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Posts Tagged ‘demand’

15 dollars

People earning the federal minimum wage of $7.25 aren’t going out to eat at restaurants because they can’t afford to do so. That’s pretty much true for those who make higher state minimum wages of nine and ten dollars an hours. These people are not taking yoga, piano, or karate lessons. They don’t belong to gyms, and they don’t take part in yoga classes. They purchase few if any new books, and buy clothes at second hand stores, like the local Goodwill. They don’t buy flowers for their mother’s on mother’s day. They’re not purchasing new computers, cameras, tables, chairs, carpets, washing machines, dryers, I-phones, cars, organic food, or houses. They’re not buying a lot of other things.

What good are these people to the economy, other than to provide rich people with cheap labor? Like the idle rich, minimum wage workers barely stimulate demand for goods and services.

What do low wages have to do to with rich people? Low wages boost profits. As a consequence of that, corporate dividends and share prices go up. People who earn less than $100,000 a year own hardly any shares of corporations. The primary beneficiaries of people working at minimum wages go primarily to the rich.

If you raise the minimum wage to $15 an hour, the people who benefit from this raise will be buying a lot of the things listed above and more, even a house in Detroit, Michigan, and elsewhere, as well.

And all of a sudden, not just large businesses, but small businesses thrive because demand for goods and services is stronger.

Studies over the last fifteen years show that the idea that high wages weakens employment is a myth.

There are two fundamental laws of capitalism. One is something about supply and demand, which is often rigged in favor of those who believe and act upon the golden rule; he who has the gold makes the rules. The other rule, which Henry Ford (the founder of the Ford Motor Company) believed was simple: When people have more money, businesses have more customers, and need more workers.

This explains why the current economic expansion is the worst since the Great Depression in virtually every category having to do with jobs, wages, GNP, and the things that are important to 99 percent of the US population.

Currently, 1 percent of the population has rigged the economic and political games over the last thirty-five years to the point where they have received a legislatively determined 95 percent of all income growth since 2009, the most ever on record. Worse yet, the rich steal 37 percent of all income produced in the United States nowadays, and that figure is growing, and with no end in sight. Rich parasites will soon be larger in terms of total income than their hosts, the 99 percent.

Ever wonder why the economy under President Jimmy Carter produced more jobs, raised wages, and had greater GNP growth on average than any year of the last fifteen with an economy that was ½ the size of today, and with a population that was 60 percent the size of today? The answer is simple.

Back then, the rich only stole 8 percent of the annual income produced in the United States. That means the rest of us earned 92 percent of all the income created in the USA, which meant demand for goods and services was far more plentiful then than today, job growth was greater, and wages for the 99 percent also rose. Under Carter, the economy created 225,000 jobs a month. Over the last fifteen years, 90,000 has been hailed as an outstanding achievement by President George W. Bush, as well as President Obama.

Something clearly is out of whack with the economy, and yes, most of it has to do with the massive corruption of the US government that was unleashed by the Reagan tax cuts. But if income can be massively redistributed from the 99 to the 1 percent, as it has been for the last thirty-five years, then the government can act to redistribute it back to where it belongs, and all for the good of the economy. This can partially be achieved by raising the minimum wage to $15 an hour by 2017.

And don’t tell me corporate America doesn’t have the money. Currently, they’re sitting on 7-8 trillion dollars inside the US, while holding another 7-8 trillion outside the US, because the demand for goods and services is so low they have no reason to invest it in new plant and equipment so as to increase production, which would require workers.

You can go back 150 years and literally find the same people shouting over and over again on behalf of their rich patrons saying the same thing, “If people on the bottom get paid more, it will be bad for them, and they will lose their jobs.” That’s just a polite way of saying, “My patrons and I are rich, you’re poor, and my boss and I want to keep it that way. And besides, it’s good for Wall Street.”

The fact that corporations are sitting on trillions upon trillions of dollars because demand is slack shows the opposite is true. Every one of those trillions of dollars could be used to create jobs if only the demand was there. The years between President Franklin Roosevelt and Ronald Reagan also show the same thing.

If you pay people more, they will purchase more, and everybody will be better off, not just a few politically powerful people. Those trillions of dollars will be used to invest in the production of goods and services. Those trillions also show that US corporations are quite capable of paying their employees more, and not just the already rich CEOs.

