Saturday, March 26, 2011

Regressives attack again.

The regressives in New Hampshire are apparently trying to one-up their Wisconsin brethren.

----"Under the terms of this plan, public sector workers in the state would become "at will" employees if and when their contracts expire."---

Read about it here.


sforst said...

Why is that a bad thing? Fear of being fired is responsible for much of our wealth. You seem oblivious to this simple economic truth. My 18 year old son figured this out the other day when he told me his thoughts on unions. Most of us moderates understand this.

Kevin Fathi said...

"Why is that a bad thing?"--Because once they are through breaking the unions, they are are going to come after the rights of non-union workers.

"Fear of being fired is responsible for much of our wealth."--You are oblivious to the fact that America had its golden age when unions were strong. Much of our current so-called wealth is generated by an over sized financial sector.

"Most of us moderates understand this".--I think so-called moderates are going to think twice about their fence sitting when the predators start depriving them of their rights and wealth.

sforst said...

It's all about the balance of power. I don't like abusive actions by people with power. I really want good things for all people. I can't stand abuse of power, and I see unions do it all the time (New York teachers union!).

In a full employment economy with reasonable legal protections of workers rights, unions are not necessary.

I'm not deaf to your concerns; I just think most them are mitigated by full employment and possibly some type of national health care funded by MMT and the related increase in national output.

I'm not sure how much power the unions had in the "golden age", maybe that was a time before they got greedy. I do know for sure that as they get too much power, they get corrupted. The auto industry was not sustainable under the UAW. This is a clear example of union power killing the golden goose. If you really challenge yourself to see both sides honestly, you will see my side; as I see your side.

sforst said...

Here is how almost every union conversation goes with non-union people. "unions had their place and they have done good things, but they got too powerful and corrupt". My union friends even say this! I can't recall a single conversation where someone didn't acknowledge the roots of union activity as positive. My point is; 95% of us that are against unions are not anti-worker.

Tom Hickey said...

sforst, this is about macro, that is, aggregates, not individuals. The fallacy of composition states that the properties of collections of individuals are different from the properties of individuals. If one person saves instead of spending it is thrift, but if everyone saves instead of spending, aggregate demand craters and recession ensues. Similarly, reducing wages for one company makes the company more competitive, but reducing wages for all companies reduces incomes, hence, aggregate demand, and recession ensues.

Tom Hickey said...

The net effect of employment insecurity and threat of lower wages is increased saving. Increased saving creates demand leakage, which, if not offset by fiscal deficits, results in an output gap and rising unemployment. Same with cutting benefits. If SS is threatened, then people will save more and the government will have to run larger deficits or there will be chronic unemployment and economic stagnation.

Remember the fiscal balance has to be the inverse of the nongovernment balance. If the fiscal balance is less then the full employment balance, then recession. If the fiscal balance is greater than the full employment balance, then inflation. This is the folly of thinking that the budget should be balanced at full employment if there is either a CAD or the private sector wishes to save.

These regressive states are setting themselves up for a fall.

sforst said...

Totally agree with you. I'm not arguing wages. I'm arguing that unions protect bad workers. My kids see it with the crazy union bus drivers that should be fired. I saw it when I was 20 and my school friends got UAW jobs at GM and Chrysler; there is a reason we stopped buying American.

I WANT high wages for school teachers and others, but the employer absolutely needs the power to hire and fire. How else can we get better teachers into the system? If your arguing we need higher wages to attract talent, then you are arguing to replace the current talent.

sforst said...

Concerning your second post. States are revenue constrained, so I'm just not comfortable being critical of how the states are protecting their tax payers.

Question. If a school district figured out how to provide high quality eduction using modern technology with only 2/3 of the teachers they have employed; would you support this gain in productivity and the termination of 1/3 staff? I promise you the union would not support it!!!!!

Tom Hickey said...

At some point states are going to have to realize that they are going to have to create jobs with incomes sufficient to support taxes, or raise taxes on businesses, or else cut spending to the bone in a race to the bottom, i.e., you're competing with Mississippi in the US and next the Third World.

It really is necessary to see the consequences of action before jumping to conclusion only to find that you've jumped off a cliff.

As I said, this post is not about unions, it is about demand. The bargaining power of labor figures in because it has to do with income level, which figures into effective demand.

While one may think that something is costing too much money, i.e., in taxes, removing it may reduce demand to the degree that everyone suffers. It may also affect future availability of real resources, since investments are not made. This is why we are doing demand side macro analysis.

This is not a perfect world and there are advantages and disadvantages to everything. Often people look only at how something affects them immediately and don't take into consideration the macro consequences.

For example, unions increase the bargaining power of labor. Over the past three decades unions have declined in the private sector and wages have not kept up with productivity. The means capital pocketed the difference, and indeed we see that inequality in income and wealth grew. The upper echelon saves more than it spends, so this created a drag on the economy that the fiscal deficit did not offset.

This would have resulted in economic contraction, but lax credit standards allowed workers to go deeply in debt to maintain their life style. Private debt growth on this order was unsustainable and it came to a resounding end, from which we are still recovering as creditors are made whole with bailouts but debtors are left with their debts. This could have been avoided if productivity gains had been passed on to workers instead of being hoarded by capital.

googleheim said...

If I remember Margaret Thatcher was a union buster in Wales.

That means Reagan probably tried too.

Under which presidency did the Japanese sell the most cars in the USA and earn the most USA Treasuries denominated in USD ?

Was it Reagan ?

They own more than China which was sold under Bush II>

And the British ? Did Eisenhower or Nixon sell the British all those treasuries ?

Or did Britain have the advantage of using surplus Pounds ( promulagated by MMT !!! ) to purchase what appears to be historically more than Japanese and China combined ?

