Saturday, August 2, 2008

Soap Opera Politics Vol 1 Issue 20: Prediction - McCain will Lose for One Reason. The Domestic Economy!

My Crystal Ball tells me the McCain campaign will soundly lose the popular vote in the 2008 Presidential Election. The signs are everywhere. Even though the GOP and their shock jocks will do all they can to scare the heck out of the American Public, in the end, the majority of people will not be fooled. My little eye into the future tells me the majority are going to vote against the GOP for one primary reason, the domestic Economy. The McCain campaign (Bush Redux) has said we do not have to worry about the economy. Two weeks ago, Phil Gramm, a McLame economic advisor, sparked controversy by stating that the U.S. is in a “mental recession” created by a “nation of whiners.” The public was appalled and Gramm reluctantly stepped down. Nevertheless, George Will, another wealthy, blustering, prominent GOP supporter attempted to support his friend Gramm by saying, "Americans are the cry-babies of the Western World. " As these out of touch Fat Cats (and oil investers) are busy chastising the downtrodden and weary every day Americans for buying less, the greedy Oil Companies like Exxon Mobile, a huge GOP contributor, is raking in billions in record profits. Additionally, this week, Wal-Mart tried to scare their workers and force their workers to vote GOP otherwise their company would be in extreme danger of becoming unionized (oh the horror!).
I used to think it was only the wealthiest, top 1 or 2 percent of the GOP that thought this way, then I read the blog of our GOP and ANTI friend Ultima. Last week, Ultima asked on his blog, "Where are the poor in America since Government data reveals that America's poor are not without modern conveniences. In large percentages they own their own homes, cars-trucks, Fridge, Washer, Dryer, TVs-VCR-DVD-Cable, Phones-Cell Phones, Computers." It seems the GOP game of chastising the poor extends across their ranks. As more and more Americans realize these perspectives are ingrained in the GOP idealogy, more Americans will realize our economic salvation can only be found in the Democratic candidates. Over the last eight years, the scale has tipped extremely to the right. We do not need eight more years of the same. Otherwise we are in for a resounding crash. We need some even-ing out and the scale tipped the other way. Here is what my friend Robert Reich says about the economy. Now he makes sense (vs the GOP)!!
The Heart of the Economic Mess by Robert Reich:
The Federal Reserve Board's "beige book" for June and July offers a clear explanation for why the economy has slowed to a crawl. It shows American consumers cutting way back on their purchases of everything from food to cars to appliances to name-brand products. As they do so, employers inevitably are cutting back on the hours they need people to work for them, thereby contributing to a downward spiral. The normal remedies for economic downturns are necessary. But even an adequate stimulus package will offer only temporary relief this time, because this isn’t a normal downturn. The problem lies deeper. Most Americans can no longer maintain their standard of living. The only lasting remedy is to improve their standard of living by widening the circle of prosperity. The heart of the matter isn't the collapse in housing prices or even the frenetic rise in oil and food prices. These are contributing to the mess but they are not creating it directly. The basic reality is this: For most Americans, earnings have not kept up with the cost of living. This is not a new phenomenon but it has finally caught up with the pocketbooks of average people. If you look at the earnings of non-government workers, especially the hourly workers who comprise 80 percent of the workforce, you'll find they are barely higher than they were in the mid-1970s, adjusted for inflation. The income of a man in his 30s is now 12 percent below that of a man his age three decades ago. Per-person productivity has grown considerably since then, but most Americans have not reaped the benefits of those productivity gains. They've gone largely to the top.
Inequality on this scale is bad for many reasons but it is also bad for the economy. The wealthy devote a smaller percentage of their earnings to buying things than the rest of us because, after all, they’re rich. They already have most of what they want. Instead of buying, the very wealthy are more likely to invest their earnings wherever around the world they can get the highest return.This underlying earnings problem has been masked for years as middle- and lower-income Americans found means to live beyond their paychecks. But they have now run out of such coping mechanisms. As I've noted elsewhere, the first coping mechanism 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 coping mechanism. 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. And now, with the bursting of the housing bubble, the piggy banks are closing. Americans are reaching the end of their ability to borrow and lenders have reached the end of their capacity to lend. Credit-card debt, meanwhile, has reached dangerous proportions. Banks are now pulling back. As a result, typical Americans have run out of coping mechanisms to keep up their standard of living. That means there's not enough purhasing power in the economy to buy all the goods and services it's producing. We’re finally reaping the whirlwind of widening inequality and ever more concentrated wealth. The only way to keep the economy going over the long run is to increase the real earnings of middle and lower-middle class Americans. The answer is not to protect jobs through trade protection. That would only drive up the prices of everything purchased from abroad. Most routine jobs are being automated anyway. Nor is the answer to give tax breaks to the very wealthy and to giant corporations in the hope they will trickle down to everyone else. We've tried that and it hasn't worked. Nothing has trickled down. Rather, the long-term answer is for us to invest in the productivity of our working people -- enabling families to afford health insurance and have access to good schools and higher education, while also rebuilding our infrastructure and investing in the clean energy technologies of the future. We must also adopt progressive taxes at the federal, state, and local levels. In other words, we must rebuild the American economy from the bottom up. It cannot be rebuilt from the top down.

