Initial recommendations for President Obama:
- Offer a $10 per hour national service job to anyone willing and able to work.
- Declare a payroll tax holiday and have the Treasury make all FICA payments at least until the economy is deemed to be ‘overheating.’
- Cut the national speed limit for private ground transportation to 30 mph to immediately reduce gasoline consumption (and save lives).
- Implement needed infrastructure spending for deferred maintenance.
- Suspend the Fed swap line program.
- Suspend a variety of the recent, counterproductive assistance programs to the financial sector.
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I had Jamie Galbraith on my radio show the other day (Monday) and when I asked him about Obama’s pledge to “blance the budget,” Galbraith said Obama never said that. But he did. He specifically addressed the deficit and his intention to balance the budget. It was in the third debate against McCain. (The both did.)
Moreover, I have been hearing Paul Volker’s name come up a lot as a possible candidate for Treasury Secretary. In his book, “The Predator State,” Jamie Galbraith offers nothing but scathing criticism of Volker. Sadly, I can only assume that Galbraith’s influence on the Obama Administration will be very minor, if anything. Too bad. God help us if he appoints Volker.
Your ideas regarding “Initial recommendations for President Obama” seem so simple and straight forward with almost immediate results, but I fear we will get the same old smoke and mirrors accompanied with the usual finger pointing, ending in the customary cluster-#&%@.
You want the government to be the “Employer of Last Resort,” yet, for many, a $10/hr. government job is far from the last resort. I believe in local independent business, and I fear that this system would make them, not the government, the employers of last resort. I know for a fact that many independent businesses are unable to pay skilled, dedicated, hardworking employees as much as you propose paying to “anyone willing and able to work.” Even many large corporations can’t pay their entry-level employees $10/hr (consider McDonalds, Starbucks, 7-11, etc.).
Moreover, independent businesses almost necessarily must expect more from their employees than the government, due to the fact that the government is limited in its spending only by the goods and services offered to it for sale. Private sector employers, however, must adhere to a payroll budget; at the least, they are restricted by actual funds. If employees in the private sector do not perform adequately, they must be either better-managed or replaced. If employees working for the government do not perform adequately, more employees can be hired until the required level of output is achieved. If the goal is to eliminate unemployment, replacement of poor employees will not be the first course of action; thus, one of the greatest motivators for entry-level employees – the risk of unemployment – is eliminated. This will make it even more difficult for local independent businesses to hire and keep quality employees while still being competitive in the marketplace. A person making $8/hr., who likely receives few or no benefits, often works unpaid overtime and is relied upon to do a variety of different tasks, needs only to lose their job in order to get a pay increase and, most likely, a decrease in work and stress.
If this system is to be implemented, I think the compensation should start at minimum wage. If payroll taxes are suspended, which should allow employers to increase existing employees’ wages, then minimum compensation should be adjusted by the average amount an employer would be able to increase a minimum-wage-earning employee’s wage. It really must be a last resort or it will detract from the private sector work force.
My primary concern is for local economies, not unemployment. I believe that if we had spent the last few decades building sustainable and self-sufficient local economies, rather than building GDP, our society – not necessarily our economy – would be richer for it.
A self-sufficient local economy will be even more important if the speed limit is lowered to 30mph. People will not only need to find necessary goods and services within a smaller area, but will also need to find suitable employment within a smaller area. I think this is a good thing, but the infrastructure is not currently in place to make it feasible. Furthermore, it would probably be at least as beneficial to limit commercial driving (e.g.: the trucks that deliver goods produced outside of the local economy). Private drivers are currently showing their ability to conserve, even when tempted by huge cuts in fuel prices; commercial drivers have no choice. If the local economy produces more of what it needs, then fuel consumption will drop.
The problems our country faces are on a national/global level; however, most of us still have to live at the local level. When the global and national economies break down, we have no recourse. If diesel fuel becomes so expensive that shipping companies can no longer operate, what will we do? More government assistance? I believe we need to try to take care of ourselves on the smallest level possible.
Warren wrote:
Declare a payroll tax holiday and have the Treasury make all FICA payments at least until the economy is deemed to be ‘overheating.’
Sounds like someone is listening.
“Details have yet to be determined and will depend on further discussions with Mr. Obama. But the speaker prefers a tax cut over a tax rebate. The speaker said a tax cut would have a more immediate impact on the economy, especially if the government speeds dollars into worker paychecks by adjusting tax-withholding tables. “The impact is faster than a rebate, which takes a few months to get into people’s hands.”
http://online.wsj.com/article/SB122600310456906045.html?mod=rss_whats_news_us
The job guarantee is a terrific idea.
The 30mph limit though, would be incredibly disruptive, and to what benefit? The oil dependence problem will solve itself. As the price of oil goes up, alternatives will naturally become more attractive. That will bring its own disruption as well, of course, but what’s the hurry?
Lots to comment on!
Yes, it looks like Galbraith is not on the top of the list for advisors, from what we’ve seen. The deficit terrorists seem to be getting a lot more weight.
