E The Road To A Post-Corona Boom - Part 1

The man with the white tipped cane stood up. As everybody turned towards him, the woman next to me leaned towards me and whispered, “No matter the forum, he always says the same thing.”

The man had a simple complaint, one he had delivered time and again. He wanted to work, but as soon as he took in a paycheck, no matter how small, he’d lose the benefits he collected as a blind man. He wanted to preserve his benefits, even if he got a job.

He wanted to contribute to society, without threatening the safety net he needed to survive.

As I look at the economic catastrophe sweeping the world, I find myself reminded of that man.

Photo by Science in HD on Unsplash

The U.S. unemployment rate, including those “absent from work due to COVID-related reasons” is already close to 20%. Vast numbers of people are people are being kept on payrolls despite a lack of work. The actual ‘unemployment’ rate is far higher than is being reported.

Most focus on the economic hardship. Jobs are lost, rent and mortgages can’t be paid, investments have vanished, bankruptcies are spreading. In this environment, our first challenge is ensuring people’s basic needs are met. We can produce food and we can subsidize rent and mortgages.

Even if we succeed in these areas, we’ll be failing to address what I would call the spiritual hardship. As that blind man made clear, resources are not all that matters. Jobs are not just a way to create or acquire resources. Jobs can give those who have them a fundamental sense of meaning, purpose and, ultimately, fulfillment. With a productive job, you are contributing to society. You are contributing to something bigger than yourself.

In the aftermath of corona, even the best subsidy and resource distribution schemes will leave tens of millions lacking the opportunity to lead fulfilling lives. Just as with the blind man’s subsidy, those distribution schemes are already keeping low-skilled workers at home. Impressive unemployment benefits are making workers reluctant to return to work. In this environment, some are suggesting boosting the minimum wage to help those workers through these challenging times. Of course, in an environment where there is less opportunity to create value, higher minimum wages will just price more Americans out of the workforce.

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Mike Faragut 7 months ago Member's comment

Great comment thread. But DRM, I disagree. In fact I think the US should make it mandatory to wear a mask outdoors. Science has proven that it helps limit the spread of #COVID19 and countries and states that have made it mandatory are faring far better.

DRM 7 months ago Member's comment

First of all, I wear a mask whenever I'm within a few meters of strangers, because I have, not one, but all of the preexisting conditions that puts an individual at high risk. However, the little that "science" or scientists have "learned" about C-19 is pathetic at best, with many of them contradicting one another or themselves every week, week after week. I've seen reports saying that masks help prevent the spread of the virus and I've seen reports that say the virus can escape the mask of someone infected and then penetrate the mask of another individual. But, look at the numbers. On the whole, humans are at no greater risk of contracting or dying from C-19 than we are of contracting or dying from the Flu virus. Take into account that there is a vaccine for the flu and yet, according to the CDC, 80,000 Americans died from the flu during the 2017-18 flu season, while 42 million Americans we infected and 900,000 were hospitalized. Do you want to be forced to wear a mask every flu season, maybe every time you are in public, year-round, for the rest of your life? Taking into account that our “brilliant” government decided to count all deaths as C-19 deaths, when an individual died, having contracted the virus, regardless of whether or not it contributed to the death, the numbers are significantly inflated. Add to this the number of elderly people who died in retirement homes, because government officials forced these homes to accept infected individuals and add to that the number of individuals who contracted the virus from someone they were forced to “shelter in place” with, then the number of deaths become much closer to the annual flu deaths. Don’t forget to take into consideration the fact that if there were a vaccine for C-19, it would in fact be much less deadly than the flu, or at least no more deadly. Finally, reports from several sources show that the forced quarantines “caused” overall more deaths than the virus itself and this does not even take into consideration the immeasurable damage done to the US and world economy, which put more than 50 million Americans out of work. But, most importantly, the freedoms guaranteed by the US Constitution, prohibit every single forced restriction that has already been imposed on the citizens of our once great nation, by the mayors and governors of almost every city and state in the country. If this ever gets in front of the Supreme Court, there will be mud on the faces of all of these politicians at best and possibly blood spilled at worst. I don’t want my freedoms, which I fought for as a US Army Infantry Officer, illegally taken away or the freedoms of any US citizen. So, no, I don’t want anyone to be forced to wear a mask in public, outdoors. I do believe that businesses and other organizations have the right to require a mask to be worn while on their premises. If you are afraid of being infected, stay out of public, but don’t restrict the freedoms of your fellow Americans. FREEDOM!

