"they had, in fact, been able to acquire vast amounts of wood for $50 a cord, and they’d been able to sell all they had for $40 a cord. How could they be broke? "
If I had $1000 and bought 50 cords of wood at $50/cord, and could only sell then for $40/cord, I'm left with $800. I took a $200 loss, but I'm hardly broke.
I'd go so far as to argue that this is a common occurrence in business when they haven't identified scalable marketing channels. Often you have to spend at a loss to gather data, optimize your efforts, and THEN hopefully make a profit.
So if I can take that remaining $800, optimize my efforts, and sell them for $51/cord moving forward (assuming no further optimizations), it will take me a little bit to earn my initial cash back, but I'm in essence printing money at that point.
Heh, well, I'm a marketer, so that model is the basis of my job. It is very rare to be profitable right off the bat. A lot of times you hear all the success stories on how a company hit viral growth, but what you don't always hear are how many of their strategies and tactics bombed and were tossed.
> First, such tariffs are probably barred under trade agreements that are in place. To impose them, we would have to abrogate those agreements.
So what? Those trade agreements were made under the assumption that they'd be good for America. Now that we know they're bad for America, the assumptions under which they were made are invalid.
> We have to wonder about retaliatory actions – wouldn’t other countries impose offsetting tariffs on U.S. exports that would further harm our manufacturing base?
We're a net importer. Tariffs in other countries would only really hurt if we did a ton of exports.
> What would happen to our ability to refinance our perpetually growing national debt if China, our biggest creditor, decided one day it wasn’t quite as eager to participate in new Treasury financings?
Lower taxes and cut the size of government. Stop printing money and allow interest rates to rise.
> What would rising barriers do to one of the main motivations behind the broadening of U.S. trade agreements since World War II: preventing conflict?
A tariff is not a wall. Trade would still take place and there'd still be interdependence.
> Finally, but most simply, what American wants to pay 50% more for a cellphone than he does today?
An American who used to be unemployed or paid minimum wage, but has gotten a much better job with an greatly increased salary because he no longer has to compete with desperately poor people who will accept pay far below the US minimum wage.
> So what? Those trade agreements were made under the assumption that they'd be good for America. Now that we know they're bad for America, the assumptions under which they were made are invalid.
Do we know that? It's easy to quantify slower income gains, but harder to quantify lower costs for goods and services. I'm not even sure what the closes proxy would be. Inflation?
>We're a net importer. Tariffs in other countries would only really hurt if we did a ton of exports.
History has shown that tariffs do result in counter-tariffs, which end up being unprofitable for both sides, driving up costs.
> Lower taxes and cut the size of government. Stop printing money and allow interest rates to rise.
100% agree.
> A tariff is not a wall. Trade would still take place and there'd still be interdependence.
But it is a barrier, starting as a low hurdle and tending to rise over time.
> An American who used to be unemployed or paid minimum wage, but has gotten a much better job with an greatly increased salary because he no longer has to compete with desperately poor people who will accept pay far below the US minimum wage.
Where and how do these new higher paying jobs come about?
Another very harmful and insidious consequence of tariffs: by preserving non-competitive industries that would not survive in a free market, tariffs delay, and worsen, the inevitable collapse of those industries.
By hiding behind tariffs, we delay the replacement of non-competitive industries with competitive ones. When we finally drop the tariffs and start developing competitive industries, other countries will have had a head start in doing so.
Our companies and workers will be behind their global competitors by years. The countries which declined protectionism and developed competitive industries when it first made sense to do so will reap the rewards.
Someone might point out that we could avoid this situation by simply keeping the tariffs around forever. But that never happens. Eventually, the tariffs will become unpopular because people will know that outside of this country, the same goods cost significantly less. That gap is likely to increase over time. The Oak Tree Capital article uses a hypothetical example of cell phones being kept at a $150 price in the domestic market by tariffs, when they are available at $100 in the international market. After a few years, they will still be $150 here, but maybe down to $80 in the international market. A few years later, they may cost only $50 internationally. They won't become much cheaper in the domestic market because manufacturers will have no incentive to lower prices, because they are protected by the tariff. Furthermore, if the domestic manufacturers were capable of competing on price, the tariff never would have been necessary in the first place. At some point, the tariff will be too politically unpopular to be sustained.
It's worth noting that one of the contributing factors to the collapse of communism in Europe in the late 1980s and early 1990s was the obvious and increasing divergence in quality of life between the communist and capitalist countries, and that protectionism and anti-trade policies in the communist countries, along with attempts at central planning, accounts for much of that. They had a good run, but they could not hide from economic reality forever when their neighbors obviously had it so much better. That's why tariffs can't survive indefinitely.
> So what? Those trade agreements were made under the assumption that they'd be good for America. Now that we know they're bad for America, the assumptions under which they were made are invalid.
How do you know that? They have certainly hurt some Americans, but have resulted in lower consumer prices and a higher standard of living for almost everyone. This is covered in the article as a tradeoff of trade policy.
