Wednesday, July 3, 2013

Karen Handle for Senate Platform: Erode Wages and Destroy Jobs.

So Karen Handle thinks that Government assistance is the reason people are out of work.

The reality is that working people of this nation face nothing short of a depression.  The political elites seem disinclined to do anything about it (see: recent fixation and prioritization of short term deficits over the very real problem of getting people working again).

Krugman has been writing about this war on the unemployed recently here and here. Noting that efforts to make people desperate via a reduction of unemployment benefits would add fire to the crisis:
While cutting unemployment benefits will make the unemployed even more desperate, it will do nothing to create more jobs — which means that even if some of those currently unemployed do manage to find work, they will do so only by taking jobs away from those currently employed.
But wait — what about supply and demand? Won’t making the unemployed desperate put downward pressure on wages? And won’t lower labor costs encourage job growth? No — that’s a fallacy of composition. Cutting one worker’s wage may help save his or her job by making that worker cheaper than competing workers; but cutting everyone’s wages just reduces everyone’s income — and it worsens the burden of debt, which is one of the main forces holding the economy back.
Oh, and let’s not forget that cutting benefits to the unemployed, many of whom are living hand-to-mouth, will lead to lower overall spending — again, worsening the economic situation, and destroying more jobs.

Another real world reminder of how out of touch people like Handle are is the SNAP Challenge.  It is an effort to encourages people to experience what life is like for millions of low-income Americans living on the average daily allowance of only $4.  The rules of the SNAP challenge are:
  • Each person should only spend $4 per day on food and drink.
  • All food purchased and eaten in this time must be counted in total spending - this includes dining out.
  • During this time, do not eat any food purchased prior to the start of the Challenge.
  • Whenever possible, avoid accepting free food from family, friends and coworkers since these opportunities are not always available to those in need.
  • Eat as healthy as possible, keeping in mind that this is how many people eat every day, whereas you can make up for lost nutrients next week.
A number of stand up members of Congress took the SNAP Challenge including an aide to a GOP congressman who failed at it, not even making it a week.

When there are 3 job seekers for every job opening the facts just do not fit Handle's claim.

But I wanted to take a second, to be fair, and accept it for a moment to see what it tells us about Handle's capacity as a policymaker to solve this problem as it will tell us more about Karen Handle and who guides her views. In the end the question of just how horrid the economy is for working people is far less important than the solutions and ways forward--especially when we are talking about someone who wants to make policy for us.

Handle proposes that we just cut the safety-net out from under people to make them more desperate.  As Krugman has noted this is just mean-spiritied; and while it speaks to her values I'd argue that more importantly it speaks to her beliefs about markets.

The GOP are famous for claiming to love the market system but then just end up pushing the priorities of rent seeking businesses.  This is another example.  Handle wants to make business owners happy by putting a downward pressure on wages.  She wants to do so at a time when hard working Georgians who are doing the exact thing Handle says they should be doing---playing by the rules, getting a job (or two or three), paying their taxes--are already desperate and unable to keep their heads above water.

Handle wants to punish lazy people and to succeed in her goal of doing so she is willing to throw hardworking people under the bus.  The problem we face is one of the types of jobs our economy is creating.  The fact is, good jobs are on decline and we have to start electing policymakers willing to implement strategies that will help incentivize good jobs.  The Center for Economic and Policy Research has done great research looking into the decline of good jobs in this country.

But Handle doesn't want to worry about the decline of good jobs and she does not want to look for market based solutions to the challenges we face. Handle wants to do the opposite--via cutting the safetynet--not out of a love of the market system, but out of a love of her political donors in the business community.

If Handle truly loved the market system she would seek to restructure the market so that upward pressure on wages inspired those "lazy bums" back in to the work arena.  Remember, her claim is that people are satisfied "on the dole" so to speak--wages are not incentivizing people into the workforce.

As John Schmitt and Janelle Jones note in their report Making Jobs Good, there has been, "a substantial decline over the last three decades in the share of “good jobs” in the U.S. economy. This fall-off in job quality took place despite a large increase in the educational attainment and age of the workforce, as well as the productivity of the average U.S. worker."

The fact that Handle skips over the jobs crisis we face is worth noting but again let accept her fundamental claim and see what markets tell us about this problem and why?

The reason wages are not pushing people into the job market is that good jobs are not being created.  To utilize markets rather than Government force is something she might cheer in theory but she seems to take a more authoritarian position.  I think it was Lenin who once said ’If you don’t work, you don’t eat" and its a claim that I believe was ingrained in the Stalin-era 1936 Constitution of the USSR.

Handle wants us to embrace these Soviet Era truths as the solution.

Remember, market prices, to crib Hayek and Mises, bring individual actions and decisions into harmony with each other, with no guidance from any higher source.  If the paltry safety net is what is keeping some people from utilizing their resources in a more productive manner, then we should want to see higher wages and better jobs that drive people back into the job market.  For a worker both labor and leisure are desirable economic goods.  Handle is making the claim that market prices are keeping leisure more highly valued than labor and her answer to use Government coercion to change behaviors.

If Handle was looking for culprit of the dwindling work ethic she sees around her, she might--if she was a believer in markets--point the decline of good jobs across the nation.  She might point out that this change in our economy didn't just happen as a fluke but occurred via policy changes and political priorities and she might try to provide the leadership to push for changes to restructure our markets to start creating better jobs.  Lets face it, its going to require major leadership and political firepower on both sides of the aisle to bring about the changes we need  to fix the decline in quality jobs. I for one wish Handle would be on board to do so.

Sadly, Karen Handles answer is to use state power to increase immiseration and remove what little safety-net we currently have.  Karen Handle wants to put downward pressure on wages not just for the lazy bums but those already working two and three jobs.  We should be seeking policies that improve labor market conditions so that the rise of wages bring people back into the workforce and off of Government assistance.

Karen Handle wants to crib her Senate campaign platform from Lenin and Stalin to force compliance in a miserable economy.  Lets all hope, for the sake of everyone, that the Georgia GOP nominate someone who wants to crib their political platform from market liberals like Hayek and Mises who opposed Government force/coercion and believed in the power of markets to harness to motivate individual actions.

UPDATE: Also see my follow up post.


  1. at least the spelling issues are consistent :)

  2. Sorry, stream of consciousness and you don't even know me. I won't be upset if you delete. | When the entire US economy is in a crunch, where does this money come from? I think the future interest payments on debt made today will surely have a negative impact on future generations. Of course, some of it comes directly from employers (usually the first half-year of benefits); so I think there is a point there about freeing up employer's money at that level, though the timing doesn't really fit Handle's point. | Overall, I caution against the very idea that either party's policies will fix this problem. It has to do with middle-skill jobs disappearing to low-wage countries, India Rupees are still 50 to a dollar. The market forces are very strong for this to continue, and if you wonder why, go no further than your local discount department store, and see if people are checking labels for country of origin. [Ah, I remember when Wal-Mart tried VERY hard to put a US made product up for EVERY category, consumer's voted with their wallets.]

    1. Gary, I'd argue that efforts to restructure our labor market will create improvements. Of course globlaization has an impact but many of the jobs we are talking about can't be outsourced anyways.

      CEPR has done a lot of work on ways to improve the labor market with structural reforms...