Peak Debt and Income

by Philip Brewer on 15 March 2011 34 comments
Photo: Anyka

The big argument in the debate on the stimulus packages was between two groups. The demand-side folks wanted to make sure that the money got into the hands of the poor, because they'd spend the money, boosting the economy. The supply-side folks wanted to keep money in the hands of the well-off, because they'd invest it, providing increased productive capacity to boost the economy. (See also: 5 Creative Ways to Invest During a Weak Market)

If you're interested in looking into the issue a bit more deeply than the economic pundits in the mainstream media usually do, check out Peak Debt and Income (PDF), a new paper by Ronald M. Laszewski. (I linked to his previous paper in my Peak Debt article.)

There are two threads to Laszewski's argument.

Maximizing Household Assets

Laszewski creates a simple model of the economy as a tool for investigating the question of how to get household balance sheets back in order after suffering the problems diagnosed in the earlier Peak Debt paper:

At the time it appeared that a peak in consumer purchasing power had already been reached, and that it was likely that there would be a long period of economic decline to follow. Three ways in which the consequences of the large over-hang of debt might be ameliorated were examined: (1) a significant growth in real personal income, (2) a default on outstanding debt, and (3) a central bank induced hyper-inflation.

The earlier paper had gone on to demonstrate that options two and three would probably have little effect in boosting future economic activity. Option one, on the other hand, could be effective.

The result of Laszewski's further analysis is that growth in GDP is strongly dependent on how total income in the economy is divided up.

Consumption by Income Group

From the end of World War II until the early 1980s, the top 10% got about 34% of total income. In recent years the share taken by the top 10% has grown sharply; they now get almost 50%. If the income fraction received by the top 10% was returned to its historic value, the current incomes of the other 90% of households could be increased by 30%.

As the demand-side analysts have been pointing out, the rich spend much less of their income. The poorest folks spend almost 100% of their income, average folks spend about 90%, and the top 10% spend only a little more than 50% of their income.

Putting these facts together, Laszewski calculates the effect on the economy if the income distribution were returned to something like its post-war norms. If the richest 10% only got 34% of the national income (instead of the 50% they're currently receiving), the increased spending on consumption would boost GDP by 4.2%. Other assumptions about how the money might be redistributed could add as much as 10.5%.

The math in this paper isn't as complex as in the previous paper. So, if you're interested, take a look at Laszewski's Peak Debt and Income paper (PDF).

Key Takeaways

The supply-side folks are wrong. At this time, additional business investment will produce very little additional growth in GDP.

The demand-side folks are right. Getting extra money into the hands of the bottom 90% of the population would produce substantial growth in GDP.

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Guest's picture
Brian

I would be interested to hear how to get money into the hands of the 90%. Maybe that could be a follow up article?

Stimulus packages and hand-outs seem like they would only encourage spending beyond one's means. Once the stimulus went away, so would the stabilization.

It couldn't be just a temporary increase in purchasing power. It would need to be an increase in real assets, and increase in real wealth-creating value.

Guest's picture
Conservative

Supply side is still correct. The thing about the economy is that you can't use a simple model of it, because there is nothing simple about it. I'm sure you can create a simple model to support whatever preconceived notions you have about it.

Furthermore, if you want to get more money into the hands of the bottom 90%, then take welfare away from them. By forcing them to join the capitalistic system rather than leeching off of it, they will make much more money than they currently receive in handouts.

The funny thing about human nature is that many people are perfectly content just getting by if they don't have to do anything. Once they are forced to do something, they no longer want to just get by.

The capitalist system works. Embrace it instead of trying to tear it down.

Philip Brewer's picture

In my experience, it's simply not true that "many people" are perfectly content just getting by.

Just getting by is fine with me, if it means that I can be a full-time writer instead of having to work at a regular job, but I find myself to be very much an exception. Of the couple hundred former coworkers whose jobs were all lost when the site where we'd worked was closed, I'm the only one who chose this path. (One other person took early retirement.)

