Thursday, October 27, 2011

Macro economic 1A - Why income distribution is important and must be managed.

The chart below demonstrates the circular flow of output and income. When there is equilibrium in an economy, the amount of the output equals the amount of income as measured by dollars.  When the cost of producing the output goes down for any reason the savings can be passed on to consumers as cheaper prices or retained by the business as higher profits which can result in higher wages for workers,  higher salaries for CEO and higher dividends for stock holders. If there is a balance of all four, lower prices, higher wages and salaries, higher profits, and higher dividends, everyone wins; the pie gets bigger and the slices remain the same. This has not been happening. Households, the suppliers of labor and the primary source of demand have not been getting any of the lower cost of production.

The problem is that the cost of producing the output has been going down because of cheaper labor which reduces the demand for the output. The cheaper labor is the result partly because of automation but mostly by corporate influence on government which accommodates an oversupply of labor either through immigration or outsourcing the work where the labor is cheaper. We have seen both of these elements decimate the bargaining power of labor. Now with the  Citizens United decision, corporations have been successful in states such as Wisconsin and Ohio in eliminating collective bargaining. 

The net effect of this has been an increase of wealth in the corporations owners and the upper income groups and less wealth in the middle class from where the predominance of the consumption comes. The result of this is the increased capacity of producing goods along with an decreased demand for those goods. The result is high unemployment and eventually collapse which will also bring down the producers of the goods.

This problem will not correct itself. The only way it can be corrected is the government redistribution of wealth or purchasing power.  The rich family already has two or three cars, the poor family can't afford to buy one. Government can do this by the three following steps: 1. Increase the taxes on the families who already have a car and lower the taxes on the family that needs one. 2. Restoring the bargaining power of the unions. 3. Creating jobs in the private sector by subsidizing infrastructure improvement and the retaining of teachers, fire fighters, police officer and nursers.

Monday, October 3, 2011

The birth of Colleen, my third child, October 6, 1955

October 6, 1955

My timing was off, I thought as I lay in bed glancing at the iridescent face of the clock on the nightstand.  I had missed the World Series by one full week.  As the sunlight began to filter into the bedroom the faint pains became stronger and were exactly five minutes apart.  With confidence I woke him announcing “It’s time to go now.”  “It’s too early.  What’s the big hurry?  The World Series isn’t till next week!”  While dressing I thought of how different it was this time than when the twins were born.  He was joking instead of being in a panic.  We were in our own home now, and I had just painted the room designated as the nursery pink.  The ironing was caught up and the house was clean.  I had washed my hair the night before and my bag was packed.
            As the motor of the red Buick Special warmed up he asked, “You got the address of this place?”  “Yes, Saint Joseph’s Hospital in Orange on Orangegrove Boulevard.”  “Never heard of it.  Oh well, I guess we’ll find it.”  He had a smile on his face and a great deal of confidence.  After all, this wasn’t like the first time.  He only got lost once along the way.
            Even checking into the hospital went smoothly.  After the birth prep he was with me again holding my hand as the pains became more frequent and intense.
            Soon the doctor ushered him out to the father’s waiting room as the final stages of birth drew near.  Dr. Stout called to the nurse who wheeled in the gurney and gently, with expert hands, they lifted me on to the rolling bed and steered me in to the delivery room across the hall.  Antiseptic clung to the air in the cool, sterile room.  The delivery table was centered in the room and had antenna-like chrome stirrups extending upward from one end.  Carefully I was moved from the gurney onto the delivery table.  I was surrounded by doctors and nurses in green uniforms with gloves and surgical masks and head coverings on.  I had to suppress a laugh, they really looked comical.  After a few bearing down pains, and enormous pressure, I felt a surge of relief and knew the baby I had nurtured inside me had begun life outside the womb.  The sterile atmosphere of the room instantly dissolved as the baby’s first cry was heard.  I gazed in wonder as the doctor laid my warm, wiggly newborn on my stomach.  I felt a mixture of joy, exuberance, love and thankfulness for her.  She was the most beautiful newborn I had ever seen!  Wisps of dark, curly hair capped her perfectly formed head, and as the corners of her mouth curved, dimples appeared on each cheek.
            My stay in the hospital lasted four days, and I felt sorry for the six girls I shared a room with each time they watched the nurses bring my beautiful daughter to me and then had to settle for their own red faced wrinkled little ones.
            People just couldn’t resist coochy-cooing her whenever I took her on outings.
            Today, as a woman, she is even more beautiful and sweet, and I love her dearly.  Maybe that’s why I cry when I hear Stevie Wonder sing “Isn’t She Lovely,” because I knew if I were a song writer that’s just about what I would have written.