29 comments:

Dee said...

McCain and his backers are busy trying to scare the American Public. Rove´s number 1 guy is now leading McCains campaign. They are attempting to swift boat Obama. However, I predict it will not work. Here is why. McCain is only promising 8 more years of the same (as Bush) in the White House plus 100 more years in Iraq.

They are attempting to say Obama is an empty suit. This charge coming from McCain who never delves into detail during the campaign tour.

I suggest both of them go head to head in a debate. Lets see who is an empty suit.

dianne said...

Dee, I think we are indeed seeing hard times for several necessities such as food and fuel. However, middle class people do not live like middle class people did in the 70's or even 80's. Middle class people now live in newer houses with 4 bedrooms and 3 garages, unheard of for the middle class a few decades ago. Middle class people now enroll their kids in not one, but several activities from music lessons to a whole range of sports activities and more. Middle class people don't cook at home anymore; rather, they eat at some type of restaurant more nights of the week than not. Middle class people's kids have braces, even designer braces on their teeth. Crooked teeth cannot be tolerated. Middle class people don't sew, don't bake bread, don't even form their own hamburger patties; rather buy the pre-formed ones. Middle class kids don't ride the bus once they're high school age; the school parking lots are full to overflowing. And, they don't work either cause they're too busy (even you have commented on that).

In short, the middle class of today has found themselves living beyond their means. They have little savings but great debt. When a job is lost, all is lost. They couldn't possibly cope with a rise in interest rates like existed in the 80's. They couldn't possibly cope with income tax surtaxes (remember those?) or SAVING for a downpayment on a car, let alone house.

I'm sorry. I don't see it the way you see it.

dianne said...

Oh and I almost forgot look at all the "necessities" that the middle class MUST HAVE now...cell phone texting, computers, flat screen tv's, x-box, play station, digital cameras, xm radio, on and on and on. They consider these things necessities and we both know they are not.

ultima said...

"My Crystal Ball tells me the McCain campaign will soundly lose the popular vote in the 2008 Presidential Election."

Nothing new here. This has always been the case regardless of which party was in power. There is some hope that McCain will be able to overcome this handicap but he will need a more articulate economists spokesperson and adviser so that he can, like Obama, tell the American people what they want to hear about the economy rather than the truth.

ultima said...

McCain has a few things going for him: a genuine improvement in the casualty rate in Iraq; the beginnings of a draw down of troops; a reduction in the length of the tour of duty in Iraq and Afghanistan not to mention Obama's flipflop on the effectiveness of the surge.

Also there seems to be a change in Obama's position on offshore drilling. This is an area where the two parties ought to be able to reach a reasonable compromise on an omnibus bill which gives equal urgency to offshore drilling, alternative energy development and nuclear power. If Obama is serious about his change in position, I would give him credit for a statesmanlike approach to this problem.

ultima said...

"Government data reveals that America's poor are not without modern conveniences. In large percentages they own their own homes, cars-trucks, Fridge, Washer, Dryer, TVs-VCR-DVD-Cable, Phones-Cell Phones, Computers."

