Obama's Silly Idea Posted by Michael Cohen

One of the central criticisms of Barack Obama has been a lack of substantive policy ideas.  Yesterday, in an obvious effort to rebut this criticism, he unveiled his "Patriot Employers" plan, which would "lower the corporate tax rate for companies that met criteria including maintaining their headquarters in the US, maintaining or increasing their US workforce relative to their overseas workforce, holding a neutral position in union drives among their employees and providing decent healthcare."

Maybe he should have stuck to the nice speeches.

Now I understand that globalization has taken a significant toll on manufacturing jobs in Ohio (where the plan was coincidentally unveiled) but this is an incredibly silly way to keep those jobs in America (and just to show that I'm equal opportunity, it's about as silly as calling Obama a plagiarizer over the fact that he used a line from a friend's speech).

Besides the fact that this plan seems a bit unwieldy to implement, I'm not sure that any company in America should be rewarded for taking a neutral position on union drives? (Wouldn't it be better to empower the Department of Labor to help workers organize and punish companies that interfere in union organizing drives?) And last time I checked Obama's plan already provides incentives for companies to provide health care - are we going to let them double dip?

Moreover, as the FT posits: "companies could “game the system” by spinning off overseas subsidiaries in order to reduce the offshore-onshore workforce ratio." But above all, this strikes me as a horribly inefficient idea - basically it would be encouraging companies to act against their best interests, namely diminishing their labor costs in order to attract tax breaks from the government. I don't pray at the altar of Milton Friedman, but I'm not sure the government should be intervening that directly in the workings of the economy.

This plan is all backwards; if Obama wants companies to stay in America then he should be focused on making it more attractive for them to remain, by, for example, improving the skill sets of workers and making education, job retraining and even broadband adoption national priorities. Giving manufacturing companies tax breaks to keep their dying industries in America may get a few votes on election day, but it's hardly a long-term plan for economic success.

Comments

[Mike D]

Not nearly as silly as this stupid article

[Prantha]

You had me all the way to "he should be focused on making it more attractive for them to remain, by, for example, improving the skill sets of workers and making education, job retraining . . ."

American workers DO HAVE THE SKILL SETS AND EDUCATION. The jobs, though, are off-shore. I have friends with masters degrees and PhDs in computer science and engineering - and who cannot get a job in their chosen fields due to outsourcing.

What kind of "job retraining" do you recommend for those Americans with advanced degrees who cannot compete price-wise with Indians in, say Hyderabad? Gimme a break.

[Michael Cohen]

Then Prantha if you agree with me up to the point when I suggest strengthening job skills, what would you do differently? The voters that Obams is speaking to in Ohio and indeed the industries to whom these arguments are framed do not have the Masters and PhDs in computer science and engineering.

[Firmalar]

The voters that Obams is speaking to in Ohio and indeed the industries to whom these arguments are framed do not have the Masters and PhDs in computer science and engineering.

[Dan Kervick]

I'm not sure the government should be intervening that directly in the workings of the economy.

Perhaps this is the place where Michael Cohen the would-be progressive Democrat runs into interference form Michael Cohen the neoliberal corporate mouthpiece?

But above all, this strikes me as a horribly inefficient idea - basically it would be encouraging companies to act against their best interests, namely diminishing their labor costs in order to attract tax breaks from the government.

No it isn't. It's an attempt to change the costs and benefits associated with the present arrangement so that these companies best interests change accordingly.

And there are a number of social and economic values worth advancing beyond efficiency and reducing labor costs to their lowest possible market-determined level. We're in this thing together. I'm willing sacrifice a bit as a consumer, and forego some of the ultra-low prices that come from a labor-hostile, efficiency-crazed marketplace, in order to benefit working Americans.

However, I would also note that efficiencies can perhaps be obtained from other sources: corporate execs seem to lose their passion for efficiency when it comes to setting their own fucking salaries. Personally, I would love to see a maximum wage law. But how about at least some sort of incentives for companies that follow a restrained executive wage model - perhaps a tax penalty if top salaries exceed some fixed multiple of the lowest 40-hour wages in the company? The argument for these huge salaries is that companies need to pay them to attract the best executive talent. Fine. Level the playing field through the tax code so that no company is at a disadvantage for paying their execs modest salaries.

The "unimplementable bureaucratic nightmare" argument has been trotted out since time immemorial against every plan for government intervention and regulation of the marketplace that has ever been offered. What do you know: the FT was able to dig up more economists to pull this argument out of mothballs.

Why is it that corporate types think everyone should be allowed to play hardball but the government and the people they represent? And why is it that the economists cited by the FT are all anonymous?

And why do neoliberals seem to think education and job retraining are the solution to everything?

[Michael Cohen]

"Michael Cohen the neoliberal corporate mouthpiece" - that's the nicest thing anyone has ever said about me on DA message board.

