OPINION & EDITORIAL
Laissez-faire policies hurt Americans
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Also by Rob Rossmeissl:
- Trolley proposal deserves thought (May 1, 2007)
- U.S. should re-evaluate free trade agreements to improve economy (April 24, 2007)
- High quality city inspires progress (April 17, 2007)
- Comic relief important in movies (April 9, 2007)
- Shout outs harbor hatred (March 26, 2007)
Related Stories:
- Socialism in progressive clothing (October 11, 2005)
- Exclusionary zoning (February 24, 2005)
- The key word is 'illegal' (December 4, 2003)
- Shock, awe, as president does right (March 2, 2006)
- Free market policies not so moral (April 26, 2006)
by Rob Rossmeissl
Monday, September 26, 2005
If home ownership is the American dream, you can bet that a lot of people are having nightmares these days.
According to a new report by the Wisconsin Taxpayers Alliance, property values in the state have increased drastically over the last year. This is the latest occurrence in a national trend of living-cost increases that have come unaccompanied by sufficient economic gains. Personal incomes have not grown to match personal expenses and, as a result, Americans are working harder than ever for less than ever.
Nearly every American claims to be middle class, but as the disparity between rich and poor continues to expand, said class is quickly becoming little more than a myth. In an economy where Applebee's has replaced the Mom & Pop restaurant, it's no surprise that every economic gain goes straight to the wealthy, bypassing the majority of Americans.
Manufacturing jobs and independent businesses seem to be disappearing faster than ever, leaving people to work in low-paying service jobs. The restructuring of corporate hierarchies has minimized compensation for the many at the bottom while maximizing profits for the few on top, but has anyone even noticed? The recognition of Americans in economic peril should not require a series of corporate scandals or a hurricane.
Americans earning the federal minimum wage have fallen behind the U.S. median income by a record percentage, according to CBS "Marketwatch". It is an atrocity that the richest nation on earth cannot guarantee its citizens a wage sufficient to simply buy bread or pay the rent.
Even the most adamant proponents of a free market economy must have some sympathy for full-time workers unable to make ends meet. Those living from meal to meal are hardly calling for socialism, but simply a little help to get out of the vicious cycle that is exclusion from economic prosperity. My apologies to Adam Smith, but many people are sick of waiting for the invisible hand to reach out to them.
Considering the common use of terms like "free ride" and "hand-out'" to reference governmental economic intervention — an unacceptable concept in the U.S. culture of self-reliance — it seems that Americans have historically been unwilling to employ their government as a charitable arm. However, while they were never afforded the same social nets and protections as many of their western counterparts, there was a time when people in the United States found some security in the jobs provided by their economy. Now, as Americans are disregarded by a private sector to which they had faithfully surrendered everything, the fates of many people are simply out of their control.
Regardless of one's beliefs about its role in providing economic equality, there can surely be agreement that the government is at least responsible for ensuring an equal playing field. In an age where streamlining, downsizing and outsourcing have put the U.S. labor market in crisis, the idea of rewarding the richest Americans with tax cuts is ludicrous. Nobody expects the government to alleviate all their economic woes, but some are beginning to wonder whether the issue is even being addressed.
These are trying times for the U.S. economy. As the wealth gap increases and confidence in the job market decreases, Americans are desperate for help. It is the government's duty to ensure that the major beneficiaries in the American economy share responsibility for the economic conditions that they have helped create. And these beneficiaries — chiefly major corporations — must realize that it is in their interest to do so, because when people cannot afford a place to live, they become restless.
Rob Rossmeissl (rjrossmeissl@wisc.edu) is a senior majoring in political science.
Anonymous (September 26, 2005 @ 6:34am):
Are you kidding me? Where do you get this idea that this is such a terrible economy? Maybe for all the political science students on this campus, but try making that point to all the business and engineering students who had multiple offers to choose from last spring. As someone who has worked in the manufacturing sector of the economy (and my guess is that you haven't), I can tell you that jobs are evolving and changing, but they are not going away.