> Riding to work the other day, I heard about protests occurring in France. Workers were complaining about potential changes in labor regulations that would make their jobs less secure. In brief, French workers like it the way things are: they can’t be pushed beyond 35 hours a week, and employers’ ability to terminate them is subject to a drawn-out, torturous and uncertain program. They also like their lengthy vacations and the extensive benefits provided by the state. The question is where the ability to pay for above average benefits will come from if neither the hours worked nor the productivity per hour is above average. Governments and regulations can’t produce prosperity.
This memo neatly glosses over where the productivity gains in the last 100 years have gone, and makes it seem as if it's fair for wages of the American worker to stagnate while the megawealthy get all the profit. If a worker in 2016 can build a car in a-fourth the time it took a worker in 1935 to build a car, why is it implausible for them to work 35 hours a week with better benefits and more vacation time?
> why is it implausible for them to work 35 hours a week with better benefits and more vacation time?
People could do that if they were all willing to live like people lived in 1935. It turns out that many (most?) people prefer to live a more expensive lifestyle which requires more hours of work.
One consequence of this is that, since the number of people who prefer this is large enough that they've established a norm in many industries which makes it harder to find an employer willing to hire a worker that's going to put in fewer hours.
If you do really want a 1935 quality of life, though, you can probably attain it working 20 or 30 hours per week at a restaurant or supermarket.
It's important to note that this life could be very different from what you have now. You would likely live in a household containing three generations of your family and seldom travel outside the town/county you live in, among other things.
Not sure why discussions on HN always have to turn into fictional comparisons, but to play along I would note that everything else has also gotten more efficient and will continue to get even more so.
> It turns out that many (most?) people prefer to live a more expensive lifestyle which requires more hours of work.
I don't know that this is quite true. I have asked many employers for fewer hours and more vacation time in exchange for less money. I am always refused. I am frequently offered more money but never more vacation time.
I work as a contractor now, but even now my main client is begging me for more hours. The only people I've seen who successfully negotiate for fewer hours are those so vital to the business that they'd rather have that part time employee than no employee at all.
Mind you that's anecdotes and all that.
> One consequence of this is that, since the number of people who prefer this is large enough that they've established a norm in many industries which makes it harder to find an employer willing to hire a worker that's going to put in fewer hours.
I actually see it as the ones with the power get to write the rules, and make things seem normal. Even if I'd prefer to work fewer hours, I still need some money to survive, and can't quite go jobless.
> I don't know that this is quite true. I have asked many employers for fewer hours and more vacation time in exchange for less money. I am always refused. I am frequently offered more money but never more vacation time.
I've managed, once, to get the full vacation time for seniority (i.e. At N years you get +1 week) by threatening to quit after being offered a 5 figure raise.
So I'd agree with you. I've never known anyone to get away with pushing past the upper limit on their seniority track for vacation.
At my company everyone gets 3 weeks, nonnegotiable. But they let you supplement it with unpaid leave, which works out to the approximately the same thing if you get a corresponding pay raise.
I guess other companies are probably frequently less accommodating.
Buying lots of stuff from one person is cheaper than buying some stuff from lots of people. This difference is caused by transaction costs—the effort required to go from desire to purchased solution—and it's core to the theory of why firms form in the first place[1]. Every employer wants as few employees as possible to get a given amount of value because it costs less. They're not against fewer hours just because they're mean or stuck in their ways.
This, and the fact that if you let your Rock Star(tm) have special treatment of 25 hrs/wk and 8 weeks of vacation the folks who can barely get a day's worth of productivity of that guy done in a week will complain incessantly to the point of it being a real problem.
I say this having attempted to run a "egalitarian" team for well over a decade now. I've learned some lessons along the way. Basically reality doesn't matter to most people - perception does. If it's perceived that one employee is getting "special treatment" the rest demand it, deservedly or not. It doesn't matter if that employee does 5 times the work.
I still operate on the "Get your work done, and I don't give a shit if you're on the beach while you're on Slack with me" premise, but I understand this is only for a very select subsection of employees. The rest simply cannot handle it, and most companies take the easy/lazy way out and simply try to treat everyone as an equal as it results in far less drama. I think this is completely unacceptable, and high performers deserve to be treated as such.
Swiss workers are among the most productive on earth and they work fewer hours than most of the OECD. Coincidence? In many fields, (software, hello!) the number of hours worked does not necessarily translate into more profit.
> This memo neatly glosses over where the productivity gains in the last 100 years have gone, and makes it seem as if it's fair for wages of the American worker to stagnate while the megawealthy get all the profit. If a worker in 2016 can build a car in a-fourth the time it took a worker in 1935 to build a car, why is it implausible for them to work 35 hours a week with better benefits and more vacation time?
Because you are both comparing oranges to oranges.
France's problem (frankly) is their labor protections are too strong.
America's problem (frankly) is their labor protections are too weak.
The parallels to be drawn here are not what you or the OP would like them to be.
The standard of living since 1916 has improved substantially and maintaining a modern level of living is expensive.
If I want to live like a college student (2 to a room, no car, and only food I prepare myself) I could be retired in my late 30s. I don't live that way and that costs something.