Are you figuring that one-half of one percent is "many people"? (I suppose it is, if you multiply that fraction across the whole population.) Or do you think that a lot more people than would choose squalor over comfort, if it meant they could be idle?

Guest's picture

The capitalist system clearly does not work, as is evidenced by TARP, etc. Granted, it has its positives, but nations that function far better than we do (assuming you're a fellow American here) incorporate multiple economic models within their overriding capitalist system. The totalitarian ideology present within the American mindset is beyond bizarre. We have multiple models that clearly work better than ours, yet to incorporate them into our system is seen as blasphemy. When ideology trumps practical workability, we've got some serious logical fallacies happening (and to our collective detriment).

Nevertheless, I don't note at any point where Brewer insists that capitalism doesn't work. An interesting interpretation of his article. You view criticism of certain aspects of the current economy as an assertion that the entire model is unsustainable? That is telling. And ironic.

But I do agree with you--let's get rid of the welfare, beginning with the most expensive model currently being funded by taxpayers: corporate welfare. Let's ditch the subsidies (start with the Farm Bill!), the taxpayer backed corporate insurance plans(e.g., Wal-Mart asking taxpayers to pay for their employees healthcare, etc.), virtually non-existent fines for breaking the law, etc. Excellent place to start.

Guest's picture
Guest

@Conciously Frugal - Ridiculous. You point out welfare, etc. and say we should (rightfully, I think) remove it in various forms. This gets us closer to capitalism. Not further away. I personally agree that the current system is not ideal, but I can definitely tell that the current US system is NOT pure capitalism. There is a lot of government regulation.

Xin Lu's picture
Xin Lu

re: get more money into the hands of the bottom 90%

I really think that they would need jobs or income sources that boost their income somehow. I am not a fan of handouts, but I am a fan of people improving their skills and finding new careers and income opportunities. So I don't see why more business investments would not help the bottom 90%. If more businesses hired more people and created well paying jobs, then the bottom 90% would benefit. I guess one issue is that businesses are working existing workers harder than ever and people are more productive in this environment because they feel "lucky" to have a job. I feel that the only solution to this is that the workers just shouldn't take crap from their employers and look for alternatives and side income if possible. Anyway, I just think that directly giving people handouts is not sustainable at all.

Philip Brewer's picture

If businesses did hire more people, that would do the trick. But businesses have no particular reason to hire people—by and large, they're employing enough people to make all the stuff they can sell. (Even less so do businesses have any reason to invest in plant and equipment—they're not yet utilizing the plant and equipment they've already got.)

The key point of the paper that I linked to is that it makes a big difference how the returns to enterprise are divided up.

All the money that comes in to businesses ends up going to just a few places—basically, to the workers, to the owners, or to the managers. Many things affect that division (in particular, customs and tradition matter a lot), but in the end it comes down to power. From World War II until 1980, labor had a lot of power—and the result was a thriving economy. After 1980, power shifted from labor to capital—and the result has been stagnant living standards for 90% of the population and a vast accumulation of wealth in the hands of the top 10%.

The long term solution has little to do with handouts. It has to do with having power in the hands of the workers. Having alternative sources of income is one great way for workers to increase their power relative to the bosses.

Guest's picture
KD

I think it's bad science to say one side is definitively wrong or definitely correct. One paper from one person does not answer anything definitively. This article is incredibly biased. I don't come to WiseBread to read lectures on which economic theory is "right" or "wrong," (which can never be proven, btw, just like no scientific theory can be definitely proven either) just tips and tricks on how to get by with what we have.

Philip Brewer's picture

I just did a rough count, and I figure that in excess of 96% of my posts here are on how to get by with what we have.

But I figure the other 4% are also important. They're largely my attempt to explain how the economy works—on the theory that a better understanding of the bigger picture helps my readers when they want to step back from the tactical questions of "living large on a small budget" and focus on more strategic questions of how to live a life that supports living even larger. Understanding how the economy works can help you come up with better answers to these questions.

