Markell Punches the Hippies

Governor Jack Markell (D) has written a rather lengthy piece last week in “The Atlantic” entitled “Americans Need Jobs, Not Populism.” The title alone enrages me because, since when were jobs and populism mutually exclusive?

Indeed, this has been the Democratic Party’s problem since 1992: they ditched populism either because they cowtowed to Wall Street or because they needed to cowtow to Wall Street to garner campaign dollars in order to remain competitive with the Republicans back in the 1990’s. At its root, populism is a belief in the power of regular people, and in their right to have control over their government rather than a small group of political insiders or a wealthy elite. So the Governor’s title to his thesis implies that only a small group of political insiders or a wealthy elite can create jobs, and the little people should shut up and be happy with what he and his friends give us.

But then I saw a highlighted and enlarged excerpt that said: “Too often, the right seems to think the creation of great wealth is more important than whether or not the bounties of that wealth are broadly shared.”

Is the Governor just trying to bait and switch me? Enrage Progressives with a condescending and false title and then embrace progressive policies to fight inequality in the body of the article? Nah, I felt it was more likely that the Governor would reject both the right and left in favor of a “third way.” Oh how so familiar, Governor. You are two decades too late for that shtick. But, my interest was piqued, so I sat down and started reading. And I read. I encourage you to read the whole thing took, but I have highlighted some important passages that require response.

In 2008, I was elected governor of Delaware. In politics, timing is everything. You can be a fantastic candidate and run in a bad year for your party and get clobbered. You can be an absolute dud and run in the right year and get the brass ring. 2008 was a good year to be a Democrat.

Uh, is he saying that he is an absolute dud who only got elected because he ran in the right year? I will leave that unanswered, as he does. Perhaps it’s a joke. Self-deprecating humor is always good. The Governor then goes on to describe the horror being inflicted upon Delaware as he took office and the Great Recession, or the Great Depression II, was deepening.

By the end of my first year in office, five percent of Delaware’s jobs vanished. My agenda was clear: My entire tenure as governor would be focused on job creation. I could have railed against the CEOs of Chrysler, GM, and Valero for pocketing bloated salaries while handing out pink slips to desperate families. I could have said that the economic system is rigged, with the deck stacked against the middle class. Certainly there were many in my party who would eagerly and loudly make such a case. It would have made for great headlines; people may have cheered. But it would’ve been a dodge. Those salaries, generous as they may have been, had nothing to do with plants closing in my state.

The real problem doesn’t fit on a placard. It doesn’t lead people to protest or “occupy” an industry. It won’t get full-throated cheers or point the way to ready made solutions. Because the economic system isn’t so much fundamentally rigged as the populists contend, as it is fundamentally, unalterably, never-to-be-the-same-again changed. And long before the financial crisis hit, Americans shrugged off this changing world.

First off, yes, Governor, the system is rigged. Yes, you should have said it. You should have railed against those companies and their CEOs. They deserved every bit of scorn, and while their fat, undeserved salaries may not have caused the collapse (nice strawman, there, Governor), they sure are evidence of the horrible greed and inequality that has prevailed in our economy since at least the Reagan era. It would not be a dodge, it would be the truth. Saying something that is the truth is not dodging the truth, it is speaking the truth. That you did not say it means you are engaged in something other than speaking the truth. So what is the problem, according to Governor Markell?

Together, the forces of globalization and technology detonating simultaneously as a financial crisis hit permanently altered the landscape of the American economy—stunting wages, reducing employment security, and providing the greatest benefits to those at the top. Even today, with plenty of jobs and wealth being created again, the altered economic terrain is preventing new wealth from being broadly shared. As governor of a state in crisis, these were the truths I had to confront if Delaware was to make progress, not headlines.

Well, yes and no. The forces of globalization and technology have been at work for a long time. They are not new phenomena that first appeared in September 2008, which was when the markets crashed and credit froze. From the moment the tracks were laid for the continental railroad, globalization, which is in essence the “contraction” of the world and the opening of new markets, has been an ever present factor. And the same is true for technology. First there was horses and buggies, then there were trains, then cars, then trucks, then planes, then satellites and spaceships. First there were letters, then telegraphs, then telephones, they computers, then email and digital and satellite communications and wifi internet. First there was building something with your hands, then with tools, then on an assembly line, then on a mechanized assembly line, then with robotics, etc, etc.

