George Rebane

[This is the transcript of my regular KVMR commentary broadcast on 2 December 2011.  Here it contains a link to augmented graphics, and is addended with relevant material that could not be included due to the limited time slot into which the commentary must be scheduled.]

The world has already changed a lot, and the biggest changes have yet to come.  Europe’s countries are facing imminent financial disaster as the bills for years of generous public entitlements and indiscriminate borrowing are coming due.  Sovereign nation-states, suffering from the disease that dare not speak its name, are rapidly running out of other people’s money.  We all know the austerity riots of bankrupt Greece, and now top dog Germany is having trouble borrowing money.  No one is immune.

In America the Occupiers have become the latest symptom of the disease, joining the already established Tea Party movement to protest the direction of governance and commerce.  However, from their statements of goals and principles to their sanitary habits, these movements have very little in common.  Unfortunately, neither has grasped the real signs of the times.

With technology accelerating into the workplace, unemployment today is at the highest level since the Great Depression, corporate profits are at an all time high in nominal dollars and as a share of the GDP, wages as a percent of the economy are at an all time low, and income and wealth inequality are near all-time highs.  (see Business Insider graphics) The simple Simon solution of the Left is for a bigger government to just take more from the producers and investors.  Sadly these solutions don’t even pencil out on the back of an envelope, but they do make all the sense in the world to the tent dwellers in front of city halls, and their quiet supporters.

Meanwhile, the middle class needs jobs which they cannot create.  Yet they are asked to punish those with the earnings and investments that have created wealth producing jobs, and are still creating them even in the face of stiff government opposition.  And then there’s a catch.

With three billion workers around the globe competing with the American worker, our unemployed have to offer something more than mirror fogging to employers.  For example, Apple’s new data center in North Carolina has created new jobs but can’t get skilled workers, as have many energy production and support companies located on our Great Plains.  The country has literally hundreds of thousands of jobs that are waiting for skill sets our workers lack.

Businessinsider.com compiled a list of today’s most useless college degrees.  From the top, these are – journalism, horticulture, agriculture, advertizing, fashion design, child and family studies, music.  This gives you an idea of what so many thousands of students are studying without much hope of getting a decent job or any job at all when they graduate.  And every year over four million young people emerge from our education pipeline, sadly many without even high school diplomas.

Today it should be clear to all Americans who read, that the old world is not coming back.  In spite of this, one set of politicians’ sense of economics and history convinces them that we can go back to the 1980s and 90s if we could only spend and tax enough.  Other politicians firmly believe that good times will return only when we cut spending and taxes.  But one thing is for sure, we got here through endless public spending funded by endless public borrowing.  Few thought about prudent spending paid for by concurrent tax revenues.

Re-election is based on promises, and accommodating lies have always been told to all according to their station in the economy.  It still works.

Today’s poster child for this kind of debate is the recent payroll tax cut.  Should it be continued through 2012, with a $1,000 one-time injection into middle class pockets “paid for” by a tax hike for job creators.  Or should we fix taxes at current levels, and create new jobs paying new wages to the same middle class.  This is the fundamental difficulty between the populist ‘get a little right now’ message from the Left, and the more complex ‘get more later’ message from the Right.

The quick fix, especially if it comes from the pockets of the rich, will always resonate more with voters who have a simpler view of the world.  And in this way, Europe’s strikes and riots will soon come to a street near us.

My name is Rebane, and I also expand on these and other themes in my Union columns, and on georgerebane.com where a linked and graphically augmented transcript appears.  These opinions are not necessarily shared by KVMR.  Thank you for listening.

[Addendum] The four economic extremes (illustrated in Business Insider graphics) mentioned above result from the confluence of pre-Singularity’s accelerating technologies and the globalization of our planet’s workforce.  These combined with the natural business cycles will cause easy-to-understand disparities in income and wealth, and extremes in unemployment.

All these are not business-as-usual happenings.  And socialist naifs like former SEIU’s head Andy Stern recommending that we adopt the ‘Chinese model’ of government managed capitalism, to avoid what we have experienced, is definitely a message targeted for smaller minds than his.  China is desperately fighting its own real estate and investment bubble, and already attempting to use bank stimulation in order to avoid a hard landing. 

Autocrats and dictators have no better means of identifying the correct transfer function (input/output relationships), for a system as complex as an economy, than do capitalistic republics.  But going back to an autocracy – whether it be a dictatorship of the elite, or an oligarchy – is the natural outlook of a collectivist when a complex societal problem arises.

Andy also doesn’t seem to grok that stupendous growth rates are easy to achieve when you start from destitution.  And he seems to be ignorant of China’s greater income disparity in its workforce (see Gini Index) than in ours.  Additionally, China is now having unemployment problems with factories cutting back, shutting down, and sending coastal workers back to inland farming villages.  For some reason we don't see all the resulting 'social disturbances' on China's evening news.

Speaking of unemployment.  The US data released this morning on employment illustrates the absolute mess that such important metrics are in when prepared by different agencies using different methods.  The number that is causing a lot of happy dancing in the Administration is the sudden drop to 8.6% unemployment, and revised job creation numbers touching the 100K per month levels.  The easy explanation for this ‘good news’ is that hundreds of thousands of workers are dropping out of the labor force – they are simply giving up looking for work and therefore are no longer counted among the unemployed desiring employment.  That should give some clever thinkers an idea on how to drive unemployment to a really low level.  Currently only about 64% of work age people are participating in the country’s labor force.  Talk about spare capacity, if they only had the needed skills.  (More here from zerohedge.com. H/T to reader.)

Finally, the local, loud, and looney Left has taken me and other conservative bloggers to task on California’s fisc when we correctly, early, and repeatedly have identified the state’s PERS as an overt Ponzi scheme played on the taxpayers and, perhaps, future government retirees.  Well, it turns out that the problem has become so obvious that even Moonbeam is beginning to understand what has been going on here, across the country, and most emphatically in Europe.  What finally convinced the governor is when PERS discreetly blew its cover recently, stating in an ever-obfuscating manner that, yes, it has been running a Ponzi.  The LA Times reports –
 
Brown was particularly bothered by a contention in a report by the California Public Employees’ Retirement System that closing the existing defined benefit plan to new employees “would threaten its actuarial soundness.”  “Well, that tells you you’ve got a Ponzi scheme, because you have to keep bringing in new members and the current system itself is not in a sustainable position,’’ Brown said. "I don’t accept that, and we don’t want to close it off anyway.’’

Did you catch that?  To PERS, an undiscovered Ponzi represents "actuarial soundness".  So Moonbeam wants to raise taxes on everybody to pay for years of obvious sleaze – our own Europe in a microcosm.  (H/T to reader.)

[3dec11 update]  The national debate in which the progressives and their more primitive cousins, the Occupiers, are demanding that the ‘rich’ pay their fair share of taxes is now class warfare at its finest.  Obama keeps referring to the “millionaire and billionaire” scrooges who will not willingly share their unfairly garnered wealth “to help the poor and the middle class”.   Into this growing socialist gale, Victor Davis Hanson provides an excellent, if not self effacing, “feeble rear-guard action to remind some why 50% of an income paid in assorted taxes is enough — and why more is not just unnecessary, but will more likely make things far worse.”  Please take the time to read this excellent summary titled ‘Why Not Pay Higher Taxes?’. 

[4dec11 update]  In response to increasing job riots in China, politburo member Zhou Yongkang tells the party "It is an urgent task for us to think how to establish a social management system with Chinese characteristics to suit our socialist market economy," (emphasis added, more here)  Andy Stern, call your office.