Mike Faragut 7 months ago Member's comment

I'm glad you are staying safe and wearing a mask. I simply don't understand those who view wearing a mask as a weakness or would actually make fun of people who wear them (which Trump HAS done). It makes no sense - if there is even a chance that wearing a mask can keep you and others safe, why not wear one while out? They aren't THAT uncomfortable. It seems to be sheer stupidity to me.

Kirk Sheffield 7 months ago Member's comment

I agree. At first I felt that people have rights, but we have plenty of other laws to help save lives. We make people wear seat belts for example. What's the difference? Even more so, why should I die because others are too lazy to wear a mask.

Joseph Cox 8 months ago Author's comment

I wrote a piece that brought together all the various policies under a single concept - empowering America... talkmarkets.com/.../empowering-america?post=265437

Joseph Cox 8 months ago Author's comment

I've added a few wrinkles to this. Instead of eliminating the minimum wage, it could just be lowered (as subsidies raised) in times of high unemployment. This could be predicated on a standard schedule. It would have a similar effect as the above, but cause fewer ideological challenges.

Secondly, is a wrinkle I'd just forgotten about. In the case of non-business asset sales (think houses and cars), people could be reimbursed for the tax paid up to the amount that was paid when they purchased the asset. So if you buy a house for a million dollars, $250,000 would go to tax prior to reaching the buyer. When you sell that house for 1.1 million you would be able to file to only pay tax on the final $100,000 - or $25,000. Likewise, if you buy a car for $50,000 and then sell it for $25,000 you would get back the tax on the sale - in essence only paying for what you consumed.

Businesses would just have business expenses and so would have their initial purchases supplemented with no option for cash back on sales. Thus, this sort of filing would be the exception, not the rule.

Joseph Cox 9 months ago Author's comment
Joseph Cox 9 months ago Author's comment

Next part added. It is about universal health care...

talkmarkets.com/.../the-road-to-a-post-corona-boom-healthcare-part-2

DRM 9 months ago Member's comment

The blind man with the cane needs to use it to beat the hell out of the politicians who got us here in the first place! No incentive system, no tax system, no wage system, no economic system whatsoever, can possibly work when politicians, Democrats and Republicans alike, throw away TRILLIONS $$$ of Dollars they don't have. The "House of Cards" is eventually going to collapse and like nothing anyone has ever seen before. Every great society, in the history of mankind, eventually collapsed. I'm sure the citizens of those societies never thought it would happen, just like the citizens of our "great" society can't see it, imagine it or believe it, even though it's really very easy, if you simply take the time to look up from your computer or iPhone screen. And, don't think the end will simply be an economic collapse. When the great nations of history faced intense internal strife, war has always been seen as a means of deliverance from the impending tragedy. If you think our politicians have led us down a slippery slope, wait and see what comes next. Also, you should understand that this will not be another Korean War, Vietnam War, Middle East War or even WWI or WWII. We are closer than we've ever been to nuclear war and I'm not talking about the fact that we've pushed the Russian bear into a corner and are poking it with a sharp stick. Our greatest threat to peace is China and we are mostly responsible for giving them the economic and technological means necessary to arm themselves. Minimum wage? Seriously?

Joseph Cox 9 months ago Author's comment

The article was about economics not nuclear war :)

Throwing away trillions is going to serve as an economic damper for a long time to come. If people see how broke the US actually is, it could deliver a catastrophic blow.

But broken, bureaucratic and corrupt systems can also hold on for a long time. Look at Byzantium.

DRM 9 months ago Member's comment

Neither the Byzantines nor their enemies had nukes.

