Thursday, October 02, 2008

A Chat With Hank and Benny - How To Fix Your Big Mess

Hank, Benny - we need to talk.

I know you're supposed to be the whiz kids, financial-wise. And I know that I'm just another dumb consumer with no arcane inside knowledge like you fellas.

But I'll tell you one thing. You guys - you Masters of the Universe, pulling the strings from on high - claim you "never saw this coming."

Guess what? I did.

I've seen it coming for a long time, and so have a lot of other people I know. We've been talking about it for years. What is surprising is how long it took to finally happen.

Maybe it's too basic for you to understand - maybe that's the problem. But you guys have always been about the supply-side, trickle-down theory of economics, and after trying it your way for almost 30 years, it's time to admit that your way doesn't work.

Y'all are all about "if we give everything to the big guys at the top - the mega-corporations and wealthy investors - then their success will mean success for everyone else on down." But I'm afraid that hasn't panned out too well. It's one thing if it's just the wage slaves that are being crunched. Eventually, though, it ends up biting you in the ass as well.

So - Benny, Hank, I have a proposition for you. It's kind of an old idea, but it worked pretty darn well while it was implemented, and it just might be worth a shot.

Have you thought about the trickle-UP theory?

I know it sounds crazy, but just listen.

Okay. You see, the bottom of the food chain is where the action is. And we wage slaves have been seeing our incomes drop steadily (when adjusted for inflation) over the last 25 or so years. Once Reagan castrated the unions, he upset the power balance that makes the so-called 'free market' a viable way to conduct business. If there is no advocate with the strength to represent the workers, negotiations over pay become completely one-sided. This means that businesses are free to eliminate raises, and cut salaries and benefits as low as they can, which makes their profit margin higher.

Are you with me so far, fellas? Good!


This cut in wages is not accompanied by cuts in the cost of living. The cost of living continues to increase at its regular rate. While big business is getting wealthier, and wealthy individuals are getting wealthier because much of their income is derived from investments, which are taxed at half the rate of wages earned through work, the wage slaves are paying a higher and higher percentage of their income towards basic living expenses. Even if their pay is not cut, but remains the same, it turns out to be a pay cut anyway if their expenses on essentials (food, transportation, utilities, mortgage or rent, medical, etc.) rise every year.

So, what do people do? They take on more work if they can. They cut back on expenses wherever they can. But you get to a point where both of these options are finite, unlike the raise in the cost of living. And the implementation of NAFTA and the free-trade frenzy means that there are less jobs available, and the ones that are available pay less.

Now, you smart guys have told us that when the consumer stops spending, the economy goes into a tailspin. And the last thing you want us to do is to tighten our belts.

So what do you guys do?

Here's where we're at the crossroads.

If you want people to continue to buy things to keep the economy going, there are two ways to do it. One way is to pay them better wages so they can afford to buy more. The other way is to make them go into debt to do it. That way it doesn't come out of business' bottom line; make consumers pay the credit card companies (Bush's biggest campaign donors) for the privilege of going into debt.

You guys picked the second way.

Not a smart idea.

You hyper-inflated the housing market and put wage slaves into a position where the only way they can keep their heads above water is to borrow against their 'equity'.They can't work any more hours; they can't cut any more expenses; and the Bankruptcy Bill made sure that there's no way around the problem other than to go into debt. That way you keep the consumers quiet and spending for a little while, anyway - long enough to give you time to finish grabbing up all this crazy money laying around.

Pretty soon, though, the borrowing has to stop. Even an uninformed idiot like me can see that. And, as the consumer goes, so goes the nation - from micro to macro, we've been borrowing as a nation the same way wage slaves have been borrowing as individuals.

The merry-go-round spins faster, faster, faster! Higher and higher we go!

Then - pow! The ride stops, the brakes are on and everyone flies off the painted ponies. A rush to the bottom ensues.

So my suggestion is that we try Idea #1 - the trickle-UP.

Start at the bottom by paying wage slaves well enough that they can buy things. It may seem as if that would cut into business' bottom line in a way they don't care for. Salaries are a liability, not an asset. But in the long term, it is an asset because you are buying future customers with that money! It is a sound investment with a very high rate of return.

People with paychecks can buy stuff. People without paychecks can't buy stuff. It's as simple as that.

When we had strong unions, everyone was paid better, not just union workers, because non-union companies had to compete salary-wise. Better-paid workers are better customers; better customers are better for business. Better-paid workrs pay more income tax, but since they have more money anyway, it does not cut into their quality of life. Better regulations insure that not only the public, but the businesses are protected also. Everyone wins here - maybe not the zillionaire CEOs, but how much gold can one person eat anyway?

So there you have it, Hank and Benny.

No need to thank me, fellas - just go and do the right thing. Start helping the folks at the bottom, and it will trickle UP - even to you guys!

It works - it's been done before.

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