That’s why it’s long past time to raise the minimum wage to $15 an hour. Besides, if the minimum wage had kept up with productivity (or real inflation) over the last 56 years, the US federal minimum wage would be nearly twenty dollars an hour.

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The leadership of the South Carolina Chapter of the AFL-CIO announced last week that it was endorsing Bernie Sanders in the Democratic primary for president of the United States. There was simply no way that the leadership could endorse Wall Street candidate Hilliary Rodham Clinton, whose economic plan calls for eliminating labor unions by shipping jobs overseas, redistributing more income from the 99 to the 1 percent, and increasing the trade deficit, among other things.

The 1 percent now steal over 36 percent of all income produced in the United States, compared to 8 percent back in 1980. This redistribution is one of the reasons why the US economy is historically weak. The 99 percent simply don’t have the money to demand more goods and services, thereby increasing job and wage growth. Clinton plans to enact her plans by supporting the Trans-Pacific Partnership, the largest income and political power redistribution scam in US history, which is currently being marketed as a trade agreement. The South Carolina AFL-CIO leadership also recommended that the national leadership endorse Bernie Sanders. Duh!

Click on the link below for more on this story.

Bernie Sanders Gets the Endorsement of the South Carolina AFL-CIO

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When the government increases taxes on the rich, they have less money to purchase politicians, which means government can pretty much follow policies the majority of voters want, such as creating jobs by spurring the demand for goods and services. Minnesota’s next-door-neighbor is Wisconsin. Governor Scott Walker slashed the state’s budget and programs in order to make room for millions of dollars of tax cuts for mostly out-of-state billionaires and millionaires. The result was a decrease in demand for goods and services and nearly last in the nation in job creation.

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Knowing the truth can set you free. Knowledge of the forces that constrain you is the first step toward achieving freedom. Great spirits always encounter violent opposition from mediocre and bought off mouths and minds.

So here’s economic myths numbers four and five.

4. Myth: Free trade is good, but only if you’re rich.
Fact: International income redistribution agreements are falsely marketed as free trade agreements. These agreements are perhaps the biggest reason why the 99 percent receive only 66 percent of the income created in the United States nowadays, compared to 8 percent.

5. Myth: The United States is a democracy in which all the people are represented.
Fact: The United States is a plutocracy, which is a government of the rich, by the rich, and for the rich. At times in the past, the USA has had a national government that represented most of the people, but never all of the people. When this has occurred the rich only received 8 percent of national income. Today the rich steal 36 percent of the total national income.

In other words, income distribution is solely linked to political power. Whosoever has the gold makes the rules.

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(A message from Citizen’s Trade Campaign, with a couple of extra graphs and paragraphs from me)

President Obama is likely to use the State of the Union to push for passage of the Trans-Pacific Partnership (TPP) and the rigged “fast track” trade promotion authority. Here are some facts to counter the expected public relations campaign.

Of Course “Trade” Is Good.

But first, of course “trade” is a good and necessary thing. We all trade with others. This is how people, businesses and even countries “make a living.” Critics of our country’s current trade policies are not “anti-trade”; they are anti-trade-deficit. They are opposed to the use of so-called “trade” agreements to promote the interests of the largest multinational and Wall Street corporations at the expense of America’s working people, its middle class, its domestic “Main Street” companies, our environment and the country’s long-term economic health.

Compare the timeline of a chart of our country’s trade deficits with the increase in the economic tensions of our middle class, our manufacturing regions and other economic troubles:

You will notice in the graph above and the graph below the amazing coincidence of the US trade deficit with the growth of income inequality in the United States. They mirror each other perfectly. That’s because trade agreements are negotiated to increase income inequality. They are negotiated to redistribute income from the 99 to the 1 percent, and the Trans-Pacific Partnership is no different than any other income redistribution treaty.

As the US trade in goods and services goes down in the graph above, you can see the 1 percent get richer in the graph below, while the rest of us suffer the consequences. When a job is shipped overseas, or a trade agreement paved the way for a US corporation to create jobs over there rather than over here, the difference between the old, higher US wages and the new lower wages over there goes straight  into the pockets of the affluent via higher corporate profits, rising share prices, and surging dividends.

