Outlaw Economics: Progressive economists talk job creation, politics at the Student Union

Progressive economists talk job creation, politics at the Student Union

Outlaw economists may not have broken any laws, but their support for progressive policies puts them at odds with the establishment.

This group of heterodox economists challenges the models and assertions of mainstream business leaders, economists, politicians and the media.

A teach-in known as Outlaw Economics 2.0, held Friday and Saturday at the Student Union, focused on job creation and preserving entitlement programs that benefit the middle and working class.

Among the outlaws are Dr. William Black, an associate professor of economics and law at UMKC, and Dr. James Galbraith, a distinguished scholar and chair at the University of Texas-Austin.

Galbraith used the opening keynote lecture to contrast the “outlaws” with what Galbraith termed the “austerity lobby”—deficit hawks and fiscal conservatives focused on reducing the size and scope of government.

“We have an election that is, in symbolic terms, defining the issues for the country and in a very clear way,” Galbraith said.

Galbraith dismissed concerns that the U.S. federal budget deficit and accumulating national debt represent a crisis that needs to be addressed as a legislative priority.

He cited historically low interest rates of 2-3 percent on long-term U.S. bonds and securities as evidence of this.

“If the United States was in danger of going bankrupt, you might not be able to market these at all, and the interest rates would be much higher,” Galbraith said.

Unlike private households, business firms and state and local governments, which have a balanced budget constraint that prevents the ongoing accumulation of debt, the federal government issues its own currency and is not required to finance spending through taxes.

Galbraith said a solvency crisis, such as the one in Greece, won’t happen in the U.S. any time soon.

“There is no operational constraint to stop the Treasury from running out of money,” Galbraith said.

Galbraith also dismissed projections that the debt-to-GDP ratio will increase to 200-300 percent by 2050. He said such projections are an arbitrary forecast that assume GDP growth rates of 3 percent and that federal interest rates will increase to 4 percent.

“It’s a complete artifice that does not withstand scrutiny,” he said.

Medicare, Social Security and job creation

Galbraith said Republican plans to cap Social Security and Medicare costs through a voucher system would hurt the economy, and that they represent a “targeted attack on the health status and finances of the elderly.”

Galbraith also criticized Obama’s “policy of cringing compromise,” arguing the president should expand Social Security and Medicare rather than finding ways to cut costs.

“We aren’t where we were in 1964 [the year before Medicare was enacted] when we knew what we needed to accomplish,” Galbraith said.

Galbraith argued that Medicare helps create and sustain jobs in the health care industry, while improving the care of the elderly.

By eliminating the early retirement penalty for Social Security and allowing retirees to begin collecting checks at age 59, Galbraith said job openings would be created for younger generations while giving older adults a stable source of purchasing power.

He argued that the depletion of the Social Security trust fund could be easily fixed if Congress found another revenue source.

“That [the implementation of the trust fund] was a device to justify drastically cutting payroll taxes [in the 1980s],” Galbraith said.

Galbraith expressed skepticism that the private sector will create jobs. The digital revolution, he said, has made it easier for businesses to cut jobs.

He pointed to data from the Bureau of Labor Statistics. The employment-population ratio of those ages 16 and up has declined from 66 percent, shortly before the 2008 financial crisis, to the current ratio of 58 percent.

It will be up to the public and non-profit sectors to create jobs and reduce unemployment, Galbraith said.

Galbraith said he supports raising the minimum wage to $12/hour, arguing that Sen. Tom Harkin’s (D- Iowa) bill to raise the minimum wage to $9.80/hour from the current level of $7.25/hour is not sufficient.

He argued that a higher minimum wage would help equalize working conditions and stimulate consumption.

Fears that a higher minimum wage would result in job losses come from “labor market economists speaking from supply and demand models and not the real world,” Galbraith said.

Income inequality and the growth of the financial sector

Galbraith and other outlaw economists believe that under the Obama administration, the financial sector has become even more dysfunctional.

Galbraith said the Obama administration has done a poor job handling the foreclosure crisis. He argued that Obama’s policy was to decentralize foreclosures, rather than provide relief for those who have lost their homes.

He said the policy of deregulation in the early 2000s created a massive market for securitized subprime mortgages that was destined to fail.

“When a system is fraudulent to the core, that creates a problem in the aftermath,” Galbraith said.

Galbraith said that the government should shrink, simplify and overhaul the financial sector, with the purpose of serving the public good.

Black expanded Galbraith’s criticisms of the financial sector in the closing lecture, titled “How Banksters Broke the Economy.”

Black said that while inflation-adjusted median household income is the lowest in 16 years, the top 0.01 percent of earners’ share of income is the highest since before the Great Depression.

“It’s the poor who get poorer in all of these circumstances,” Black said.

Black said that instead of facilitating economic growth by putting money into productive investments, the financial sector has taken money out of the economy. Financial sector compensation has risen steadily since 1980.

Black argued that the political right overlooks economic inequality, because it believes inequality provides a profit incentive that leads to growth. Black argued this philosophy has led to the exploitation of the workers.

Black attacked the political philosophy of Mitt Romney’s campaign, which he said portrays the working class as “lazy schlubs” who refuse to work and accept personal responsibility.

As evidence for this, he cited comments made by Romney at a private fundraiser, that the 47 percent of Americans who have no federal tax burden are dependent upon government and see themselves as victims.

“It’s not enough to leave them [the unemployed] without jobs,” Black said. “They’re abused, degraded and insulted.”

Black said that while conservatives and libertarians have focused on fraud and abuse in the government sector, they have ignored the waste created by unemployment—loss of health care insurance, housing, dignity and depression.

“People who are looking for jobs want to work and take personal responsibility, and if they had jobs, they would pay more taxes,” Black said. “The definition of unemployed is that [one is] trying to work.”

Support for the outlaws

The teach-in was sponsored by the Jobs Now! Coalition and several other progressive groups: the UMKC Economics Club, KC99, the Institute for Labor Studies, Move to Amend, College Democrats, the Urban League of Greater Kansas City and UAW Local 249.

Amr Gaber, a graduate student in the School of Computing and Engineering who attended the teach-in, said he has been a member of KC99 since last spring.

“I don’t believe in the philosophy of Ayn Rand,” he said. “I believe the point of our lives is to work together, make a better world and build relationships with our community, not to secure your own personal wealth.”

He said he enjoys organizing because it gives him an opportunity to talk to people “about the issues that matter to them.”

“We have replaced our ability to be good citizens with a rote mastery of being obedient consumers,” he said.

Communications studies senior Hannah Hayes has been a member of Jobs Now! since the group organized at UMKC last fall.

“We call for real jobs, good jobs, living wage jobs and environmentally sustainable jobs,” she said when introducing Black.

Her father, Pat Hayes, is a member of UAW Local 249 at Ford’s Claycomo Assembly Plant in the Northland. He taught a teach-in workshop titled “The Rise and Fall of the American Middle Class.”

“Most of those guys up there—I grew up listening to them talk politics,” she said, “so when they came to UMKC, I joined.”

Jobs Now! meetings are held at 7 p.m. every Wednesday, and the location of the meetings can be found on the group’s Facebook page, www.facebook.com/jobsnowkc/.

nzoschke@unews.com