Alright, so after a summer of political radio listening, I can say with confidence that I “disapprove” of President Obama. It’s pretty clear that the rhetoric of his speeches doesn’t really match up with what he’s done from the Oval Office.
In his inauguration speech, he promised to reduce government size wherever government was inefficient. He promised to increase government only where it was found to be efficient at creating jobs and stimulating the economy. It doesn’t take too hard of a look at the “stimulus” package to realize that most of the money was used for bailing out inefficient state governments. Even after spending a trillion dollars, it’s pretty clear that the economy hasn’t really been “stimulated” all that much. As there are now talks of a second “stimulus” bill in the works, this makes me nervous.
I was livid when I heard about the forced closings of hundreds of local Chrysler dealerships; many of whom had shown a profit. It was a perfect example of the flaws of “top-down” management that takes a concept that may be true in the abstract sense, (that fewer, larger car dealerships will make the company more efficient) and ends up ruining the lives of many hard-working Americans. You can say it was Chrysler, not the government, that did this, but it was the government who forced Chrysler to come up with a better “business model” and stood by with approval as they carried out this new plan.
There was an interview on Jan Michelson back in June about an Iowa Chrysler dealer who had been told by Chrysler earlier this year that he needed to purchase more inventory to help bail the company out. Although he knew it was a risky business move at best, he obliged to the company’s wishes, only to find out a few months later that he would not be able to sell that inventory a few weeks later. Even though he owned it. Worse, Chrysler (or the government) wouldn’t buy back his inventory. He said he plea to the appeals court. Jan informed us a month later he had been denied. He went from being a successful life-long car dealer to an unemployed worker a million dollars in debt overnight.
I think the President’s original proposals on the environment and health care were far from “bipartisan,” and it infuriated me how the legislators ignored the opposing views and wrote bills (that no one actually read) behind closed doors. Quick timetables were set to leave no room for debate or revisions to the bills, although fortunately some Democrats were smart enough to realize that they were going to quickly lose their positions if they passed something that held such a low public opinion.
And then, of course, there’s the national debt. I’m tired of hearing “it’s not as bad as Bush” because for one, it is (if not at an even greater pace), and two, because that was one of Bush’s biggest problems. The average American is now born into $40,000 (probably a little high… but that’s the right wing radio statistic) of debt. About 1/10 of our annual budget goes to paying interest for past debt. China doesn’t believe we’re good for our money, and there seems to be no interest in lowering our expenses. There was some talk of increasing taxes, which actually wouldn’t be the worst idea considering the crises, but no one in Congress (save Ron Paul) seems to be interested in passing any sort of “equal budget law” which would prevent Congress from passing irresponsible budgets.
The problem, of course, is that its really easy to get re-elected if you can show how you’ve spent money to help your constituents. It’s easy to spend money on your constituents if you’re using money from people other than constituents. Taxing future generations to create spending money is politically smart, but is going to ruin this country, if it hasn’t done so already.
Which brings me to the economy…
I’m not an economist by any means. I took Econ 102 (Macroeconomics) last semester and I think I squeaked by with a B. It was a challenge for me, mostly because the professor was horrible, but also because I just didn’t see the connections between the textbook diagrams and the way the politicians talked about the economy.
Politicians talk all the time about the need to create jobs. There is a need to create jobs to produce products to make money, and the jobs also allow people to buy products, which allows our economy to grow. It’s a circular diagram. It makes sense, I suppose, especially in a micro sense of thinking. If I have a job, I’m being productive, as well as having spending money.
I thought about it a lot this summer (while killing bugs), and I’m just not convinced it’s that simple. This isn’t my final dissertation on the subject, but rather questions that I haven’t been able to answer.
I’ll start with jobs. A long time ago, America used to make things. From toys to t-shirts, chances are it wasn’t made too far from your hometown. The people employed by the toy factory had money to buy t-shirts, and the people that made the t-shirts had money to buy the toys. Of course, there was always all sorts of labor disputes between the workers and the managers, and often the workers were taken advantage of and not given a fair wage, but eventually fair labor laws were passed. The price of toys and t-shirts went up, but the people at the toy factory had more money to spend on t-shirts.
All along the way, people from other countries began to take notice. People would come to America to buy our products. Our economy not only became more domestically efficient, but began to grow due to the inflow of capital. Where we may have started with 100 tons of gold, thanks to foreign investment, we now had 1000 tons of gold. Everyone assumed America would continue to grow, and continue to make better products more efficiently. People would soon be able to work fewer hours during the week for more money, and America would always be the envy of the world.
