Economy adds 228,000 jobs in November, unemployment holds at 17-year-low rate of 4.1%, but wages are stagnant. Why?

December 9, 2017

Yesterday morning the Labor Department announced that the economy added another 228,000 jobs in November and the unemployment rate held steady at 4.1% – the lowest rate in 17 years.  Yet, wages remain stagnant.  Everyone – economists, the Federal Reserve, business analysts – everyone, seems totally baffled by this phenomenon.  Why isn’t this supposedly strong demand for labor beginning to drive up wages as employers compete for workers?

The answer is that the unemployment rate isn’t really 4.1%.  It’s 7.1%.  The Labor Department would like you to forget that the rapid drop in unemployment following the “Great Recession” in 2008 was fueled in large part by its “mysteriously vanishing labor force” trick, claiming that vast swaths of workers were simply dropping out of the labor force, so they were no longer included in the unemployment calculation.  Take a look at the following chart.  It’s a little confusing, so I’ll explain.

Labor Backlog

Look first at the blue and orange lines.  The blue line tracks the actual growth in the labor force due to growth in the overall population.  The orange line tracks the labor force growth as reported by the Labor Department.  Note that in all but three of the past ten years did the Labor Department’s reported growth in the labor force exceed the actual growth.  It usually significantly under-reports that growth.  The result is a growing “backlog” of unreported workers, represented by the yellow line on the chart.  That backlog peaked at 6.4 million workers in 2014 and fell to 5.1 million in 2016 but, so far this year, has actually begun to rise again, hitting 5.2 million workers in November.

Now, look at the green line, which is the growth in the employment level.  If that growth matches the growth in the labor force, then unemployment will hold steady.  If it exceeds that growth, then unemployment will fall.  Compared to the blue line – the real growth in the labor force – it has consistently exceeded that blue line by a small amount each year, beginning in 2011 – the start of the recovery from the “Great Recession.”  But if you compare the green line to the orange line – the fake growth in the labor force reported by the Labor Department – it has beaten that growth by a significant amount every year beginning in 2010.  The result of that growth in the employment level relative to the fake growth in the labor force is the Labor Department’s reported unemployment rate, represented by the purple line.  Note that it has fallen precipitously to its current bogus level of 4.1%.

That’s why wages are stagnant, because there is a huge, unreported backlog of labor force which eagerly snatches up any extra jobs that are created each month.  The labor force is still pretty grossly out of balance with the demand for labor.  Until that backlog of workers is employed, wages will remain stagnant.

Just to drive home the point about how phony the official unemployment rate is, take a look at these next two charts:

Per Capita Employment

Unemployed Americans

The first chart tracks the employment level relative to the total population.  It’s analogous to what the Labor Department reports as the “participation rate.”  As yo can see, it’s been very slowly recovering from the 2008 recession, but still hasn’t gotten back to its pre-recession level in 2007.  (You can see that, even then, it was already plummeting.  I can’t tell you what it was before that since I didn’t begin tracking it until then.)  In November of 2007, per capita employment was at 48.4% and the unemployment rate was 4.7%.  Last month, per capita employment was at 47.2%, but the unemployment rate was 4.1%.  How in the world could unemployment have fallen at the same time that per capita employment fell?  Sounds pretty bogus, doesn’t it?

The second chart above shows a similar phenomenon.  It tracks the number of unemployed, assuming that the labor force grew along with the population.  In November of 2007 there were 7.2 million unemployed workers.  Last month there were 11.8 million.  And yet the unemployment rate fell?  Baloney.

While some see nothing but good news in yesterday’s employment report, I see some warning signs.

  • The employment level grew by only 57,000, far less than the reported growth of 228,ooo jobs.
  • Per capita employment fell slightly for the 2nd month in a row.
  • An honest accounting of unemployment (one that’s honest about growth in the labor force) finds that unemployment rose for the 2nd month in a row to almost 7.2% after reaching a low of 6.8% in September.  That’s a notable jump.

So now you know why wages are stagnant.  The demand for labor hasn’t caught up to the backlog of unreported growth in the labor market.

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Overpopulated Nations Sucking the Life out of American Manufacturing

May 11, 2016

I’ve finished my analysis of trade in manufactured goods for 2015 and the news isn’t good.  The effect of attempting to trade freely with nations that are much more densely populated than our own intensified yet again in 2015, dragging our deficit with those nations to a new record.