The revelation of these facts can hardly be considered chastising the poor. When I was a child we had none of these things because the meager family earnings went for what was important: food without food stamps, a roof over our heads, and hand me down clothes. Many of the poor are in no place to dry their clothes outside but there are laundramats so washer/dryer ownership cannot be considered a necessity. Shouldn't we be defining the poor in terms the necessities? Those with luxuries can hardly be considered poor based on my personal experience and definition. But this has nothing to do with chastising the poor; it is just telling it like it is. Some folks just can't stand the truth and like to twist the facts to fit their predilections and personal biases rather than examining them dispassionately for their real content and meaning.

ultima said...

", more Americans will realize our economic salvation can only be found in the Democratic candidates." The unproductive ones will, i.e. those who wish their more productive neighbor to support them. The more intelligent ones will realize that part of the decline in the economy is merely the cyclical nature of same that is usually not amenable to anything either party can do. Once durable good begin to wear out and need replacement, the demand will increase and employment will improve. In spite of Reich's reasoning, this will happen without a massive redistribution of wealth. This is not to say that I am in favor of the increasing gap between the haves and have nots. I think it would be a good idea to tie executive compensation to worker compensation in a constant ratio industry by industry. Executive compensation has clearly gotten out of hand and boards of directors have not done their jobs. They blame it on the competition for executive talent but I have heard that story before for example when they searched for a new president of the University of Colorado. You'd think there is only one person in the whole universe of all of the PhDs or JDs who would make a good president at a reasonable price. I believe there are many who would like to have president of a major university on their resumes and that the salary offered is largely a secondary consideration. The problem would be solved if executive pay was tied to worker pay in a fixed ratio by industry but this is inconsistent with free market economics but so is redistribution of wealth where one man receives what he has not earned, while another receives only a part of what he has earned.

dianne said...

Obama has discovered that the masses want offshore drilling and that he is on the losing side of that issue. So, he has changed his mind. So did McCain. I'm glad our future leaders have finally listened to the people. However, I don't think either one of them would have changed if it wouldn't have been for the outcry of the public.

McCain's odds of winning are not great; however, he can beat Obama if Obama keeps his "elitism" persona going. Conservatives certainly aren't in love with McCain. He better pick a super VP candidate like Romney or Pawlenty to stand a chance of winning. Tom Ridge ain't gonna cut it.

ultima said...

"Most Americans can no longer maintain their standard of living."

I predicted this as the influx of illegal aliens and legal immigrants ultimately must reduce our standard of living and bring it into equilibrium with that of their homelands, especially as our finite natural resources are spread thinner and thinner until there is less for everyone who is here.

ultima said...

"The only lasting remedy is to improve their standard of living by widening the circle of prosperity."
I imagine Robert Reich is not exactly among the impoverished that he speaks of. The question is how much of his large income is he willing to give up immediately to set a good example and prime the pump. I notice that those, like Reich, who advocate allowing those who have not earned it to receive what another person has earned but does not receive, never volunteer to do that. It must be a case of do as I say, not as I do. This tends to undermine his credibilty.

ultima said...

"For most Americans, earnings have not kept up with the cost of living. This is not a new phenomenon but it has finally caught up with the pocketbooks of average people. If you look at the earnings of non-government workers, especially the hourly workers who comprise 80 percent of the workforce, you'll find they are barely higher than they were in the mid-1970s, adjusted for inflation."

How can this be? If the earnings of hourly workers is higher than they were in the mid-1970s, adjusted for inflation, by definition they are as well off or better off than there counterparts in the 70s. There's something about Reich's statement that I don't understand. On the one hand he says earnings are keeping up with inflation and on the other they aren't. Which is it,Bob?

And why exclude government workers at all levels? Aren't they part of the workforce and people who spend money to keep the economy going? It sounds like Reich knew what answer he wanted so he selected the portion of the earnings data that suited his advance conclusion rather than vice versa, i.e. basing his conclusions on all the data.

ultima said...

"Per-person productivity has grown considerably since then, but most Americans have not reaped the benefits of those productivity gains. "

Reich fails to explain that the source of these productivity gains is not the extra efforts of the workers but the investment of capital in robots and other labor saving devices or equipment that improves efficiency and productivity. Is Reich suggesting that those who made these investments in improved equipment should reap the benefit of their investments? How many more such investments will be made if there is no return on those investments?

ultima said...

"The wealthy devote a smaller percentage of their earnings to buying things than the rest of us because, after all, they’re rich. "

This is true of Reich as well as the ultra rich.

ultima said...

