Cramer on Free Trade and Immigration

January 9, 2014

Did you watch NBC’s “Meet the Press” on Sunday?  For those of you who didn’t, check out this roundtable discussion of the economy with Gene Sperling, Director of the National Economic Council and Jim Cramer, host of CNBC’s “Mad Money” and former hedge fund manager.  Approximately 5 minutes and 40 seconds into the discussion, the topic turns toward globalization, free trade and immigration.  I was pleasantly surprised – stunned, actually – (and I think you will be too) at Cramer’s comments.  Essentially, he asked “why do we continue to pursue free trade” and, regarding immigration, asked “why don’t we worry about putting our own people back to work first?”

It’s a sign of cracking support for globalization and immigration when someone of Cramer’s influence begins to challenge these economists’ sacred cows.  Good for you, Jim!

Bloomberg: Open the Immigration Floodgates

May 3, 2011

 In case you missed NBC’s “Meet The Press” with David Gregory on Sunday morning, here’s a link:  It was one of those programs that got me fired up.  New York mayor Michael Bloomberg was one of the panel guests, along with David Axelrod and Virginia governor Bob McDonnell.

It was Bloomberg’s soliloquy about how to fix the economy in general and Detroit’s economy in particular that raised my hackles, soon followed by Gregory’s use of the  The Economist magazine’s feature article titled “What’s Wrong with America’s Economy?” to prompt a discussion about the state of the U.S. economy.

The following is the comment I posted on the “Meet the Press” website:

As a remedy for Detroit’s economic woes, Bloomberg suggests filling it with immigrants.  No doubt, that would reverse the decline in Detroit’s population.  But the people who already live in Detroit (including many immigrants) are experiencing the highest unemployment in the country.  What exactly would Mr. Bloomberg have all these new immigrants do for a living?  How would loading up Detroit with more labor capacity fix the problem that has driven people out of the city in the first place – the lack of sufficient work to employ them? 

Mr. Bloomberg also repeated a frequently made and patently false statement when he said that “this country was built by immigrants.”  While it’s true that the U.S., like every other nation on earth (with the possible exception of Iraq, where the garden of Eden is believed to have been located between the Tigris and Euphrates Rivers) is populated by the descendants of immigrants, the vast majority of labor that went into the building of everything you see in the U.S. was provided by native-born Americans.  Sure, immigrants contributed, but to say that the U.S. was built by immigrants is ridiculous. 

David Gregory then went on to prompt a discussion of the economy with the cover of “The Economist” magazine, which asks the question, “What’s Wrong With America’s Economy?”  How ironic.  What’s wrong with America’s economy is that its economic policy is guided by the field of economics which, thanks to its refusal to ever again consider the full ramifications of the biggest factor at work eroding our economy today – population growth – its theories, most notably those regarding trade, are fatally flawed. 

If economists ever get over the beat-down their field took in response to the seeming failure of Malthus’ theory about overpopulation and food shortages, and once again consider the full implications of unending population growth – not just strains on resources and stress on the environment – but other implications as well, they might discover the relationship between population density and per capita consumption.  They might come to understand how extreme population densities erode per capita consumption, driving up unemployment and making overpopulated nations utterly dependent on manufacturing for export in order to gainfully employ their bloated labor forces.  And they might come to understand that this is the driving force behind the trade imbalances that nearly collapsed the global economy. 

But, no, economists continue to foolishly rely upon population growth as an engine for macroeconomic growth and as a way to stoke sales and corporate profits, never giving a thought to the relationship between per capita consumption and employment.  Until economists emerge from the fetal position they adopted in response to cries of “Malthusians!” and open their eyes to the full ramifications of population growth, America’s economy and, indeed, the global economy as a whole will continue to deteriorate. 

Pete Murphy

Author, “Five Short Blasts”

Time to End the War on Wages

December 9, 2008

For the past two decades or so, the federal government and the Federal Reserve have waged a relentless war on wages.  This war was a “shadow” war, a subset of the war on inflation that began with the Reagan administration in response to the soaring inflation of the ’70s.  But never mind that most of that inflation was caused by soaring oil prices.  It was assaulted on all fronts, and that included wages. 

Paul Volcker and the Federal Reserve attacked with interest rates.  But the real weapons of mass destruction were in the hands of the federal government.  The first was trade policy.  We threw open our doors and welcomed any and all foreign competition, regardless of whether or not they reciprocated, and the impact on wages was devastating.  As we were blinded by the flash of low prices, the blast wave leveled factories across the whole country.  Then came the biological weapon – immigration policy.  The labor market was flooded with immigrant workers, legal and illegal, white collar and blue-collar.  The aftermath of this war is that blue-collar wages are now lower than their peak in 1977 and median family income is now lower than it was in 1969.  Family net worth is lower than it was in 1976 and family indebtedness has soared to record levels as Americans have struggled in vain to hold onto their standard of living. 

Sunday, while being interviewed by Tom Brokaw on “Meet the Press,” President-Elect Obama remarked that all sides in the auto industry must come together and make concessions, including further wage and benefit concessions by the UAW.  With wages of $28 per hour, assembly-related workers are already paid below the national mean income and, with wages at $14 per hour, non-assembly-related UAW workers’ pay is already well below the median income.  Is cutting their wages further and cutting tens of thousands of jobs to help the Big Three survive in some form his idea of helping the middle class?  Will he claim moral victory if a few of us manage to hold onto low-paying jobs, saying that at least those jobs weren’t lost too?

High wages aren’t the problem.  Wage inflation that exceeded the overall rate of inflation is what gave Americans the highest standard of living in the world.  Since wages only represent two thirds of the cost of products, rising wages driven by a strong demand for labor actually improve purchasing power.  Cutting wages cuts prices at a slower rate and purchasing power is lost.  Inflation-fighting focus needs to be on the other factors, things like raw material shortages, product shortages, rising taxes and so on.  Want to help the middle class?  Start focusing on driving a demand for labor.  Your stimulus plan will be a nice kick-start, but we need permanent jobs – the ones our misguided trade policy gave away.  We need policies that will increase market share of the domestic automakers, not cut their capacity to match declining market share.  We need policies that will drive the domestic automakers to hire more workers, not cut their jobs and cut their pay. 

Ultimately what we need are immigration policies that stop feeding an over-supply of labor and trade policies that hold foreign nations accountable for upholding their end of the bargain.  They can either buy as much as we buy from them or we can take action to cut imports.  One way or the other, balance must be restored.  It’s their choice, but it’s our responsibility to make sure that one or the other happens.