Check out this chart:  Deficits Above & Below Median Pop Density.  First, some explanation of the data is in order.  I studied our trade data for 166 nations and separated out those product codes that represent manufactured products.  Subtracting imports from exports, I was able to determine the balance of trade in manufactured goods for each.  I then sorted the data by the population density of each nation and divided these 166 nations evenly into two groups:  those 83 nations with a population density greater than the median (which, in 2015, was 184 people per square mile) and those 83 nations with a population density below the median.  I then totaled our balance of trade for each group.

As you can see, in 2015, our balance of trade in manufactured goods with the less densely populated half of nations was once again a surplus, but a smaller surplus of $74 billion.  This is down from $132 billion in 2014 and is less than half of the record high of $153 billion in 2011.

Conversely, our balance of trade in manufactured goods with the more densely populated half of nations was a huge deficit, plunging to a new record deficit of $722 billion, beating last year’s record by $53 billion.

Some observations about these two groups of nations are in order.  Though these nations are divided evenly around the median population density, the division is quite uneven with respect to population and land surface area.  The more densely populated nations represent almost 77% of the world’s population (not including the U.S.), but only about 24% of the world’s land mass (again, not including the U.S.).

Think about that.  With the people living in 76% of the world’s land mass, the U.S. enjoyed a surplus of trade of $74 billion in manufactured products.  But with the rest of the world – an area less than a third in size – the U.S. was clobbered with a $722 billion deficit!  Population density is the determining factor.  Not wages or wealth.  Wealthy nations were just as likely to appear among the deficit nations as among the surplus nations.  Not currency valuations.  Virtually ever currency in the world weakened against the dollar in 2015.  Population density is the key factor that drove these trade imbalances.

Some may point to the increase in the trade deficit as proof that currency values and manipulation are driving the imbalance.  But the data from previous years has shown that no such relationship exists.  A much more likely explanation is that American exports are declining and imports are rising because as more and more manufacturers lose ground to foreign competition, there are fewer and fewer products available for export or for purchase by domestic consumers.  Like a horde of mosquitoes, the overpopulated nations of the world are literally sucking the life out of American manufacturing and, with it, the American economy in general.

So what’s to be done?  “Give free trade enough time to work,” free trade advocates say, “and these imbalances will even themselves out.”  Wrong.  Free trade policy has had decades to work, beginning with the signing of the Global Agreement on Tariffs and Trade (GATT) in 1947 and the result has been that the trade deficit with densely populated nations just gets worse and worse.  This happens because free trade theory doesn’t account for the inverse relationship between population density and per capita consumption.

The only remedy that would restore a balance of trade is the same trade policy that the U.S. employed until 1947 to maintain such a balance – tariffs.  The use of tariffs to compensate the U.S. for nations’ inability to provide us access to equivalent markets – markets that have been emaciated by overcrowding – would restore a balance of trade and breathe life back into the American economy.

 


We are ruled by economists.

April 21, 2014

http://blogs.reuters.com/anatole-kaletsky/2014/04/19/time-to-stop-following-defunct-economic-policies/#comment-1696

I’ve been gone for two weeks and have a lot of catching-up to do, but thought I’d begin with something most recent.  You’ve heard me claim that there are no political solutions to our slow-motion economic demise because our political leaders simply hand over economic policy to some economist who, invariably, regardless of whether they subscribe to the philosophies of Keynes or Hayek, are pro-growth and lean heavily on population growth to achieve it.  Only by opening the eyes of economists can there be any hope for real change.

So I’m especially fond of any writings that take the field of economics to task.  The above-linked editorial appeared on Reuters a couple of days ago.  (And I especially love the opportunity to be the first to comment!)  In this piece, the author, Anatole Kaletsky, calls for “… new thinking about politics and not just economics.”  He begins with a quote from economist John Maynard Keynes:

The ideas of economists, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed, the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually slaves of some defunct economist.

