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posted on 02 May 2016

The Sure Way Not To Solve Any Unemployment Problem

by Rodger Malcolm Mitchell, www.nofica.com

Every politician tells voters he/she plans to bring jobs back to America. It is a lie, designed to fool desperate people.

It is a lie when Donald Trump says it. It is a lie when Ted Cruz and Hillary Clinton say it. It is a lie when Bernie Sanders says it.

The very words, "bring jobs back to America" always are, and always must be a lie.

I'll tell you why, but first let's go over what Bernie Sanders says, for it is quite typical of all politicians.

Bernie Sanders Slams United Technology's Plan to Outsource Jobs By Andrew Emett, April 29, 2016 News Report

Speaking at a United Steelworkers rally, Sen. Bernie Sanders lambasted United Technologies' decision to outsource 1,400 U.S. jobs to Mexico.

Despite the fact that United Technologies recently posted larger earnings and revenue than expected, roughly 2,100 employees in Indiana are expected to lose their jobs to foreign labor willing to work $3/hour.

"I intend to do everything I can to prevent United Technologies from shutting down their plants in Indianapolis and Huntington from throwing 2,100 American workers out on the street and moving to Monterey, Mexico, where they're gonna pay people there three dollars an hour," Sanders asserted on Friday.

Can you think of any reasons why United Technologies would transfer operations to Mexico? Do the words "profit," "lower costs," "lower selling prices," and "competitive advantages" come to mind?

Are these bad words in business? If you were running a business, would you forget about profits, costs, selling prices and competitive advantages?

Would you consider your company to be a charitable operation, the purpose of which is to pay more money than necessary for labor and materials?

"Today we are sending a very loud and clear message to the CEO of United Technologies: Stop the greed. Stop destroying the middle class in America. Respect your workers. Respect the American people," Sanders announced to the crowd of protesting workers.

Actually, the loud and clear message is, "Be as inefficient as possible. Force American businesses to paying more for labor and goods than they need to. Make sure American businesses can't compete with the rest of the world."

But, of course, there is another part to the story.

In 2014, United Technologies provided its retired CEO, Louis Schenevert, a golden parachute of $172 million along with a pension worth $31 million. Making a profit of more than $7 billion last year, United Technologies also received $6 billion in defense contracts.

While receiving more than $58 million in corporate welfare from the Export-Import Bank, United Technologies also received nearly $530,000 of Indiana taxpayer money in training grants.

Despite the fact that United Technologies recently posted more revenue than expected, totaling $13.357 billion for the quarter, roughly 2,100 Indiana employees will lose their jobs in an attempt for the company to "stay competitive and protect the business."

Supposedly, because the CEO was overpaid, and because United Technologies made a big profit, and because it received big defense contracts, and because it received lots of money from Indiana as well as from the U.S. - because of all these things, United Technologies should pay more than necessary for labor and materials.

The "logic" is that because UT is profitable, it can afford to pay more than necessary, so that is exactly what a patriotic American should do.

"Look around Indiana and you will find once vibrant and strong manufacturing towns like Gary, South Bend, Muncie, Bloomington, Indianapolis and Evansville shattered by abandoned factories, shut down steel mills, sky-high poverty rates, and foreclosed homes," Sanders observed.

"You do not have to have a PhD in economics to understand that our unfettered free trade policies have failed. We need new trade policies in this country, policies that are designed to protect the interests of American workers, not just the compensation-packages of corporate CEOs."

You also do not need to have a PhD in economics to understand that there are many reasons for unemployment in manufacturing, and trade policies isn't one of them - unless one believes that protectionism is long-term beneficial to a nation's economy.

Remember, protectionism runs both way. What we do to other countries, those other countries will do to us.

The Great Recession caused unemployment. The fault: Lack of federal government regulation of banks.

Every recession and depression has been cured by federal deficit spending. Tea Partyish austerity has delayed recovery. The fault: Insufficient deficit spending by the federal government.

Manufacturing largely uses unskilled labor. Third-world nations can supply unskilled labor at a low cost.