Similarly, the gains from 1916 -> now are mostly in things we take for granted. The 40 hour work week (it used to be 60 then it became 48 and then 40), the access to quality medical care wasn't common, people lived two to a room in smaller homes, people didn't have the mobility of a car but relied on their own muscles, etc.
A good 50% of the productivity gains over the last 100 years went to moving things from 60 hour work weeks to 40. Modern conveniences represent the other half.
The reality is we got screwed in the 1980s -> 2016 in the US but that is a separate problem and conflating the two doesn't help anyone. Labor needs to start acting like its the 1920s again and get organized and push back politically.
> Labor needs to start acting like its the 1920s again and get organized and push back politically.
But it's not the 1920s again. Acting like it is isn't going to work in this climate.
You want to demand higher wages? Great. Yet more jobs go overseas, priced out of the US by the higher labor costs.
You want to protect against cheap imports (created by cheap workers) with tariffs? Well, you just made everything everyone buys from overseas more expensive, so the cost of living went up. You also just broke a bunch of trade agreements, and there will probably be retaliation from quite a few trade partners, resulting in fewer exports, which will cost jobs.
The world is a much more complicated place than it was in the 1920s. Simple responses aren't likely to fix things. We need to fix things - I'm with you there, there's a lot that's broken from the point of view of the working person - but an antagonistic power struggle is unlikely to produce an improvement.
>You want to demand higher wages? Great. Yet more jobs go overseas
The jobs that can go overseas are pushed overseas regardless.
The jobs that can't be pushed overseas? Turns out fighting for higher wages works well, as the fight for 15 can testify to.
>You want to protect against cheap imports (created by cheap workers) with tariffs? Well, you just made everything everyone buys from overseas more expensive
When that's offset by rising wages, which, in the absence of underpriced competition it will - the people at the bottom end aren't bothered. They're happy, in fact.
Besides, what eats up most people's paychecks these days? Not plastic crap from China - student loan repayments and rent/mortgage payment to keep a roof over your head.
>The world is a much more complicated place than it was in the 1920s.
>You want to demand higher wages? Great. Yet more jobs go overseas
> The jobs that can go overseas are pushed overseas regardless.
No. For every increase in the minimum wage, some incremental amount of jobs get pushed overseas.
What is true, though, is that those jobs were pretty crummy jobs. You can make a case that we didn't want them anyway. And if we had better jobs to replace them with, I think I'd agree. We don't, though, at least not at the moment.
> >You want to protect against cheap imports (created by cheap workers) with tariffs? Well, you just made everything everyone buys from overseas more expensive
> When that's offset by rising wages, the people at the bottom end aren't bothered. They're happy, in fact.
That's probably true. It probably hurts the middle class, though. Hurting the middle class to help the bottom isn't really the trade-off we want. We want the pain to go more to the upper- or upper-middle class.
> You want to demand higher wages? Great. Yet more jobs go overseas, priced out of the US by the higher labor costs.
Eh, you clearly don't understand what being organized and pushing back politically means.
> You want to protect against cheap imports (created by cheap workers) with tariffs? Well, you just made everything everyone buys from overseas more expensive, so the cost of living went up. You also just broke a bunch of trade agreements, and there will probably be retaliation from quite a few trade partners, resulting in fewer exports, which will cost jobs.
Your point of view is exactly why Trump exists, populist outrage. That populist outrage is available for anyone to tap precisely because:
A) Labor is getting screwed.
B) There are a bunch of people whose strong views were in the closet and willing to take any panderer that offers a possibility their views will be heard.
These things don't exist in a vacuum. You need outlets and balanced scales, politically, or you'll end up with populist panderers.
> The world is a much more complicated place than it was in the 1920s. Simple responses aren't likely to fix things. We need to fix things - I'm with you there, there's a lot that's broken from the point of view of the working person - but an antagonistic power struggle is unlikely to produce an improvement.
There is an antagonist power struggle. The fact you believe there isn't or there shouldn't be has been the game they've played for 40+ years. (i.e. Collective, organized labor as a political force is bad)
If this power struggle, which you are convinced doesn't exist, truly did not exist...why is there such a disproportionate shift in income growth? Such a powerful and effective push for lower tax rates for the rich than everyone else?
The AMT was originally intended to minimize the disparity for people making substantial money btw. It was created to deal with corporations/people with extremely low tax burdens (i.e. 0%) and so forth.
The problem here isn't the gross income, the problem is how the income is distributed by the tax system. The concept the burden "increased" is an illusion since its largely caused by increased income concentration (by percentage) rather than fundamental tax code changes that shift things. (i.e. Tax the wealthier more, tax the poor less)
10 pages of libertarian supply-side drivel from someone with a conflict of interest that conveniently ignores all counter arguments or dismisses them as political and "matter of opinion"
I'm not sure why you've been downvoted. This is generally true, and it's a point made several times in the article -- if policies aimed at taking money from the rich end up damaging the economy, the poor will suffer more than the rich once it all shakes out.
I'm sure the downvotes are due to this thread being a rephrasing of supply-side economics (aka Reaganomics), which has (shown to be|considered to be) (unworkable|undesirable) or otherwise fallen out of favor (at the very least as a political platform).