I couldn’t have said it any better.  The world is ruled not by politicial leaders but by economists.  It’s a scary thought when you realize that economics isn’t a real science at all, but something more akin to philosophy, mixed with a little psychology and some mathematical expressions of theories to lend it credibility – theories virtually devoid of facts and data to support them.  Real sciences are rooted in data, and real scientists go unafraid wherever the data takes them.  That’s why technology advances at breakneck speed while our economy limps along the edge of a precipice.  Scientists examine all possibilities.  Economists bury their heads in the sand, cowering in the face of criticism and unwilling to ponder where their single-minded devotion to growth may lead.


Big Plunge in Consumer Goods from China Drives Down Trade Deficit

May 2, 2013

A big drop in imports of consumer goods, especially from China, led to a significant decline in the March trade deficit.  (Here’s a link to the full report from the Bureau of Economic Analysis:  http://www.bea.gov/newsreleases/international/trade/2013/pdf/trad0313.pdf.)

This would be good news if it were driven by a shift to domestic manufacturing of these products.  But it’s not.  All other economic indicators have been pointing to a manufacturing sector that has slowed, or is even declining.  (For example, yesterday’s ADP employment report showed a loss of 10,000 manufacturing jobs in April.)

Most categories of imported goods slowed in March, led by a decline in consumer goods of  7.5%, or by $3.4 billion, accounting for most of the decline in the trade deficit.  And imports from China plunged by $5.5 billion from February, accounting for all of the decline in the trade deficit and then some. 

The overall trade deficit fell by $4.8 billion in March to $38.83 billion.  Here’s a chart of the overall balance of trade since January, 2010, when President Obama set a goal of doubling exports in five years:  Balance of Trade.  As you can see, the trade deficit has been on a declining trend since January of last year.  There are basically only three reasons why a trade deficit declines:  1)  the economy is shifting to domestic production, or 2) exports are rising faster than imports, or 3) the economy itself is in decline. 

We’ve already ruled out reason number 1.  Aside from a slight shift toward domestic auto production, there is no other shift toward domestic manufacturing.  And exports are definitely not increasing.  In fact, overall exports fell in March and are even lower than they were in March of 2012.  Overall exports have now lagged the president’s goal for 20 consecutive months, and now lag that goal by $38.5 billion – the largest shortfall yet.  In fact, if exports had grown at the rate required to keep pace with the president’s goal, our trade deficit would have been only $0.3 billion in March.  Here’s the chart:  Obamas Goal to Double Exports.

Of course, the real goal is to double exports of manufactured goods in five years, since that’s where the jobs lie.  And this is also where the biggest failure to grow exports lies.  Exports of manufactured goods have been flat for the past year and have now lagged the president’s goal for 18 consecutive months and by their biggest margin in March – $22.7 billion.  Here’s the chart:  Manf’d exports vs. goal.  And here’s a chart of the balance of trade in manufactured goods:  Manf’d Goods Balance of Trade.

So, there’s been no corresponding shift to domestic manufacturing to explain the declining trade deficit, and no pick-up in exports.  That leaves only one explanation – the overall economy is slipping into recession.  We’ve seen it before – during the Great Depression and the more recent “Great Recession.”  Overall trade declines (and with it, the balance of trade) as consumers world-wide stop buying.  That’s exactly what’s happening as unemployment around the globe is getting worse.  Just this week it was announced that unemployment in the Euro zone hit a record.  And, if the federal government were honest about unemployment and stopped claiming that more and more workers are dropping out of the labor force, unemployment in the U.S. would also be near a post-depression record level. 

While the headline number for the March trade deficit may hint at an improving economy, the truth is anything but.


Economists’ Next Big Idea: The “Invisible Foot” (?!?)

March 2, 2013

http://blogs.reuters.com/reihan-salam/2013/03/01/to-create-growth-unleash-the-invisible-foot/#comment-330

This is the 21st century.  An unmanned vehicle roams the Martian terrain, beaming back analyses of soil samples.  The human genome has been mapped, opening the door to incredible medical advances.  Human organs can be reproduced on a 3-D printer with ink of living stem cells.  We carry incredible computing and communication technology in our shirt pockets.  Physicists work on nano-structures and discover ever-smaller particles while unlocking the mysteries of the universe. 

Then there’s the pseudo-science of economics.  As central banks feverishly shovel money into the economy in a clumsy effort to fend off global economic collapse, economists grope in the dark to find explanations that fit their gilded 19th century theories.  The above-linked article by Reuters columnist and economist Reihan Salam reports on economists’ latest and greatest answer – the “Invisible Foot” – apparently the long-ignored but newly rediscovered and dusted-off counterpart to Adam Smith’s “invisible hand.” 