Let me finish by saying that your larger point is half right: In science it's very hard to say that something is definitely correct. It is, however, very easy to say that something is definitely wrong—scientists falsify hypotheses all the time. So I'd urge you to respond to my statements by reading the paper and grappling with the issues it addresses. And if you do, come back and tell us about it. We'd all benefit.

Guest's picture
CalgaryGuy

"From the end of World War II until the early 1980s, the top 10% got about 34% of total income. In recent years the share taken by the top 10% has grown sharply; they now get almost 50%. If the income fraction received by the top 10% was returned to its historic value, the current incomes of the other 90% of households could be increased by 30%."

This statement assumes a fixed amount of income. There is no guarantee that if you "return" the top 10% to its historic value (however that is achieved) that you won't just shrink the total amount of income. I would rather have 50% of $300 than 66% of $200.

Philip Brewer's picture

There's no guarantee, but you can look various places for clues. For example, the graph on the page linked below shows the rate of growth in GDP from 1947 to 2010.

When I mentally divide the graph into the period before and after the early 1980s, I see no indication that the capture of a larger share of income by the top 10% has increased the rate of growth. The left-hand side of the graph definitely has higher peaks. It also had lower troughs, except that the trough of the most recent recession is much deeper than any previous post-war troughs.

As you say, this does not guarantee that growth wouldn't have been lower still, but I'd say that it's suggestive.

http://research.stlouisfed.org/fred2/graph/?&chart_type=line&graph_id=&c...

Guest's picture
Guest

A thought regarding how to get capital into the hands of the 90%: raise the minimum wage, a lot---or rather, institute high punitive tax rates on the profits of corporations that don't pay a living wage to ALL of their employees. Calculate that wage based on 35 hours of work per week, not 40. Then fuss with overtime laws so that it's cheaper to hire extra employees than it is to make (allow?) the current ones to work overtime. This means more people doing work and getting paid, and less work done per person without endangering their ability to earn enough, and greater flow of revenue back into the lower-90% population.

We've gotten to the point where work is considered an end in itself (because it's so attached to income, for most of us); but the POINT of work is so that things are created, services are provided, et cetera, to sustain the needs and wants of the population. The fact that there aren't as many jobs available means that this can be accomplished with less work than we're demanding of people. It is literally being demanded of us, by economic coercion, to do more work than there is for us to do. Sharing the available work more equitably would result in the same amount of stuff getting done, but spread among more people, so each worker would have less work to do to sustain production of what's needed.

Corporations are pocketing the profits of this. What if we, the rest of us humans, could live on those profits instead, could exchange them for more free time to spend with our loved ones and our hobbies and living our own lives that don't revolve around work, in security and freedom from deprivation? If we have so much unemployment that our needs can be met by only 90% of workers working 40 hours a week (yes, that's an oversimplification, but not unreasonable), then the same amount of work could be done by 100% of workers working 36 hours a week.

Xin Lu's picture
Xin Lu

artificially inflated wages would just lead to more unemployment. also, i don't think some jobs merit huge wages. do you think every mcdonalds or jamba juice cashier deserve 30 dollars an hour? That doesn't make sense to me.

Guest's picture
AnnJo

I think I learned the foolishness of this kind of thinking from running my own little neighborhood fruit stand when I was twelve. Even the most elementary understanding of what 'profits' are would rescue someone from a statement like, "Corporations are pocketing the profits of this. What if we . . . could live on those profits instead. . . ."

The fact that Guest can talk about "wants and needs" as if they are finite in the same post that talks about "a living wage" should say it all. A "living wage" is enough to keep body and soul together. This can pretty much be done with one 25# bag each of rice and beans per month per family and some dandelion greens. But if you ask the typical McDonald's employee, he/she will argue forcefully that a living wage includes the ability to buy a flat screen TV, cable, and one of those gadgets that starts with the letter I.

