The twin issues of taxes and spending tend to dominate discussion about economic policy. Within Republican circles, economic solutions focus on the increased investment that can come from cutting marginal income tax rates or reducing the government’s take on capital gains income. Within Democratic circles, solutions are built around increasing federal spending to put more money into the hands of consumers. This solution got heightened public scrutiny during congressional passage of President Obama and Speaker Pelosi’s $787 billion stimulus package earlier this year. The purpose of this column is not to debate which approach is better, or even if a mix of the two is most ideal, but to instead argue that both miss the mark. The rate at which we are taxed and the level at which government spends is peripheral to the very structure of the economy itself. And that can only be addressed by focusing on the issue of international trade. To paraphrase the war room slogan of Bill Clinton’s 1992 campaign staff, “It’s the economic structure, stupid.”
The current structure of the economy works in favor of people like this writer, who work in information and communication fields. It works against people whose skill sets are geared toward heavy industry. It works in favor of people who are stock market-savvy, as companies quickly shift gears and change course, moving across national boundaries with the click of a mouse (at least so it seems sometimes), and the return on stocks changes accordingly. It works in favor of people who are bilingual and able to thrive in several different countries and against people who want to settle down in their hometown and see it stable. Now I don’t meet all the criteria, especially the bilingual one (you’re reading a guy who flunked out of Indiana University because of the foreign language requirement), but I do fall in the general realm of people who benefit from the new order.
But that benefit will be temporary and short-term if the long-term problems of the nation are not addressed. Several years ago I had a friend who worked in tool-and-dye, and he assured me that the type of work he did was not in danger with the new global economy, because it’s very high-skilled, implying that I was equating heavy industry with low-skill. Of course that wasn’t the case, and as we sit here today, the tool-and-dye trade in the United States is collapsing and moving to China, thanks to a coddling of the Chinese in trade policy in which presidents of both parties have been complicit. Similar problems can be found across the board in industries like steel, cars, and even TV sets. The latter has been completely taken over by Japan and America’s problems in the first two are well-documented.
Thus we create a situation in which the economy becomes more and more service-based, rather than production-based. Manufacturing is increasingly done abroad for cheap wages and then shipped back into the United States and its lucrative consumer market. This in turn makes the road to middle class security harder. What’s a better path to a decent home in a safe neighborhood, a job in a plant with good wages and benefits, or working at a retail outlet? For the precious few that find management jobs, the latter will work out okay, but for the vast majority it will not. Whether it’s the fishing industry in New England, steel and cars in the Rustbelt, textiles in the Carolinas, farming in the Plain States or clothing in the Bayou, America is not only more self-sufficient, but has a more equitable economic structure when manufacturing is done right here.
When first running for president in 2000, John McCain derided a questioner in South Carolina who broached these concerns to him at a town-hall debate, taunting him with the jibe “I’d hope you’d want more for your kids than to work at a textile plant.” Apparently Senator McCain thinks being a greeter at Wal-Mart has a much brighter future. And we wonder why McCain couldn’t carry a single Rustbelt state or why Republican fortunes outside the favored classes collapse whenever there’s not a national security threat.
In this economic environment, debating over taxes and spending is a sideshow. It amounts to one group of people having a sumptuous banquet laid out before them, while another group sits below begging for food. The people eating the feast debate vigorously over what scraps to throw them, tossing several self-righteous remarks back and forth amongst each other. But no one bothers to consider actually inviting the people to the banquet themselves. That would involve a rearranging of the chairs and of the structure of the table, and it’s much easier to simply fulminate and toss a few bones.
Solving the current economic structure would not be an easy thing. It would require taxing foreign imports, so there becomes a real financial consequence for companies moving abroad. No longer could they get the best of both worlds—low wages and production costs in nations with lax labor and environmental laws, and unimpeded access to the U.S. market. It would be time to choose. In the short-term there would be dislocation. Companies providing things like low-cost clothing at Wal-Mart would suffer, while it would take time for better jobs to come out of a revitalized manufacturing base. But over time, the increased job opportunities for people on the economic margins of society would make up for the decreased cheap imports on the shelf. The structure would change.
Everyone would ultimately benefit. Democrats, who have long championed the working class in their rhetoric, should know this. Republicans, who have long fought the fallacy that prosperity can be found by pitting one group against another should also know this. If a rising tide lifts all boats, the reverse is also true. Those on the “right side” of their current economic structure should consider that before wasting further time on issues of secondary importance.