Can you believe this?  Here we are, in the 21st century, with the global economy collapsing all around us, and we’re talking about invisible hands and feet.  This is the best that the progeny of our best economics universities can come up with?  Invisible hands and feet?  It seems more suited to a Harry Potter movie than 21st century economic reality.  (Not that I’ve ever seen a Harry Potter move.)

The idea goes something like this:  as opposed to Adam Smith’s “invisible hand” of consumption driving economic growth, the “invisible foot” (brainchild of mid-20th century economist Joseph Berliner) aims to give productivity a swift kick in the pants.  Here’s how the author of the article explains it:

… This invisible foot of new competition is what drives incumbent firms to either step up their games ‑ a process that often involves burning through stockpiles of cash and shrinking profits ‑ or go out of business.

… Unfortunately, this reallocation of resources ‑ from inefficient incumbents to innovative upstarts and the incumbents that manage to keep up with them ‑ stops when incumbent firms succeed in erecting regulatory and legal barriers to shield themselves against competitors, which is why regulatory reform and patent reform are so important. It is also why we ought to take care not to give large incumbents any undue advantages in our tax code.

… the tax-deductibility of interest expenses and not dividends gives the entrenched corporate Goliaths that have the option to borrow a big boost, while doing nothing for the would-be corporate Davids eager to take them on.

… With this in mind, Robert Pozen of the Brookings Institution and Harvard Business School and his research associate, Lucas Goodman, have devised an ingenious plan to level the playing field.  First, they call for cutting the corporate tax rate from 35 percent to 25 percent. … To finance this substantial cut, Pozen and Goodman propose a modest 60 percent to 85 percent cap on the amount of interest companies can deduct from their tax bills, sharply reducing debt bias and keeping the proposal revenue-neutral. … The end result could be an entrepreneurial renaissance, as lumbering corporate dinosaurs that had used cheap credit to scare off competitors are forced to reckon with innovative new rivals.

The following is the comment I posted in response to this article (which you can find by scrolling down to about the 7th comment), repeated here for your convenience:

There seems to be no limit to the goofy places that economists’ tortured logic will take them. The “Invisible Foot?” Here we are in the 21st century and this is what we get from the field of economics – the “Invisible Foot?”

The real problem has, for many decades now, been economists’ inability to distinguish true, healthy economic growth from macroeconomic growth, a large component of the latter being a malignant growth fed by nothing more than population growth. If the macroeconomy grows by 1%, but the population has grown by the same amount, no one is better off. In fact, all are worse off.

Because of their self-imposed blindness to the economic ramifications of population growth (no self-respecting economist dares risk being labeled a “Malthusian”) the field of economics is blind to the very real inverse relationship between population density and per capita consumption, and its implications for worsening unemployment, poverty and global trade imbalances. Economists can’t see that, beyond some critical population density, while population growth continues to stoke total sales volumes and corporate bottom lines, the cost of dealing with rising poverty while maintaining an illusion of prosperity through deficit spending is bankrupting local and national governments across the globe.

Instead, the field of economics maintains its “see no evil” posture and dreams up things like the “Invisible Foot,” an idea that might have played well during the dawn of economics in the 18th century. Are we really to believe that a revenue-neutral reshuffling of the tax code will spawn some sort of economic renaissance? Has no one noticed that the economies of those countries with lower corporate tax rates are still dominated by the same global mega-corporations as the U.S.? Are we to believe that these corporations grew as they did by being sloppy and inefficient, instead of mercilessly boosting productivity by cannibalizing the competition and slashing redundant workers?

The cowardly refusal of the pseudo-science called “economics” to even consider the most dominant factor driving economic trends today makes it the laughing stock of the 21st century. This nutty idea is just one more example of why.


The National Debt: How Big and Who Pays?

December 17, 2012

In light of the intense debate over the “fiscal cliff” – triggered by unsustainable federal budget deficits that are growing the national debt at an alarming rate – this might be a good time to revisit the national debt and put that problem in perspective.  Just how bad is it?  Who’s on the hook to pay it?  What’s the best way to fix it? 