Industries and economies had to evolve with each advancement over time. The problem, Governor, is not that globalization and new technology are new factors affecting the economy that our “betters” in the wealthy elite didn’t plan on. The problem, Governor, is that our “betters in the wealthy elite no longer give a damn about anyone but themselves. Their only goal is maximizing not only their yearly profit but cumulative wealth. That is exemplified with each opposition to any new taxes, and their continued demand for the lowering and elimination of taxes, while at the same time seeking tax payer credits and inducements to avoid paying for anything out of their own pockets. It is exemplified by the steady and constant decline in middle and lower class wages, while salaries and bonus packages for the executives and CEOs were skyrocketing. This misdiagnosis of the problem will plague the entire article, but let’s continue…

The Governor then goes on to describe a trip to India he took in his younger years that was very formative, for he saw tremendous poverty contrasted with tremendous wealth, and he was told that the poverty was due to a caste system and due to a fundamental lack of jobs. And from that, and from his experience in the private sector and public sector, he came to a fundamental conclusion that shapes his thinking:

Central to my perspective—from that first trip to India, through my work in the private sector, to my efforts as treasurer to help empower the economically disempowered, to finally returning to India nearly four decades later as governor, seeking job opportunities for Delawareans—is the synergy, rather than the contradiction, between economic growth and economic justice.

And that is true. The government cannot employ everyone, or else it would have been done already. And the private sector cannot do it either, or else it would have been done already too. What you need is both working together, with a balance that allows government to function in providing basic infrastructure and services and allows government to regulate the private sector so as to protect the safety of the worker and the consumer, while at the same time allowing businesses to grow and profit and hire. The United States achieved that to a large extent in the 50’s and 60’s. What undid the balance was the Reagan revolution that saw the private sector declaring war on the government. You saw the undoing of regulations and the lowering of tax rates that made it impossible for the government to function in providing infrastructure and services and enforcement of what regulations were left. That in turn enriched the private sector, and began the decline in middle class jobs and wages that has been exasperated by globalization and technology.

The bottom line is that private enterprise creates the primary condition for reducing poverty and want: economic growth. Governments don’t create jobs; however, government has an ability and responsibility to create a nurturing environment where business leaders and entrepreneurs want to locate and expand. What that means is that government has an active role in creating an economic environment that creates middle class success and prosperity.

The government has the ability and responsibility, if it is allowed to function by the private sector, to provide infrastructure for businesses to use, to educate the populace so businesses can have skilled and knowledgeable workers, to provide health care to keep the populace healthy so businesses can have a productive workforce, again, if it is allowed to by the private sector, and to provide regulations so that the population does not literally die. When the governor says “nurturing environment,” that is code for doing everything and more that the private sector wants. Low to no taxes. Very few regulations. And bribes in the form of tax breaks and credits.

The pre-recession, credit-filled boom years masked vast changes in the global economy that make recovery more difficult. Specifically, in a world where 3 billion people are looking for jobs but only 1.2 billion jobs are available, employers have more choices than ever about where to hire. And the emergence of digital technologies that displace millions of jobs and lead to rising economic insecurity is significant.

Here is the irony about the modern U.S. economy: It’s once again among the world’s strongest and getting stronger. Unemployment is down and the stock market is near record highs. But individual Americans don’t live in the aggregate and their relatively good fortune compared to other countries is of little comfort to many families across the country. Income inequality is growing worse. And when it comes to the distribution of wealth, ours is now the most unequal of all advanced economies.

I will give the Governor credit in recognizing income inequality is a big problem. But the problem is, he doesn’t seem to recognize that his solutions are just more of the same, coupled with a defense of the financial sector and the wealthy.

In Congress, particularly among Democrats, the rhetoric revolves around fixing a “rigged system” that causes income inequality as well as a reflexive blaming of the financial sector for America’s continued economic woes. Yes, economic mobility isn’t as robust as it might be. And yes, the wealthy and powerful have more influence than they should. But this is certainly not a new phenomenon. The vast changes in technology and the global economy, however, are the explosive new variables in the economy.

