China and the Olympics are generating lots of news stories; but one on Marketplace at American Public Media caught my ear this morning. Commentator Will Wilkinson of the Cato Institute was talking up a recent working paper (warning - pdf file) by University of Chicago economists Christian Broda and John Romalis.
With the headline Trade With China Gets The Gold, Wilkinson summarized their findings as showing that trade with China has been a net benefit for the poor and not so good for the rich.
Follow me below the fold to find out why it sucks to be rich - and look at some signs that the GOP Class War on America is heating up.
The working paper pdf file by Broda and Romalis, Inequality and Prices: Does China Benefit the Poor in America? is not light reading; it's filled with equations, graphs and jargon of the economics profession. Wilkinson's summary is much simpler:
...trade with China -- as brought to you by beloved institutions such as Wal-Mart -- has done more for poor families than rich families. Trade even helps to hold real income inequality in check.
How rich you are in real terms depends both on how much money you have and the prices of the things you tend to buy. Poorer families spend a bigger share of their budget on goods whose prices are affected by international trade -- like cotton shirts and canned fish. Wealthier families spend a bigger share on services that don't face the same kind of global price competition -- like yard work and psychoanalysis.
This means the rich have faced a higher effective rate of inflation than the poor have -- so much so that the gap in real incomes has stayed put, even as the nominal gap has gone through the roof. According to Broda and Romalis, prices of consumer goods heavily used by poorer Americans have fallen most rapidly in sectors where the Chinese have become most involved.
emphasis added
Just reading the transcript doesn't do full justice to this; you have to listen to the audio file to hear the emotion in Wilkinson's voice as he rhapsodizes over this analysis. I'm sure it's a great comfort to those lucky duckies working two or more Mcjobs to survive to know they're feeling much less pain from inflation than some poor billionaire in the financial sector. Imagine! All that money is worthless, because the price of yachts is going up so much faster than the price of Mac & Cheese...
I am not competent to analyze the conclusions Broda and Romalis claim in their paper, but I think I CAN see how it's being spun: despite 30+ years of a growing economic gap in America, it doesn't matter because the stuff the poor have to buy is cheaper than it would be if we hadn't shipped their jobs to China. Therefore the economic policies - tax breaks for the rich, corporate welfare, cuts in social spending - that have driven all the money to the top are working just fine and there is no need to change anything.
This is part of the ongoing effort by conservative think tanks like the Cato Institute, the American Enterprise Institute, et. al. to make the rich richer and the poor....happy with that.
The job gets tougher every day - the third richest man in the Senate, John McCain, is doing his best by lying about Obama's economic plan, claiming it will raise taxes and cost jobs even as McCain plans to keep tax cuts for the rich.
Partisan hack author Jerome Corsi (Unfit for Command) has put out another hatchet job of lies, slanders, and rumors to extend and enlarge the demonization of Brack Obama with The Obama Nation: Leftist Politics and the Cult of Personality. Economics are part of the assault, as this hysterical blurb for the book warns of:
his determination to raise capital-gains taxes, his impractical plan to achieve universal health care, and his radical plan to tax Americans to fund a global-poverty-reduction program.
(Side note - you have to love the play on words in the title: Obama Nation is a great two-fer. First, it suggests a land of deranged cultists, a la Jonestown. Second, it's a word play; watch how pundits and conservatives will effortlessly elide Obama Nation into abomination. These bastards are slick.)
This is also the reason the story about John Edwards infidelity is not going away. Anyone who attempts to bring up the issue of economic justice in America is immediately going to be bludgeoned with the alleged hypocrisy of Edwards. This editorial in the Albany Times Union shows how it works:
So, who succeeds Mr. Edwards as the voice of the downtrodden? With Mr. Edwards in exile in that 28,000-square-foot mansion in North Carolina — an early hint, by the way, of his penchant for hypocrisy — we can't help but think the battle against poverty ought to be led by someone with much more monastic credentials.
Perhaps another Jimmy Carter, the onetime peanut farmer who committed lust, but only in his heart?
It would be easier to believe the 'regret' about this if so many of the same people claiming to be worried about the poor hadn't spent so much time and effort ridiculing Edwards long before the sex scandal broke. There's also another message here: you are NOT allowed to publicly worry about the poor unless you are poor yourself. By extension therefore, no rich person need worry about anyone's poverty. Anyone with money who claims to care about the poor is only lying to get votes, not because they could possibly believe it might be the right thing to do. Noblesse oblige is off the table, suckers!
To understand how skewed the economic debate has become in this country, one needs only notice what's lacking. Why are rebate checks stolen from future tax revenues a legitimate remedy for economic tough times - but raising the minimum wage isn't? People getting minimum wage need the most help, they need more than a one-time fix, and that money will go right back into the economy immediately because they have to spend it NOW to make ends meet.
Why is there so much emphasis on creating 'good' jobs with high wages - when that seems to translate into huge subsidies for megawealthy corporations? (Divide incentives by actual number of jobs created and you''ll find absurdities like over a million $ + for every job created.) Why pay rich corporations to 'create' good jobs instead of taking crappy or average jobs, and making them better?
Why are government programs to help people attacked as massive waste by the same people who tout ever larger corporations because of economies of scale, synergy', and buying power? (Hint - the benefits from one go to everybody, while the benefits of the other get funneled into the pockets at the top.)
Why the constant emphasis on cutting taxes? Why not instead work on raising incomes instead? Then people can pay those taxes with less pain AND get more services from the government that needs them to function.
Remember these questions when the right wing echo machine starts spouting how shipping jobs to China (and enriching the Walton family) has been good for the poor. Because you know they'll be flogging this story hard.
Meanwhile, enjoy Vickie Burns interpretation of BS&T interpreting Billie Holliday.