It looks like an inductive thing possibly, that Republican president XYZ sells American out.

Again, the only presidents to ever have reduced the spending by the US government is Clinton and Carter for the past 50 years of data. ??

googleheim said...

You can do this stuff in imaginary fairy tale lands with low populations.

You can do the opposite fairy tale socialist stuff in places like Denmark and make that agenda work too ( and put up huge immigration barriers keeping the population looking like each other ).

And new hampshire ?

googleheim said...

wait a second

the same blasts against the deficit were made by left wing agendas in the 80's

how did this happen ? am i seeing this right?

sforst said...

I always read your post with thoughtful consideration. We agree on a more equitable distribution of wealth. But after having too many negative experiences with unions, I will need to find another mechanism to get there. I really think the general public is on my side on this one.

MMT has opened my mind to the Federal governments true fiscal strength, which logically allows my politics to drift left. I'm also big on individual economic freedom (with pragmatic constraints); which will keep me firmly in the middle.

Tom Hickey said...

sforst, how would you deal with the wages -productivity gap that will only increase with global labor arbitrage. Wages in the developed world are falling as wages in the emerging world are rising, but the gap is so great that the fall is greater than the rise in the leveling process. In China, for example, workers wages have risen by pennies, while US wages have fallen by dollars.

Capital has pocketed the difference between wages and productivity gains, so inequality is growing, with the result that savings are accumulating at the top and creating demand leakage. In order to get to full employment under these circumstances, either workers have to borrow more, which is financially unsustainable, or government has to run large enough deficits to offset the leakage, which is politically unsustainable, or the savings pool has to be taxed away as economic rent, which savers will resist mightily.

I don't see any market-based solution other an improving the bargaining power of workers. The only tool that has been effective so far is collective bargaining. You may not like unions but without collective bargaining, the developed world is in a race to the bottom with the emerging world, as US wages and Chinese wages converge.

But maybe you see a better solution?

Anonymous said...


What are your thoughts regarding economic democracy?

Or more specifically, Parecon:

Tom Hickey said...

Laura, I am in general agreement, but the question is how to get from here to there. The problem is the "right" to private property on which capitalism is based. The present system sees that right as absolute and so it will be difficult to change the present system. I agree that fixes to the present system are patches over rot, and I encourage people to join the underground economy as far as possible to avoid being sucked into a system that is rigged against them.

sforst said...

My solution? hmmm... I would shoot for some hybrid that uses the best ideas from both the left and right with the underlying fundamentals of MMT supporting all of it.

1) Minimum wage set via the Moslers Job Guarantee. This could be consolidated with a nation Job Core program that works similar to the military.
2) National health care of some form (prefer some market mechanisms involved) - no healthcare cost for employers.
3) Cuts to defense spending; offset by increase in national police force that can help bring crime down and restore a sense of sanity and responsibility to crime infected communities. I would also build a lot of new jails.
4) Full employment policy along with increase gov. jobs and low tax. This allows the market to work it's magic on wages and working conditions.
5) Some type of legislation that mitigates the "financialization" of our economy.
6) Mostly free trade, but I would like some controls when trading with developing countries that don't share our cost structures.
7) Smart regulations that keeps the private sector honest; but doesn't restrict too much freedom and innovation.

I will admit that this is all fantasy and the existing infrastructure of collective bargaining is already in place. But my instincts tell me full employment and strong unions are not compatible.

Tom Hickey said...

sfort, it seems to me that even if all this were put in place, which I would welcome, the problem of compensation v. productivity gains remains. CEO's work for shareholders and that means increasingly that they have to work for Wall Street by increasing share price through earnings. This is a strong restraint on profit-sharing.

One thing that could and should be done that would alter the situation is eliminate employer funding of health care, for example, by going to single payer. Employee compensation has been holding steady over several decades but real wages have been shrinking because benefits have occupied a larger share of compensation. Most of this is due to rising health care costs.

Anonymous said...

Private property vs. more democracy in the way we live? I know which side I'm on.

Capitalism is characterized by private ownership of productive resources, the market, and wage labor. The Soviet economic model abolished private ownership of productive resources (by collectivizing all farms and factories) and the market (by instituting central planning), but retained wage labor. Economic Democracy abolishes private ownership of productive resources, and wage labor, but retains the market.
- David Schweickart

Tom Hickey said...

As I said, it will take a revolution to accomplish that. But Batra called it right on communism, he may be right about capitalism, too. The problem with capitalism is that it migrates from market capitalism to monopoly capitalism.

What's happening on the world scale now is a test between the Chinese system and the Western system. the emerging nations are watching this closely now that they have been disabused of the idea that the Western model is superior, after the global financial crisis has left the West struggling while China seems to have come out pretty much OK.

Social democracy would be between those systems.

mike norman said...


If the threat of losing one's job was such an efficient wealth creating paradigm, then why don't we take it one step further? How about the threat of losing one's life? If job loss was so stimulative, then being killed for not working to the max should be even more so. Think about all the "wealth" created in the Southern slave states or, in the Nazi work camps. "Arbeit macht frei," remember? Do your job well, work without food, water or rest and you'll be allowed to live. That's what I call motivation!! Maybe your 18 year old son will like this one, too!

sforst said...

You had previously had my respect, you just completely lost it.

What an infinitely stupid thing to say. My irrefutable point is that for any institution private or public to function over time, it has to have the ability to innovate and "evolve" its work force. That means a company has to be able to do both layoffs and direct firings for cause or to upgrade talent.

Are you a sports fan Mike? How would your favorite sports team do if we put a 10 year ban on their ability to fire a single player or coach? Do the math on that comrade!

Too bad this is a dead thread; I would really like to know how your readers would respond to your absurd comment. Turns out the FOX guys are right about you after all.