Most economists relate the national debt to our gross domestic product, or GDP – in other words, the size of the economy.  So let’s begin there.  The following shows the growth in our national debt vs. growth in GDP:  National Debt vs. GDP, 1929-2012.  (Source:  U.S. Bureau of Economic Analysis.)  Note that the two have grown in tandem but, beginning in the early 1980’s, the national debt began to catch up to GDP and the lines crossed in 2010. 

To make it easier to understand, let’s look at the national debt as a percentage of GDP:  National Debt as Percentage of Chained GDP.  (Source:  U.S. Bureau of Economic Analysis)  The war effort (World War II) skyrocketed the national debt to 120% of GDP but, once the war ended and federal spending returned to normal levels, growth in the economy steadily outpaced growth in the national debt until the national debt fell to only about 33% of the economy in 1981.  Aside from a brief period in the late ’90s, when a bubble in the stock market and in the PC/cell phone/internet businesses generated a ton of federal revenue, resulting in balanced budgets, the national debt has grown steadily as a percentage of GDP, but really began to accelerate in 2008 when the “Great Recession” took hold.  Now the national debt exceeds our GDP, a milestone where some economists begin to fret.  How much debt is too much?  I don’t think anyone really knows.  As a percentage of GDP, some nations’ debts are actually much larger than that of the United States.  Interest payments on the debt are still a relatively small part of the federal budget, though growing. 

But who’s really on the hook for this debt?  If holders of America’s bonds decided to cash them in and demand repayment of their principal, where would the money come from?  The federal government would have to extract revenue from “the economy” in order to come up with the cash.  But that’s misleading.  Almost all federal revenue comes from the pockets of individual taxpayers.  Any revenue generated by taxing business simply gets rolled into the cost of their products and we still end up paying.  So, what’s more significant than the percentage of GDP that the national debt represents is your share of it.  How much do you owe?  Would you be able to pay it?  Here’s a chart of the national debt per capita, and how it’s grown from 1929 to today:  National Debt Per Capita, 1929-2012.  (Sources:  U.S. Bureau of Economic Analysis and U.S. Census Bureau)

Yikes!  Now that’s scary!  On average, every man, woman and child owes about $44,000 on the national debt – a new record in 2012, and climbing really fast.  That’s more than double what it was at the end of World War II.  If you’re the breadwinner for a family of four, your family owes $176,000.  Could you afford to pay that?  Few could.  Virtually no one could by having a percentage deducted from their pay in the form of taxes.  It’d have to come from your net worth – your home and your savings. 

So let’s take a look at household net worth to see just how many people could afford this.  This chart shows both the median (the point at which half of the people have higher net worth, and half have lower net worth) and the mean (average) net worth of households:  Household Net Worth.  (Source:  U.S. Federal Reserve)  First of all, as an aside, notice that the median net worth hasn’t grown at all since 1983, the year the Federal Reserve first began tracking this data on a triennial basis.  But the mean has grown nicely.  This means that the net worth of the top few percent of households has grown at a phenomenal rate.  In 2010, the median household net worth was about $77,000.  But, on average, each household owes $176,000 on the national debt.  In other words, if your net worth is anywhere near the median or less, you’re broke!  You just don’t know it yet. 

In actuality, though, the national debt wouldn’t be spread evenly across all households.  The rich would have to shoulder much more of the burden, since their net worth is much higher.  So how much would each household owe if the percentage of net worth was the same for everyone?  To calculate this, we divide the national debt by the sum total net worth of all households combined.  Here’s the chart:  National Debt as Percentage of Total Household Net Worth.  (Sources:  U.S. Bureau of Economic Analysis and U.S. Federal Reserve)

As you can see, this figure held fairly steady for decades in the 12-20% range.  But, in 2010 (following a brief period during which if fell, thanks to the bubble in housing market), it jumped to 28%, thanks to a big jump in the national debt and a fairly big drop in household net worth in the wake of the “Great Recession” a few years ago.  The point is that, if we’re all to pay an equal amount in terms of percentage, we’ll all be called upon to fork over 28% of our net worth. 

