Thursday, June 21, 2012

Solving the Economic Crisis

The economies that do the best will be those that attract the best labor supply,

Imagine you own a company. Your company has been growing and has been profitable for some time. You see no reason for this trend to alter. This is the experience you have always known and observed continue. This is like the frog in the hot water that your sadistic frog-hating Science teacher showed you. The frog will continue sitting in the hot water even when it becomes too hot to sustain life for frogs because a.) frog brains are relatively smaller and the notion that death is imminent appears not to register with frogs in hot water and/or b;) the sadistic Science teacher has seen to it the frog can’t jump out and ruin the demonstration.  What it is we school children were supposed to learn from this, other than the fact our Science teacher hates frogs, we have no idea. I suspect if any of us ever got a hankering for frog legs, his house might be a place to inquire if he had any.

Back to the company I claim you own (don’t deny it, I saw you in the last paragraph dreaming about your company, even those readers who actually do own companies). We decide (actually, I am deciding for you since I am writing this and you are not) that we want more profit over time. The way to get more profit, so we may afford to eat more frog legs, is to expand the company. We took some business courses, or read about business practices somewhere, or we learned it on the street from some whore, also known as a banker, that if we borrow money we more expand our business so that it will earn even more money even after we pay back the banker who, if the banker were really so smart, why doesn’t the banker go out and earn more money borrowing money and creating businesses, but I digress.

Governments are like businesses, except they are not. They are governments, not businesses. Governments borrow from banks. They also borrow from themselves. A government may decide to buy something and then say, I’ll pay for it later because I am the government and I say I may borrow from myself. Incredibly, this can work, as long as whoever borrowed the money has the money to pay the person who loaned the money, even if the entity that borrowed and loaned the money is the same entity because whatever the government purchased and said it will pay for later will have someone demanding that future payment.  This works as long as the economy is expanding so that everyone earns more money.

In economic terms, if your productivity increases, things are great, at least economically (your health, sex life, and golf scores are other matters).  Yet, what happens if productivity decreases. Then your economic success decreases, your health deteriorates from increased worry, your golf score increases due to your poorer health, and your significant other is more apt to run away with a younger version of someone like yourself.  Why might productivity at your company decrease? You may have borrowed to expand and you over-expanded.  Over-expansion is not limited to obese people at an all you can eat buffet. People are not buying as much of the extra whatever it is your company offers because you have flooded the market, or maybe your customers flooded their basements and they are spending their money on cleaning their basements and not on whatever it is you offer.

You may over-expand and discover you are unable to find enough qualified employees to do whatever it is you do. This is becoming more of a current problem. The baby boomers are retiring from jobs at larger number than there are baby born more  sooners, aka Millenials, are entering the workforce. This causes many companies problems a double problem as their pension costs increase while they find themselves unable to find enough experience new employees, especially since new employees but the very definition do not have as much experience.  Companies are paying retirement to their expertise and paying for employees who lack expertise.  This may also increase your golf score, and cause other affiliated difficulties.

This is a problem more governments, from local to national levels, are experience worldwide. The elderly population is growing more rapidly than the new labor force. The elderly are using the social services and safety nets that have been established for them in larger amounts than ever before. In the United States, this is helping drive health care costs much higher. The increase in health care costs far dwarfs the increase costs of social security. That is the great American problem.

Economists who better figure these things (because they have data and expensive computers I don’t have, honest) claim that, if little changes in our economy, that the entire Federal budget in today’s dollars will be 100% for debt repayment in about half a century.  That doesn’t sound good to me. Maybe it sounds good to you, but if it does and you are an American, you are not the best of Americans, or you really, really love debt repayments.  That means there all the Federal government budget will go for paying for stuff we already bought, like a few wars, some prescription drugs, a few safety nets, a park here and there, and things like that. There will be no money to buy anything new, like keeping all the parks and military and health care research and members of Congress paid and continuing. That means there will either have to be huge tax increases, which would hurt our global economic competitiveness, or we will have to make huge spending decreases, who could do great harm to large numbers of people.

