Economics

I have to admit, I wasn't the best student ever when it came to my courses in Economics. In the MBA, I had to take macro and micro, and can't say I enjoyed either one. Especially the macro class, I had a sneaking suspicion that it was one of those academic disciplines created mainly for the purpose of employing college professors.

But lately I'm hearing a lot of debate about the US economy, basically with Republicans saying it's great and Democrats saying it stinks. At its most basic level, the debate is clearly one of perspective; Republicans see the glass as half full, while Democrats prefer to see it as half empty.

Let's see if I can apply my humble logic and reasoning skills to separate each side's truth from their BS.

Republicans say:

The economy is terrific! There is more home ownership than ever before. We have achieved full employment, with unemployment rates lower than they've been in the last decade. The stock market is strong, corporate profits are up. All true.

Why should Republicans and the President get credit? Because of the tax cuts. Tax cuts stimulate the economy by allowing companies and individuals to keep more of what they earn, which they in turn spend on things that help boost the economy. True, but there's room for debate on how significant the tax cuts were in boosting the economy.

Democrats say:

The economy is only terrific if you're rich. The poor and middle class are getting slammed with higher energy prices, higher education costs, out-of-control healthcare costs, and all this while their wages are declining. I can't deny that there is truth to all of this. It's easy to agree, because we're all experiencing firsthand or know plenty of others who lost jobs to outsourcing and offshoring, can't get or can't afford health insurance, and our household budgets are all getting slammed by high energy costs. And my consulting work is involved regularly with setting up payrolls for companies, and I see it all the time: A handful of executives are raking in outrageous salaries, bonuses, and stock options, while the vast majority of the employee base only gets somewhere between minimum wage and around $50-$60K per year. The middle pay grades are practically gone - I saw the transition from the 80's and 90's, as the whole group we used to call "middle management" disappeared. It's true, they are gone forever.

Democrats also say the tax cuts are responsible for today's struggle in the lower and middle class. That's bunk. First of all, the tax cuts went to everyone, not just the rich. The Democrats make their living on class envy, misleading their consitituents into believing that the rich are somehow getting away with avoiding their fair share of taxes. That's just not true, unless of course you consider socialism the model of "fair share", where we go back to the late 60's and early 70's with marginal tax rates at 70 to 80 percent.

The fundamental dilemma should be defined independent of the rhetoric of both sides. Sending high-tech and other formerly good-paying jobs to India is helping corporations post record profits on the backs of their own country's workers. Illegal immigration is taking entry-level jobs away from young Americans every day; it is misleading to suggest that they only do those jobs Americans won't take. Basic economic fact says that you can fill any job simply by paying the market wage, but that market wage is artificially skewed by uninvited foreign workers. Finally, I find it morally reprehensible to do what Cummins and other big companies all around the country have done to their high-tech workers: Fire them all and replace them with immigrants from India who will do the work for a fraction of the compensation.

What is the solution? I don't like the so-called "solutions" offered by either party. Of course, the Republicans have no solutions, because they don't believe there is a problem. And the Democrats' solution has nothing to do with solving the problem, because they are more focused on regaining their political power to move the country closer to European-style socialism than actually dealing with any problems.

I say we need to ignore the political parties and find leaders who actually have real positive ideas that solve the real problems. Those solutions have to include sealing the borders and revamping the immigration system so it makes sense for everyone. It's not necessary to punish corporations for doing what they do, but it's certainly a good idea to stop the current preferential treatment they are getting from the government and begin actually enforcing our anti-trust laws again.

Actual solutions to the healthcare crisis that make it possible for average citizens to afford medical care and prescription drugs without turning the whole system over to an inefficient and corrupt government bureaucracy are badly needed. Oil exploration and drilling wherever reserves are found on our own soil must be permitted, starting with ANWR and continuing with the vast reserves we already know are sitting just offshore. More refinery capacity should be encouraged, mostly by enforcing anti-trust laws on the oil industry to foster competition.

Education needs to be fixed. We should not longer accept the outrageous failure rate of our public schools, and must demand our schools produce results or we'll close them down and send the students to schools that work.

There's more, but I'm tired of writing and need to get some work done. But isn't it interesting how all these issues intertwine? We have two choices if we continue the status quo of the two political parties in America: We can either become like Europe, with a socialist society where nobody starves but nobody is allowed to earn much either, and we all can live in cramped little apartments while squeaking by on the government dole. Or we can continue the current course, with a gradual consolidation of business power into fewer and fewer mega corporations, who can reach around the globe for the cheapest workers and continue to chip away at employee health and retirement benefits.

There's a third way, and it requires a third party. My other blog talks about the tenets of this party, but it takes a huge number of people to band together to begin to make it a force for change. Maybe someday.