As for the finance sector, it’s too convenient to blame bankers and Wall Street for the fifteen years of stalled middle-class wages, sub-2 percent average U.S. GDP growth, and outsourcing of millions of middle-class jobs. In my state, the finance sector is actually critical in creating middle-class jobs and a strong local economy. Where Wall Street deserves blame—like selling junky mortgages as AAA assets – it should be noted, punished, and reformed. But American capital markets are, on balance, a huge competitive advantage to the U.S. economy.

On the right, the congressional debate revolves around the sanctity and theology of the free market. Too often, the right seems to think the creation of great wealth is more important than whether or not the bounties of that wealth are broadly shared. To be fair to conservatives here at home, a growth rate beyond the meager 1.9 percent the U.S. has averaged since 2001 would benefit everyone. But as the McKinsey Global Institute wrote recently, “changes in average income will not be enough to increase demand if most of the gains accrue to individuals whose needs have already been met.” Growth is necessary, but not sufficient. The growth must lead to the wealth being more broadly distributed.

He is saying all things and nothing at the same time now. First, he is punching hippies by saying the left focuses too much on a quote rigged system unquote. As if he thinks the system is perfectly fair. Otherwise, why use the quotes? Second, he punches again referring to the “reflexive” blaming of the financial sector, as if the lack of regulations and the non-enforcement of what regulations we do have, added to the literal fraud by the brokers looking to maximize profit at all costs, aren’t directly DIRECTLY responsible for the crash. My God, Governor! Reflexive? Your friends in the finance sector should have done hard jail time. 10 years or more. They should have lost everything. And you call any criticism or blaming of them reflexive, as if it is undeserved.

Third, then it throws us a little nugget of truth: where Wall Street deserves blame… it should be noted, punished and reformed. It was noted. It was not punished. And what meager reform that did take place is now being rolled back by Republicans and ignored by Wall Street. So please, Governor, shut up about this defense of Wall Street.

Fourth, then he says the wealthy have always have had too much power and influence, and the only changed variables are globalization and technology. Like I said above, there is nothing new about technology advancing or globalization. The new thing new is the new forms of technology and the new markets opened up by globalization. So what I am left here with is that the Governor really doesn’t have a problem with the wealthy having too much power and influence for the sole reason because they have always had too much power and influence. So why stop them now?

But to be fair to the Governor, he does criticize the right by saying that, yes, wealth must be created and increased, but it must be more broadly shared, or else the national economy will not benefit. That is correct, Governor.

But then he dives back into third way triangulation…

Delaware did not accept either anti-business extremism or laissez-faire dogmatism; instead, it embarked on a three-part strategy to invest in people, engage with the world and reduce the risks for those who want to take chances for a better future.

Governor, you are an idiot if you think progressives, or anyone on the left, are anti-business. Only the most fervent socialist or communist believes that. No, what we want is accountability and fairness. We tend to be opposed to people who are defrauding us, or harming us, or ripping us off. But we will greatly favor businesses who play by the rules and treat their workers and customers with respect and fairness. And yes, you can do both and also make a profit. Just like you can raise taxes and grow the economy.

So the Governor’s three-part third way plan:

1) Invest in people through education.
2) Engage with the World
3) Reduce the risks for those who want to start businesses

The battles over the Governor’s education policy are legion now. He is not wrong to say education is the key. His policy was wrong. Governor, we don’t need more tests and standards, for the simple reason is that it is a literal waste of time and much needed resources. We need to spend more on education in the form of new or improved facilities and equipment and higher salaries for teachers. We should be supporting teachers, which in turn supports the students, rather than placing more and more burdens on them while cutting their salaries.

Engaging the world is fine too, so long as it is done fairly. Free Trade is good so long as it is Fair Trade, so that it does not weaken or eliminate protections for our workers or the environment. The Governor opposes any concerns by calling it skepticism that should be ignored because of the opportunity free trade presents. Then the Governor says this: “Corporate tax rates need to stop providing an incentive to global businesses to do “inversions,” in which they reincorporate and invest abroad instead of at home.” So, we need to lower corporate tax rates too. I will consider if only upon the elimination of all corporate tax breaks, credits, giveaways and loopholes that currently exist anywhere for any corporation or business. If we wipe the slate clean, we can then lower the rates. But until that is done, lowering the rate is a crime, for it will only enrich the rich at the expense of the economy, exasperating the inequality gap, not solving it.

