The REAL problem with the economy

[johnd83]

I am sure that this is preaching to the choir, but I think it is a valid point to be made.

The national deficit is a symptom of a complex set of conditions that are made far worse by the current anti-tax crowd. The real problem with the economy is deeply structural and something that has been completely missed by the current debate. I am a robotics and automation engineer, and in a cynical way I spend my day figuring out ways to take away jobs from working class people. In fact I personally don't do this type of work because I do research on stuff that people can't do anyway, but the fact remains that robotics, automation, and computers are completely replacing a lot of workers. I look at this as the fourth great paradigm in human civilization: first we were nomadic hunter-gatherers, next we were farmers in villagers, and then we reached industrial farming and production. The old industrial model required a lot of workers to do dull and repetitive tasks, and the administration of this society required a lot of bureaucrats and paper pushers to function. Now we are going through the automation renaissance, and a lot of the lower level jobs are being replaced by computers and robots. This is a massive structural change and results in a lot of unemployment.

There are a lot of economic consequences to high automation. We have had leading effects of automation because we have outsourced a lot of the repetitive jobs to third world countries but even those jobs will soon be done by robots so even if we managed to get manufacturing back it will not really help unemployment much here. On a micro-economic scale robots are great and I expect the capital investment required to buy robots to plummet in the next decade or two as most of the cost are in stuff like electronics which are always getting cheaper. On a macro-economic scale automation has a very peculiar effect: it results in a sever concentration of wealth for those who own the robots, and a large unemployed group of former workers with no access to resources to create or consume wealth. We are finding ourselves in this situation now.

So the question is, what do we do with this glut of unemployed people who are unemployed due to a structural transition in the economy? History has shown that they will find something useful and productive to do. I wonder what our society will look like when we are free to work to improve our society instead of doing repetitive soul-crushing work. But in the meantime we have two options: provide some money to float those who are unemployed, or watch them starve.

And that is the heart of the matter. Are we really going to watch good people suffer because of a structural economic problem in a land that can feed easily a billion people? This debt ceiling debate is nonsense, it is like using cough syrup to treat lung cancer.

[mike_c]

1. absurd theater is about all we can expect from national leadership these days....

Absurd theater and betrayal, too.

[johnd83]

2. I forgot to mention peak oil, that sure isn't helping

[Drahthaardogs]

3. We could make things a hell of a lot better if we put a tariff on Chinese steel.

Coal mines, foundaries, rail roads, and steel mills would all fire back up. We produced good steel, plus, compared to China, our steel processes were a lot less environmentally damaging.

One little item like Chinese steel has huge implication on this economy.

[Warpy]

4. I can sum that up a little quicker

It wasn't enough for the Republicans to fatten the supply side. Their policies also choked off the demand side of the consumer economy.

No one is hiring right now because customers aren't out there with money in their pockets looking for goods and services to buy.

What history has shown us over and over again is that to have a vibrant economy and a strong middle class takes government intervention. Capitalism will concentrate all wealth into as few hands as possible without it and then the whole business stagnates and so does the country.

[johnd83]

6. Capitalism is unstable

Pure capitalism is what we control guys call an "unstable system". Money inherently goes toward those who have capital to invent. High concentrations of capital lead to decrease in economic activity and poverty. It is not that capitalism is good or bad, it is just unstable. Treating pure capitalism as an ideology is insane, it is just a really complex system that is useful but not optimal if left uncontrolled. An interesting analogy is an F-22 jet. Without a control program it is incredibly unstable and impossible to fly. With a control system it is astonishingly effective.

[baldguy]

5. Teabaggerism can only exist when lies are treated as reality.

And the real horrific thing is that the Dem leadership - including the President - go along with the lies.

[FreakinDJ]

7. "structural transition in the economy" - BULL SHIT

I'll see you "robotics and automation engineer" and Raise you a "Automation Systems Integrator"

The Structural problems facing the economy have nothing to do with "Robotic Arms and CNC Cells" on the production floor. The Structural Problems with the Economy is the Corporate Tax Code. Desperate employment adds seeking CNC operators is proof enough of that

Many many Fully Automated "Turn the lights out and Go Home While the Machines RUN" can not buy the Raw Material for the cost of the parts manufactured in China. Thanks to Wall St and Hedge Fund Managers Manipulating the Price of Commodities (ie:Aluminum, Steel)

Today's Corporate Model is ship ALL production off shore to take advantage of GAPING TAX HOLES

Not until the Corporate Tax Code is addressed will Americans return to work

Sorry for the Rant

[johnd83]

8. My point was actually slightly in the future

I am actually a very high-tech research engineer with work that has been presented internationally several times in the last few years. My point is probably a little more general and slightly in the future compared to the current manufacturing state of the art. A lot of the jobs being lost have to do with things that are more clerk-type jobs that are being replaced by computers. The Watson-type computer is going to wipe out a lot more. The issue with commodities I think is due to China's massive housing bubble. I am not really sure what we can do about that in a more short term scenario. Also there are lots of things in the pipeline that are going to allow robots to leave their current workcell setup.

