Obama should save the banks, not the bankers Pt.5

Story Transcript

PAUL JAY: … (00:14) Welcome to The Real News Network and our continuing—…. (00:19) Welcome to The Real News Network and our continuing series of interviews with Tom Ferguson on the economy. Thanks, Tom. So how important is the issue of wages? As we know, wages—.

TOM FERGUSON: Look, don’t make me laugh. We know wages are really crucial for any ordinary person’s everything.

JAY: That we understand.


JAY: How important is the fact that wages haven’t moved much, certainly in relationship to productivity, for more than 30 years? How much is that a root cause of the current crisis? And if so, are any of the current measures from the Obama administration addressing it?

FERGUSON: Well, I actually don’t think it’s much of a—what I’d say is you have a bad condition, but this crisis didn’t come out of wage inadequacy. I mean, one wants to say it’s the sort of exact opposite of the old Elisabeth Kübler-Ross, when bad things happen to good people, when good things happen to bad people. I mean, no. This was a financial crisis brought on by lack of regulation. It’s not even a global imbalances problem that fed into the lack of reg-—. I mean, the stuff they were selling in the core economy of the world turned out to be rotten. Everybody thought this thing would end when some large dollar holder in Asia or in the Gulf, the Persian Gulf, thought that they would just sort of get out of dollars or something like that. None of that happened. This was a domestically caused crisis, and it was started, as far as I can tell, in the financial sector. Now, otherwise, I suspect it would still be going, they’d still be rolling up debt, they’d still be loaning, you know, more credit cards to folks. I mean, all I can say is, you know, it’s a problem. In the background was always the fact that the population was not gaining much out of all the vast increases in productivity, but they were just making the super-rich becoming ever richer. But, you know, I could not tell you, I don’t know of any theory that would say that caused this financial—I mean, that looks to me like really financial regulation was—. I mean, they blew themselves down, in other words. Now, the question is: how can you fix this, since this is the thing that’s crucial for the ordinary person? I mean, on this, I certainly think that should be the chief issue in American politics. You know, I have to say, the two things you’ve got to do right off is you’ve got to get to a sort of reasonable budget, you should be running a budget deficit if you’ve got unemployment, and, you know, you should be going into surplus when you’re at full employment. I mean, that sort of just a straight, traditional Keynesian position strikes me as exactly right. They got to do that first. It would be nice if they would fix exchange-rate misalignment problems that encourage folks to just shift stuff out of the United States. I mean, you know, I actually favor a sort of world full-employment with exchange rates and equilibrium.

JAY: How do you get to full employment if you don’t have more real purchasing power?

FERGUSON: Well, you know, I don’t have any problem with the use of the state to do it.

JAY: But just simply print money and hire people?

FERGUSON: If you don’t like just that, you can always just do the old full-employment, balanced—pardon me, the balanced-budget multiplier, remember, where you just tax exactly equivalent to the amount you want to spend, but you get a multiplier out of that. And some more people—I mean, national income actually goes up, and the budget deficit does not increase at all. But, you know, you can just print money, and, I mean, I don’t have a problem with printing money, as long as you’re not at full employment. You know what I mean? Once you get to full employment, that becomes stupid, or you’re getting near it. So, you know, you need to run—all I’m basically really saying is you’ve got to have a fiscal and a monetary policy aiming at full employment.

JAY: But isn’t part of the issue that real purchasing power requires more wealth to be distributed amongst people who work and the wages need to be more realistically tied to productivity, that you have so much capital in so few hands, they keep coming up with all these machinations and ways to earn on their capital, which in the final analysis comes back to whether people can buy stuff or not?

FERGUSON: Look, this underconsumptionist approach, I appreciate the spirit. It’s not clear to me that—and I would like to see the economic model that shows you clearly that goes from, if you like, limited wage power to economic collapse. I mean, my sense is that an awful lot of gaps in the last 20 years got made over by extensions of credit, and just purchasing power went upstairs. It might not break down. That’s not an issue I’d claim to have a good fix on. What I do think—never mind whether the thing has to collapse. I mean, why not just say, "Hey, look, we don’t want an economy like that," and just aim the policies away from it? I mean, if the question boils down to what can you do about wages, I mean, I repeat, the first thing you got to do is you got to run a fiscal and monetary policy that’ll allow you to get to full employment. I also think you’ve got to deal with exchange-rate misalignment. Then I would certainly think about wage subsidies. And above all, you’ve got to redo the federal budget so that it stops being largely, if you’ll allow the—sort of subsidies to the rich. I mean, much of the defense budget is spent on stuff that just—you know, it may be of interest to some multinational overseas; it’s not any vital American interest. And a huge chunk of what the state in the United States actually spends itself on, spends its money on, is just stuff that is just support for upper income groups. I mean, if you could retarget state spending to a reasonably efficient medical-care-delivery system, if you could sort of fix schools and fund them adequately, if you could sort of make credit available to sort of ordinary people as they try to sort of either start businesses or even just go to college, things like that, you’d do a tremendous amount to reorient income flows in the United States over time too. And so I think you could do a lot to sort of drive up—. And you can encourage unionization, I mean, which—I mean, the card-check business ought to just pass.

JAY: That’s the Employee Free Choice Act.

FERGUSON: Yeah, the Employee Free Choice Act. Yeah. And, I mean, those policies would all tend to support ordinary people’s wages. And if you redid the tax system so that—I mean, there’s a huge amount of—. You know, the social security tax falls, you know, hugely on ordinary people and largely leaves the rich off. I mean, there’s a cap on it right now. I forget what. It’s about $15,000, something like that. After that, they don’t pay on it. I mean, that’s absurd. If you redid the tax system, you would find wages and also the share—seeing the wage problem as part of a question about the government budget too. You’d make the lives of an awful lot of Americans much easier.

JAY: Well, in the next segment of our interview, let’s get into the issue of politics and finance, and why some of these measures that you’re suggesting aren’t being done. Please join us for the next segment of our interview with Tom Ferguson.