No, it's simply that a threshold exists at which people will move, and it hasn't been reached yet. Like most of the problems discussed in the economic reality article, this is a tradeoff -- people have clearly decided that they are willing to put up with higher taxes to live in New York instead of New Jersey. But surely you can see that there is a point at which it won't be worth it for many people.
Well, the sheer deluge of articles proclaiming an impending exodus every time the idea of raising taxes is mooted and the lack of any evidence for these so called exoduses has made me... skeptical.
Historically the highest US income tax rate was 95%. Guess what?
It only takes a few one-percenters moving away from a state to drain tens, or even hundreds, of millions of dollars from the state's tax revenue. I think this was mentioned in the article: http://www.nytimes.com/2016/05/01/business/one-top-taxpayer-...
The article makes the point that even if the rich don't leave, or avoid their taxes in some other way, high taxes on the rich disincentivize creating wealth. That's likely to have a drag on the entire economy.
People may not like the fact that much of our material, technological, and medical progress over the past century has been a result of people trying to get rich, but it's still a fact. If getting rich becomes less attractive due to high taxes, fewer people will try. Everyone will suffer if the economy slows, and the non-rich will suffer more than the rich will.
I found it disappointing this lengthy article didn't touch on Basic Income at all. It would have been helpful to see how that (potentially) slots into all this.
Based on what the author wrote I suspect he would say that it would reduce the nations productivity (and ultimately peoples living standard) as less people would choose to be productive if they are not forced to.
1) I did not qualify the viability of basic income in my statement. I just gave my opinion on what the author might say on this issue given that he is highly critical of the financial viability of the US social system. (he wants to reduce spending)
2) YCombinator doing a test doesn't mean that it is a viable model.
You could try reading the YC article, which says, "I’ve been intrigued by the idea for a while, and although there’s been a lot of discussion, there’s fairly little data about how it would work."
It's clearly an experiment to get real data about basic income, which has not been done before. Even if basic income is not viable, having data will be useful.
It doesn't slot in to economic reality. It is simply an unrealistic proposal, for several reasons:
1. A guaranteed basic income to every citizen, which would be enough for a person to live on without a job, would cost more than the entire annual income of the Federal government. Even if it didn't, people would simply vote to increase their incomes until it did.
2. It would be regressive: under most of the basic income plans that have been proposed, people who are currently on welfare would get less money from the government than they do now. On the other hand, middle class people who don't need extra money will get it. Basic income would represent a transfer of income from the poorest to everyone else.
3. It would not replace existing welfare systems. People like to think that it would, but political realities would prevent that from happening. When has the Congress ever passed a simple, elegant piece of legislation that undid layers of bureaucracy, and then prevented it from being changed? It's simply unrealistic to assume that could happen in our political system.
4. Political, ideological, and moral forces in our culture and society have caused us to have our current welfare systems, and those same forces would cause us to revert to those systems even if basic income were implemented. Some examples of these forces are the social constructions of race and class, views about who deserves money and who does not, and the moral value of work. Basic income is a blank-slate social engineering fantasy that ignores all of these things.
5. Basic income is likely to be a race to the bottom. You cannot redistribute wealth that does not exist. By decreasing incentives for work, basic income will reduce the amount of wealth created, which will reduce the amount of money that can be distributed to people as their basic income.
6. If steps are taken to incentivize work to avoid the problem in #5, e.g. increasing the basic income payments to people who have jobs to incentivize other people to get jobs, basic income won't be "basic" anymore. Such incentives would open the door to many other proposals that would result in some people getting more basic income money than others. Many of these proposals will be popular, such as extra money for single mothers, less money for convicted felons and drug users, etc. The forces I mentioned in point 4 would thereby reconstruct our current welfare systems within the framework of the basic income policy.
I like the Geo-Libertarian idea of basic income. Thomas Paine wrote something similar in Agrarian Justice.
It basically goes like this:
1) Governments have claimed a monopoly on the land and resources. Basically through military conquest at some point in the past.
2) Before there was any government people were able to use the land freely. So basically they were robbed of something that they could previously use.
3) Fairness dictates that compensation for such a loss must be made.
4) Charge people for the use of land, resources, airwaves, etc.
5) This income goes to all people in the country equally.
This type of basic income does not violate any economic reality that I am aware of.
Now, it will not be enough to so that people can choose to live without working. Such thinking is anti-reality. Absent work, decay (entropy) is the law of the universe. This can not be changed. But it will be fair compensation for no longer having access to the land resources that hunter / gatherers had.
>Rather than believing central banks can make economies more productive, it’s my bottom line that there’s a naturally occurring growth rate for each economy, and that rate dictates the long-term output, not central bankers’ actions.
While I don't disagree in general principle, I simply don't find this observation or belief all too compelling or unique as it's being framed in political context. Ever since Greenspan the Central Banking "toolchest" has been of questionable merit and practical utility. If anything, the asset buying irrational market behavior result (see: US stocks) disconnecting record highs from real-world growth or economic engine performance only seems to acknowledge the "naturally occurring growth rate" concept has merit.
Granted, some people don't like talking about how a negative growth rate can be natural too.
>The U.S. government couldn’t figure out how to stop it in the 1970s, and the nations of the world can’t find a way to start it today.
