After mentioning life at the bottom in my previous diary, I thought I'd mention policy prescriptions that could and would help the lower classes. Some of which we might already have were Congress functioning the way it was intended.
As I mentioned in 'Economics Of Being Poor', life for those with minimal means suffer at the whims of those jobs they are lucky enough to find. Problems ranging from too few hours -usually so a business can avoid offering benefits to its employees- to lack of job security, abuse in the work-place, poor wages, and transportation issues (for those who don't live in an urban area), are all issues afflicting life at the bottom.
There are many things that could be done, both monetarily and fiscally, to take some of the pressure off of the lower classes. Some ideas are new, but many are policies used for generations to help lift those at the bottom tier of the income scale.
I'll start with monetary policy because it is one of few areas that can be less susceptible to outside political pressure. To start, Janet Yellen and the Fed must make it clear that the Federal Reserve will not even entertain the idea of raising interest-rates until we have achieved a high-pressure, low-unemployment economy with strong upward pressure on inflation. Arbitrary dates for rate-rises do little to comfort markets and does more to hold back investment, which is the exact opposite of what we want right now.
Under normal recession conditions, lowering interest rates usually quickly brings about a tighter labor economy and wages begin rising more quickly than it did before the recession. But History has shown that Recessions caused by a Banking Crises, like what we've recently experienced, the stagnation and low-growth, known as a 'Deflationary Trap', can last as long as a decade or longer without the proper stimulation of the economy.
One of the ways the Fed can help the economy along, is by making it clear that inflation is not a danger. The economy we live under today, in no way resembles that which we lived through from the mid-1970's to the early-1980's. There is almost no chance of inflation shooting up the way it did in the late 1970's.
The reason for this is no simple matter. But suffice to say, the example of the ultra-tight economic conditions of the late 1990's, shows how inflation is no longer responding to low unemployment conditions the way it did in the decades before. The average unemployment rate in 2000 was 4%, yet inflation remained low. Thanks to Alan Greenspan (I'll never thank the man for anything else again), we learned that the American Economy can, in fact, hold unemployment down at very low levels, all without seeing an increase in inflation.
Also, in our current sluggish Global Market, a bit of higher inflation would actually be a good thing, as long as it was caused by a tighter labor market. In the late 1990's, the unemployment rate reached levels as low as 3.2%, and yet again, no hint of stifling inflation.
Now, normal conventional wisdom would say that the NAIRU (Non-Accelerating Inflation Rate of Unemployment) or the point at which wage-driven inflation begins to kick-in, should be higher since the Great Recession, than it was before. This is common after a period of high-unemployment, where it takes less low-unemployment levels to cause higher wages and inflation to kick-in. For example, say a 6% unemployment-rate causes wage-based inflation to kick in, instead of the 4.5% it might have taken to cause wage-growth before the recession.
Oddly, this has not yet happened. As we reach lower and lower levels of unemployment, the wage growth and inflation we would expect to see, hasn't yet kicked-in. This could be a signal that far more people have unwillingly dropped out of the work force than we previously thought. So now, those people who've given up looking for a job, are not being counted in the standard measure of unemployment, called the U3 Unemployment rate.
By the U3 measure, those who are not actively searching for a job, or are part-time workers looking for full-time work but can't find it, are not counted as unemployed. So in that sense, actual unemployment is closer to 11%. This is called the U6 measure of unemployment and includes the underemployed as well as those too discouraged to look for work.
Another reason not to worry much about inflation, is the fact that, should inflation begin to rise again on a more normal trajectory, the current strong US Dollar would be eroded slightly. This is actually a good thing for the economy. Higher levels of inflation would bring down some of the strength of the US Dollar that is hurting Exports right now. With a trade deficit as skewed as our own, a weakening of the Dollar would actually help the economic recovery, even as wages and prices begin to rise again.
But as our unemployment rate began lowering to more normal levels, wage-driven inflation never kicked in. This is still a mystery as of now, and something the Fed is working to study non-stop at the moment. Without that wage-driven inflation kicking in, there should be NO reason to even consider beginning to raise interest-rates. If anything, like Europe, we should be worrying about falling prices or Deflation, which is much worse for a recovering economy than high inflation is.