Human "wants and needs" are infinite and infinitely variable. Mine include good subscription seats at the opera, regular range practice with enough ammo, and Manchego cheese. On the other hand, my 14 year old car will probably last me another 8-10 years, and I don't need I-gadgets. In order to get what I want, I work as much as necessary and no more. I don't actually understand why people pay me for what I do, but they want it, I can do it competently, so I'll give it to them.

The views Guest espouses require us to accept Guest or someone like him/her to decide for everybody else what we need and how hard we should work to attain it and ultimately, what we should do as work. No thanks.

Guest's picture
Chris Nystrom

And the idea of using the government to steal money from those that earned it and giving it to those who have not earned it does not bother you at all?

I have an idea: lets not give money to the wealthy or the poor. Lets just create an economy built on justice and take our lumps come what may.

Guest's picture
Twist

This point of view would make sense if you were arguing that by reason of possession the people who are currently getting 50% of the income stream are automatically the ones who earn it. However, we don't argue for example that by virtue of people having given Mardoff money he has automatically earned and deserves that money. Same thing when a gangster extorts protection money.

It's specifically said that the best way to increase income distribution would be to give greater power to workers so they can negotiate a bigger share of profits and therefore a bigger portion of the money that currently goes to the top 10% in the form of company profits. You know the people who are getting paid to actually do the work and thereby are MOST of the cause of the profit? This is not an arguement that the problem would be solved by giving more profits to people completely uninvolved in doing the work of getting said money.

The ones who do the earning are all of the people in a company, not just the heads of the company, and our current system is set up to disproportionately reward people doing management and punish people doing skilled tasks.

Guest's picture

When you say, It's your money, you're overlooking the role that public investment plays in creating a system that enables you to generate revenue: creating infrastructure, educating the workforce, establishing and enforcing laws and regulations. Those elements are what make our society possible. Our current system allows the wealthy to benefit from what public investment created and skim off the profits.

Guest's picture
Guest

"Lets just create an economy built on justice and take our lumps come what may."

That is only possible if you level the playing field as much as possible- via education. Give every single US school the same level of teachers (use a rating system that evaluates professional expertise), the same teacher to student ratio, and the identical facilities, books, computer access both at school and at home, and identical offerings both academic and extracurricular. As long as public school is funded via property taxes, the rich get a hug advantage in the form of better education, Knowledge is power.

If you have THAT in place, then I say hands off economic lift-ups.

But if the economics strongly favor an already privileged group with better educational opportunities for their entire formative life (not earned, BTW- a child can work extremely hard at a lousy school, or work extremely hard a great school - one does not inherently deserve a better PUBLIC education), then we will never have equal opportunity. We cannot fix all home factors, but we can do as many other countries do, and either offer uniform education, or educational opportunities based on ability and continued achievement- not on zip code at birth, and the size of daddy's wallet. The way we dole out educational opportunities is fascist, and does not benefit our economy in the long term.

Guest's picture
AnnJo

There has been a correlation between the decline in labor power (private sector) since 1980 and the stagnation of working class incomes, but I think you have the causation reversed. The "power of labor" pre-1980 in the private sector went away because it effectively destroyed itself by destroying the businesses in which it operated, forcing the bankruptcy or export of American manufacturing, which in turn cost manufacturing jobs and their unions to vanish.

Since then, the "power of labor" has been steadily growing in the public sector, with public sector workers who used to lag their private sector counterparts now having significantly better total compensation packages. We are seeing the results now in exploding budgets, vast underfunded pension and health care liabilities and local & state governments facing financial tsunamis. Once again, the "power of labor" is destroying its own substance.

It is no more possible for labor to think about the long-term consequences of its immediate demands than it is for executives to think about the long-term health of their companies if their bonuses are driven by short-term-performance results.

I read the article you link to. As far as I can tell, it's economic GIGO.

Guest's picture
Edgar A.