The Governor goes on…

It’s not enough, though, simply to increase economic growth, unless its fruits are broadly shared. When Americans support each other, they maximize their individual and collective opportunities to succeed. Delaware has increased the minimum wage, invested in substance-use disorder treatment to help people get back on their feet and created strong partnerships between employers and educational institutions on skills training. The ability of Americans to earn a decent minimum wage, to access affordable and quality health care, and to live a retirement in dignity differentiates us from so many countries where those conditions don’t exist. Failing to provide these basic supports actually cannibalizes the economy. When Americans don’t feel confident in their own financial future, they won’t spend the money that fuels the consumer-driven economy.

I agree with all of this, but more has to be done to increase the minimum wage, to increase investments in treatment and training programs, to provide for health insurance and care and increase retirement benefits. More cannot be done, however, because the government does not have the money to do it. In fact, government is always tempted to cut rather than invest. Because government is fearful of taking on the wealthy elite and raising their taxes back to where they were before the Reagan Revolution

Long-term success requires an active government that partners with business to ensure that the bounty of economic growth is shared broadly. Sharing this bounty is not about having a “bleeding heart.” It’s a matter of cold economic sense.

I agree. But as an active government partners with business, business needs to partner with an active government. The two are not enemies, and should not be, but are under the current conservative theory, which dominates the thinking of everyone in the Republican Party, too many in the finance sector, and still even some in the Democratic Party. It is time that part of the Reagan Revolution dies. You want to kill income inequality? Then kill the theory that created it.

Around the same time the Governor was writing his place, Nicholas Kristoff was writing his, entitled “Inequality is a Choice.” Indeed it is. A choice of the wealthy elite the Governor does not want to challenge.

[W]e broadly lament inequality, we treat it as some natural disaster imposed upon us. That’s absurd. The roots of inequality are complex and, to some extent, reflect global forces, but they also reflect our policy choices.

In his new book, “The Great Divide,” Joseph Stiglitz, the Nobel Prize-winning economist, includes two chapters whose titles sum it up: “Inequality Is Not Inevitable” and “Inequality Is a Choice.”

“I overheard one billionaire — who had gotten his start in life by inheriting a fortune — discuss with another the problem of lazy Americans who were trying to free ride on the rest,” Stiglitz writes. “Soon thereafter, they seamlessly transitioned into a discussion of tax shelters.” […]

We as a nation have chosen to prioritize tax shelters over minimum wages, subsidies for private jets over robust services for children to break the cycle of poverty. And the political conversation is often not about free rides by corporations, but about free rides by the impoverished.

Kristoff then goes on to list a few of the suggestions of Anthony B. Atkinson, a British economist, of how to reduce inequality:

1) Government should be more concerned with monopolies and competition policy.
2) Trade unions should be bolstered to represent workers’ interests.
3) Government should provide public-sector jobs at minimum wage to those who want them, in areas such as meals-on-wheels, elderly care, child care and so on.
4) In addition to a minimum wage, there should be a framework to restrain pay at the highest levels. Atkinson cites companies that have voluntarily decreed that executive pay should be capped at 65 or 75 times the average pay in the firm.
5) Personal income taxes should be made more progressive, with a maximum rate of 65 percent.
6). Every child should get a “child benefit” payment, to help keep kids out of poverty.

A lot of these items have an active government doing something. An active government, in order to enact policies that provide benefits or services, requires funding. So the first step is to wipe clean all corporate or business tax credits, loopholes, giveaways or inducements across the country, on the state, local and federal level. Second, we lower the corporate rate to some 15-20% depending on certain factors. Third, we raise taxes on all other income above $250,000, including adding new brackets above higher and higher levels of income, at both the state and federal level, across the country. Fourth, then we can talk about which regulations on businesses we need, and which we don’t, with the highest emphasis on keeping those regulations that directly affect the environment and consumer and worker safety.

That is a four step preliminary plan to fight inequality. And these are only the necessary first steps. But they are steps the Governor won’t consider.