Now, aside from the Fed and the goal of reaching a high-pressure economy, there are still a lot of things Congress can do to help. The most obvious of which would be a large jobs program that directly puts people to work fixing our nation's crumbling infrastructure. Meanwhile we should also be drastically increasing state aid for public service programs, K-12 Education, State Pension-Systems, and State University-Systems.
For the poor, the most obvious of policies that could help those at the bottom is to 're-reform' the welfare system. Sure, today fewer people are on welfare than ever before, but that's because it's nearly impossible to fulfill it's requirements. On top of which, its benefits are so small, that no one could possibly rent even a small room for the $390 welfare recipients receive each month. That's less than what some families spend on groceries in a single week! Who could possibly be defrauding the welfare system? There's nothing there to defraud!
By returning to the old welfare system, and combining it with an incentive system that continues to support families and individuals for sometime after the recipient finds a job; an efficient and supportive welfare system can be created. By not immediately cutting off the benefits after a recipient finds a job, you are not only eliminating one of the concerns regarding cash-welfare (that recipients won't want to get a job), but by continuing assistance you are giving the recipient time to get old bills paid off and time to get back on their feet.
Add to this system a job training effort or community service while the applicant receives benefits, and you have a system that is both supportive of families and helps the unemployed stay skilled while jobless. That in itself raises the unemployed's chances at being hired and decreases incentives to stay in the system.
Another older policy that has received a good bit of attention lately, Paid Family Leave, Paid Sick Leave and Paid Maternal Leave, are simple but popular programs all over the world. Paid leave programs have been a mainstay of support for families living in Liberal Democracies for most of the Post World-War II period.
Of the 125 member countries of the International Labor Organization (ILO), only two countries don't have some form of Paid Family Leave; The United States and Papua New Guinea. For how much longer are we going to be part of the third-world as far as public policy is concerned? This topic is so beneath us to even argue about, that it is nothing short of amazing that we're finally beginning to discuss it on a national level in 2015!
A newer idea that's been gaining some traction in parts of the world is the idea of Baby-Bonds. Government Bonds issued to a low-income families' child at birth. The bond matures when the child reaches a certain age. Suppose a bond worth $40,000 is given to a young adult to cash; it could be used as a down-payment on a home after college, or maybe invested into a business or into the Stock Market.
Whatever she or he chooses to do with that bond, it offers a low-income, young adult, a bit of a head start in life. And isn't that one of the toughest parts of growing up poor? The inability to jump right into an investment on a home, or a business upon reaching adult age? Or the Debt of College weighing you down?
Another problem that hasn't gone away just because the Affordable Care Act was passed, is high-quality healthcare for the poor and middle-classes. We need to return to the idea behind a Public Option. The idea was a good one when President Obama proposed it on the Campaign trail, and it is still a good idea now.
Government run healthcare is more efficient and equitable than private healthcare could ever be. For those worried about healthcare rationing, well, that's too bad. Healthcare is already rationed, and poorly at that. Under a Single-Payer system or even a private system with a Public Option, that rationing in our Healthcare system could be done in a fairer, more efficient way. With Baby-Boomers retiring at a rate of 8,000 a day as of 2011, we cannot afford to pay for a giant, bloated, over-priced healthcare system going into the future.
One of the more serious problems our economy will face in the coming years is the continued disruptive technological advancements that, more and more, will be taking over many of the jobs humans currently do. (Anyone remember the job of Secretary?)
So one of the questions that many scholars including economists, philosophers, Social Scientists, and Policy Makers have pondered on is: What happens if job growth begins to permanently disappear? What happens if the future doesn't offer enough jobs to satisfy the economy at large? One scary fact, actual hours worked in America, even as millions of jobs have been added to the economy, hasn't changed since 2000. There are just a lot more part-time or temporary contract jobs then there were in the decades before.
