The Union Buster’s Mythology

Much of the world we know is defined by its mythology, and politics is no different. Perhaps my favorite bit floating around the ether goes something like this; “The recession was caused by greedy Americans who make too much money and demand unsustainable benefits, while producing little of value. These people are not Wall Street brokers or big ticket bankers.” That’s right friends, the enemies of all that is good and wholesome, apple pie and baseball, are no longer poor people with no prospects and less work ethic. Step right up into the modern world, where working folks who have solid wages and benefits are the bad guys.

This brave new world we live has a really neat new math to power it as well. It would have to though, wouldn’t it? Basic arithmetic just doesn’t support the common contention, in both conservative thought and a brain dead national media, that purposely deflating wages would be the economic wonder drug that works wonders. The basic arguments that conservatives seem to be making on this subject are difficult enough to swallow, but the follow up arguments they are forced to make when their math breaks down are priceless. This isn’t high powered stuff here either, this is basic arithmetic…I promise.

The history of this debate has been chronicled ad nauseum on this blog; a 30 year orgy of tax cuts, relaxation of corporate financial rules, and lax regulatory enforcement has not improved the lot of working Americans. How do I know this? Household income gains, a surging force from the end of the recession into the 1970’s, became a trickle over the last three decades.

Despite explosive increases in the incomes of those at the top of the strata, median income is flat since the late 1990’s. This stands in contradiction to the predictions of Laffer’s supply-side economics theory, the academic bulwark that supports the political appeal of the modern conservative ideology. As that idea, and the legislative agenda that is has driven, crumbles, its proponents have gone in search of new villains to explain the failure. Unions have stood as an easy target for some time now; big, slow moving, and populated by humans who make decisions both bad and evil.

The new conservative math is this:

  1. Deficits cause recessions; deficits are caused by governments that spend too much money on the wages and benefits of their public employees
  2. Struggling corporations cause recessions; struggling corporations are caused by companies who are forced by evil trade unions to pay wages above the poverty level
  3. Outsourcing that is caught by the typically half-blind national media causes recession; outsourcing is the only option for companies forced to be good corporate citizens and pay their employees more than Wal-Mart pays their store greeters

Again, it is important to note that if conservatives handed this math into their third grade teachers, they would be held after class. To their first point, deficits at the state and federal level do not cause recession, they are in fact caused by recession. Recessions destroy both income and sales tax revenue, causing budgets to go into the red. In this recession, the principal agent of destruction was an asset bubble, meaning that local governments reliant on property taxes were annihilated. Laying off, limiting hours, or reducing the hourly wage of public employees lowers income and sales tax collections, and can precipitate further asset devaluations. Visualize a dog chasing its tail, and you will understand the dilemma of trying to balance a budget with expense savings that erode your revenue.

To their second point, after tax corporate profits, from 1980-2010, have increased by a factor of ten. Lets think about that from a math perspective. Household income during that time-frame has increased by about 20%, while after tax corporate profits has increased by about 1,000%. Now, I don’t begrudge the earning of money, and I am a capitalist. But the idea of taking the tops off of corporate growth was that it would be beneficial to the country as a whole. Keep these facts firmly in mind when you hear (or make) the argument that higher taxes on big corporations and the wealthy is evil redistribution. It is pretty clear from whom the wealth is being redistributed.

The last contention is my favorite. Yes, it is true that basic economic theory states that economies evolve from agrarian, to industrial, and finally to service. What is also certain is that the United States will find it counter-productive to compete with developing nations that have comparative advantage in the production of many items. What we can do about this problem is be flexible. Having the best educated work force in the world, and allowing that force to be mobile by breaking down structural barriers (like, say, inflexible and exceptionally expensive health care), will allow us to meet new market challenges with the same workforce.

What is not possible is the math-deficient idea of “controlling” wages and benefits to make companies that base their operations at home competitive with companies that outsource or move. To make the U.S. labor-cost competitive with the developing world, hourly wages and benefits would have to be cut in half. For most Americans, that is a prospect that is completely unsupportable. But let’s say you are a business owner, and are reading this thinking, “I will be fine.” Where does your business come from? Who buys your pizza, beer, cigarettes, homes, home remodels, plumbing services, haircuts, auto repairs, or alarm consoles? Economies function on money…there has to be demand for products and services for the supply side to make a buck.

It is also important to look at the big picture; the United States is the fifth highest ranked nation in terms of ease of doing business. Our rankings on health care, green energy production, and transportation efficiency are all substantially lower. If you were the all-powerful leader of America, which subject would you work to improve first? Conservatives continue to turn a self-blinded eye to our competitive deficiencies in energy, health care, and transportation, while simultaneously trying to “improve” our business climate. But the notion of being “pro-business’ has proven to be an easy sell to Americans.

Unions have made themselves easy targets over the years, in part because their failings make good copy. Union breaks, the protection of low performers, and the detailed public knowledge of wage and benefits negotiations makes for a lot of hard feelings. Unions have also had occasion for the use of disreputable tactics in the enforcement of their mandates. Of course, so have corporations. When we the people look at the state of our economy today, we see a picture of dramatic wage transformation over time. Thirty years ago, Wall Street brokers and bankers were wealthy and powerful, and average Joe’s working a union job made a decent living. Today, Wall Street brokers and bankers are wealthy beyond the dreams of avarice and “earn” mulit-million bonuses when their portfolios fail; those Joe’s fortunate enough to still have a job are being castigated for making $27.50 an hour. This argument has gone well past any midpoint…it is high time we reeled it back in.

The Rational Middle is listening…