Tuesday, February 28, 2006

Feb. 27, 2006

Tale of Two Economies

So there I was Saturday night, curled up with my Wall Street Journal Weekend Edition. In my not-so-humble opinion the WSJ is the best newspaper in print. That is, until you hit the editorial page. I know reporters who work for the Journal and whenever I mention their paper's Op Ed page they blanch in embarrassment. The folks who regularly appear on the WSJ Op Ed pages are – not to put too fine a point on it – different – and not in a good way.

All was going well Saturday night as I perused long, well-written, fair and balance national and international news, until I turned the page and there it was, the Op Ed section. I knew I should just throw the Section 1 into the trash and move on to safe and sane Section 2. But instead, I read it. Why? Got me. I suppose it's the same sick need that forces me to look when I pass a car crash, only to regret it later.

The one that got me this time was an editorial by David R. Henderson, from (where else) The Hoover Institute. It was entitled, Minimum Wage, Minimum Sense. In case you don't get the point, Mr. Henderson – and all his kind – are flat-ass against raising the minimum wage. Henderson's knickers were in a twist over news that California Governor, Arnold, was pushing for a 15% boost in the minimum wage. The Terminator had turned traitor.

Whenever conservatives argue against increases in the national minimum wage they drag out the same old argument; that rather than bettering the lives of low-wage workers, it makes their lives worse. The reason, they claim, is that employer hire fewer low-wage workers when they have to pay them a few cents an hour more.

To quote Mr. Henderson:

“The law of demand says that at a higher prices, less is demanded....Since a legislated increase in the price of labor does not magically increase workers' productivity, some workers... will lose their jobs.”

To listen to Mr. Henderson you might think that this law of labor cost vs. demand applies universally. But no way Jose. If you're a corporate CEO, Henderson's Law of Labor Cost reverses itself.


And forget productivity. It doesn't seem to matter that health care companies can't cover nearly 50 million Americans. If you run a health care company you are kicking the ceiling off your own minimum wage:

Healthy Salaries for Healthcare CEOs

By AMNews staff. May 26, 2003.

William McGarvey, MD, a retired Indianapolis otolaryngologist, found the high pay commanded by managed care CEOs so reprehensible that, at Anthem's 2002 annual meeting, he confronted President and CEO Larry Glasscock about his multimillion-dollar pay package.

In 2001, the year covered at that meeting, Glasscock got $3.1 million in salary and bonuses, as well as a $12.4 million long-term incentive payout. In 2002, Glasscock got $3.3 million in salary and bonuses, about the average for managed care CEOs at the largest firms. His 6.5% raise was actually below the 17.7% average bump for the top managed care CEOs, as reported by Equilar Inc., an independent corporate research firm.

Physicians, like Dr. McGarvey, feel that high pay for managed care CEOs is particularly galling considering companies are jacking up premiums by 20% or more, and tightening physician reimbursement as a means to raise profits. In their view, money that could presumably be used for care, or to make insurance more accessible, is instead heading into the pockets of paper-shufflers.

"We have (over) 40 million people in this country who have no medical insurance because they can't afford it," Dr. McGarvey says. "They work just as hard as the CEOs. They just haven't had the breaks that they have, and it's not fair. The majority of Americans live from Friday to Friday."

So, what have learned today, boys and girls? We've learned that Mr. Henderson's law, that higher wages hurt workers, only applies to low-income wage workers. Because there appears to be no penalty -- in the form of lost jobs -- for the astronomically high salaries of CEO's .

The rich have gotten lousy rich under this administration. Life is good, for them, and they are now busy trying to figure out how to keep the party going after their boy George leaves office. But now it's getting trickier. As income inequities grow it gets harder and harder to just talk wages down with their time tested, “mandatory-minimum-wages-cost -workers-jobs,” argument. And now that they see Republicans like Arnold being forced to back minimum wage increases, the rich know they need a new ploy, and soon.

And they have one. Say hello to the new ploy: A Guest Worker Program.