Yes, the hope is Obama isn’t true to his words and that they were spoken only to get elected, as most of his supporters seem to think.
So our best hope is we have another president who doesn’t mean what he says.
3. Yes, $10 per hour could initially be ‘disruptive’ as you suggest.
If so, there would be a one time upward adjustment in the price level, as the agg demand from the higher wage would result in higher prices in the market place and give businesses sufficient earnings to pay a higher wage to attract workers from the elr pool. In theory, the elr wage can be set anywhere and the rest of the economy would adjust accordingly.
Over time, by keeping the elr wage fixed, it will be the lowest wage in the economy, and losing one’s job in the private sector will mean a step down financially to the elr pool. And with a fixed rate of pay for elr workers business can readily hire at some spread in compensation above the elr compensation.
elr is a bufferstock policy that ‘buys’ labor during contractions and ‘supplies’ labor in an expansion.
i agree the $10 wage may be deemed ‘disruptive’ as you suggest, particularly in many regions. And Congress may decide to have regional differences if it wants that kind of incentive in place.
I am certainly not against starting the program at a lower wage, and in any case i would include health in the comp package.
The basic princ is that an employed bufferstock is far superior to the unemployed bufferstock we currently utilize for price stability.
Nate- as perviously discussed, rationing will take place either regressively by price, or less regressively by other methods. For example, fuel economy standards as well as my reduced speed limit proposal.
Yes, it will solve itself, after maybe 10 more years of declining real terms of trade and widening inequality of consumption (the rich in ever larger suv’s and the poor on bikes). I am offering an alternative.
$10 dollars an hour is not nearly enough to support aggregate demand in many parts of the US. In the part of the country where I live, people make $10 and hour flipping burgers at McDonalds, and the outcome of working full time at *that*, after taxes, is barely enough to pay for a room in someone else’s shack plus bus fare to get back and forth to work. In other words, it is barely enough to provide for bare necessities.
What I think is missing in the calculus of many people is an understanding of how significantly things have gotten out of whack with respect to fundamentals in many parts of the US. The cost of living in many regions has rapidly outpaced wages in many regions.
I live in an area where the average price of a 1 bedroom apartment is $1400 a month and where the average price of a home is $600,000. Rooms for rent routinely go for $500 – $700. I’m a highly educated engineer and my wife is in the medical field… but I know people who make $17 an hour here and they struggle to get by. There is no way they can rent their own apartement and they struggle to afford having an automobile.
You don’t need to be a math wizard to determine that someone making $10 an hour here, after payroll deductions for taxes, etc… can barely afford rent, food, and transport (which likely does NOT include owning a car). How do you support aggregate demand under such circumstances with $10 an hour? All you are really doing is making sure people are fed and housed. For this to be effective, it would need to be pegged to a cost of living index by region.
the $10 dollar jobs alone won’t support agg demand without a continuing contraction large enough to put more people out of privates sector work and into the elr pool, as falling tax revenues and rising govt payments for elr and other things cause the deficit to get to where it needs to get to again support output and employment. this is what i call the ‘ugly way’ to get there.
instead, we have the option of proactively cutting the fica taxes, for example, as in my proposal. this will restore output and employment without first increasing the elr pool.
Not sure how much this is worth, but Obama has his Transition site up. You can apply for a job, and even share you “vision.” for the country. Might as well put in some of Warren’s suggestions there. If a lot of us do, maybe they’ll notice. Also you can apply for a job. I think you should give that a shot Warren.
http://change.gov/page/s/application
http://change.gov/page/s/yourvision
Will do, thanks!
Asphalt shortage? How do I subsidize jobs if the raw materials have run out? That didn’t factor into my models!?! Duh! Taleb is laughing at all of us!
http://news.yahoo.com/s/ap/20081109/ap_on_bi_ge/asphalt_shortage
Vipual thanks for the link, I am going there right now to insist they hire Mosler to come up to washington and get larry summers educated that it is ok to blow up the money and even the government as long as citizens lives are getting better and better. Mosler is the very definition of “change” that Obama needs to embrace and I don’t see how he could refuse Warren.
Asphalt shortage? How do I subsidize jobs if the raw materials have run out? That didn’t factor into my models!?! Duh! Taleb is laughing at all of us!
news.yahoo.com/s/ap/20081109/ap_on_bi_ge/asphalt_shortage
Vipual thanks for the link, I am going there right now to insist they hire Mosler to come up to washington and get larry summers educated that it is ok to blow up the money and even the government as long as citizens lives are getting better and better. Mosler is the very definition of “change” that Obama needs to embrace and I don’t see how he could refuse Warren.
Reduce the speed limit to 30? I will be a barrel of fun driving your MT900 then!
You forgot to re-investigate 911! I have been studying the events of that day and we were all lied to just check http://www.ae911truth.org Over 500 professional architects and engineers who say we were lied to again by the corrupt fascist government!