Tuesday, November 4, 2014

Consumer Spending, Bedrock of the Economy

That’s the common view by business. I don’t happen to agree with it, but it’s the buzzword voiced every time ‘what’s wrong with the stumbling economy’ is discussed, so I’ll accept it for this column.
Seems to me it follows that, if consumer-spending is truly the key to prosperity, consumers should have something beyond the soul-killing basics with which to spend.
Agreed? I mean, that’s central to the argument.

Increasingly, inexorably and heart-breakingly, they simply don’t. Not to try to draw that rusty sword of economic inequality from the scabbard, but a frightening number of our citizens simply are unable to contribute to consumer spending. Yet expansion is the key, according to the pundits and (as Johnny Carson was famous for saying) “if you buy the premise, you buy the bit.”

Okay, I buy the premise. But I have big problems with ‘the bit’ and here’s why.

  • Millions of American families are one health issue or job loss away from bankruptcy.
  •  Student-loan debt now surpasses all credit-card and auto-loan debt combined.
  • About 50 million Americans live below the poverty line and a record 47 million of them get along on food stamps.
  • 3 1/3 million wage earners make less than minimum wage and more than half are below the age of 24.
  •  52% of college graduates, carrying an average $27,000 in student-loan debt, are unable to find work upon graduation.
Not a pretty picture and I agree that the answer is not to tax the rich to boost them up the ladder. That might make a difference in quality-of-life, but would hardly solve the problem of America’s slide into poverty and joblessness. Wal-Mart, McDonalds and others can (and perhaps should) pay their workers fifteen bucks an hour, but I suspect they will have to be yanked by the short-hairs to do that.
Side note: I just recently returned from Seattle, a city that made that fifteen buck minimum wage decision by unanimous City Council vote. Wal-Mart and McDonalds are doing just fine there and the economy is booming. Surprisingly (to some), Wal-Mart employees can actually afford to shop where they work and step up to buy a Big Mac on the way home. Americans will pay more for a stereo or hamburger to support a living wage. So there’s a partial solution.
But not a perfect one. If the consumer economy is to recover in the sustainable long-term—and that means decades forward—it need not arrive with pitchforks at homes of the 1% or run up social-net costs to unsustainable numbers. We Americans have always been at our best with our backs against the wall. What we need is jobs—good jobs that cross over into all areas of our society and pay sufficiently to sustain and ramp up a solid middle class. And that moment is here—that opportunity awaits us.
Its name is infrastructure and I can already feel your eyes glazing over, but the day will come (and come very soon) when toilets won’t flush in our major cities, drinking-water will be rationed and power outages will become the norm. That’s not going to be fun.
In many of our major cities, such as Chicago, sewer and water systems were built soon after the Civil War and have been given precious little maintenance since. Our national electric grid was established in 1934, made its major expansion as part of FDR’s Rural Electrification program in the Depression and (at 80 years old) has been patched together since.

So, two needs present themselves almost simultaneously, their confluence laying out a mutual solution and a route forward toward renewed national prosperity. A mere glance at the job-reach might be worth a look:
  • Planning, architectural and engineering firms (hiring at good wages)
  • Heavy-equipment operators (union)
  • Laborers and specialists, such as welders, masons, carpenters, electricians (union) 
  • Truckers by the gazillion (union) 
  • Suppliers of steel, concrete, piping, asphalt, lumber, gravel and middle-class housing 
  • Supervisors, secretaries, accountants, food-service workers and on and on
Let you imagination run and the list grows as your time allows.

Great idea, Freeman, but who pays for it? The Federal Government and, before your eyes glaze again, let me make the case between investment and spending:
When government throws money at Wall Street or further social programs, that money is gone and adds to the national debt without demonstrable value. Saving a fraudulent banker is less worthwhile than saving the man who lost his job because of that fraud—but that’s another argument.

When government invests money in things that leave actual value behind (such as Hoover Dam, the Interstate Highway program or even WWII’s Marshall Plan) that money enriches the nation as a whole or, as in the last example, brings peace to Europe. Those investments made America the greatest nation on earth and are the foundation of our wealth.
As wealth increases (yes, even among the 1%), social spending declines, jobs are available to our kids and society advances. Three things are necessary to human happiness and progress: something to do, someone to love and something to hope for. They’re all there for the asking. As Winston Churchill once said, Americans will always do the right thing — after exhausting all the alternatives.”

Perhaps it’s time to do the right thing. We’ve had six years of alternatives.

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