But slowly, everything changed. Everyone knows the story from here; American jobs were sent abroad, where labor was cheaper, and Americans began to work in “service jobs” rather than “manufacturing jobs.” People talk about the dangers of this all the time; how Wal-Mart’s low prices are going to kill our economy.
But there’s something I still don’t understand. I don’t understand how our service jobs help our economy at all. Unless your service makes me more efficient at manufacturing something, it all seems to be sort of an endless cycle. We have services to help make our services make our other services more efficient.
And then there’s advertising jobs. The advertising industry is one of the fastest growing in America, and an advertising degree from Iowa State is one of the most promising degrees a student can graduate with. The average first year salary of someone with an advertising degree is much higher than those graduating with teaching, journalism, and all degrees form the LAS College.
But what does an “advertiser” do? Obviously, they help people sell their products. Sounds innocent enough, I suppose. In theory, the more product information that is made available, the more likely it is that the consumer will make a better choice, leading to a more efficient economy rewarding good manufactured products. In practice, consumers usually choose the product that is best advertised.
Consider Coke and Pepsi, two comparable products. The CEO of Pepsi wants to sell as much as possible, so he invests a billion dollars in Pepsi advertisements. The CEO of Coke notices his sales have dropped, so he decides to invest two billion dollars in advertisements. Pepsi comes back with four billion dollars, and the CEO’s go back and forth until they have each spent fifty billion dollars, and the sales of each have equalized because people are seeing so much advertisement for each that they don’t notice the difference if they see 100 advertisements a day for Coke and 110 a day for Pepsi.
The problem is now that Coke and Pepsi are both more expensive. Neither company is necessarily more profitable, and customers aren’t necessarily making more informed decisions. While Coke’s marketing director is now a millionaire, I would argue that the kids detasseling corn over the summer are actually making more of a contribution to our economy, as we export our corn all over the world. (sidenote: considering only Coke’s marketing for domestic purposes… international advertising may be a worthwhile investment, actually, but only if it is competing against foreign products)
Now, what if someone invented a machine that was able to detassel corn without any human intervention? Wouldn’t that be great? Of course! Except all of a sudden thousands of teenagers are out of summer jobs. The cornfield owner is happy with the machine, and becomes much more profitable, but he sees no reason to share the wealth with the teenagers. The teenagers aren’t able to save up for college because they have no job, so they vote Democrat and force the cornfield owner to pay for them to get Liberal Arts and Science degrees. The teenagers get out of college, presumably much wiser than the cornfield owner, and now need jobs. The teenagers write letters to their Democratic representative and tell him of their plight. The Democratic representative sits down and writes a bill that will increase the cornfield owner’s taxes to provide government jobs for the new graduates. The psychology, sociology, political science, and women’s studies majors all start work for the government, and they all perform their specific services for each other. They are grateful to the cornfield owner for paying his taxes, and offer their services to him free of charge. The cornfield owner is not happy, however, to be making the same amount of money as the “Director of Public Psychiatric Services,” and refuses to pay him a visit because he doesn’t consider himself to be a headcase.
On a larger scale, I think this is what the U.S. economy is turning into. There are approximately 300 million people living in America. We’ve become so efficient at producing everything that I would guess we only need about 100 million “real” jobs. That number is not scientific at all, and is probably way too high. Only 1% of our population works on a farm. I would say that another 1% of the population works service jobs to make our farming more efficient. Other than that, our economy is mostly “creating jobs,” and its only going to get harder. The internet marketplace will one day replace even the Wal-Mart jobs, new mechanical inventions will require even less labor, and fewer and fewer people are going to control more and more of the wealth. Not because they’re scumbags who take advantage of their workers, not because the working population is lazier, and not because the government tax system messed everything up; it’s just because of advancing technology.
I believe this is what is happening in America. Everything is changing, and the argument shouldn’t be controlled by a socialist/capitalistic debate.
I listened to President Obama’s book “The Audacity of Hope” this summer on audiobook, as read by the President himself. I was actually really impressed. I felt like he had written the book for his cynics and critics, rather than for his celebrity following. He addressed both sides of issues, and talked about why he believed the way he did. It was all very interesting, actually. I even enjoyed hearing the story about how he met his wife, and what family life was like while he was running for Senator. I feel like I would genuinely like Barrack Obama, like I would genuinely like George W. Bush if I were to get to know them personally. Obama even said that he admired and highly respected George W. Bush on a personal level, and his only problem with Bush was his policies. I hope Obama learns from his spring and summer mistakes and is able to match the rhetoric that I’ve come to admire him for.
As for the larger questions about the economy… I just hope I have a job when I graduate.