Oh, they can find a way, they just would prefer not to, methinks.
>For example, lending people money can enable them to buy things today that they otherwise mightn’t have bought until later (if at all). If a consumer buys a boat today with money made available through a low-interest loan, that’s a boat he won’t buy next year. Lending people money doesn’t alter their lifetime incomes, meaning consumers may buy fewer boats later, when the loans have to be repaid, causing disposable income to contract.
Is that really how capitalism works, though? I believed it was more like this: making available loans at low interest rates stimulates the production of boats to large levels. The sale of these boats at profits creates wealth for the owner AND the employees of the boat making company. The employees spend that money and stimulate economic demand; the owners/investors make great profit and thus concentrate capital even more. This capital is then invested in other ventures, perhaps even as low interest loans to other consumers.
Loans/Debt enable businesses, consumers and nations to create economic activity NOW and accumulate the capital NOW; we don't know what the future will look like but the concentration of economic power (i.e. capitalism) has certainly played a most important part in technological progress.
> The sale of these boats at profits creates wealth for the owner AND the employees of the boat making company.
The boat is wealth. The person selling the boat gives some wealth away, in exchange of a monetary profit. That profit will enable him to buy wealth produced by some other person.
Let's make things clearly.
- There's the real economy. Here, work, capital, natural resources, etc are used to create wealth. People create their valuables and exchange them for things they value more, increasing the wealth of everybody.
- There's the nominal economy. Here money is invested in acquiring resources, that other people will spend money consuming.
In a simple theory, the real economy works alone and money is irrelevant. But that theory seems to be wrong. In fact, people gladly raise prices, but resist lowering them. That creates an asymmetry and the consequence is that the real economy works well¹ when the amount of circulating money is constant or increasing, but does not work well when it is reducing.
Now, finally, people getting loans makes the amount of circulating money to increase, and paying them back makes it reduce.
1 - At least according to the mainstream theories. Also, only up to a certain point.
54 comments
[ 3.5 ms ] story [ 96.9 ms ] threadBy losing $10 per cord?
If I had $1000 and bought 50 cords of wood at $50/cord, and could only sell then for $40/cord, I'm left with $800. I took a $200 loss, but I'm hardly broke.
I'd go so far as to argue that this is a common occurrence in business when they haven't identified scalable marketing channels. Often you have to spend at a loss to gather data, optimize your efforts, and THEN hopefully make a profit.
So if I can take that remaining $800, optimize my efforts, and sell them for $51/cord moving forward (assuming no further optimizations), it will take me a little bit to earn my initial cash back, but I'm in essence printing money at that point.
> First, such tariffs are probably barred under trade agreements that are in place. To impose them, we would have to abrogate those agreements.
So what? Those trade agreements were made under the assumption that they'd be good for America. Now that we know they're bad for America, the assumptions under which they were made are invalid.
> We have to wonder about retaliatory actions – wouldn’t other countries impose offsetting tariffs on U.S. exports that would further harm our manufacturing base?
We're a net importer. Tariffs in other countries would only really hurt if we did a ton of exports.
> What would happen to our ability to refinance our perpetually growing national debt if China, our biggest creditor, decided one day it wasn’t quite as eager to participate in new Treasury financings?
Lower taxes and cut the size of government. Stop printing money and allow interest rates to rise.
> What would rising barriers do to one of the main motivations behind the broadening of U.S. trade agreements since World War II: preventing conflict?
A tariff is not a wall. Trade would still take place and there'd still be interdependence.
> Finally, but most simply, what American wants to pay 50% more for a cellphone than he does today?
An American who used to be unemployed or paid minimum wage, but has gotten a much better job with an greatly increased salary because he no longer has to compete with desperately poor people who will accept pay far below the US minimum wage.
Do we know that? It's easy to quantify slower income gains, but harder to quantify lower costs for goods and services. I'm not even sure what the closes proxy would be. Inflation?
>We're a net importer. Tariffs in other countries would only really hurt if we did a ton of exports.
History has shown that tariffs do result in counter-tariffs, which end up being unprofitable for both sides, driving up costs.
> Lower taxes and cut the size of government. Stop printing money and allow interest rates to rise.
100% agree.
> A tariff is not a wall. Trade would still take place and there'd still be interdependence.
But it is a barrier, starting as a low hurdle and tending to rise over time.
> An American who used to be unemployed or paid minimum wage, but has gotten a much better job with an greatly increased salary because he no longer has to compete with desperately poor people who will accept pay far below the US minimum wage.
Where and how do these new higher paying jobs come about?
By hiding behind tariffs, we delay the replacement of non-competitive industries with competitive ones. When we finally drop the tariffs and start developing competitive industries, other countries will have had a head start in doing so.
Our companies and workers will be behind their global competitors by years. The countries which declined protectionism and developed competitive industries when it first made sense to do so will reap the rewards.