Several lines of thought seem to be reaching similar conclusions to Laszewski. For example, a student of energy in world systems, Charles A. S. Hall, points out that most of our economic and financial hypotheses were formed during the period when energy subsidies (mostly from fossil carbon) to everything humans do were increasing exponentially. Now that energy is declining, he suggests, the old ideas, such as market economics, probably are no longer a realistic guide.

One of his interesting calculations is that our new-found natural gas stores probably require so much energy to produce that the net energy from current natural gas production is near zero.

But more to the point here are some of his "new ways we will have to do economics," such as "We will have to reduce labor productivity." "We will have to reduce wages." And "it is a great time to think about redistribution."

Guest's picture
MoneyIsTheRoot

I think many smaller businesses do have a reason to hire more people, it's because they desire to expand. For instance, Michigan has an outdated tax structure where small business owners basically are exposed to double taxation. Our governor, though currently unpopular, is trying to end this in order to encourge small business growth.

www.moneyistheroot.com

Guest's picture
JBaughMK

in re: "From the end of World War II until the early 1980s, the top 10% got about 34% of total income. In recent years the share taken by the top 10% has grown sharply; they now get almost 50%."

I find this statement curious. The top 10% "got" the the 34% and they now "get" the 50%? Interesting choice of words as I would have said they earned those incomes, not got them. Maybe the reason that percentage has grown from 34% to 50% is because these people chose to work and earn versus waiting to get!

Philip Brewer's picture

The money is earned by the enterprise, and then is divvied up between the workers, the owners, and the managers. In the last thirty years or so, for a variety of reasons, the share that goes to workers has shrunk, while the shares that go to the owners and the managers have grown.

As I said earlier, the sizes of the shares vary for a lot of reasons. But over time, the most powerful determinate is power.

Guest's picture
Steven

Phillip - Come on, you've been around long enough to realize that Republicans have zero interest in anything other than improving their own financial situation. Just like with global warming, science and reason and data have zero ability to influence them any other way. Even if (as a whole) we move backwards as a well functioning society, it does not matter so long as their own financial situation improves for the better. Unfortunately, their blind faith in the corporate machine has, and will continue to lead to the country's demise as an economic super-power. Without a true middle class, if a small portion of the country controls all of the money, how the hell is everyone else going to keep buying things in order to keep the economy from collapsing? We are a consumer-driven economy. If only 10% of us can consume, even that 10% at the top is ultimately going to end up being screwed.

Guest's picture
AnnJo

I wrote a comment earlier that the Laszewski article was GIGO, but didn't have time then to elaborate.

First, the article notes that high-income people do not consume as much of their income proportionately as people in lower income deciles. It ignores that one of the reasons for this is that many people are 'high-income' for only one or two years of their lives, and must conserve the 'income' from that high point to last the rest of their lives. Over the course of my live, I've worked with perhaps three or four dozen clients who have been in the top 5% of income earners by the Laszewski charts (roughly $450,000 and above), but in every single case it was a result of some unique circumstance that would never be repeated in that client's life - the sale of a small business, the settlement of a personal injury lawsuit, the sale of a family farm or commercial real estate, etc.

The article talks of the various decile levels of income earners as if they were each a unique and immutable caste, whereas instead they are ever-changing - this year's high-income individual who sold his business for $1 million will earn $30,000 next year in income from investing what's left to him of that million after taxes. And while he won't consume all the income from that business in the year it is sold, he'll consume MORE than his income in future years because he'll draw on that capital for consumption throughout retirement.

It doesn't surprise me that the distribution of income to the top decile has seemingly increased since the 1980s. For one thing, it was during the 1980s that the ability to income-average an extra-high year's income over five years was eliminated, which evened out somewhat those who enjoyed rare high-income years. The late 1970s was also the beginning of an inflationary spiral that increased the 'nominal' gain from the sale of long-term capital assets even though, after inflation, some of those assets might actually have lost value.