Well, for one, you can't force someone to work a job that doesn't exist. So how we approach Social Services will have to change. Of course Education, including Universally Free Higher-Education, will become a MUST if we mean to remain competitive in the Global economy. But if more and more of the Global economy begins to be run by new technologies and not by human capital, then what do we do about it?
Now we enter into one of the most existential questions facing human kind's future. (Aside from Climate-Change) When human labor is no longer needed; how do we manage our very human need to remain meaningfully occupied? How do we feed or cloth or shelter armies of the unemployed and underemployed? How do we keep a high-pressure economy if the jobs just are not there?
My answer is to begin the transition by addressing it in phases. A free Universal College education and free healthcare would be a great start. The next sensible phase is to introduce a Universal Minimum Income or UMI. A livable income that is guaranteed to every citizen regardless of class or education. A Kind of Social Security payment guaranteed to every person from the time they exit school until their retirement. The fact is, we live in radically changing times, which means we must address new issues with radically different ideas, not just the same old status-quo.
This combination of free higher-education, baby-bonds and a Universal Minimum Income (UMI), would not in itself be the cure-all. The key to these programs effectiveness is how they are applied, payed for and how they interact and overlap with each other. The nuances of which will, of course, be complicated to say the least. And certainly it would take all year for me to sit here and devise it all, so I apologize for leaving it alone.
But as far as disruptive technology, it is already leaving many people without the proper skills or replacement jobs. It is not something the Private sector is equipped to deal with. Only an Activist Government, quickly responsive to people's needs, can sufficiently address these future issues. Some of which are right on our doorstep.
No one can predict the future, but if most manual labor is replaced by robotics and algorithms and computers, all very technical work requiring high-levels of specific educations, then a college degree no longer continues to be optional, and retraining must be quick to respond to disruptive technologies. We MUST treat higher-education as we did High-School in earlier generations; as a necessary public good that we all benefit from as a society when it is free.
The future I envision, will be one where a small subset of society studies the Science and engineering sector of our economy, as machines and computers begin taking over our scientific studies, our classrooms, our restaurants, our manufacturing, even news reporting will be taken over by computers and already can be!
If this sounds like Science Fiction, you're sorely mistaken. Already computers are involved in the lions share of the sciences (think 3D Printing Technology) and soon will be making decisions without human input and even researching scientific studies on its own.
So the idea that if everyone just studied Science, Mathematics, and engineering we'll all be OK, seems to me, about as likely as the energy giant Shell, stopping its drilling in the arctic and joining the UN to fight Climate Change.
So my answer to this particular conundrum, would be to reintroduce the Liberal Arts as the mainstay of the average college education. Arts and Humanities along with civic studies should, and I believe will be, a major part of the education of future generations. Not because technology won't disrupt the Liberal Arts too, but because a good Liberal Arts Education can prepare students for a wide range of careers and offer a flexibility that other studies may not offer.
Critical thinking will, I believe, become far more central to education in general. This may be why we are seeing such a push-back against high-stakes testing. High-Stakes testing requires teaching the memorization of facts, instead of the skills required in critical thinking and reason. Students, teachers and parents see this problem, and are pushing back handily against this shift of our educational studies toward rote memorization.
With Computers, AI and robotics taking over management of a vast portion of the economy, humans will have an opportunity as never before to delve into the Arts, Humanities, Social Sciences, Anthropology and philosophy, among other studies.
Throughout this process, our Government could and should subsidize a large portion of society dedicated to the preservation of the Arts and humanities, far more than we currently do. Imagine a future where artistic pursuit is thought to be on equal footing with engineering and aeronautics. Both are important to society and both should offer plentiful opportunity and decent wages.
It's not that I think robots will take over all labor, or that entirely new sectors of the economy won't produce new, differently skilled and unskilled jobs. The problem that arises is if productivity continues rising independent of Human labor or wages. In that case then we could be facing a continued future of mass stagnation in wages and high unemployment. Meanwhile, the elite-class will continue to rewrite the rules of the market by interfering with the politics of what's left of our Democracy.