"This underlying earnings problem has been masked for years as middle- and lower-income Americans found means to live beyond their paychecks. But they have now run out of such coping mechanisms. As I've noted elsewhere, the first coping mechanism 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."

Perhaps it had something to do with adding a few SUVs, cellphones, color TVs, and extra large houses to the family budget. It wasn't so much to prop up family incomes as it was to enable them to afford more luxuries.

ultima said...

". They worked more hours." How is it then our workers cannot compete with those in Germany where they work less. There's something wrong with this picture.

ultima said...

"The only way to keep the economy going over the long run is to increase the real earnings of middle and lower-middle class Americans. "

Yet, there are some who maintain that economic growth is based on population growth, that in the final analysis is unsustainable.

ultima said...

"The answer is not to protect jobs through trade protection. That would only drive up the prices of everything purchased from abroad. "

Does anyone believe we can continue to send our treasure abroad to the Middle East, Venezuela and China and still keep our standard of living intact? I have become less of a free trade enthusiast so that our own folks can earn more.

This in a sense is the same argument Reich makes. If you pay workers more, the price of what they buy will also up and perhaps in the end they may not be better off than they were before. If you raise the wages of a home builder's crew, he will charge you more for the home.

Dee said...

Ulty,
Why do you support additional off shore drilling here? Dont we want to reduce the need for oil? I thought you were an environmentalist. Additionally, we all know we would not even see this oil for at least 7 years. Why not look into Solar or Wind power as alternatives? By continuing this oil dependency, we will not only additionally destroy our own environment and deplete resources, it is only a drop in the bucket as it relates to our overall increasing oil needs if we remain dependent on it.
You know as well as I do, the reason the GOP is filibustering right now is due to their support for Exxon and other Oil Company GOP PAC contributors. The GOP politicians are the most corrupt group in Congress´ history!

Dee said...

Additionally, Obama DID NOT say he was in support of off shore drilling. What he said was willing to compromise with the GOP in order to establish a comprehensive energy policy that would bring down gas prices. This means, in order to get the corrupt GOP crony loving filibusterers off of their corrupt stoop, in order to help the American Public (reduce gas prices) he would be willing to make some compromises, as long as these comprises didnt negatively impact the environment.

Obamas Quote:
"My interest is in making sure we've got the kind of comprehensive energy policy that can bring down gas prices," Obama told The Palm Beach Post in Florida on Friday.

"If, in order to get that passed, we have to compromise in terms of a careful, well thought-out drilling strategy that was carefully circumscribed to avoid significant environmental damage -- I don't want to be so rigid that we can't get something done."

Dee said...

Ulty, I wonder if Free Trade is working. If we continue to outsource manufacturing in order to purchase cheap products how do we gain? If we outsource technical jobs to other countries, how do we gain? I remember the speeches we heard in the 80s and 90s. Many of the jobs in the US would be technical job so go back to school and obtain an advanced degree. Now those jobs are outsourced to Canada or the Middle East. If we dont allow the lower to middle class to have jobs with decent wages, they are not going to purchase products. I agree with Robert Reich. The lower and middle class have been surviving on two incomes and longer hours so they can purchase cheap luxuries at Wal Mart. We do need a change. We need a President who can resolve our Economic needs.

Dee said...

BTW Ulty, Obama said today we need to Build fuel-efficient cars and have one million 150 mile-per-gallon plug-in hybrids on the roads within six years.

Now, here is my multi million dollar idea to all the Bill Gates type of inventors out there. Build a car battery that can take an instant full charge. Then, instead of Gas Stations, we will have Energy stations. Instantly charge up your car batteries.

Dee said...

McCain received contributions from oil and gas executives increasing dramatically in June, with more than $1 million going to his campaign and to the Republican National Committee Victory Fund established to assist McCain in the Fall.

ultima said...

"Why do you support additional off shore drilling here? Dont we want to reduce the need for oil? I thought you were an environmentalist."

I support it because I believe we need that oil to bridge the gap between what we can develop in alternative energy sources in the short term and what it actually takes to keep this country running and keep it from collapsing because of fiscal madness and because of the worldwide demand for petroleum that is steadily increasing, especially in China and India.

ultima said...

"My interest is in making sure we've got the kind of comprehensive energy policy that can bring down gas prices," Obama told The Palm Beach Post in Florida on Friday."