BTW it's very nice of you Dan to sacrifice by paying higher prices, which you can likely afford to pay. But what about the working class Americans who rely on "ultra-low prices that come from a labor-hostile, efficiency-crazed marketplace." With a plan like this somewhere, somehow, someone's ox is going to get gored.

[Nicholas Beaudrot]

Didn't Clinton propose something similar in '92?

I'm also pretty sure that anything like this would violate WTO rules.

[JC]

The unemployment rate is under 5.0%, yet people are complaining about job loss? In trade there are winners and losers in specific areas. While we may have lost manufacturing jobs since NAFTA, we've seen a net gain in total employment numbers. We're doing what we're best at, and other countries are doing the same. What's the problem here?

[Dan Kervick]

But what about the working class Americans who rely on "ultra-low prices that come from a labor-hostile, efficiency-crazed marketplace."

They also rely on keeping their jobs and seeing predictably rising salaries, and now maybe a few more people will see more of both of these things. And some more may also now avoid having to go back to school at age 50 to "retrain" so they can then start at the bottom of the ladder at some new firm in a new place. They may also avoid having to listen to a bunch of parasitic servants of capital nattering on about how its the workers' fault they lost their jobs because they are so uneducated and ill-equipped to "compete in the global marketplace."

But you're right that until we are much more serious in this country about attacking myths of economic rationality, understanding power relations, and working pro-actively to better regulate the systems by which the powerful steer inordinate shares of our economic product into friendly pockets, then there will be a lot of robbing poor or middle class Peter to pay poor or middle class Paul. Maybe some day we'll start goring the right oxen. It's bound to happen some day, since we are so inherently good.

[Dan Kervick]

But what about the working class Americans who rely on "ultra-low prices that come from a labor-hostile, efficiency-crazed marketplace."

They also rely on keeping their jobs and seeing predictably rising salaries, and now maybe a few more people will see more of both of these things. And some more may also now avoid having to go back to school at age 50 to "retrain" so they can then start at the bottom of the ladder at some new firm in a new place. They may also avoid having to listen to a bunch of parasitic servants of capital nattering on about how its the workers' fault they lost their jobs because they are so uneducated and ill-equipped to "compete in the global marketplace."

But you're right that until we are much more serious in this country about attacking myths of economic rationality, understanding power relations, and working pro-actively to better regulate the systems by which the powerful steer inordinate shares of our economic product into friendly pockets, then there will be a lot of robbing poor or middle class Peter to pay poor or middle class Paul. Maybe some day we'll start goring the right oxen. It's bound to happen some day, since we are so inherently good.

[Michael Cohen]

I take it back, "parasitic servant of capital" is truly the nicest thing anyone has ever said about me on DA. Honestly though if you think I'm blaming workers for losing their jobs, you couldn't be more wrong. I just think trying to get companies to act inefficiently doesn't strike me as very smart or very effective. I would have to look at some of the research, but I'm not sure that the tax breaks Obama is envisioning would make up for the higher labor costs that these companies would have to pay. The smartest companies would just figure out a way to game the system or will not be convinced that it's in their interest to keep jobs in the US.

The bottom line is that this approach besides being unwieldy and very open to manipulation probably won't stem the loss of jobs. it's the wrong solution to the right problem.

[Dan Kervick]

Sorry Michael. While I did call you a neoliberal corporate mouthpiece, I didn't really have you in mind when I was talking about the parasitic servants of capital. I was thinking more about economists and the business media that manufactures our collective economic wisdom. You say:

The bottom line is that this approach besides being unwieldy and very open to manipulation probably won't stem the loss of jobs. it's the wrong solution to the right problem.

I think we can both agree that whatever policies are adopted, they should work. Is it fair to say that neither of us has yet seen any sophisticated analysis of this new proposal, but we are so far just talking about some off the top of the head musings from a Financial Times reporter and one or two unnamed economists? Maybe I am responding with a kneejerk readiness to see more aggressive government intervention in the economy; but then you are responding with a kneejerk suspicion of this kind of interference.

Again, the point isn't to get companies to act inefficiently, but to change the ground rules so that the pursuit of efficiency recommends different company policies. If there are costs added to exporting jobs, then it becomes less economically efficient to export those jobs. And whether the imposition of these higher costs is a good thing or not depends then on what compensatory social benefits are produced. We can't decide the question just by noting that it will then cost those companies more to produce what they produce. We need some estimate of the totality of social and economic consequences of the policy. But in the end, we may still have disagreements rooted in difference over the relative values we attach to those consequences.

Economists, it seems to me, tend to think of labor as simply a tool or resource. The more efficiently that resource flows from one enterprise or sector to another; the more readily a labor resource can be retooled, refitted and re-adapted to new employments; the more productive work that can be squeezed out of few laborers at the lowest possible labor cost - the the more optimally and more efficiently an economy runs. And in most economists' books, that's all good.