So let's change that. Let's mobilize, organize and fight to take back our Democracy! We can change our politics by force of numbers! The elite are few, of us there are many. Election reform is badly needed. I won't get too much into that but most of us know what is needed. Citizen's United must be overturned and a new publicly-financed election system must be put in place to replace this Oligarchy of power.
But back to the Economics.
Developed nations such as the United States, need desperately to address the biggest contradiction in Capitalism of all. The contradiction of growth. Capitalist economies require constant new growth or the system stalls and possibly collapses. This is sort of what we're seeing in Europe right now.
Youth unemployment in European countries is making it very difficult to pay for their largely ageing population. Europe's Millennial generation isn't nearly as large as that of the US, making the Capitalistic contradiction of growth standout to a much larger degree than in the US. Europe needs both more immigration and population growth to feed the ageing retirees. As does the US to a lesser degree.
Since new growth requires new populations; do we really expect to continue adding drastically to the population without seriously damaging our odds of sustaining that population? Or sustaining the ecology of the earth we live on?
At some point these questions have to be answered. The sooner the better. We may already be living on an over-populated earth, adding to the problem of Climate-Change. And yet, Capitalism drives us to continue growing! It's an seemingly unstoppable growth machine that's gone Global!
Another concern I have with sustainability, is how deeply lacking our Industrial Farming System is; How poorly and inadequately it feeds our current population. My proposal is to break up Industrial farming and begin a return to locally sourced, sustainable small farms. Here too technology is quickly disrupting human labor, but unlike some other parts of the economy, new technologies may actually make it easier to create a small, locally sourced farming system.
Instead of competing with the world by growing row upon row of symmetrical crops to be shipped across the states and the world; what's to say we can't have a system growing varied naturally seeding crops that can more easily adapt to the changes wrought by Climate Change? And to do it all while shifting over to farms of a far smaller scale would be a huge accomplishment. There's no reason we couldn't do this. All the while still adequately feeding our current population, maybe even more efficiently than we do today.
Currently, we grow more than enough food to feed the world. Yet, food is rationed based on the ridiculous idea of the 'Market Forces'. And since we, as in humans, design the markets, we can also designate where those resources are and are not going.
This not only challenges the idea that Capitalism is the most efficient form of an economy -the same can be said with the Healthcare, Energy and Financial Sectors- but raises ethical questions that are finally beginning to gain some traction. Anyone who has ever read a Mark Bittman piece in The New York Times has heard his ethical arguments against industrial farming.
It's not enough to, as we currently do, offer ever smaller amounts of food-Stamps (SNAP) to the poor. Instead we could be feeding our country very well, with smaller, far more ecologically sustainable farms.
Recent studies have shown that small-scale organic farming, can in fact, be grown with nearly the same level of efficiency as Big Agra Industrial farms. So what is it, other than 'Capital Concerns' and 'Market-Forces' that is stopping us from doing just that? Nothing more than an elite class that doesn't want to give up its source of power.
A larger and larger percentage of people want local produce over foreign grown produce, even if they have to pay a little more for it. Yet, Big Agra Businesses show no signs of losing competitiveness. Why? Again, these are contradictions of Capitalism that is supposed to be the Government's job to solve. But instead Large Corporate Lobbyists write the bulk of the market laws Congress enacts. Including ridiculous laws against things like seed co-ops. A Law written by and for Monsanto, one of the largest industrial Farm companies in the world.
This is because the rules of the market allow large business like Monsanto to acquire a near complete monopoly on the industrial farming industry, without so much as a worry that Government will break it up. Let me be clear about this: It is a complete failure on the part of Government, Congress, and various Presidential Administrations as well as the Regulatory System responsible for keeping competition in the market. This is not Capitalism anymore, this is reverse Socialism. Laws written to be anti-competitive for large companies afraid of losing market-share based on their own product and how it stands up to competition.
Our Government is actively blocking competition from challenging large corporations like Monsanto. Even as large as Monsanto has become, it is, even right now, trying to merge with multiple other humongous Industrial Farming companies. All in an attempt to corner the Global industrial Farming market for equipment and seeds. And sadly, they have more to worry about from EU Regulators than American ones.