Someone might point out that we could avoid this situation by simply keeping the tariffs around forever. But that never happens. Eventually, the tariffs will become unpopular because people will know that outside of this country, the same goods cost significantly less. That gap is likely to increase over time. The Oak Tree Capital article uses a hypothetical example of cell phones being kept at a $150 price in the domestic market by tariffs, when they are available at $100 in the international market. After a few years, they will still be $150 here, but maybe down to $80 in the international market. A few years later, they may cost only $50 internationally. They won't become much cheaper in the domestic market because manufacturers will have no incentive to lower prices, because they are protected by the tariff. Furthermore, if the domestic manufacturers were capable of competing on price, the tariff never would have been necessary in the first place. At some point, the tariff will be too politically unpopular to be sustained.
It's worth noting that one of the contributing factors to the collapse of communism in Europe in the late 1980s and early 1990s was the obvious and increasing divergence in quality of life between the communist and capitalist countries, and that protectionism and anti-trade policies in the communist countries, along with attempts at central planning, accounts for much of that. They had a good run, but they could not hide from economic reality forever when their neighbors obviously had it so much better. That's why tariffs can't survive indefinitely.
How do you know that? They have certainly hurt some Americans, but have resulted in lower consumer prices and a higher standard of living for almost everyone. This is covered in the article as a tradeoff of trade policy.
This memo neatly glosses over where the productivity gains in the last 100 years have gone, and makes it seem as if it's fair for wages of the American worker to stagnate while the megawealthy get all the profit. If a worker in 2016 can build a car in a-fourth the time it took a worker in 1935 to build a car, why is it implausible for them to work 35 hours a week with better benefits and more vacation time?
People could do that if they were all willing to live like people lived in 1935. It turns out that many (most?) people prefer to live a more expensive lifestyle which requires more hours of work.
One consequence of this is that, since the number of people who prefer this is large enough that they've established a norm in many industries which makes it harder to find an employer willing to hire a worker that's going to put in fewer hours.
If you do really want a 1935 quality of life, though, you can probably attain it working 20 or 30 hours per week at a restaurant or supermarket.
It's important to note that this life could be very different from what you have now. You would likely live in a household containing three generations of your family and seldom travel outside the town/county you live in, among other things.
I don't know that this is quite true. I have asked many employers for fewer hours and more vacation time in exchange for less money. I am always refused. I am frequently offered more money but never more vacation time.
I work as a contractor now, but even now my main client is begging me for more hours. The only people I've seen who successfully negotiate for fewer hours are those so vital to the business that they'd rather have that part time employee than no employee at all.
Mind you that's anecdotes and all that.
> One consequence of this is that, since the number of people who prefer this is large enough that they've established a norm in many industries which makes it harder to find an employer willing to hire a worker that's going to put in fewer hours.
I actually see it as the ones with the power get to write the rules, and make things seem normal. Even if I'd prefer to work fewer hours, I still need some money to survive, and can't quite go jobless.
I've managed, once, to get the full vacation time for seniority (i.e. At N years you get +1 week) by threatening to quit after being offered a 5 figure raise.
So I'd agree with you. I've never known anyone to get away with pushing past the upper limit on their seniority track for vacation.
I guess other companies are probably frequently less accommodating.
[1] https://en.wikipedia.org/wiki/Theory_of_the_firm
I say this having attempted to run a "egalitarian" team for well over a decade now. I've learned some lessons along the way. Basically reality doesn't matter to most people - perception does. If it's perceived that one employee is getting "special treatment" the rest demand it, deservedly or not. It doesn't matter if that employee does 5 times the work.
I still operate on the "Get your work done, and I don't give a shit if you're on the beach while you're on Slack with me" premise, but I understand this is only for a very select subsection of employees. The rest simply cannot handle it, and most companies take the easy/lazy way out and simply try to treat everyone as an equal as it results in far less drama. I think this is completely unacceptable, and high performers deserve to be treated as such.
The "luxuries" which have had the greatest inflation over the last 30 years:
* Rent/house prices
* Education
* Health care
But hey, at least we have iPhones, right? Totally makes up for the rest.
http://www.reuters.com/article/us-usa-fed-dudley-ipad-idUSTR...
[1] http://www.ft.com/cms/s/0/c413ca76-ce3c-11e4-86fc-00144feab7... [2] http://www.insee.fr/en/insee-statistique-publique/connaitre/...
EDIT: But I am surprised by the higher productivity per worker, compared to UK.
Because you are both comparing oranges to oranges.
France's problem (frankly) is their labor protections are too strong.
America's problem (frankly) is their labor protections are too weak.
The parallels to be drawn here are not what you or the OP would like them to be.
The standard of living since 1916 has improved substantially and maintaining a modern level of living is expensive.
If I want to live like a college student (2 to a room, no car, and only food I prepare myself) I could be retired in my late 30s. I don't live that way and that costs something.
http://www.pbs.org/livelyhood/workday/weekend/timeline.html
Similarly, the gains from 1916 -> now are mostly in things we take for granted. The 40 hour work week (it used to be 60 then it became 48 and then 40), the access to quality medical care wasn't common, people lived two to a room in smaller homes, people didn't have the mobility of a car but relied on their own muscles, etc.
A good 50% of the productivity gains over the last 100 years went to moving things from 60 hour work weeks to 40. Modern conveniences represent the other half.
