A note in response to Krugman's 7/3/09 column: "That ’30s Show"
by Artie Gold on Friday, July 3, 2009 at 10:10pm
The real question at this point is "will we get to 1937?"
A lot of the problem is that 9.5% unemployment is something we've seen before; a quarter of a century is but one generation. Yes, things are bad -- but to many, it's a restoration of "the way things are supposed to be" (hideous wealth distribution, the commoditization of labor and everything else). The big difference is that our expectations have changed to such a great extent. After all, the last time we saw unemployment at these levels it preceded a pair of decades of considerable growth (the second better shared than the first, to be sure -- and even then medians barely touched the pre-oil-shock levels).
Perhaps the first thing we need to do is to un-massage the unemployment numbers; if the "real" number were promulgated (is it 13%? 14%? more, using the pre-Reagan standard?) Of course, the "other side" would immediately demagogue that issue too -- happily comparing apples to oranges...
Yes, what must happen is to drive a stake through the heart of the trickle-down worldview that got us into this mess. There's a somewhat creepy predestination-type argument that keeps being made, that the whole problem was that people got loans who didn't deserve them -- indeed who were not WORTHY of them -- and THAT'S what brought things down.
No, dammit, the fact is that a consumer-based society coupled with a consistently upward-redistributable (read: "low tax") economy is, by its very nature, unsustainable.
Here's my prescription:
Raise the minimum wage by 30% over two years.
Institute a sharply progressive income tax for incomes over, say $400000, up to, say, 60% for incomes over 1500000 and 75% over 5000000.
Establish a living wage, at likely 150% of minimum wage; wages paid below that create a corporate tax liability of 25% of the difference (against profits).
Fund the shortfalls of the states.
Create a significant fund for very low cost loans for education.
Pass a reasonable form of Universal Health Care.
Might all this be inflationary? Yes. Most likely. Truth is, inflation has been artificially low for decades now. Capital has had its party. If we are dependent upon consumption, money has to be placed in the hands of those who will use it to consume.
When the party (finally) gets started -- and goin' pretty good -- *then* you take the punchbowl away. But not until we cut unemployment by half.
Look, I'm not an economist, nor am I an MBA (many of whom are wonderful people, but as a group -- in terms of their overall effect -- not so much). I am, however an observer of the scene and have been around the block likely a few more times than I have left. Still, it seems pretty obvious.
If we make the stated policy goal to eclipse the former high in real median income by 10% we'll be all right. Otherwise it's gonna be a long slog.