Aside from your improper analysis of today's economy, you also miss some important points when writing about the housing market. One of the main reasons that property values have continued to increase is that conditions are currently very favorable for buying real estate. Interest rates and unemployment are both low, and with the availability of interest-only loans that new homeowners often take advantage of, it creates a huge buyers' market, and home ownership has continued to increase in the United States. With an increase in buyers, that increases property values. It also decreases the number of renters, which keeps rent rates stable. So everyone, owners and renters, win.
The problem is that you're looking at real estate the wrong way- as an expense, rather than an investment (and one of the best investments you can make). The government should not be removing money from the economy in the form of taxation as Rob seems to advocate, but rather getting out of the way and making it easier for more taxpayers to invest and become home owners.
Dale Norton (September 26, 2005 @ 12:22pm):
Mr. Rossmeissl-
Income disparity is a legitimate concern.
But, I urge you to examine the issues more deeply before you implicitly argue in favor of government intervention as a policy solution.
I think you will find that the most important underlying influences tend to be "education/ training" ... or lack thereof ... and demand for labor.
As admirable an objective as improving the lot of the working poor is ... and it is ...
reducing employment "barriers" to better paying jobs is a better solution than simply raising wages by fiat.
I'll bet if you looked on Google for LEGITIMATE economic studies of the minimum wage question you would find almost unanimity of professional opinion (atypical among economists).
Those studies virtually all say that raising real minimum wage over time works to the disadvantage of those it is designed to help.
And sadly, our wonderful, I suspect cynical and/or ignorant politicians play the game as a means of accumulating votes.
Another cynical group is where few really expect to find it. Labor unions have traditionally argued in favor of increases in the minimum wage.
But, it also is a bit cynical on there part, although ignorance at the rank and file level of how economics works may contribute.
Very often, organized labor will peg the wage of those workers organized at some premium to the minimum wage. And, when there is an increase in the minimum wage, you can be sure that every wage negotiation in the land will factor that narrowed spread iinto their own adgenda.
What happens over time depends on private sector productivity. Where firms show productivity at or in excess of wage increases, (GREAT!) prices stay flat or even decline ... and the demand for people in those areas will be sustained.
Alternatively, lacking productivity, wage increases simply cause inflation ... which is an UNSPOKEN (and cynical) tax levied on all of us by our so-called leaders.
And, wanna take bets on who gets hurt worse?
If you picked any group other than the group you are trying to help with mandated minmum wage increases, you flunk. Sad, but true.
Don't take my word for it: go ask econ or public policy professors.
It's a terrible game to play. But, so long as most people don't understand how it works, you cannot expect politicians to do other than what they do.
Get folks educated ... and trained.
And, shame on your poly-sci profs for not addressing this somewhere along the way.
dhn
Anonymous (September 26, 2005 @ 12:25pm):
So rising home values are bad? So then what is good, dropping home values?
New homeownership is has been growing because of low interest rates. So I think its pretty fair to say that more lower income people are buying today than 20 years ago. That's a good thing. In fact it has never been easier to get a home loan.
Would you be happy if interest rates were in the teens, property values were low, and value steadily declining? You think that would be more affordable for lower income people?
Anonymous (September 26, 2005 @ 3:12pm):
Great column, Rob! You hit the problem squarely on the head.
Anonymous (September 26, 2005 @ 5:31pm):
"...the idea of rewarding the richest Americans with tax cuts is ludicrous."
What is ludicrous is the fact that so few Americans pay income taxes. No wonder there is so little interest in politics except for the rich, they're the only ones with any skin in the game.
Go with a flat tax so that tax cuts benefit everyone and tax increases are paid by everyone.
Personally, I wish we'd just eliminate ALL income taxes and go back to funding the federal government with import duties. This would also increase national security and reduce illegal immigration as a side-effect of the border controls necessary to minimize smuggling.