But laborers are not means only, and a mere economic resource. They are the very ends for which the economy exists in the first place. Turning people into a smooth, multipurpose, frictionless lubricant of the economic engine might make the engine run more efficiently and powerfully, but it does not mean that the lubricant is better off. We need to know how much of the engine's output goes back to the laborers who generated it. And we need to know whether the value of that output - the stuff people are able to buy - is adequate compensation for the kind of life they have to lead to produce it.

Many people do not want to "flow" from one place in the economy to another. They do not want to be retooled and re-educated over and over, or change their careers or places of employment seven, eight or nine times in their lifetimes. They want some stability and predictability. They want to put down roots. They do not want their beloved natural and communal landscape to be transformed into something they no longer recognize. They do not want their children to all have to move away when they are grown. And if those children do move away, they want at least to have a place that is still "home" that those children can come back to visit. A lot of people want to spend a life among long-term friends and co-workers in a stable community where they live and die. Not everyone wants to live this way; but a lot of people do.

I reject the notion that these desires are pipe dreams, and that we have no say in the matter. We are free, rational human beings who have the power to concentrate our powers of thought and our industry to create the kind of society in which we actually want to live. We can opt for a life devoted to the ever more efficient production and exchange of stuff, and accept the social and human costs that entails, or we can sacrifice some of this stuff, or some efficiency in the making of it, so that our work lives and social lives can be more rewarding.

I think a lot of people would like economists to spend a lot more time using their expertise to help us build the kind of society in which we want to live, rather than simply fatalistically analyzing current conditions, and distilling from them the social-economic rules according to which we must live, as though these rules were established from on high, or from the unthinking and aimless dynamism of a superhuman economic Leviathan which we can only attach ourselves to, but not control. An economy doesn't have to be the result of fate. We can build the world we want.

Many people see their lives being ripped apart by the neoliberal global economy which human beings have created, and are asking "How do we make it stop?" The contemporary economist tends to treat that economy as simply a big uncontrollable FACT, and ask of people "How do we make them fit?" I would suggest this is because most of those economists work for people who have the least interest in changing current arrangements, because they profit from them more than others.

[Michael Cohen]

Dan, I have to say I think you're a little confused about the role of economists - they're not working for the folks who "profit" most from their analysis but they are trumpeters of basic economic facts. Of course, basic macroeconomic theory, particularly as its related to trade, shows that their are always winners or losers. How we deal with those who lose in a globalized economy is the rub. In my view, government should be focused on helping the losers develop the skills to compete as opposed to punishing or rewarding businesses, which operate (as they should) in pursuit of profit. Certainly it's been done before in this country and it can be done again.

More specifically, I don't even know if we can argue there is such a thing as an "American business" any more. For every "American" manufacturing company that goes overseas there is a Toyota that opens new factories in this country because they want to be closer to the strong US market. Toyota is becoming as much as an American company as Ford or GM. Government is notoriously bad at picking economic winners and losers (what a sure fire way, by the way, to increase the power of corporate lobbyists) but in a globalized economy it strikes me as near impossible and fairly counter productive. Saving dying manufacturing industries that probably should locate overseas if they want to survive might be good politics in some sections of the country, but on the whole it's bad for the economy and it's bad for consumers.

[Dan Kervick]

I suppose we would have to look at a statistical breakdown of employment patterns for professional economists, and who they do and do not work for, to begin to answer the question of whether they work disproportionately for the wealthy. But I'm inclined to guess there are a lot more economists working for Wall Street than Main Street, so to speak.

Yes are always winners and losers, but there are enormous class divisions in who reaps the benefits of the wins or bears the costs of the losses. And isn't it an extraordinary coincidence that the more affluent winners at the top of the food chain tend to have whole teams of economist-coaches working for them and the losers very few.

Based on my two careers, first as an academic and now in the business world, I have less substantially less faith than you do in the empirical reality of idealized models of economic and scientific rationality, and am more impressed by the ease with which beliefs are adapted to self-interest, and the degree to which business decisions promoted as serving the aggregate well-being of a firm reflect all sorts of other power interests. The most stark example is the radical over-incentivizing of work with extravagant compensation as one moves up the power hierarchy.

But just as important as the extent to which the economist's perception of reality is colored by social influences and self-interested incentives to get the answers desired by employers, is the question of what the economist does with his knowledge, even when that knowledge is accurate. Economists are not just analysts and finders of fact. They are more often technicians who use their specialist knowledge to help devise business and investment plans and policies. And the plans and policies they devise are obviously supposed to serve the interests of the people who are employing them to come up with the plan. In our society, there is not nearly enough specialist brainpower going into devising laws and policies that would truly serve the interests of those near the bottom of the ladder.

When I was in college I was a Math major for my first three years. I was considering becoming an actuary, so I went one day to shadow an actuary working for an insurance firm in Hartford. I asked him what he was working on, and he said this: "Well, the State of Connecticut has a law which says the executives at a company cannot receive better health insurance packages than the company's other employees. And what we're trying to do is figure out how to design a health insurance plan for this client so that their executives will receive a better health insurance package than the company's other employees."

I hasten to add that these people were all inherently good.

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