For example, my parents bought a duplex in 1964 for $15,000 and sold it in 1996 for $60,000. [Ignoring depreciation recapture] they paid taxes of $9,000 on their $45,000 nominal gain. But they would have had to sell it for over $75,000 to just break even with inflation over that time period. So their 'income' was entirely illusory and they actually sustained a loss of real wealth of $24,000 in 1996 dollars or about $4,800 in 1964 dollars.

People who want to find justifications for income and wealth redistributionary schemes can always fake some plausible-sounding argument, but diligently avoid looking at the real-life historical consequences when such schmes are put in practice.

We don't have to go to the extremes of Cuba, Zimbabwe, North Korea or even the Soviet Union to look at the real-life effects. European socialism implemented many of these schemes over decades, and as a result also 'enjoyed' chronic unemployment for decades at the levels we are only experiencing today, until finally they have been forced to start liberalizing (in US language it would be Republicanizing) their labor markets and tax structures, a task that has a long way to go and is causing major unrest in the countries with the most enthusiastic schemers.

And people who talk about the 'evil corporations' (I haven't seen Philip do this, but other comments here run along those lines) hogging all the money forget that corporations are legal fictions for aggregations of individuals. Corporations CAN'T hog the money. They don't even have a mattress to stuff it into.

Philip correctly identifies those individuals as workers, managers and owners, and wants to give workers more power at the expense of owners. First, he fails to recognize that in today's economy, workers and managers are almost certainly also owners, if not of their own company then of others through pension, retirement and insurance plans. But more importantly, if workers take more money away from owners than owners find tolerable, the owners will withdraw their capital and the company will fail, taking workers down too.

Philip Brewer's picture

Laszewski's paper actually stops short of advocating that more money go to the bottom 90% of income earners. What it says is that, if the division of money between the bottom 90% and the top 10% returned to its pre-1980s levels, GDP would increase by 4.5%. Other allocations of the returns to enterprise (putting even more money into the hands of the bottom 90%) could produce even greater levels of GDP increase.

Whether you want to change the way money is divided up by the enterprise is a different question. (As, indeed, is the question of whether you want higher rates of GDP growth.)

Guest's picture
AnnJo

Philip, don't you agree, though, that Laszewski's whole argument may be specious if the supposed change in distribution of income is a mere artifact of changes in the tax code re: income averaging and/or inflation's effect on nominal income? Or if most members of the 'highest-income' 5% are only there rarely over the course of their lives, who consume that rare high-income in subsequent years?

Guest's picture
Guest

Comparing consumption of income groups is irrelevant to the debate between supply and demand-side economics. Supply side argues that *investment* is key to economic growth, not consumption. That upper income brackets consume less than lower is meaningless because the income that they do not consume is not buried in their backyards or stuffed into mattresses. It's invested in businesses or put into banks where it's available for loans. That is the process that generates growth.
Further, the notion that supply-side exclusively favors upper brackets over lower is also false. Supply-side marginal tax rate cuts in 1964, 1981, as well as the more recent Bush tax cuts were across the board--all tax brackets. The 1964 and 1981 were particularly effective because the upper most tax brackets were sufficiently high to be a disincentive to investment. The more recent cuts were less effective simply because rates were not high enough to be a barrier to investment--we were not beyond the peak on the legendary Laffer curve.
The real debate is between those who advocate monetary policy to regulate the economy and Keynesians who argue for consumption by government as a method to stimulate growth. The monetarists won that argument handily until recently when they failed to execute the theory properly. The Federal Reserve simply could not distinguish between real growth and the real estate bubble.

Guest's picture
Peeceebee

I generally agree with the article. However, in the past 30 years, technology, and globalization have changed the paradigm. As a result, purchases of consumer goods tend to profit companies wthout creating new jobs at home for the most part. Thus, stimulus spending is making the rich richer as well and profiting non-Americans. I'm not against people in China bettering their lives, nbt not on my tax dollars. Unless policies change to reflect this, pumping money into the economy is like trying to pump water into a river that feeds to the sea and pretending you're watering your garden. I'm being purposely simplistic here to make my point.

