A Dialog Between Two Progressives

This began as a discussion about Bernie Sanders on Facebook and has been paraphrased here. Be advised the names have been changed to protect the innocent.

Abbey: … The empirical data is correct. Rich people are not our friends. ALL of the "profit" involved in greater efficiencies caused by technological advances, all, had gone to the top one percent since 1981.

Abbey: From the non-partisan Congressional Budget Office:

Abbey: And from an apostle of Christ:

1 Timothy 6:10 

"Again I tell you, it is easier for a camel to go through the eye of a needle than for someone who is rich to enter the kingdom of God."

JustJim: Agreed but the inequality is just the tip of the ice berg. Technological change is eroding the old jobs (typist and bookkeeper for example) and new jobs are not replacing them (we get rid of 10 bookkeepers and replace them with one much lower paid categorization clerk that is probably working in India). 

The non-rich guy's boat is sinking as fast and the rich guy's boat is rising. This is something that is inescapable, economics just exacerbate the problem. No matter what we do on the economic front (wealth re-distribution etc) the gap will continue to grow. 

The solutions to this situation are not clear but we need to figure it out in all the different domains social, economic (at a very fundamental level), political (really I mean at a governance level) educational (again at a fundamental level).

Going forward we need some really really out of the box thinking leaders. Is Bernie the epitome of that? Maybe not, but he's a hell of a lot closer then anyone else I see out there. 

Abbey: No need to think "out-of-the-box," the solutions are well known. 

(1) Raise the minimum wage to $22 an hour and peg it to worker efficiency improvements, not inflation. Workers today are much more efficient than they were 30 years ago. The rise in minimum wage will also help increase wages of higher skilled workers too.

(2) Increase the MARGINAL tax rate for the ultra rich and anyone making more than $250,000 a year. 

(3) Eliminate the tax differential for unearned income.

(4) Pass laws that make unions stronger, repeal the Federal loophole for "right-to-work" states, allow "card check" organization, increase the fines for anti-unionization retribution. Allow for company-union collaboration like Germany does. 

(5) Break-up the "too big to fail" bank and investment firms.

(6) Change the tax code to force repatriation of corporate profits sitting in foreign nations.

(7) Eliminate tax write-offs for companies for foreign investments.

(8) Amend the constitution to overturn Citizens United.

(9) Reduce college tuition.

JustJim: Abbey, unfortunately these steps lead to a number of unintended consequences over time when you factor in technological change. Let's take a look how it really looks. 

Consider the following scenario:

An auto manufacturer has 2 workers and produces 2 cars a day. The auto CEO reworks the line installing the latest and greatest, whoop – whoop automation widgets and as a result the plant has the capability to produce 4 cars a day with only 2 workers. 

The technologists who came up with the widgets assumed that this was a good thing. The auto manufacturer would produce 4 cars a day with a 50% reduction in unit cost which would be passed along to the consumer. It's a win – win for every one, right? The workers (lets call them Joe and Bob) are gainfully employed (and who knows maybe the CEO uses some of the cost savings to give Joe and Bob a raise). The consumers are happy because they pay less for their cars. The CEO and shareholders is happy because profits are up. Everyone is smiling. Right?

Well …

It doesn't work that way.

You see the CEO likes being a CEO. He (yes generally a CEO is male), likes the perks, the salary, the bonuses, the respect. This makes him risk adverse. He looks at the impact of his automation effort (believe it or not he's not stupid) and asks himself what if I can't sell the extra 2 cars? Bad things will happen (at least from his standpoint). Being smart he realizes that he can still cut costs by half.

He shoots Joe in the head (metaphorically speaking; actually he lays Joe off).

Viola, the CEO is happy; 2 cars a day are being produced and purchased. If the demand raises, he can always hire somebody new and under the above at $22 per hour. He still saves money and has increased his profits even more (notice under the above he has every incentive to hire a lower paid new employee rather then rehire the ex-employee)

Bob is happy. He still got a job and under the above he's even gotten a raise! Heck, Bob thinks this a great deal.

The stockholders are not exactly ecstatic as under the above they've lost their capital gains but at least the stock price is going up and all in all that's a good thing (not great but good none the less).

Wait a minute, what about the victim here, lying prostrate on the ground in a pool of economic blood? 

What's Joe to do?

None of the other auto manufacturers will have anything to do with him. They are busy automating everything in sight and are taking the same kinds of actions as our CEO.

Well, Joe is pretty good with figures and pretty personable. How about becoming a bank teller? He goes to the local branch of Chase. Guess what? Not a teller in sight. The three tellers that had been there previously have been replaced by teller stations (by the way this is true, go check out the Chase branch located at 7301 Baymeadows Way Jacksonville, FL).

How about that great refuge of the economic displaced, Walmart?

They have replaced all of their stockers with robotic equipment similar to what they used in their distribution centers, laid a bunch of people off and are not hiring (This hasn't happen yet but you can bet that there are people in Bentonville who are giving this consideration. If the minimum wage goes up to $22 an hour you can double down on that bet that they will give it real serious consideration).

Well there's always McDonalds …

Let's quit beating a dead horse. We get the point.

Two of the biggest barriers to automation are:
  • The decision makers are not comfortable with the technology
  • The initial capital investment.