Gary Anderson 9 months ago Contributor's comment

They probably crashed after weakening the lower classes. Also; we are the world's greatest threat. Not China.

DRM 9 months ago Member's comment

How do you measure the threat? And why do Americans who despise America, stay?

Texan Hunter 8 months ago Member's comment

I've always asked the same question!

DRM 7 months ago Member's comment

Because their full of crap! They know there's no better place on earth, no better place to live, in history, than the USA.

Gary Anderson 9 months ago Contributor's comment

We are continually provoking China in the South China Sea. We are the greatest threat to world peace.

DRM 9 months ago Member's comment

This may surprise you, but I despise that our presidents and congress continue to sacrifice American soldiers in military conflicts, along with trillions of dollars, on practically every continent, year after year and to no avail. No one benefits except the military industrial complex and the politicians they fund. But, I neither support, nor care about those who've become our enemies. We should leave the world to its own demise. The world is full of conflict, as it has been since the beginning of time and will be until the end of time. What a great country we could have if it weren't for politicians.

Gary Anderson 9 months ago Contributor's comment

We need China, the only real growth machine in the world. China may leave us to our own demise.

DRM 9 months ago Member's comment

Have you been to China and why do you have an affection for a communist dictatorship with slave labor camps?

Gary Anderson 9 months ago Contributor's comment

Look at it this way. China has brought 700 million people out of poverty. I am not a fan, but respect is due. China bailed us out of the Great Recession. They may not help us now.

DRM 9 months ago Member's comment

You can thank the West for bringing China out of poverty. Thank the American and European companies that exported jobs and technology to China. Thank the Western markets for scarfing up China's production. Thank Bill Clinton for sending rocket scientists to fix their missiles that can now reach the USA.

Gary Anderson 9 months ago Contributor's comment

Why would you treat China any differently than Japan? Japan is an ally. China is a fake enemy, set up to be one by our perverse government.

DRM 9 months ago Member's comment

I agree that our government is full of perverse, corrupt politicians. Unfortunately, though there are some honest and good intentioned politicians, there is no uncorrupt government and probably never has been anywhere in the world, at anytime in history. I have flown around the world many times, more than 3 million miles as an adult, for both pleasure and business. I've been to more countries than 99% of Americans. I've lived in Europe (Western and Eastern) and in Asia, as well as both coasts of the USA, and in the North and South. I've seen the corruption that exists elsewhere and it's ugly. Unfortunately, corruption is getting worse and worse in America. About China, if a country acts the same as an enemy, conducting espionage, stealing technology, trade and military secrets, are they not in fact an enemy? Do we have to wait until they attack us by surprise, before we consider them an enemy? Remember Japan?

Gary Anderson 8 months ago Contributor's comment

Japan's economic boom came years after Pearl Harbor and is the reason why your car doesn't fall apart every few years.

Bill Myers 9 months ago Member's comment

While I don't consider China an enemy (at least not yet, that may change if Trump wins a 2nd term), they are certainly not an ally. Japan is.

DRM 9 months ago Member's comment

I'm a patriot and a capitalist, but I believe that the American corporations, to be more exact, the executives at the American corporations, who exported our jobs and technology overseas are no different than those who betray their country during time of war. They're technically traitors! Their greed and short sightedness will cost future American generations immeasurably. About Japan, allies sometimes become enemies, think about the Soviets. Hopefully, this won't be the case with Japan. One of the biggest problems we face is the insane idea that all cultures have the same morals, values and ethics as we do. They don't! If this were the case, Pearl Harbor would never have happened.

Gary Anderson 9 months ago Contributor's comment

You aren't a capitalist. Free traders are capitalists, and that includes China! Why would we want our greatest customer base to experience hardship? We want customers to prosper. That is capitalism.

Jack S. Chen 8 months ago Member's comment

Gary, China is NOT a capitalist country.

Gary Anderson 8 months ago Contributor's comment

Actually, the economic miracle of China is based upon free trade and low tariffs. When the USA was young like China, our tariffs were far higher than China's are.

DRM 8 months ago Member's comment

Show me proof of you claim!