This kind of anti-capitalistic, monopoly driven market, is now a commonplace in every inch of our economy. Capitalism, or at least our current rules of the market, are anti-competitive, and anti-consumer; the driving forces we now see that are destroying the middle-class. At some point, we must decide what all of this unfettered growth is doing for the progress of the human condition.
Now true Competition can be a driver of innovation. However, how can we drive innovation or improve the human condition, if the rules we must all play by are actually designed to be anti-competitive? If it's no longer possible for an individual or group of individuals to start a competitive new business, it's mainly because they must compete with multi-billion or multi-trillion dollar industries. How could any college grad compete with that unless they already are vastly rich?
Most Americans are stuck in a lose-lose situation. New businesses cannot compete with massive corporations, nor can American workers compete with Vietnamese workers making 50 cents an hour. The combination of rigged markets domestically, and a Globalized workforce internationally, has formed a deadly combination for the American middle-class. It is unsustainable, and outrageous on its face. WE MUST ACT!
So what can be done?
Well, the answer could be simpler than one would think. One idea I've thought about lately, is to have two economies in the US. A state-run economy and a privately-run economy. A mix of the best parts of Capitalism and Socialism.
To start with, anyone could start a business in any field. A Nationalized Domestic Financial sector would be able to easily issue loans to individuals or group cooperatives, to start a new business at very low interest-rates. Interests rates would never need to be higher than necessary to keep a nationalized bank functionable or to control inflation.
Energy companies would also be state-run, providing renewable energy at rates low enough to just cover its costs. No more, no less. Anything considered a public service would be part of this Socialized economy. Non Public-service industries would be liberalized with a streamlined regulatory infrastructure that can respond quickly to changes in the economy but also do so without stifling businesses that don't ruin our shared natural resources that are ALL publicly owned.
Let's say that a company provides goods or services. The company becomes successful and it grows. Eventually, the company grows so large that it no longer has any competitors. That company is now considered anti-competitive. This leaves the regulatory system with two options.
The first option is to break up the business and sell it off in small pieces to other private non-profits or for-profits. This is what was done in the post New Deal era but almost never occurs anymore because the rules of the market were drastically rewritten in the 1980's and 90's.
The second option for regulators will be nationalization. If the government decides that the service or product that the company offers is now a vital public service, say broadband internet. Regulators can then label the industry as a Public Service and decide that this new service is now essential and to be offered to all Americans at the lowest cost possible through Nationalization. The original owners and share-holders are paid the full value of the company and go along their way to start a new business or invest elsewhere.
An activist Government, in such a fast-paced, high-stakes global economy, is more essential than ever before; Trust-busting is more important than ever before; protecting the poor by stopping the constant upward shift in capital toward the rich, is more important than ever before.
The only way we will accomplish a fair and efficient economy that provides for everyone, is with strong protections for the poor and a strong activist government willing to break up too-big-to-fail companies. A Government should be willing to nationalize those parts of the economy that are essential to all of us.
Every American could and should have the right to a fair mortgage or loan from a bank that is Publicly owned. Every American should have the right to a free higher-education in a well-funded Publicly Owned University. Every American should have a right to cheap, renewable energy from a Publicly owned company.
And lastly, every American deserves to live and retire in dignity through the expansion of Social Security and a UMI, as well as living a substantive life with a meaningful occupation and good health.
In my mind, no amount of taxes are too high, nor a Government effort too strong, to guarantee those things which I see as essential to every human being. That we all have the right to live a healthy life in pursuit of happiness, all the while protecting the planet that gave us our life and the opportunity to live it.
Call it what you will. But at least my ideas don't put rich people's right to get richer, over the health of the majority and that of our planet. Anything is possible to those willing to work for it. For those with the empathy to see the nuances of the choices we make and the complexity of experience behind every person's story.
Mistakes will be made, have we the bravery to face those mistakes? Or will we sit idly by while those around us continue to suffer under a system built by and for the elite?