What are the odds that all of America’s creditors will want to cash out at the same time?  Slim to none.  Why would they?  They’d be paid in dollars.  Then what?  What do they do with those dollars which, ultimately, can only be redeemed in the U.S.?  Nevertheless, as the debt goes higher, so too does the risk that more and more creditors will become uncomfortable and will want their money back.  One way or the other, the debt has to begin coming down at some point, whether it’s done by the government through tax increases and spending cuts, or by creditors cashing out.

In essence, you owe 28% of your net worth to the federal deficit spending that has taken place over the decades, propping up the economy and making us all feel wealthier than we really are.  And, bear in mind that the median household net worth hasn’t risen since 1983.  Were it not for that deficit spending, most of us would actually be 28% poorer.  The unraveling of the national debt process is going to be painful.  Even if it occurs over many years, it will be a matter of the federal government withdrawing stimulus from the economy.  It’ll leave all of us poorer than we would be if the deficit spending continued – something that can no longer be sustained.

Of course, there is a way that the national debt could be cut painlessly – a way that no politician or economist has dared to address – a way that addresses what necessitated the deficit spending in the first place – and that’s fixing our trade policy to restore a balance of trade.  As I’ve discussed many times in the past, it’s no mere coincidence that the growth in our national debt closely tracks the growth in our cumulative trade deficit.  You’ll notice that, in all of these charts, things took a turn for the worse in the early 1980s.  That coincides closely with the beginning of our string of 37 consecutive annual trade deficits that began in 1976, sapping nearly $12 trillion from our economy.  Here’s that chart once again:  Cumulative Trade Deficit vs Growth in National Debt.  (Source:  U.S. Bureau of Economic Analysis)

Without tackling the trade deficit, any meaningful progress toward reducing the national debt is impossible without throwing the nation into recession.  Both parties know it.  Neither wants to address it.  Republicans love our trade policy because it’s in the best interest of their rich, corporate benefactors.  Democrats love it too – perhaps not to the same degree – because it makes people more dependent on government largesse.  But now both parties are stuck.  The most likely action is some token, trivial revenue increases and spending cuts in return for mutual agreement to address the problem in a more meaningful way, perhaps after the next election.  And the next time the debt is tackled again?  The result will be the same.


Republican Party Needs to Shift Focus

November 8, 2012

In May of 2009, I predicted that if President Obama failed to address the trade deficit in a meaningful way, he’d be a one-term president.  (See https://petemurphy.wordpress.com/2009/05/12/obama-approach-to-economy-faltering/.)  I was wrong.  Although, predictably, unemployment is no better today than it was in 2009, it didn’t doom Obama to a one-term presidency as it should have – as it did to every president in the past.

It was clear from the polls that the economy and high unemployment were the biggest issues in the campaign, and that Americans were dissatisfied with Obama’s meager progress.  When Reagan campaigned against Jimmy Carter in 1980, he asked Americans “Are you better off than you were four years ago?”.  The answer was a resounding “hell, no” and Carter lost in a landslide.  In 1992, the Clinton campaign’s mantra was “it’s the economy, stupid” and George Bush, presiding over a recession, was summarily drummed out of office after one term.  How is it possible that Republicans couldn’t parlay similar circumstances into a Republican victory on Tuesday?  Mitt Romney was a good candidate – articulate, handsome, a successful businessman, a successful governor and savior of the olympics – perhaps the best Republican candidate since Ronald Reagan.

On Wednesday morning, pundits cited all kinds of factors, including Romney’s position on issues and demographic factors.  But I believe there’s a more fundamental and more powerful factor involved – one that becomes evident when you examine the electoral college map and the state maps showing the blue and red counties.  Densely populated states went heavily in favor of Obama, as did densely populated counties in the more sparsely populated red (Romney) states.  Back in September, I noted the huge discrepancy in the average population density of the projected Obama states vs. the projected Romney states.  (See https://petemurphy.wordpress.com/2012/09/12/the-population-density-factor-in-the-national-election/.)  To summarize, Obama’s states had an average population density of 928 people per square mile, while Romney’s states averaged only 60.  We’re not talking some 60-40 demographic split here.  This difference is greater than an order of magnitude.  That’s huge – far too big to be shrugged off as mere coincidence.

