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When Ignorance Isn’t Bliss

Thursday, January 8, 2009

Guest Post

When Ignorance Isn’t Bliss

by Cheryl Rankin

It is interesting where one can find information regarding the economy. I was reading an article in Wood Digest magazine, October 2008 issue, titled “When Ignorance Isn’t Bliss” by Don Shultz. Very informative and actually right down the line with what I consider to be basic common sense.

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The writer begins by stating that what you don’t know CAN hurt you. He goes on to point out one fact that most of us are aware of, and that is the one regarding our government spending more than they are taking in, which is bad economics any way you look at it. And of course we ALL had our fair share of political rhetoric about how each candidate plans to address the economic dilemma we are currently facing.  So obviously this is not the ignorance that the writer is referring to with his choice of title.  No, what this article brings to light like a shining beacon of reason is that our government needs to pay attention to the source of income and the inherent risks to those sources.

He writes that there are basically three types of organizations that participate in the economic chain: Those that  generate wealth, those that consume it, and those that redistribute it. Wealth-creating jobs include manufacturing, construction, mining and farming. Companies or individuals that produce either durable or consumable goods create wealth.  Then we have the service organizations such as retailers, law firms, accountants, medical facilities, banks, restaurants, theater, media and the like that redistribute wealth across the economic chain. They primarily depend on the wealth-creating enterprises for their flow of revenue. And then we have the organizations that primarily consume wealth, and these would include local, state and federal governments, public education, law enforcement, military, fire departments, highways, and entities of that nature. Basically Shultz states that a healthy economy exists when we have a steady or growing number of wealth-generating entities in relation to the redistribution and wealth-consuming entities. It is very important that the wealth-creating sources always stay ahead of the wealth-consuming jobs.  This, unfortunately, has not been the case, and he proceeds to present statistics that substantiate this.

According to the Bureau of Labor Statistics the number of manufacturing jobs has fallen substantially from its peak of 19.5 million in May of 1979 to a level of 13.6 million as of May 2008. But what makes this decline even worse is the increase of government workers over this same period. In 1958 there were 7.9 million workers in government. By 1979 this number had risen to 15.9 million. As of May 2008 the number had climbed to 22.4 million. Then if you add the additional 8.3 million workers in education the number of wealth-consuming jobs is up to 30.7 million, exceeding the total manufacturing jobs by over 17 million!

In 1958 there were 6.3 million more jobs in manufacturing than in government. By 1979 the gap narrowed to 3.6 million. That gap has closed steadily until 1990 when government jobs caught up to manufacturing jobs. From 1992 to May of 2008 3.7 million more government jobs were added and 3.3 million manufacturing jobs were lost. As of May of this year wealth-consuming government jobs surpassed wealth-creating manufacturing jobs by 7 million. And now President-elect Obama has made known his intent to add another 600,000 government jobs which will increase this figure to over 7.5 million!

This should be sending up red flags all over Capitol Hill, but what is their solution? The solution I hear bandied about the most is the need to create more jobs. Most definitely, yes! But what type of jobs?  Certainly NOT government wealth-consuming jobs! It is not the role of the government to create jobs. It is actually their responsibility to create an environment in which wealth creation can occur.

The writer then goes on to explain why the decline of manufacturing jobs in the U.S., and surprisingly it is not what most people have been inclined to think it is. The prevailing assumption is that corporations are greedy or that foreign trade agreements are the primary causes. Not so. These assumptions totally ignore the real question of the uncompetitive business environment that exists in the U.S. due to bad policy and over-regulation.

Over the past 30 years, excessive, repressive legislation and constrictive regulatory policy has, to put it simply, created an economic environment that is highly unfavorable to manufacturing businesses. Structural costs today show a 42% increase over the levels of 2003. Structural costs include indirect overhead expenses such as corporate taxes (among the highest in the world!), regulatory costs, tort litigation, energy costs, and employee benefits including health care. With the exception of health care most of the costs are the direct result of legislation and regulations enacted over the past 30 years.

Our legislators have a responsibility to their constituents to make good economic decisions. They must be held accountable for their decisions. They must put partisan politics aside and address this alarming trend immediately. Failure to do so will only end in an economic meltdown. There is already a lot of damage that must be undone and it must be addressed quickly. More regulations and even bigger government will not fix the problem.

The writer ends by stating that we must help our leaders understand that they must do everything possible to encourage the re-growth of manufacturing within the country. We need to tell our elected officials that they must pare down to the basic necessities within the wealth-consuming jobs sector if they want real economic change, and we MUST make them listen! We must do everything we can within our power to inform our government at the local, state and federal level that they must not drive manufacturers out of business or off-shore by over-regulation and unwise legislation. They must not exacerbate an already dire situation by creating even more wealth-consuming jobs. In this instance, knowledge is bliss.

For a link to the article complete with charts and additional statistics please go here: When Ignorance Isn’t Bliss

Editors note: During the Amnesty/Immigration battle in Washington in the spring of 2007, Cheryl Rankin was a regular visitor to this site and posted many comments. I enjoyed Cheryl’s well constructed posits and asked if she would like to write a guest post. Thank you Cheryl Rankin!

Posted: 1700PT  01/08/09


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