"Free trade" has been a net loss for the average American. Yes, we can buy cheaper flat screens and socks, but we no longer have high quality jobs, which erodes our tax base, well being, and our outlook for our future. The oligarchs remain oblivious or uncaring to what amounts to an upcoming economic and social tsunami. I guess their escape plans are secure or they are completely myopic. Time tell which is the case, as only time can change this course.

Guest's picture
teresa

A "living wage" is very hard to put a number on, but can anyone REALLY live on minimum wage? The arguments that only younger people that don't need to make so much money get this wage is just not true. The types of jobs that pay low wages are essential to the operations of our country, think about the janitors, school aides, gas station attendents, food servers, laundry personel, dishwashers, maids, nursing home aides, this country could not operate without these people but they are put down and paid substandard wages. The other argument is that education will get you a good paying job, not in this economy! The only thing a college education will guarantee you now is student loans!!
Welfare has become a subsidy progam for businessess!! The govt. has created a program that allows these low paying businesses a source of cheap labor. And I know these businesses have many excuses why they pay low wages, but it really comes down to greed and lack of respect. There is a saying "The the Lord gave us enough to go around, but it is our job to distribute it."

Guest's picture
Kitty

Great article, Philip! I just finished rereading "What's the Matter with Kansas?". It is so frustrating to see working class families vote against their economic interests year after year, hoping for a different result. The government spending during the Great Depression was focused on projects that would last for generations - investments that are still paying dividends to our communities. I hope to see more agreement on those types of solutions rather than the current attempts to cut, cut, and cut education, public safety and social services.

Guest's picture
Erik

One gap not address in the analysis is people not living within their means is the first problem and is an issue at all levels. If people and the US government, do not live within their means the issue will never be addressed which is too much debt. Also many people have not done what is necessary to improve their situation which is have balance because the pain has not caused many people to change their ways because lack of basic financial skill are not there.

Cut cost and expand your income are the two ways to fix things. Both are within everyone's responsibility. If the government wants to play in this help people via providing skills in financial management which is a key to success. This is the area to focus.

Capital is being "horded" because the "market" does not know what the bottom is so we are in a prolonged pain. If the bailout and redistribution did not happen then the short term pain would have been higher but money would have flowed to the opportunities that would create jobs.

Guest's picture
Kitty

As we studied in my Economics 101 class years ago........re: welfare and handouts. How about I load up my car with people each week who currently live on some sort of public assistance and each week I bring them to another place of employment for their new jobs. Think about it. Next week I will bring four to your office.

Some people are really not capable of handling the work environment. I'll bet you that after a couple of weeks of working side by side with them you might pay me to come pick them up and help get them on some sort of minimal public assistance so they could stay home and watch tv while you catch up on your lost hours of work!

I'm just saying that lazy is a catch-all term for those on public assistance - when in fact most people who are able to gain employment are working. The rest have very valid mental and physical health issues that make it impossible for them to succeed in the working world. It is beneficial to all of us to release them from our places of employment.

Philip Brewer's picture

There is, of course, a sliding scale.

During the dotcom boom, unemployment was pushed down to multi-generational lows, largely because there was a lot of very simply software work to do. Those tasks (fixing Y2K bugs, for example) were easy to explain and easy to check. The result was that a lot of people who had previously been considered unemployable were able to find and hold jobs.

Those sorts of jobs have largely moved overseas now.

Disability is also on a sliding scale. Lots of people who become gradually less able to work because of health problems, injuries, and so on are able to keep a job they already have, because the people they've been working with know them as a person, which make them willing to go to considerable effort to accomodate their capabilities.

Those sorts of accommodations are required by law, but it's a law that's very hard to enforce, so that never works as well as it does when the accommodations are motivated by caring.

The result is that lots of people who are actually disabled (in a legal sense) are able to hold a job, but not able to get a new one. Once they lose that job, they become totally and permanently disabled in a very real sense.