Jobs are the largest export product of the United States. Nearly 29 million of them were exported from the United States from 1990 to 2010 (see graph below), and that doesn’t even count the jobs that trade treaties allow to be created overseas by US corporations. Those exported jobs are the principle reason the US economy is historically weak. Exporting those jobs overseas have taken away trillions of dollars from the 99 percent, and weakened the demand for US goods and services in the process.

And every one of those exported jobs represents lost tax dollars that should have gone to schools, fire, police, infrastructure and the social safety nets, such as the Social Security Trust Fund and Medicare. Those jobs used to pay the wages of US workers, but international trade has redistributed the wages and salaries of those jobs from working Americans to the rich, and every year each of those jobs exist overseas is another year in which income continues to be redistributed to the 1 percent via that same job, for as long as each job exists.

International trade treaties are the primary means to end the idea of shared prosperity, and they are the primary reason why 95 percent of all income growth in the USA has gone to the 1 percent since 2009. The evidence on this is overwhelming. And the president of the USA is trying to rig the economic game against the 99 percent even more with the Trans-Pacific Partnership.

Trade policies that are rigged to boost the interests of the giant, multinational corporations at the expense of the rest of us are not good at all. “Trade” agreements and “offshoring” of jobs have become synonymous. But “trade” doesn’t at all have to be about moving American jobs and factories out of the country so that executives can pocket the pay difference and the difference in the cost of enforcing environmental protections.

The Recent Korea-U.S. Free Trade Agreement Is An Example

During the State of the Union speech the president is expected to feature the owner of a small business that has increased its exports to South Korea since the Korea-U.S. Free Trade Agreement (KORUS FTA) was signed. This is ironic. Americans believe in and support small business – hence the use of the owner of one – but our country’s trade deals have been negotiated primarily for the benefit of giant, multinational corporations, and their interests often collide with the interests of smaller, “Main Street” businesses.

Some American businesses have indeed added sales and workers as a result of the KORUS FTA. But the fact is that since that trade agreement was signed the U.S. trade deficit with Korea has grown 50 percent – a metric that has resulted in 50,000 American jobs lost. In other words, since the KORUS FTA went into effect, South Korea is selling much more to us than the country is buying from us – and this problem is getting worse and worse. And as the trade deficit chart above shows, this just happens to be the record of our “trade” agreements.

Please take a look at this Census Bureau data page, “Trade in Goods with Korea, South.”

The KORUS FTA went into effect in March 2012. That month we sold $4,224 million in goods to South Korea and we imported $4,788.2 million in goods.

In November 2014 the U.S. had a $2.8 billion monthly trade deficit with Korea – the highest monthly U.S. goods trade deficit with Korea on record. We had $6.3 billion in imports from Korea (a record) and $3.5 billion in exports to Korea that month. In the first two years of the KORUS FTA, the U.S. goods trade deficit with Korea went up by 50 percent (a $7.6 billion increase).

So since March 2012 our exports to South Korea decreased from $4.224 billion to $3.5 billion. Meanwhile, our imports increased from $4.788 billion to $6.3 billion.

The KORUS FTA has hit American small businesses harder than large ones. According to U.S. Census Bureau data, small firms with fewer than 100 employees saw exports to Korea drop 14 percent while firms with more than 500 employees saw exports decline by 3 percent. According to “Report Funded by Big Business Explains to Small Businesses What’s Best for Them” at Public Citizen’s Eyes on Trade blog, “As a result, under the Korea FTA, small businesses are capturing an even smaller share of the value of U.S. exports to Korea (just 16 percent), while big businesses’ share has increased to 72 percent.”

This is the record: The KORUS FTA so far has resulted in a trade deficit of $2.8 billion a month, representing the loss of around 50,000 jobs. It has been harder on smaller businesses than larger ones, allowing the larger businesses to push the smaller businesses aside. But in the State of the Union, the president is going to bring attention to the owner of one small business that increased its exports and hired more workers, and use this to say to make the public think that the KORUS FTA has been good for our country – and that we should enter into more agreements like it.

Other Trade Agreements

The KORUS FTA certainly is not our only “free trade” agreement. NAFTA is the shorthand name many Americans use for our trade agreements generally. How has NAFTA – the North American Free Trade Agreement – worked out for the U.S.?