(Translation: Open the valve at the Mexican/American border and let the cheap labor flow in. Let American workers arguing for wage increases face Mexican workers for whom our current minimum wage looks like a small fortune. )

This explains why normally xenophobic Republicans suddenly want to institutionalize and legalize an influx of cheap Mexican labor.

As usual Democrats are too tied up in their own politically correct triangulation to do much about it. Once again the Republicans have slapped Democrats into handcuffs of their own making. The Dems are, so they say, for minorities, workers and the down-trodden. Wouldn't it be nice, if it were so.

As the African/American demographic fragments, and American labor whithers, Democrats need the to attract the growing Hispanic vote. But Republicans what them too and actually have a plan to get them. In fact, Republicans see backing a guest worker program as a win/win:

- First the GOP ingratiates itself to Hispanic voters by backing what appears to be a humane Guest Worker Program.

- And, if they pass a robust guest worker program, it will keep a lid on US wages, for decades ahead, particularly at the bottom.

(Republicans may be evil, but they are smart-evil. Democrats? What can I say? What need I say? )

As the disparity between the haves and have-not's widens it will interesting to see how Red State voters, so-called "Reagan Democrats," and evangelicals react. After all, the super-rich amount to just 1% of those who caste votes. The other 99% have less – increasingly a lot less. At some point something's gotta give.

Even Biblically-lobotomized evangelicals have begun to showing signs of unrest with this administration. The first break has come over the ruination of the environment this administration seems so comfortable with.

The next break will come when Bush's so-called, “faith-based charities” his “armies of compassion,” wake up and figure out that they've been used to justify cuts in social programs. They will learn this when their modest little churches are drowned by a rising tide of hungry, homeless and heathcare-less Americans -- and Mexican guest workers, who don't earn enough to live here and send money home to Mexico as well.

That's when Bush's faith-based armies of compassion will morph into a pissed off army of prayin', marchin' hell-raisin' evangelicals. Because hell hath no fury like a screwed evangelical. That's when Bush becomes the Anti-Christ.

Maybe the Wall Street Journal editorial board ought to apply Mr. Henderson's theory, that lower wages create more jobs, to the executive suite. Because, if he is right, there seems to be something out of whack up there. There seems no breaking point when it comes to executive compensation.

The Hendersons out there argue that wages have to be in balance with worker productivity. But clearly, “productivity,” doesn't apply to the top 1% either. Hell, they get raises and obscenely large bonuses even when their company's stock is in the shitter. They simply get, because they've got. They deserve, simply because they are deserving.

Believe me, this sorry state of affairs had nothing to do with those musty old economic bromides Mr. Henderson parroted in his editorial. Instead it is all about an even older law of society: "The rich get richer.” If you are not one of them, that's not their problem. Eat cake, losers.

A piece today by New York Times columnist Paul Krugman makes a similar point:

The idea that we have a rising oligarchy is much more disturbing. It suggests that the growth of inequality may have as much to do with power relations as it does with market forces. Unfortunately, that's the real story.

Should we be worried about the increasingly oligarchic nature of American society? Yes, and not just because a rising economic tide has failed to lift most boats. Both history and modern experience tell us that highly unequal societies also tend to be highly corrupt. There's an arrow of causation that runs from diverging income trends to Jack Abramoff and the K Street project.

It may take some time before we muster the political will to counter that threat. ... It's time to face up to the fact that rising inequality is driven by the giant income gains of a tiny elite, not the modest gains of college graduates.

Sooner or later the wealth gap gets so large that those at bottom no longer have anything to protect.. or lose. And that's when those who have over-filled their personal silos with society's finite wealth start getting calls from their front gate guards:

“Ah, sorry to disturb you sir, but there's large crowd gathering down here -- and they're in a pretty ugly mood.”

When Ugly Moods Happen

Quote of the Day
"Of course I believe in the free enterprise, but in my system of free enterprise,
the Democratic principle is that there never was, never has been, and never will be
room for the ruthless exploitation of the many for the benefit of the few."
President Harry S. Truman