As a result, the U.S. has been converting to industries that require more skilled and educated workers.

But, the excessive cost of education together with widespread poverty, has taken many American workers from school. The fault: Insufficient federal support for education and insufficient financial support for the poor.

See the pattern here? The politicians blame business for doing exactly what businesses should do: Be efficient, creative and competitive.

The real problems are the fault of the federal government and its austerity-leaning policies.

Singling out United Technologies, Sanders also noted that the layoffs in Indiana have been happening across the nation over the last 35 years with no end in sight.

Since the passage of the North American Free Trade Agreement (NAFTA) in 1994, Indiana alone has lost 113,000 good-paying manufacturing jobs.

Although Sanders fought against the NAFTA and other disastrous trade agreements, Hillary Clinton staunchly supported their passage.

Hmmm . . . He says layoffs have been happening for 35 years, and NAFTA came 22 years ago, but the layoffs are the fault of NAFTA?

"It is not acceptable to me that today the top one tenth of one percent owns almost as much wealth as the bottom 90 percent," Sanders declared.

"We need a political revolution. We need millions of Americans to begin to stand up and fight back and demand a government that represents all of us.

Agreed. The Gap between the rich and the rest is too wide. In fact, it is the single worst economic problem in America and in the world.

But that problem will not be solved by erecting federal trade barriers to shelter increasingly inefficient businesses (i.e. protectionism.)

It will not be solved with federal spending cuts and tax increases (i.e. austerity).

It will not be solved by impoverishing America with college debt, or by allowing criminal bankers to run wild.

Bernie Sanders hates the Citizens United (Supreme Court) case that indicated corporations are people. Yet, wants corporations to act like super patriots, and give their profits to charity - a sure way to destroy the American economy by making our businesses inefficient.

Bernie has some good ideas. Medicare for All is one. But the notion that companies are responsible for unemployment, and should pay excessively for labor and materials, is economically suicidal.

The federal government was responsible for the Great Recession, and in fact has been responsible for every recession and depression in U.S. history.

Growing the American economy does not involve building a wall of protection around inefficient businesses and their workers. Growing the American economy requires making sure American business is competitive.

Finger pointing at business for not solving the federal government's problems is a sure way never to solve the Gap problem.

Stop over-taxing businesses and start educating the American workforce. That is the federal government's job.


THE RECESSION CLOCK

Recessions begin an average of 2 years after the blue line first dips below zero. A common phenomenon is for the line briefly to dip below zero, then rise above zero, before falling dramatically below zero. There was a brief dip below zero in 2015, followed by another dip - the familiar pre-recession pattern.

Recessions are cured by a rising red line.

Monetary Sovereignty

Vertical gray bars mark recessions.

As the federal deficit growth lines drop, we approach recession, which will be cured only when the growth lines rise. Increasing federal deficit growth (aka "stimulus") is necessary for long-term economic growth.


Mitchell's laws:

  • Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.

  • Any monetarily NON-sovereign government - be it city, county, state or nation - that runs an ongoing trade deficit, eventually will run out of money.

  • The more federal budgets are cut and taxes increased, the weaker an economy becomes..

  • No nation can tax itself into prosperity, nor grow without money growth.

  • Cutting federal deficits to grow the economy is like applying leeches to cure anemia.

  • A growing economy requires a growing supply of money (GDP = Federal Spending + Non-federal Spending + Net Exports)

  • Deficit spending grows the supply of money

  • The limit to federal deficit spending is an inflation that cannot be cured with interest rate control.

  • The limit to non-federal deficit spending is the ability to borrow.

  • Liberals think the purpose of government is to protect the poor and powerless from the rich and powerful. Conservatives think the purpose of government is to protect the rich and powerful from the poor and powerless.

  • The single most important problem in economics is the Gap between rich and the rest..

  • Austerity is the government's method for widening the Gap between rich and poor.

  • Until the 99% understand the need for federal deficits, the upper 1% will rule.

  • Everything in economics devolves to motive, and the motive is the Gap between the rich and the rest..

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