Internet, I was a compulsive computer solitaire player—so my habits are not Internet born, merely Internet enhanced.

However, when I do work, I’m a machine. I often have good ideas fast and can execute large projects in surprisingly little time. This may be just the way my brain works but I actually attribute it to my work habits.

Here’s my theory: we are the sum of our experiences. If all you ever do during the workday is focus on work, you’re going to be a drone trapped in the machinations of your job. But if you focus some attention elsewhere during the day, you’re letting the outside world into the work world. To sound all motivational-speaker-like: procrastination keeps the door of ideas open.

Good ideas don’t come from the inside, they come from finding something new on the outside, bringing it in and adapting it to a new purpose. For most companies working in the information economy, the bottom line is not measured in hours the employees are diligently working. It’s measured in the value of their ideas and services.

In a factory-economy, success is very much tied to the speed of production. But information-economy success is as much dependent on human ingenuity as it is on raw productivity. Companies understand this dynamic but I question how many know how to create environments of creativity. From my experiences and observations, too many modern businesses still rely on the “everyone working all the time” approach.

As our economy becomes more and more information based and our workforce becomes less manual and more intellectual, we’ll have to find ways to keep our businesses ahead of global competition. Could a tolerance of procrastination be a helpful step? That would be a development I could heartily endorse.