Skip to comments.Henninger: America's Two Economies ( Must Read )
Posted on 07/26/2012 11:15:51 AM PDT by mojito
For a long time, the United States had one economy. Now we have two economies that compete for America's wealth: A private economy and a public economy. The 2012 election will decide which will be subordinate to the other. One economy will lead. The other will follow.
How the U.S. arrived at the need to choose between two competing economies reveals a lot about the political polarization in the country. Any history of the Democratic Party in the 20th century will recognize its roots in the American labor movement. The party was defined by the names of those unions. The United Mine Workers. The United Auto Workers. The Brotherhoods of Teamsters and Railroad Workers. Consider what those names represented: Both Democrats and Republicans were rooted in the private economy. Unionized workers knew then that this private economy was where they made their living. The arguments were over dividing the productive fruits of that economy. That was your father's Democratic Party.
From the 1960s onward, the professional Democratic Party began to lose its relationship with the private economy. Democratic politicians drew closer to a rising public-sector union movement and its campaign financing, while the private unions declined. This meant the party itself was slowly disconnecting from the machinery of the private economy and becoming part of a rising parallel economy, the public economy of government.
(Excerpt) Read more at online.wsj.com ...
Any history of the Democratic Party in the 19th century will recognize its roots in the Slavery movement.
There is one important paragraph the author failed to include. It is short and goes like this:
The conundrum is that the “Public Economy” cannot function unless 75% of the wealth generated in the country is purely from the “Private Economy.” Otherwise, the “Public Economy” will run out of revenue. The Public Economy does not generate wealth and must rely on redistributing that portion of the Private Economy's wealth which it confiscates. If the Public Economy wins the day in an Obama reelection, it will be doomed to the same fate as the European economy. It will run out of funding sources. The private economy needs to generate 75% of the wealth because a full 50% of that wealth is confiscated in the form of taxes at multiple levels so that it can be redistributed in the public economy. If the private economy ceases to be profitable under the weight of the public economy, it slows and finally stops producing wealth at all.
I’m going to have to cut and paste your conundrum and send it to my liberal family...that is a a great paragraph to go with the WSJ article. Thanks Tenacious!
And it’s people in the private system, including a lot of small business owners that I end up arguing with about Obama.
It’s hard to feel sorry for the middle class - they’re voting to cut their own throats.....
Excellent addition. BTW, how do you document your 75% needed from the private sector statistic?
Think of the government sector as the tribe operating the casino (or cut rate tobacco store or whatever model you want to use).
Think of the private sector as the visitors and customers who generate the wealth. You can even get them to do some of the work you'd normally have to pay for by letting them dress up like Indians.
Only problemo is that there’s another dualism of economies going on, and that’s between the elite 1% and the rest of us, workers and vunables alike. The top 15,000 control $700 billion dollars. Wages have been stagnant since 1970. The R-i-i-i-c-h have drank our milkshake. They haven’t been willing to invest in Jobs for America, but they’ve been willing to LOAN the money to us, so now they think they’ve got a nation of debt slaves, but what the really have is a nation that’s realizing that if they don’t pay back all there lifes theres nuthing the wealthiest among us can do about it.
“I have no sympathy for the German people. After all, they elected us, and so they asked for everything they got. And now they’re getting their little throats cut (makes throat cutting gesture and a little “snick”). Boo-hoo.”
Josef Goebbels character from Untergang
From the viewpoint of empirical evidence, however, 75% makes a pretty good private sector minimum, because exactly half of that number (3/8th) is typical of what a government making up 25% of the workforce by number will consume due to the nature of inefficiencies, lower productivity, complacency brought on by the lack of competition and the like.
The private sector, meanwhile, will function fine with 1/8th less wealth than what their numbers would dictate for precisely the opposite reasons.
So, in general, the private sector (75% of the workforce, but 5/8th of the national wealth) will consent to give up about half of the income they generate to support government as long as there is a perception of being on the same team and being more or less equally well off.
Said perception can be sustained only as long as government's take can be reigned in to 3/8th or less of the economy and 1/4th or less of the workforce.
It probably could and should be actually less on both counts. There is emperical evidence to suggest the optimum level of government sector GDP could be as little as 1/6th or the economy.
However, if it is more than 3/8th, the ratio of wagon riders to wagon pullers becomes unsustainable. The more lopsided the ratio, the quicker though, of course, there are additional adjustments necessary for how long economy is willing to accept such trade-offs due to such things as culture, docility, willingness of a strong ally to provide national defense and so forth,
Great question. Answer: Author's Logic. My number is arbitrary as the actual comparison is flawed mathematically. The percentages are only there to show a ratio of the size of government compared to the size of our private economy (GDP). The author is effective for the point he is making by using these comparisons but mathematically comparing apples and oranges.
The mathematical flaw lies in the fact that all wealth is first generated in the private economy (100% not 75%). Of that, the public economy collects wealth and then spend a percentage of that, which has been historically at about 20%. Using the authors logical comparison, I deduced that if the government gets to a point where the private economy cannot afford to fund the spending of the public economy, then both economies will fail. We shall see this start to happen as the nation experiences runaway deficits and credit rating reductions because it has to barrow lots of money from other countries. Our fed is now spending 25% of our GDP and we seem to actually have crossed some magical threshold where our bloated government can no longer be sustained by a shrinking private sector. By the author's logic, that means 75% is the magic number.
I proposed a gap 75% (+)or Vs. 20% because a portion of the government spending is borrowed money from foreign nations (It ain't even our money). I don't know exactly what that percentage is. But we are both spending American wealth and foreign wealth, not to mention that amount spent solely to pay the interest on the debt. So there must be a gap there (by the author's logic).
I am not an economic expert. So my thoughts are open to critique and refinement. Have at it. I won't be offended if someone can mathematically formulate a tidy solution.
Nevadan explained it better than I. Well said and thank you.
Those who do not learn from history are doomed to repeat it.
Good find! This article makes a clear distinction of paths.