There is a solution to this problem. Fortunately, it is an easy solution. Unfortunately, in the United States, we are not doing it. We need to increase our economic productivity to increase the number of people paying taxes into the system to keep our Federal government and our national economy vibrant and growing. Some economists believe that could be achieved by adding 50 million taxpayers over the next half century.

So, get busy and start churning out future taxpaying babies.  Hmmm, it seems the message is not getting out there. Even when your significant other runs off with a younger version of you, there still are not enough new babies being born. It seems many of you spend more time on your golf game than your bedroom game.

What will solve the problem is to increase immigration. These smart economists note if we add one million new working immigrants a year, things will be hunky dory. I am not certain what a hunky dory is, but economist tell me it is a good thing.

One thing that is for certain is that, in this increasingly global economy with expanding contact and trade among people around the world, the economies that do the best will be the ones that attract the best labor supply. Those that shut out good workers will fall behind.

I spoke to one of the economists who spoke of the projections of oncoming insolvency. He projected huge increases in taxes and large amounts of unemployment and a lower standard of living where people would expect to see their lives worsen over time and their children living with less than their parents had. He admitted that an addition of immigrants would solve the dire economic forecasts he had, yet he did not believe that Americans had the willpower to allow that to happen. So, I ask you Americans: which would you prefer, the complex solution to this problem which means much higher taxes, greater difficulty in finding and keeping a job, and your children having a lower standard of living than you have, or are you willing to accept the simple solution of allowing more immigrants and having to keep you job, keeping your taxes low, allowing our economy to grow and your children to live a better life, all for the discomfort of having more people around you speaking with accents? If you ask me, and I hope you do, go with the more people with accents choice.

Some American oppose increasing immigration. The American history has been one of immigrant arriving in the United States with large organized groups seeking that no one else is allowed in.  Time after time we have seen America grow because of immigration. Human nature shows us that the hardest working and most productive generation often are second generation Americans.  We need more second generation Americans in America, and the first step is to attract more first generation Americans.

There are some who fear increased immigration because of fears of terrorism. Fighting terrorism is a separate issue that requires deligence from experts who combat terrorism. A benefit from increased immigration is that it may solve one of the main problems those fighting terrorism experience is a lack of people from within the communities that most engage in terrorism that can be recruited to work with anti-terrorist authorities. If the communities are larger with more eyes and ears and noses and other senses within those communities, we may better combat terrorism.

Americans need to remember that we are all immigrants. Even Native Americans entered the continent through Alaska and either stayed or made their way southwards and eastwards over the objections of bears, deers, and other current residents. Unless your family has always lived where humans first formed, you are descended from immigrants. Without immigration, you wouldn't be here today, which would really hurt my book sales.

Americans have survived immigration. In 1890, almost 15% of the population were immigrants. Which is nothing compared to what the percent was in 1620. There was a large anti-immigration organization in the 19th century that called themselves the Know Nothings, which at least shows they recognized their own intellectual shortcomings.

As an aside, if we really wish to fight terrorism, and I suspect most of us do (those who don’t, please report yourselves to the nearest authorities), I do not understand why we require people seeking to become citizens to return to their countries for one year.  Isn’t that handing terrorist groups a list of people to concentrate for recruiting, while they are back in their own countries, further beyond our powers of observation, and closer to contact with the terrorist organizations? Isn’t it better to let these people continue to better assimilate and get their careers and lives moving forward within the United States?  Just a thought.

Let us welcome more immigrants. Several communities have excellent programs where they help locate immigrants into marginal socioeconomic communities that are in decline. These new immigrants often improve their homes and, when brought in sufficient numbers, turn around the economic decline in these neighborhoods such that existing residents see profit in improving their homes. Declining neighborhoods turn into economically growing neighborhoods.

Plus,let’s face it. Our labor supply is diminishing as baby boomers retire in large numbers than Millenials are replacing them. There are also a lot of jobs that many Millenials, due to their generally higher educational attainment, do not wish to do. We need immigrants to do these jobs. We need to attract the best skilled labor from around the world, including creating and keeping our own skilled labor. That is how an economy will survive and thrive.

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