The reality is we got screwed in the 1980s -> 2016 in the US but that is a separate problem and conflating the two doesn't help anyone. Labor needs to start acting like its the 1920s again and get organized and push back politically.
But it's not the 1920s again. Acting like it is isn't going to work in this climate.
You want to demand higher wages? Great. Yet more jobs go overseas, priced out of the US by the higher labor costs.
You want to protect against cheap imports (created by cheap workers) with tariffs? Well, you just made everything everyone buys from overseas more expensive, so the cost of living went up. You also just broke a bunch of trade agreements, and there will probably be retaliation from quite a few trade partners, resulting in fewer exports, which will cost jobs.
The world is a much more complicated place than it was in the 1920s. Simple responses aren't likely to fix things. We need to fix things - I'm with you there, there's a lot that's broken from the point of view of the working person - but an antagonistic power struggle is unlikely to produce an improvement.
The jobs that can go overseas are pushed overseas regardless.
The jobs that can't be pushed overseas? Turns out fighting for higher wages works well, as the fight for 15 can testify to.
>You want to protect against cheap imports (created by cheap workers) with tariffs? Well, you just made everything everyone buys from overseas more expensive
When that's offset by rising wages, which, in the absence of underpriced competition it will - the people at the bottom end aren't bothered. They're happy, in fact.
Besides, what eats up most people's paychecks these days? Not plastic crap from China - student loan repayments and rent/mortgage payment to keep a roof over your head.
>The world is a much more complicated place than it was in the 1920s.
Yet some things never change.
> The jobs that can go overseas are pushed overseas regardless.
No. For every increase in the minimum wage, some incremental amount of jobs get pushed overseas.
What is true, though, is that those jobs were pretty crummy jobs. You can make a case that we didn't want them anyway. And if we had better jobs to replace them with, I think I'd agree. We don't, though, at least not at the moment.
> >You want to protect against cheap imports (created by cheap workers) with tariffs? Well, you just made everything everyone buys from overseas more expensive
> When that's offset by rising wages, the people at the bottom end aren't bothered. They're happy, in fact.
That's probably true. It probably hurts the middle class, though. Hurting the middle class to help the bottom isn't really the trade-off we want. We want the pain to go more to the upper- or upper-middle class.
^^^ What gets threatened by lobbyists fighting minimum wage increases.
http://www.ft.com/cms/s/2/b9602ba0-3c91-11e6-8716-a4a71e8140... (Push for higher wages squeezes US corporate profits)
^^^ What actually happens in reality
>That's probably true. It probably hurts the middle class, though. Hurting the middle class to help the bottom isn't really the trade-off we want
^^^ What politicians say when Bernie Sanders proposes raising taxes on people earning over 200k / year.
There isn't much of a middle class left in America these days. The people who would be helped are in the majority.
Eh, you clearly don't understand what being organized and pushing back politically means.
> You want to protect against cheap imports (created by cheap workers) with tariffs? Well, you just made everything everyone buys from overseas more expensive, so the cost of living went up. You also just broke a bunch of trade agreements, and there will probably be retaliation from quite a few trade partners, resulting in fewer exports, which will cost jobs.
Your point of view is exactly why Trump exists, populist outrage. That populist outrage is available for anyone to tap precisely because:
A) Labor is getting screwed.
B) There are a bunch of people whose strong views were in the closet and willing to take any panderer that offers a possibility their views will be heard.
These things don't exist in a vacuum. You need outlets and balanced scales, politically, or you'll end up with populist panderers.
> The world is a much more complicated place than it was in the 1920s. Simple responses aren't likely to fix things. We need to fix things - I'm with you there, there's a lot that's broken from the point of view of the working person - but an antagonistic power struggle is unlikely to produce an improvement.
There is an antagonist power struggle. The fact you believe there isn't or there shouldn't be has been the game they've played for 40+ years. (i.e. Collective, organized labor as a political force is bad)
If this power struggle, which you are convinced doesn't exist, truly did not exist...why is there such a disproportionate shift in income growth? Such a powerful and effective push for lower tax rates for the rich than everyone else?
The AMT was originally intended to minimize the disparity for people making substantial money btw. It was created to deal with corporations/people with extremely low tax burdens (i.e. 0%) and so forth.
The problem here isn't the gross income, the problem is how the income is distributed by the tax system. The concept the burden "increased" is an illusion since its largely caused by increased income concentration (by percentage) rather than fundamental tax code changes that shift things. (i.e. Tax the wealthier more, tax the poor less)
If the car is 1/4 the price[0], that's a wash on the income of the worker. A huge benefit to society, but a wash for that guy.
[0] in real terms, i.e. normalized to cost of living
This undermines his point that it's the fear of failure that drives business, since bankruptcy laws reduce the impact of failure.
I'm not sure what the solution is, but travel is one aspect of globalization that seems to benefit the rich more than the poor.
http://nymag.com/daily/intelligencer/2014/07/rich-people-don...
Oh wait.
Gee I wonder if it's actually all bluster and empty threats.
Historically the highest US income tax rate was 95%. Guess what?