As time goes on new decision makers will arise who are comfortable with the technology. They will be willing to spend money on new technology and implement new technology at an even greater rate.

If we implement measures that drive costs up (such as some of the above), the initial capital investment becomes more attractive.

The measures that Abbey has proposed are good measures for addressing the problems we saw in the Eighties when we were encountering technological change at a much slower rate. In a way, it's a shame that they were not adopted back then, we may be in a better position today. 

The fact of the matter is that we didn't. Adopting these kinds of measures today does nothing but pour gasoline on the fire as the above scenario illustrates.

The impact of technological change is not science fiction. It's a serious issue being considered by serious people. For example see:

The rate of technological change is rapidly increasing. The time that it takes for adoption is getting shorter. This issue is rapidly reaching the the point where it is a big challenge.

Big challenges require big responses.

This is why we need to think out of the box. What we are encountering, today is different then anything we've encountered in the past. Don't believe this? Go read 'Future Shock'. Given that this is different, we need a different response, an out of the box response.

So what would such a response look like?

Our response should seek to ensure that every person should:
  • Be able to sustain a reasonable subsistence
  • Live a long healthy productive life
  • Spend their time productively on things they want to do, not things they have to do.
  • Have their educational desires met. 

Having said that, we should:
  • Repeal: 
    • The current tax code in it's entirety.
    • Welfare (TANF, SNAP etc.) as it currently exists.
    • Social Security.
    • Medicaid.
    • Citizen's United
  • Institute a flat tax on all income (individual and corporate).
  • Extend the Medicare program to everyone.
  • Cease engaging in perpetual warfare.
  • Adopt a basic income guarantee. 
  • Provide free access to educational resources.

Repeal the current tax code in it's entirety

Our current tax code is terminally broken. Everybody knows it, few are willing to address it in a serious fashion. As currently implemented, it merely confuses people, provides full time employment for literally legions of accountants and attorneys and serves as a wealth redistribution mechanism for the rich. In short, plain, earthy English: “let's shitcan it”.

Repeal Welfare (TANF, SNAP etc.) as it currently exists

As a safety net, to say that they are inadequate is being kind. Lets get rid of them and replace them with something that works (keep reading)

Repeal Social Security

See the comments on repeal welfare.

Repeal Medicaid


Repeal Citizen's United

This should be a no brainer. The simple reality is that organizations (such as corporations and PAC's) are not people; they are groups of people. The only purpose this decision seems to serve is as evidence for requiring the honorable justices to undergo annual mental competency assessments. Seriously. Regan suffered from Alzheimers the last two years of his presidency. How do we know the one or more of the justices are not secretly drooling in their chambers? We are entitled to know. The job is far too important for us not to.

Institute a flat tax on all income (individual and corporate)

Under the current setup individuals pay tax on every dollar they take in while corporations pay taxes on what they don't spend (profit = income – expenses). Taxing all income eliminates this. 

Citizenship is like a club and taxes are the membership fees. A flat tax is equitable. Warren Buffett and his secretary now pay the same percentage.

Extend the Medicare program to everyone

Currently this program seems to work quite well. It provides excellent coverage in return for a modest premium. It is much more efficient then the private insurers. We should improve it by getting private insurance out of parts C and D. Lets get rid of the means test and make it available to everyone, not just seniors.

Participation will be optional. Those who would turn to the private sector to cover their health expenditures are free to do so (and God have mercy on their souls). 

Cease engaging in perpetual warfare

According to the DoD, we had 662 bases on foreign soil in 2010. Once we back away from our policy of perpetual war, we should be able to substantially reduce this number. Ideally the only bases we should have are those necessary to pre-position material for rapid deployment purposes.

Adopt a basic income guarantee.

A basic income guarantee (BIG) is where “all citizens or residents of a country regularly receive an unconditional sum of money, either from a government or some other public institution, in addition to any income received from elsewhere.” It would replace the current hodge-podge of social programes. Under a BIG program each man, woman and child would have resources that would be available for basic subsistence. This would be a root, hog or die approach. If one squanders this resource, so be it.

There will be no further funds forthcoming.

Under this approach people would be free to work on things they want to work on rather things they have to work in order to sustain a livelihood. Another potential benefit is that this may well result in a downward pressure when it comes to pay expectations resulting in a broad reduction in the cost of labor.

Provide free access to educational resources

In the 21st Century skill and experience is what is important. That is not to say the traditional structured presentation of information that occurs in a classroom is unimportant, it is merely less relevant. The number of wildly successful college dropouts includes such luminaries as

  • Bill Gates
  • Steve Jobs
  • Mark Zuckerberg

There are hundreds of thousands of college dropouts whose success is more modest.

Access to the information presented in a course rather then classroom attendance is what matters. 

Rather then providing for free tuition with its attendant political friction, we should mandate that educational institutions make the course content available for free. A kind of open source education. We should require that any educational institution that directly or indirectly receives federal funds make their course content available for free.

Now we could take the time to debate the pros and cons of JustJim's proposal versus Abbey's proposal but that would miss the point.

This is just one out of the box proposal out of potentially thousands. 

Historically Americans have proved to be innovative. We are facing huge social, economic and political changes as a result of the rapidly increasing adoption of rapid technological change. This is a big challenge and big challenges require big responses. It is about time we applied our innovative spirit to these challenges.

Let the discussions begin.

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