Letter 2 America for September 24, 2013

Dear America,

I fret constantly about the lack of concern in this country over what I see as our greatest problem, and as each day passes, I am evermore earnest in my fear for the future of the American capitalist system.  Since the ascendance of "Supply-Side Economics" during the Reagan years, the cognate fixation on supply...that is capital...has gone essentially undiminished despite the fundamental discredit into which supply side economics as a whole has fallen in consequence of the deepening socio-economic divide and injustice that have devolved from it.  Still, even our president, who disavows supply side theory, seems to be fixated on the supply side of the supply/demand equation as evinced by, among other things, his favor of Larry Summers to be the new chairman of the Federal Reserve Bank, though Mr. Summers has withdrawn his name from consideration as of this date...a boon for which we should all give thanks.  Summers, you may recall, is in favor of unfettered banking practices, and he advised President Clinton to sign  the Gramm-Leach-Bliley Act, which repealed the Glass-Steagall Act that had protected us from the predation of those in the financial industry for sixty years...until then that is.  Note that it only took 18 years of the free reign provided by the repeal of Glass-Steagall to plunge us back into a situation like that which precipitated Glass-Steagall in the first place.  But Summers isn't really the issue.  Banking--the financial industry as a whole really--is just one of the tails wagging the dog of our economic philosophy.  We are also being undermined as a society by concepts like "increased worker productivity," which is just a euphemism for business owners' ability to give workers less and less in wages while still increasing the amount of wealth that those workers produce for them.  And then there is the conservative plaint about "big government," which is a euphemism for the more in our society that mandates provision of the rudiments of life to those who cannot provide them for themselves.  Of course, Christian values are often invoked to refute the claim that each day we stray as a nation more and more from keeping our brothers in the Christian sense when used to rally conservatives to ostensibly moral-Christian-values type candidates who would ignore the Christian creed of charity and compassion, but seek to preserve our right not to be taxed or to be required to have medical insurance so that everyone can gain access to our healthcare system...if indeed we even have one.  But even these ethical issues are not material in my fears for our prosperity as a people.  What concerns me is the amorality of American capitalism and the governance that it has precipitated, which, if I may introduce a little banality here, actually undermines not just Christian, but capitalist values.  They're not necessarily mutually exclusive.

Starting with the most recent manifestation of what I am suggesting, the Republican controlled House of Representatives has passed a massive cut in the food stamp program.  Frankly, I cannot profess to know exactly what the cuts are in nature because I haven't read the bill, though I intend to, but the politics surrounding it falls squarely along liberal-conservative lines.  Information I have seen so far goes to the effect that almost 4 million people will be wiped off the roles of the program, 10% of the total recipient population today, and these aren't people who are comfortable living off the system.  These are people who are on the bottom wrung of our economic ladder, and what they will lose is not new clothes or candy; it is food from their tables.  How can you justify taking food off someone's table and leaving him hungry with the kind of impunity that the vote on the bill represents.  Setting all that aside however...leaving morality off the table, and this is my point...that $40 billion that the bill cuts from food stamps over the course of the next ten years is money that will not be pumped into the economy, and in particular into food stores in impoverished areas.  In other words, what are called "food deserts" will likely result from these cuts and people who have no personal transportation will have nowhere within a reasonable distance to shop for food...with or without food stamps.  Supply, that is businesses that are now outlets for groceries, will dry up because demand has dried up, and the jobs that they create will go with them.  Then there is the failure to pass tax penalties for companies that ship their jobs overseas, which has been defeated in The Senate by the threat of a Republican filibuster more than once.  If those jobs that have already gone abroad are not induced to return to this country, the demand that their wages represent won't return either...at least not here in the United States.  And then there is the manifestation of many of these things in the form of a statistic: 95% of the financial gains that have accrued during the years since the financial crisis began at the end of 2007 have inured to the benefit of 1% of the American people, and those people will never spend that money...more demand that will never affect our market economy because it is sidelined in off-shore accounts just to be counted and never spent.  So why is all that significant for us ordinary Americans you might ask.

Well, the list of these vectors pointing us toward diminished demand are not just some incidental trend.  Without demand, who are the supply-siders going to sell their goods to.  And if it isn't going to be Americans, who will be living here rather than overseas where the demand, and thus the jobs on the supply side, have migrated to.  In short, what will become of the United States if we do not find a way to reverse the trend toward emphasis on the supply side of the supply and demand equation?  Seventy percent of our economy is consumer spending, the rest being spending by government and business.  So why is no one noticing that we are digging our own grave by trimming back the seventy percent portion of our economic activity.  The consuming populace of a nation are the geese that lay the golden eggs, and supply-siders are actually eating the geese for dinner because they claim that is they who lay those golden eggs...and they're betting not just their future, but ours on that false premise.  The New York Times published a story in its Sunday business section last week about a new SEC rule regarding disclosure by registered corporations of the ratio between CEO salaries and those of their average workers.  The crux of the piece was that it would be more appropriate to measure the ration between CEO salaries at comparable companies, but it seemed to ignore the fact that those salaries...all of them...are set by boards of directors, the chairmen of which are...you guessed it...those very CEO's.  It used to be that there was a chairman of the board and a president who answered to the board and ran the company day to day.  But some time around the advent of supply-side economics a trend began with regard to not just electing presidents to the board, but making them chairmen of the board as well.  And those chairmen/CEO's run roughshod over the other board members, most of them being sinecure members of other boards as well.  It's kind of like part-time minimum wage supplementation for the rich.  Thus, when the board determines the CEO's salary, they are docilely led by the CEO to the pay level he seeks, but no one complains about his conflict of interest in being involved in the process.  That the SEC isn't interested in regulating, and thus, the daisy chain that siphons corporate profit into the accounts of ever fewer rich executives goes unabated and the rich get richer but demand continues to decline because the working man gets a smaller and smaller wage for what he produces.

It comes to this.  Just as diminished government spending on programs for the less fortunate in our society puts more money in the pockets of wealthy tax payers, it puts less into the demand aspect of our economic cycle, and the failure of government regulation to address the root causes of the trend just ensures its perpetuation.  That perpetuation is a death spiral.  The rich will blame the poor, but the real drag on our economy is not the food that a poor person gets, it is the money that a rich one gets, but never spends.

Your friend,

Mike