The Public Citizen Global Trade Watch report titled, “NAFTA at 20: One Million U.S. Jobs Lost, Mass Displacement and Instability in Mexico, Record Income Inequality, Scores of Corporate Attacks on Environmental and Health Laws” compared the promises with which NAFTA was sold to the results measured 20 years later. Some of the effects of NAFTA that are highlighted in the report include:

● a $181 billion U.S. trade deficit with NAFTA partners Mexico and Canada,
● one million net U.S. jobs lost because of NAFTA,
● a doubling of immigration from Mexico,
● larger agricultural trade deficits with Mexico and Canada,
● and more than $360 million paid to corporations after “investor-state” tribunal attacks on, and rollbacks of, domestic public interest policies.

The data also show how post-NAFTA trade and investment trends have contributed to:

● middle-class pay cuts, which in turn contributed to growing income inequality;
● U.S. trade deficit growth with Mexico and Canada 45 percent higher than with countries not party to a U.S. Free Trade Agreement,
● U.S. manufacturing and services exports to Canada and Mexico that have grown at less than half the pre-NAFTA rate.

What about our deal to bring China into the World Trade Organization? Obviously South Korea is small potatoes when compared with China and the data bear this out. In August 2012 the Economic Policy Institute estimated that the U.S. lost 2.7 million jobs as a result of the U.S.-China trade deficit between 2001 and 2011, with 2.1 million of those lost in the manufacturing sector. Along with these job losses, U.S. wages fell due to the competition with cheap Chinese labor, which has cost a typical U.S. household with two wage-earners around $2,500 per year.

The Commerce Department reported earlier this month that our November trade deficit with China was $29.8 billion. That’s $29.8 billion in one month! Our exports to China decreased $200 million to $11.1 billion and our imports from China decreased $100 million to $40.9 billion from the previous month. Think how many jobs would be created here if $29.8 billion of additional orders came in to companies making and doing things inside the U.S., and this continued every month!

Balance Needed

Trade should be balanced or economies are thrown out of whack. “Trade” is supposed to mean we buy from them and they buy from us. It is not supposed to mean we buy from them and later they use the money to buy us. It is not supposed to mean we send jobs and factories out of our country so that a few executives and shareholders can pocket the wage difference and the reduction of environment enforcement costs.

Exports are great, but if a deal to increase exports increases imports even more, we have a trade deficit and are still at a net loss of jobs, factories and wealth. This means that we are still offshoring jobs so that executives can line their pockets with the wage differential. This has been the case with the KORUS FTA. This has been the case with NAFTA. This has so obviously been the case with China. The last thing We the People need is even more of this.

The reason our trade policies are working out this way is because the beneficiaries of this kind of trade deal are the ones controlling and negotiating these trade deals. The giant, multinational corporations and Wall Street make money from offshoring U.S. jobs and production – partly because our tax laws encourage this activity. The rest of us, including our “Main Street” businesses and the country at large, are net losers. This is obvious to anyone who drives through much of the country or who talks to regular, working people. This is obvious to anyone who looks at the timeline of that trade deficit chart and compares that to the economic shifts of our last few decades.

Our trade negotiating process is rigged from the start. Giant, multinational and Wall Street corporate interests are at the negotiating table. Consumer, labor, environmental, human rights, democracy, health and all the other stakeholder representatives are excluded and the results of these negotiations reflect this. A rigged process called “fast track” is used to essentially force Congress to pre-approve the agreements before the public has a chance to analyze and react to them.

Obviously the giant, multinational and Wall Street corporations would want the public to believe that everyday small businesses gain from our trade deals, when in fact they do not. It is less obvious why President Obama would want to present at the State of the Union the story of one small business that does not reflect the reality of the trade deals he is promoting.

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The Intelligent Economics Behind Raising the Minimum Wage

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The evidence is all in; tax cuts for the rich destroy jobs. The money from tax cuts for the rich is used to purchase politicians, like Wall Street Congressman John Boehner and Wall Street Senator Ron Wyden, who then press for legislation or free trade treaties that redistribute income from the 99 to the 1 percent, destroying American jobs in the process.

Free trade treaties are the most obvious case in point. These treaties pave the way for corporations to ship jobs overseas, and the difference between the old higher US wages and the new lower overseas wages goes into the pockets of the super rich via higher corporate profits, rising share prices and soaring dividends.

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