Nel's New Day

September 9, 2013

Samuelson Turns Left, Odell Keeps Far Right

While eating out at my favorite breakfast place this morning and looking out at the sun over the ocean, I started, as usual, to read the newspaper. Frequently, I skip Robert Samuelson’s column because it tends to be such far-right twaddle. The headline, however, was intriguing: “What’s Stunting a Slow Recovery.” Curious about what myths the conservatives want to perpetrate, I checked out the first paragraph:

“In the struggle between capital and labor, capital is winning — and that’s hurting the feeble economic recovery. To simplify slightly: Labor (wage-earners and consumers) can’t spend; and capital (businesses and shareholders) won’t spend. Without a powerful growth engine, the economy advances haltingly. I wrote about this last week from labor’s perspective, but the subject deserves deeper treatment.”

Stunned by such a reasonable answer, I continued reading. He actually said that he had reported last week (missed that column!) that “labor’s share has plunged in the past decade. In 2013, it’s 57 percent. This shifts about $750 billion annually from labor to capital.”

And he kept on in a mildly progressive tone: “The shift worsens economic inequality, because capital income — dominated by profits — is skewed toward the wealthy. But the explanation is not a simple story of unbridled greed and undue influence.” Samuelson said that he didn’t know why. I could explain the reason, but he’s already come a long way.

According to Samuelson, the loss in labor’s share is global: “in 22 other advance countries … labor’s share fell from 73 percent in 1980 to 65 percent in 2011. The trend also occurs in poorer countries, including China, Turkey and Mexico, reports Timothy Taylor, managing editor of the Journal of Economic Perspectives.”

Samuelson’s rationale is pure progressive:

“Labor’s shrinking share curbs consumer spending. The economy will then falter if the recipients of capital income don’t offset the weakness with increased spending on buildings, equipment, research and new products. Unfortunately, this doesn’t seem to be happening. Corporate America is husbanding its profits. It invests mainly in the safest projects…. A well-functioning economy is a circular process by which one person’s spending becomes another person’s income, which is then spent again. Today, there’s a damaging disconnect between capital’s rising share and its subsequent spending. So the economy sputters.”

His answer is the same as real economists:

“What would improve the odds is more exuberance from the custodians of capital. CEOs seem content to sit on their profits and invest only when the needs and the returns are indisputable. Careless capital, which fostered the financial crisis, has given way to ultracautious capital, which is making a lackluster economy self-fulfilling.”

On the same page of the newspaper was a guest column from Oregon attorney Jill Gibson Odell, part of the Gibson Law Firm in conservative Washington County (OR), in support of a proposed “right to work” petition. Oregon has a system of initiatives: enough signatures can put anything on the ballot. In this case it’s temporarily called Public Employee Choice Act and would give public workers the right to not join a union if they wish. Odell touts “freedom,” becoming incensed when Gov. John Kitzhaber said, “A right-to-work state means you have a right to be exploited and ripped off and work at unsafe jobs and low wages and no benefits.”

Odell thinks that people should have the right to choose membership in a union in the same way that they want to choose abortions, assisted suicide, and marriage equality. She failed to point out whether she agreed with all these choices. According to Odell, “being pro-choice means that you believe in a person’s right to make his or her own life decisions, even if you don’t agree with those decisions.”

What Odell ignores about the “choice” to join a union is that unions are obligated under federal law to represent workers in their bargaining units, whether they are dues-paying members or not. Therefore all people get the same benefits even if they don’t pay for them, and the paying members have to pay for these non-paying users. They can be compared to people who think that they deserve all government benefits even if they “choose” to not pay any taxes although their level of income requires it.

States with “right to work for less” laws typically have worse economies. Because salaries are lower in those states, people pay less taxes. Even libertarians oppose right to work laws as shown by an editorial in Reason magazine late last year about the new law in Michigan:

“I consider the restrictions right-to-work laws impose on bargaining between unions and businesses to violate freedom of contract and association….  I’m disappointed that the state has, once again, inserted itself into the marketplace to place its thumb on the scale in the never-ending game of playing business and labor off against one another.”

Census data revealed that a 10-percent increase in union membership would boost the average annual income for middle-class households by $1,501 a year. In 2011 the five states with the lowest unionization rates—North Carolina, South Carolina, Georgia, Arkansas, and Louisiana—all had middle classes with below-average strength, defined as the share of income going to the middle 60 percent of households. Four out of the five states with the highest unionization rates—Alaska, Hawaii, Washington, and Michigan—all had middle classes with above-average strength.

Without unions, people would not have weekends, employee-provided health coverage (such as it is), and the Family and Medical Leave Act,   Without unions, the country would have child labor. In the prosperous 1950s, almost one in three workers in the United States belonged to a union; now we have no unions and no prosperity—except for the very top few percent of people. The following chart shows the correlation between middle class income and union membership.

unionincomeWisconsin is an excellent example of what can happen with the “right to work” law that Odell wants in Oregon. Gov. Scott Walker claimed that he would save the state by creating 250,000 jobs. Instead, this past June the state came in 49th in a monthly state-by-state index of leading economic growth indicators. Only four other states in the nation are in contraction—Alaska, Louisiana, North Dakota, and Wyoming—projected to decrease growth. Wisconsin is second from the bottom; all five states have GOP governors who are associated with lower rates of growth.

Two months earlier, Wisconsin came in as the fifth worst in terms of the erosion in private-sector wages. Forbes named Wisconsin one of the “worst states” for business in December of 2012. The governor led the state to the bottom of short term job growth from September 2010 and November 2012. That’s where Odell wants to take Oregon.

Wisconsin’s economic recovery started this summer, but, as blogger John Peterson pointed out, it’s not difficult to improve when you’re at the bottom. Even with the growth in average wage, it’s still 12 percent lower than the national norm, and income is 5.1 percent lower than the U.S. average.  The GOP pledged never to raise taxes, meaning that their only choice to fund transportation projects is through borrowing. Studies show that the states’ roads are rapidly worsening. Wisconsin companies received $34.23 per worker in venture capital, a five-year increase of 6.5 percent but far below the national average of $200.94.

I’m grateful to a conservative columnist like Samuelson who understands the serious issue of economic inequality in the United States and the importance of labor. Those of us who live in Oregon can only hope that we won’t follow Wisconsin because of people like Jill Gibson Odell.

1 Comment »

  1. Just so you know, Washington County would really no longer be considered Conservative (though Odell certainly seems to be; I know neither her nor her law firm). Voters in Washington County now have many more Dem. state reps than Rep.; and also more Dem state Senators than Rep.. Also, in the big races Washington County voters overwhelmingly voted Democratic (for example: Obama 57% to Romney 40%; Sec of State, Kate Brown 52% to Buehler 43%, etc.). I’m not sure if there are more D’s than R’s (it has been very close for years), but the R’s tend to be, for the most part, fairly moderate and many of them are voting for the Democrats.


    Comment by Central Oregon Coast NOW — September 10, 2013 @ 7:40 PM | Reply

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