DRM 9 months ago Member's comment

Why do you think that I'm not a capitalist? I'm an entrepreneur who owns multiple businesses, trading freely with my customers. Based on my research, according to Forbes, Mexico is now America's biggest trading partner, then the EU, then China. India will someday overtake China. If you compare imports/exports or the "trade imbalance", we purchase almost 4 times as much from China as they do from us. About what capitalism is, you need to look at a dictionary. I think that you are either a Chinaman disguised and an American, married to someone from China or have some other connection with China that is clouding your ability accept reason.

Gary Anderson 9 months ago Contributor's comment

Chinaman? You use a negative term, Chinaman? My natural father was born in Key West. You must understand that US tech makers must be able to trade with China. The Chinese can afford the products. But they are now being stressed. Our companies will pay dearly.

DRM 9 months ago Member's comment

I disagree! The US "needs" no trading partners. We have all the natural resources and technology necessary to be self sufficient. We don't need the rest of the world. We would be much stronger and economically sound had we never engaged with China. It will be very interesting to see if Trump follows through on his promise to fund the return of American businesses supply chains and manufacturing to the USA. By the way, saying that your natural father was born in Key West sounds exactly like something a foreigner would say if they were trying to show that they were truly American. My heritage is Irish/Cherokee!

Gary Anderson 9 months ago Contributor's comment

That is ridiculous. We do not make all that we need. China does. We don't. You are naive.

DRM 8 months ago Member's comment

Speaking like a Chinaman again. Like a Maoist Chinaman. I did not say that we "make all that we need". I said that "we could", if we chose to. You're naive to think we couldn't.

Joseph Cox 9 months ago Author's comment

DRM Gary Anderson Bill Myers my take on China...

talkmarkets.com/.../the-road-to-a-post-corona-boom-foreign-policy-part-3

Angry Old Lady 9 months ago Member's comment

Why is the answer to get rid of the minimum wage rather than to raise the minimum wage. The minimum wage is to protect workers from being taken advantage of. In an economy like this, people might be willing to work for a few dollars per day. That's practically slavery. It used to be like that here and still is in some 3rd world countries.

DRM 9 months ago Member's comment

Do you have idea why McDonald's, Burger King, KFC, Pizza Hut and other fast food chains are installing kiosks in their restaurants for customers to order and pay for their food, along with the new pickup counters? The kiosks replace employees as businesses fight to keep their costs as low as possible, in order to stay in business and make profits.The major benefit is cost savings. Forcing a $15 minimum wage, or any minimum wage, for entry level labor, ultimately results in fewer jobs, especially as more businesses take advantage of technology developed to help them reduce costs. Labor costs are typically the single highest cost for a restaurant. The wage that businesses choose to pay, at all levels, not just entry level jobs, is the lowest they can get away with. That's the nature of business. When the labor force exceeds demand, wages drop. The opposite occurs when there is a shortage in the labor pool. Entry level jobs are a "commodity" which means wages move with demand for that commodity.

Joseph Cox 9 months ago Author's comment

If you raise the minimum wage you'll raise unemployment (at least long-term). The cost of labor, combined with improvements in technology, has led to marginal automation getting the leg up (think self-checkout, fast food ordering screens, German and Japanese factories). We shouldn't drive labor costs down to address this - if machines are cheaper, great. But we shouldn't artificially raise them either. Instead, we should make it possible for anybody who isn't severely disabled or a criminal to be worth employing. Dropping the obligation on companies to provide a minimum salary enables this. At the same time, we add an obligation on society to supplement those with low wages.

This is a method of getting people into the workforce and subsidizing the little value they can return in this sort of environment.

Of course, as the economy improves the value they can deliver will rise. This is why software developers, doctors and many others don't get paid minimum wage - there is labor market demand that drives up their salaries. This is also why 98.7% of Swiss full-time workers make more than $37,000 a year - despite there being no minimum wage in Switzerland.

People are worth more in a successful economy.