I completely agree about the tax code, I really wish they would fix that obvious problem.

[FreakinDJ]

10. Well when you actually enter the Working World - Get Back to Me

Hate trashing on you but I hear that same speech time after time in a backhanded argument in favor of Dysfunctional Corporate Tax Policy and lopsided Free Trade Agreements. Yes there are lots of problems facing American Manufacturing sector - most significantly the Tax Code - and I don't mean that in a TeaFarty kind of way.

BTW: my latest project "A Green Project" is being sold for $20 Million - to bad I was only contracted

Oh - and Welcome to DU

Stick around - we probably got a few more things to talk about

[johnd83]

11. Always interested in a debate, not a flame war

Their argument works because there is a nugget of truth. They just ignore everything else. They are actually really good at that type of propaganda.

[FreakinDJ]

12. True - what I find difficult to believe is

Admittedly I haven't researched this enough, but I am not sure the Off Shore/China manufacturing model works without the "Off Shore Profits Tax Exemption"

China has a flat 25% Corporate Tax WITH a 10% Capitol Gains Tax applied on top. Additionally any goods or materials shipped into China is subject to a 20% import tariff. America has a 35% Corporate tax but the Effective Tax Rate of Corporations is 23%. Huge MultiNationals such as Google or GE armed with divisions of Tax Attorneys and numerous resources to avoid taxes at their command commonly pay effective tax rates of 2 or 3%

My question is does the Off Shore production / sales in United States model of Corporate business WORK without the Off Shore Tax Exemption ?

Here is what is really perplexing - Grover Norquist and Bill Clinton AGREE on the need to move away from the current Corp Tax system loaded with special interest tax exemptions and move to a flat 25% Territorial Corporate Tax system void of the numerous loopholes.

For 1 that would level the playing field between the Huge Multinationals and smaller upstarts. It is Small Business that creates 67% of all new jobs in America, but those small businesses can't afford a fleet of lawyers nor the capitol required to partake in all of the tax dodges. Subsequently they are all too often gobbled up by the larger Tax Dodging Multinationals, the workforce laid off, and production facilities moved off shore.

So far that model has moved an estimated 43,000 manufacturing facilities offshore at a cost of 3 million US manufacturing jobs

[johnd83]

13. From my research it is even stranger than that

A lot of Chinese companies are making money through property development. For instance Lenovo makes their profits off real estate development, not laptops. Also there is lots of cheap capital floating around because the Chinese have no way to invest their savings except corrupt banks. So in truth I think a lot of companies are actually operating at a net loss. I can't guarantee this claim is 100% accurate but it would sure explain a lot. The places I have gleamed the info from are not official as you really can't get good information out of China.

Also, the Bay Bridge replacement was made in China and barged over. Are you kidding me?? That is wrong on so many levels. One of my biggest pet peeves of outsourcing.

[FreakinDJ]

14. Are you local to SF bay area ?

"Lenovo makes their profits off real estate development" would indicate to me there is extremely heavy competition or they are dumping their product. China does give some exclusions on the Capitol Gains tax for selected industries - I'm sure laptops is one of them

A good friend of mine is an R&D engineer for Intel's memory division. I was in close contact with him all during 2004 - 2005 when the supposed take over of the Simiconductor Market by China was scheduled to occure. China had invited Intel in with huge concessions and then basically took over a major share of the China Div to control the take over. Problem was Intel didn't quite hand over ALL the technology. Sure they are making 12" wafers but they are lacking certain things to truly be competitive in the world markets.

But back to production facilities

Sure they get cheap labor but the production facility is not supported by any infrastructure. They have to build and operate their own power plant, water treatment facility, ect ect ,,, It is a costly endeavor and Intel would not have entered China without ample concessions

[johnd83]

15. Product dumping on a massive scale

I think we are seeing product dumping on a massive scale. I am just waiting until their bubble bursts and things even out. Also, even if we do lower our credit score through stupidity they will still be forced to buy our bonds, otherwise the yuan would appreciate and they would lose their low-cost advantage.

Actually IBM had the same problem with infrastructure in India. It is hard to work with intermittent utilities and communications.

I live in the northeast but have worked in California.

[FreakinDJ]

16. Try reading this paper outlining Off Shore Corporate Tax Abuse

I realize the paper is written by the Peterson Economic Institute who is "Highly Supportive" of Free Trade, but in their argument in support of the US transitioning to a "Territorial Corporate Tax System" they include ample illustrations of the "Who How When Were and Why" of Corporate Off Shore Tax Abuse

http://www.piie.com/publications/chapters_preview/4051/06iie4051.pdf

The document is locked so you can't "Copy and Paste" any of the contents

[Dj13Francis]

9. The real problem with the economy?

Here I was hoping that you were gonna say it was the F'n RepubliFUCKERS. F them! FFFFF TTTHHHEEEMMMM!!! AAAAAAAAAAAAAA