In Five Short Blasts, I wrote of a divergence of interests that occurs when population density breaches some critical level.  While it remains advantageous for corporations to see the population continue to grow, stoking total sales volume, worsening population density begins to erode per capita consumption, employment and the quality of life of individual people.  The Republican party, above all else, serves the interests of corporations, believing that “what’s good for General Motors is good for the country.”  (A quote from Charles Wilson, head of General Motors, while testifying before a Senate subcommittee in 1952.)  Back then, it was probably true.  But no more.  While no one understands this divergence of interests, people living in crowded conditions sense it, just as animals that have never experienced a tidal wave sense danger as one approaches.  While the Republican message may still resonate with people in rural conditions who have never experienced overcrowded conditions, it falls flat in urban settings, and America is steadily becoming a more urban country.  For these people, the Republican message of placing faith in corporate growth while being stripped of government safety nets doesn’t ring true.  They know instinctively that they’ll be left high and dry.

The irony is that the Republican Party finds itself stewing in its own juice.  The growth that it so fervently championed for decades, stoked by a flood of H1-B visa immigrants, has resulted in an urban America where the supply of labor is out of balance with demand, leaving workers and unemployed alike more heavily dependent on safety net programs.

Of course, both parties embrace free trade and globalization.  They’re equal partners in crime in the decimation of America’s manufacturing base and the corresponding decline in wages and cuts in benefits.  It’s one thing to take away people’s ability to make a decent living, but at least the Democratic Party provides a backstop with safety net programs.  Republicans would take that away too, still believing that, like half-a-century ago, the unemployed are simply people too lazy to work.  That’s not the world we live in today – the world that the Republican party helped to create.

So how does the Republican Party distinguish itself once again from the Democratic Party, appealing to urban voters, while holding true to its “conservative” philosophy?  It can begin with a return to true conservative values and turn away from the brand of conservatism that favors corporate interests over the interest of the common good.  If it wants people to embrace the virtues of hard work and self-reliance, it needs to champion policies that give people a real opportunity to earn a decent living in the private sector.  The only way that’s possible is by promoting a return to sensible trade policy that employs tariffs to assure a balance of trade and to bring our manufacturing jobs back home, abandoning the radical free trade experiment begun in 1947.  That’s true conservatism. That’s a clear difference from the policy of the Democratic Party.

If the Republican Party wants to promote less government intrusion in our lives, then it needs to promote a return to a less crowded America where that was once possible, the America it foolishly destroyed to satisfy corporate benefactors.  Nobody likes living in crowded conditions.  The promise of escape from such conditions will be appealing to many urban voters who feel trapped there.

If the Republican Party doesn’t like government health care, then it needs to offer a real alternative, not another government health care version that carries its own brand.  We need to return to the days when employers offered health plans at affordable prices because they had to in order to remain competitive.

If the Republican Party wants to balance the budget, then it needs to address the real driving force behind deficit spending – the trade deficit – and stop pretending that the two aren’t related.  That’s true conservatism.  That’d be a real distinction, one that’d send people flocking away from the Democratic Party and back to the Republican Party.

Much has been made of the Republican Party’s failure among certain demographic groups, notably Latinos.  It can hold strong to its opposition to illegal immigration, but it needs to do a better job of explaining to Latinos how illegal immigration harms them, as Americans, just as much as any other American.

Beyond these things, there are other changes the Republican Party needs to make.  It needs to distance itself from the extreme elements that are increasingly characterizing the party, and it needs to more quickly repudiate weird and offensive statements.

The Republican Party has a choice to make.  It can remain the party of corporate interests and try to fool the populace into believing that growing corporate bottom lines will translate into success for them as well.  There’s obviously mountains of campaign finance money to be had there.  But what did it buy them in this election?  Nothing.  Not the presidency.  Not even any seats in the House or Senate.  They actually lost seats in both.  People aren’t buying the message any longer.  They work for those corporations and can see very well the disconnect between growing profits and their wages and benefits.  The idea that the government should cut spending on the very programs they now increasingly rely upon to keep them afloat, just so that tax rates on corporate profits can be cut further, makes no sense to more and more voters.

Or, Republicans can choose a different path, one that offers a conservative, viable alternative to the Democratic platform, focused not on corporate interests but on the interests of the common good.  They can offer to bring our manufacturing jobs home, to balance the federal budget painlessly and to stop the cancerous growth that’s choking our quality of life.  The Democrats offer an assurance that people will be taken care of as they eke out a meager existence.  Republicans could offer so much more.