In the modern American economy, employers can't band together to force down wages on employees. There is robust competition between employers and industries for talent. A few months ago, this meant that only 2% of workers earned minimum wage. A robust economy drove up wages. We don't have a robust economy, so instead of minimum wage we'll just see mass persistent unemployment.

I'd prefer to cleanly and simply subsidize the working poor than put them out of work.

Bindi Dhaduk 9 months ago Member's comment

I don't get it. So the man with the cane was blind? What does that have to do with anything?

Joseph Cox 9 months ago Author's comment

He couldn't work because we have a benefits system that 1) threatened his subsistence if he earned a living and 2) required him to be worth more than the value he could deliver.

This is about addressing those issues.

Joseph Cox 9 months ago Author's comment

A friend wrote: "Read the article on TalkMarkets. It is a good idea. You write “spending could be classified as business spending. In these cases, taxes on spending would be refunded.” In this case what we have is a VAT, Value added Tax. This doesn’t change the idea, I just think it is a more accurate description.

One downside is that people currently consider what they spend their money on private. This would force you to show everything you buy to the government.

The argument could be made that the government could find this data by looking at credit cards and bank statements but currently they need to search it is not handed to them. The other issue is the burden of retaining and dealing with all the paperwork for those that don’t have a credit card although I suppose that using debit cards would handle that."

I responded:

A VAT requires a connection in the goods used. It doesn't apply to salaries for example (or replace related taxes). It also requires collection by the business. It is an enormous filling and paperwork burden.They figure out value add but in a very intensive way. This is just cash flow add, which is far simpler. You just have to follow cash, not goods. And you don't need to link inputs and outputs.

The government would only need to be able to see details in an audit. Otherwise all they need is amounts, vendors and dates, not identification of what was purchased.

I am imagining reporting paperwork only being needed for:

1) Non-electronic spending on which you want a subsidy (need evidence so you can collect it)

2) Non-electronic revenue (so you can pay tax on it)

3) Spending you want to classify as business spending (so you can justify it). I'd also add charitable spending to the non-taxable category, and it would also attract audits.

Everything but category 3 would just need meta-data - who from, who to, amount, date/time.

A debit card could handle it. And, for people who are 'unbankable' there could be a government sponsored account that allows no overages etc... but is only used for this purpose.

Joseph Cox 9 months ago Author's comment
Gary Anderson 9 months ago Contributor's comment

You are such a typical Republican. You have no real solutions. The problem since 2008 is that the Fed and government do trickle down. But trickle down does not work in an environment of weak demand. We have weak demand. Supply side does not work in that environment. Republicans will never get this.

Joseph Cox 9 months ago Author's comment

I'm actually not a Republican.

I'm not sure where the trickle down is here. The typical trickle down description seems to be very low tax rates and just drive lots of high-income which results in more demand lower down the curve. I'm not sure how that labeling applies here. After all, this is quite a high tax rate and it is also progressive.

Most importantly for me, this not only makes it easier for Betty to have a business, it also has an extensive income support system. I'm pretty sure that isn't typical supply side Republicanism.

The label just seems kind of irrelevant.

If I were to characterize left and right, right would be focused on enlarging the pie and left on making sure everybody has enough of it: Creation vs. Absence of Want/Fear.

This approach is about addressing both. But creation for me isn't some big supply side thing - it comes down to regular people having fulfilling and productive jobs. And the absence of fear isn't about just collecting a guaranteed income - the lack of work rots people (just look at studies on early retirement and early death).

Do I care about supply? Of course. Money without supply is just paper. But I also care about demand - not as a driver of economics but as a reality: people have needs and society ought to help meet them.

I am not interested in making sure people have money, if they have nothing to spend it on.

There are lots of examples of that particular catastrophe.

For me, you ought to aim somewhere in the middle: finding a way to support both creation and the absence of want/fear.

Gary Anderson 9 months ago Contributor's comment

Certainly trade Warriors like Trump have changed the Republican dynamic. Trade warriors shrink the pie. But thanks for letting me know you aren't a Republican. As far as what the Fed has done, it appears skewed to money interests. The Fed does not seem to be geared to assisting end demand.