Nothing new there. That's what everyone wants in both parties. If the GOP could wave a magic wand and cut gas prices in half, they would do it in an instant, Exxon, etc. be damned.

I favor a comprehensive approach with high priority placed on wind, solar, nuclear and oil, with the last of these as I said above just to keep our economy going and our homes heated while the others come on line. None can be accomplished overnight but we should begin on all of them. I would like stringent safety controls on offshore drilling to protect our coast lines and beaches. Things like extra suction or vacuum pumps, radar beacons, shipping lanes kept away from drilling platforms, and anything else the experts can think of. No one wants another EXXon Valdez disaster. Some things can be done to prevent that and to contain the dangers and the contamination. Surely we have learned something since Valdez.

I'm not sure everyone comprehends how petroleum dependent our society and economy is. It's not just gas for our autos -- it petrochemicals for medicines, fertilizers, plastics, roofing materials, asphalt for roads. Many of those uses will be hard to offset with other sources. I think we can replace much of the petroleum used for energy but not the other uses. So we better think twice before we decide we don't need to vigorously pursue offshore drilling and before our country goes bankrupt or belongs lock stock and barrel to the Middle East despots. They already own 70% of the Chrysler building in New York and probably numerous other properties around the country.

ultima said...

You didn't mention how much the oil companies have contributed to the DNC and democrat candidates. It is standard procedure for all contributors to play both sides of the street. They would be making a big mistake if they didn't try to make the DNC, et. al. beholden to them. What would you do if you expected the dems to win? This is an age old process of hedging your bets.

ultima said...

Finally, I don't like the idea of offshore drilling but I think it is a necessity if we are to have the transition period we need without putting our country and the world into a deep depression.

dianne said...

I had a solar house. It was a total disaster. The government (Carter) gave grants to builders all over the country (thousands of them) without the technology being fully developed and affordable and without oversight of the program. The builders just went for the $$$ and they didn't even know how solar was supposed to work. Our bills were over $400/month in 1979 and 80! I screamed bloody murder to HUD and they sent engineers from Boeing who ripped out the whole thing, including our roof, and restored the whole house to fossil fuels. The taxpayer paid for it to begin with and paid for it again to dismantle it. Boeing told us the whole program failed in thousands of homes around the country. It was a complete boondoggle.

We CANNOT rush into these new technologies or it will be the same story over again. They need to be efficient and affordable and that will take time, a lot of time.

dianne said...

This article from a 7/30 Forbes article is exactly why we should NOT tap into our oil reserves. Despite what the administration is saying, there is a great probability that Israel is going to strike Iran, and oil prices are going to go through the roof. The That's when we need our reserves. The administration knows this but won't say it out loud, of course. It is incredible that the Democrats can't understand this.

"United States -

WASHINGTON (Reuters) - U.S. Energy Secretary Sam Bodman on Wednesday downplayed the suggestion that the Bush administration was keeping oil in the nation's Strategic Petroleum Reserve just in case of a military attack by Israel on Iran's nuclear program facilities.

U.S. lawmakers have repeatedly called on the White House to release some of the oil in the emergency stockpile in order to put more supplies on the market and help lower crude and gasoline prices. The administration has refused, saying the reserve should be used for a severe supply disruption.

"Well, I don't think it's due to any particular threat," Bodman said on the FOX Business Network when he was asked if the administration was stockpiling the reserve's oil instead of releasing it because of the threat of a confrontation between Israel and Iran.

"I do think the president is quite right in his policy of not opening up the Strategic Petroleum Reserve," Bodman said.

The stockpile, created by Congress in the mid 1970s after the Arab oil embargo, now holds about 706 million barrels of crude at four underground storage sites in Texas and Louisiana. (Reporting by Tom Doggett; Editing by Christian Wiessner)"

Dee said...

From what I have been reading, even if we began off shore drilling tomorrow, it would take 7 years before we see the benefit.

I also think solar power has been significantly improved since the 70s. Hey, my calculators work fine.

We all know the real solution, as Ulty pointed out a few weeks ago. We have to do what we did in the 70s. We have to buy smaller, fuel efficient cars. We have to take care of our cars by tuning them up, making sure our tires are fully aired and we should probably resort to drive 55 again. These are all things that saved tons of gas and polution.
We saved millions of gallons of gas. Gas prices dropped.
But we hated every minute of it!!

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