People may not like the fact that much of our material, technological, and medical progress over the past century has been a result of people trying to get rich, but it's still a fact. If getting rich becomes less attractive due to high taxes, fewer people will try. Everyone will suffer if the economy slows, and the non-rich will suffer more than the rich will.
It doesn't have to be that way. https://www3.epa.gov/airtrends/images/y70_14.png
But yeah there are tradeoffs
https://blog.ycombinator.com/basic-income
1) I did not qualify the viability of basic income in my statement. I just gave my opinion on what the author might say on this issue given that he is highly critical of the financial viability of the US social system. (he wants to reduce spending)
2) YCombinator doing a test doesn't mean that it is a viable model.
It's clearly an experiment to get real data about basic income, which has not been done before. Even if basic income is not viable, having data will be useful.
1. A guaranteed basic income to every citizen, which would be enough for a person to live on without a job, would cost more than the entire annual income of the Federal government. Even if it didn't, people would simply vote to increase their incomes until it did.
2. It would be regressive: under most of the basic income plans that have been proposed, people who are currently on welfare would get less money from the government than they do now. On the other hand, middle class people who don't need extra money will get it. Basic income would represent a transfer of income from the poorest to everyone else.
3. It would not replace existing welfare systems. People like to think that it would, but political realities would prevent that from happening. When has the Congress ever passed a simple, elegant piece of legislation that undid layers of bureaucracy, and then prevented it from being changed? It's simply unrealistic to assume that could happen in our political system.
4. Political, ideological, and moral forces in our culture and society have caused us to have our current welfare systems, and those same forces would cause us to revert to those systems even if basic income were implemented. Some examples of these forces are the social constructions of race and class, views about who deserves money and who does not, and the moral value of work. Basic income is a blank-slate social engineering fantasy that ignores all of these things.
5. Basic income is likely to be a race to the bottom. You cannot redistribute wealth that does not exist. By decreasing incentives for work, basic income will reduce the amount of wealth created, which will reduce the amount of money that can be distributed to people as their basic income.
6. If steps are taken to incentivize work to avoid the problem in #5, e.g. increasing the basic income payments to people who have jobs to incentivize other people to get jobs, basic income won't be "basic" anymore. Such incentives would open the door to many other proposals that would result in some people getting more basic income money than others. Many of these proposals will be popular, such as extra money for single mothers, less money for convicted felons and drug users, etc. The forces I mentioned in point 4 would thereby reconstruct our current welfare systems within the framework of the basic income policy.
It basically goes like this:
1) Governments have claimed a monopoly on the land and resources. Basically through military conquest at some point in the past.
2) Before there was any government people were able to use the land freely. So basically they were robbed of something that they could previously use.
3) Fairness dictates that compensation for such a loss must be made.
4) Charge people for the use of land, resources, airwaves, etc.
5) This income goes to all people in the country equally.
This type of basic income does not violate any economic reality that I am aware of.
Now, it will not be enough to so that people can choose to live without working. Such thinking is anti-reality. Absent work, decay (entropy) is the law of the universe. This can not be changed. But it will be fair compensation for no longer having access to the land resources that hunter / gatherers had.
While I don't disagree in general principle, I simply don't find this observation or belief all too compelling or unique as it's being framed in political context. Ever since Greenspan the Central Banking "toolchest" has been of questionable merit and practical utility. If anything, the asset buying irrational market behavior result (see: US stocks) disconnecting record highs from real-world growth or economic engine performance only seems to acknowledge the "naturally occurring growth rate" concept has merit.
Granted, some people don't like talking about how a negative growth rate can be natural too.
>The U.S. government couldn’t figure out how to stop it in the 1970s, and the nations of the world can’t find a way to start it today.
Oh, they can find a way, they just would prefer not to, methinks.
Is that really how capitalism works, though? I believed it was more like this: making available loans at low interest rates stimulates the production of boats to large levels. The sale of these boats at profits creates wealth for the owner AND the employees of the boat making company. The employees spend that money and stimulate economic demand; the owners/investors make great profit and thus concentrate capital even more. This capital is then invested in other ventures, perhaps even as low interest loans to other consumers.
Loans/Debt enable businesses, consumers and nations to create economic activity NOW and accumulate the capital NOW; we don't know what the future will look like but the concentration of economic power (i.e. capitalism) has certainly played a most important part in technological progress.
The boat is wealth. The person selling the boat gives some wealth away, in exchange of a monetary profit. That profit will enable him to buy wealth produced by some other person.
Let's make things clearly.
- There's the real economy. Here, work, capital, natural resources, etc are used to create wealth. People create their valuables and exchange them for things they value more, increasing the wealth of everybody.
- There's the nominal economy. Here money is invested in acquiring resources, that other people will spend money consuming.
In a simple theory, the real economy works alone and money is irrelevant. But that theory seems to be wrong. In fact, people gladly raise prices, but resist lowering them. That creates an asymmetry and the consequence is that the real economy works well¹ when the amount of circulating money is constant or increasing, but does not work well when it is reducing.
Now, finally, people getting loans makes the amount of circulating money to increase, and paying them back makes it reduce.
1 - At least according to the mainstream theories. Also, only up to a certain point.