The Wrongologist

What’s Wrong Today?

First, median
household income has not been this low since 1999. The Wall Street
Journal reported on the Census Bureau data release which
showed a continued steep decline in Real Median Income, falling by 1.5% in the
past year,
and it has declined by a total of
8.1% since 2007.

Second, also according to Census Bureau reports, poverty
has risen to near-record highs, with 46 million people falling below the
official poverty line, and the poverty rate reached 15 %.

Third, the FDIC reported that 29% of households do not have a savings account. The
FDIC sponsored a survey of unbanked
households, that is, those among us who have no checking or savings accounts.

Nobody can get ahead unless they can build some savings to send a kid to school, to purchase a
computer, to tide them over between jobs.

Some of the key findings from the
FDIC 2011 Survey include:

• 8.2 % of US households have no bank account. This represents 1 in 12 households, or
  nearly 10 million households in total. 
• 29.3 % of households do not have a savings
  account, while
  about 10% do not have a checking account.
• Only 66% of
  households have both checking and savings accounts. 

So, What’s Wrong?

Good stock market, good GDP, good
corporate profits, but median income is down, poverty is up and 29% of us do
not have a savings account.

Welcome to the new normal.

Many of us no longer live in the
America we grew up in. The new normal
is a growing economy and growing ranks of the unemployed, the lower class and
the chronically underemployed.

We are witnessing the end of the post-industrial-revolution
economy and the birth of a new American economy right on top of it. High tech service jobs have replaced
manufacturing jobs as the standard for attaining a middle class
lifestyle.  This jobs environment is
changing faster than our leaders seem to understand. They can’t react to it,
since it requires a long-term world view and long range planning, neither of
which are strengths in Washington. The main stream media also fails to mention that
“normal” is shifting much more rapidly than our slow recovery seems to
indicate.

If they did notice, it would force
longer-term thinking and possibly, an acceptance that the job booms we remember
from the mid-20th century and Y2K may be gone forever.

Nobel Prize winning economist Joseph Stieglitz says:

“The growing lower class lives in a world marked by mediocre
education, job insecurity and rationed health care.”

Meanwhile, the 2012 election
campaign rolls on, as though Washington is the axis around which job creation
revolves. Politicians might be an axis of change, but sadly, they are not, and
will not be effective in growing new jobs, until
they embrace a national industrial policy on jobs and job formation.

Mitt Romney campaigns on a promise
of “more jobs, less debt, and smaller
government,” implying that Obama’s government
policies and the 2009 stimulus destroyed jobs or prevented hiring. Democrats in
turn take credit for a slowly reviving economy with a declining unemployment
rate, conveniently soft-pedaling just how many people are out of work and how low
wages are for many of the new jobs.

The voters think the election will
turn on which candidate will create more jobs.

The problem is: Each suggest that more of their party’s programs will soon bring
prosperity to those without it today. They are wrong.

What has to happen?

Fix our broken economic framework. 

The world in which people sell largely
unskilled, uncredentialed physical labor is slipping away, replaced by robotics
and different services, ranging from information to nursing to logistics to
entertainment.

We are well along in a transformation of the American job market as
dramatic as the changes that occurred when farming became more mechanized and
displaced millions prior to the Great Depression.

Aside from brief protests from
movements like Occupy, we are not had an honest discussion about class, about
economic divides, or about what to do when we confront forces beyond the easy
control of our government.

We will lose a generation unless we act soon (and decisively) to embrace different
strategies for employment. Winning the fight also requires a new social
contract that few in Washington (or outside) have shown the courage to discuss.

What does this new economy look like?

• It is a vast
  (and growing) class of knowledge and service workers, at new jobs like human/tablet interface designers,
  jobs that require slick programming skills and a deep appreciation about how we
  want to use information in business and entertainment. These people are
  unlikely to hold any one job for more than a few years. Therefore, pensions and health care must be portable.
• The new
  economy is one where of tens of millions of men and women with college
  educations will continue to staff the still-growing health care industry. These people need continuing education
  and cheap/free college loans.
• This economy
  will provide limited job opportunities for tens of millions of young and
  middle-aged people with skills in construction and labor. These people need a national commitment to retraining for different
  jobs.
• The new economy
  has whole new businesses: Integrated Logistics for example, which provide jobs
  managing vast amounts of infrastructure and information, and the global retailers
  that use these services will reward those workers and businesses. This industry needs a million+ very
  skilled workers to support global expansion. And many of them will make big
  bucks.

How government crafts policies that address all of these conflicting
needs will be critical.

James Steele & Donald Bartlett’s
book, Betrayal
of the American Dream, (Public Affairs, New York, July 2012) gives us a
list of things we should change immediately:

• Revise the tax code: We lowered the effective tax rate on the
  wealthiest Americans from about 51% in
  1955 to 16.6% by 2007. The primary justification for the cuts was to
  stimulate the economy and create jobs. That hasn’t happened. Instead we created
  the widest wealth gap in the US since the late 1920’s. We need to make the
  wealthiest pay more, and invest those proceeds in education, training and
  infrastructure that can help create 21st century jobs.

• Keep free trade, but make it fair trade: We have followed the expansion of the free
  trade ideology too far. Our trade policy must limit imports from countries that
  won’t play fairly. A healthy economy balances its imports and exports, like our
  biggest trading partners do (Canada, China, Japan and Germany). Let’s start by
  limiting subsidized imports and deal primarily with countries that agree to
  remove barriers to importation of our goods.

• Invest in America: This used to be the job of our corporate
  leaders, their bankers and the stock markets. That is no longer the case. The
  American Society of Civil Engineers issues a periodic report on the
  quality of America’s infrastructure (bridges, highways, airports, electric
  grid, rails, tunnels, dams, you name it). The latest ASCE report grades our national
  infrastructure as a “D” and estimates that we have $2.6 TRILLION of
  deferred maintenance. All of our
  country’s competitors are building new infrastructure that we already have
  difficulty competing with. We need to be matching them to promote our
  commercial competitiveness and create jobs.

• Rethink Training:  The
  nation’s federal training programs for those who have lost their jobs to
  outsourcing/off-shoring need a major upgrade. Rather than simply counsel the
  out-of-work, we need to set up well-funded apprenticeships/internships with
  large corporations as sponsors. Let the big firms take on 2 million interns in order to justify the low/no tax
  payments they enjoy under our rigged tax structure. 

This means politicians must face up to a long tough fight and get
busy grappling with the world as it is, rather than the world they remember.

For our part, we will need patience
and the brains to avoid demagogues promising a quick fix. There will be no quick fix
for us.

What is coming is a world in which many
workers will be in effect, contractors or temps, self-employment will be the
norm. So we also need to decide what our
social contract will look like when that is the real world for most people.

Have you ever vacationed in a banana
republic? Where every morning, the locals pick up their trinkets and head for
wherever the tourists gather to sell their wares? It is a hardscrabble life
with limited upside.

That kind of life can’t become America’s New Normal.