Economic Futures

Twice in the last week friends asked me if I were optimistic about the economy. Do they think my degree in economics and a career as a business journalist qualifies me to know more than, say, the pinheads at Standard & Poors who made a $2 trillion mistake when calculating their assessment of the credit worthiness of the United States? Do they think I know more than the complicit bean counters at S&P who valued Lehman Bros. AAA worthy even as it imploded and who gave favorable reviews to toxic mortgage-backed securities at the heart of the financial freefall of the last few years?

I’d like to say I responded with a positive take on the economy. But I would be as guilty as those fabricators at S&P who have done more to ruin our economy than a dozen Bernie Madoffs could. Yet even in their obfuscations there is a kernel of truth—there is little to be confident about the will or power of our elected officials to bring a sane, rational approach to a resolution of our financial crisis.

I’m perplexed about several parts of this unfolding story.

First, does S&P believe we need a balanced approach to setting a national budget? Does it believe only more program cuts are required, or are higher taxes on the rich and closing corporate and personal loopholes necessary as well?

Second, several interviews portrayed ordinary citizens understandably lamenting the debt ceiling deal. But in the same breadth they said they wouldn’t favor higher taxes, as desired by President Obama and the Democratic leadership. Do they not understand taxes would have gone up just for those households making more than $250,000? Have Republicans so brainwashed the common folk they believe their taxes would go up?

Third, given we live in a global economy where it is generally cheaper to manufacture in Third World countries than here in America, how long will it take for our citizenry to comprehend we are not going back to the time when the United States was the foundry of the universe. Think of most consumer products, from iPhones to digital cameras, from Christian Louboutin shoes to Nike cross trainers—they’re not made in America. During the last century we shifted from an agricultural to a manufacturing economy. Now we’re a service and information economy. Yes, there are remnants of our production prowess. But most new jobs will require the ability to say “would you like fries with that” or will rely on one’s skill to create platforms that aggregate consumers into marketable segments (at least those who retain enough money to spend on discretionary items). Or you will need to be part of the financial community that doesn’t produce an ounce of goods but earns dollars by the pound based on an ability to jimmy-up trades and market fluctuations (case in point: oil speculators with no tangible assets in the energy business who have driven up the price of gasoline and home heating oil).

Fourth, if Republicans are interested in putting Americans back to work, why don’t they push for legislation to benefit companies that hire more U.S. workers and tax those that outsource jobs?

Fifth, how can anyone see value in a bifurcated society? It wasn’t good when we discriminated based on color, or ethnicity, or sex. Yet our leaders are letting us devolve into a nation of haves and have-nots. Riots like in London, as well as the Arab Spring revolts, are demonstrations of the hopeless and destitute seeking relief against the accumulation of wealth in an elite. Verizon land-line workers are on strike. Even if you believe the company that the average Verizon workers makes $150,000 in salary and benefits, it is 120 times less than the $18.1 million compensation of the company’s CEO last year. It’s an obscene differential. Ivan Seidenberg makes $50,000 a day, every day of the year. Is his three-day compensation equal to an average worker’s full year? It’s not as if he invented a new form of communication, or discovered the cure for cancer, or helped solve world hunger. His job is to run a profitable company, even if it means squeezing his employees to pay more for health care coverage and their retirement plans. I’m not advocating wealth redistribution, but there really should be a limit on corporate compensation.