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January 11, 2014

How to bridge a widening wealth gap

By Mike Zagata
The Daily Star

---- — If the government’s figures are correct, the gap between the haves and the have-nots is growing. Two questions logically follow: should that be a surprise; and what are we going to do about it?

A decade or so back our politicians made a conscious decision to change the US economy from a manufacturing-based economy to a service-based economy. It was popular to send our manufacturing jobs offshore and to pass NAFTA (North American Free Trade Act) which allowed countries with lower manufacturing costs (especially labor costs) to flood the US with cheap goods. It seemed like a good idea at the time to transfer all those “nasty” environmental and health issues (externalities) somehow tied to manufacturing, either by perception or reality, to some other country and then buy their goods for less than our own manufacturers could sell them.

Unfortunately, our middle class jobs went with that manufacturing. For decades our middle-class existed and prospered due to the manufacturing giants that provided good paying jobs and benefits. It is difficult, if not impossible, for the service industry to compete with that record. In other words, McDonalds isn’t able to provide a comparable level of compensation and benefits and still compete. There is an effort underway to unionize that workforce and thus enable those workers to better advocate for increased pay and benefits. However, if they get them, the cost of a big-Mac will increase.

Looking back, it’s easy to see that a similar thing happened to our manufacturers. Early on the unions provided a much-needed force to improve workers’ well-being. Over time, however, they may have gone too far and contributed to the inability of those manufacturers to compete on a global basis. It wasn’t just the US economy that was going through change – we were beginning to face the complexities and challenges of competing in a global economy.

So what are we doing about it? Our president has on his agenda a desire to redistribute the wealth possessed by US citizens. Some might refer to that as socialism and we’ve seen how that worked out in the USSR – not well. It punishes rather than rewards for hard work and creativity and, over time, folks lose their enthusiasm for it. However, in the short term he is moving forward with plans to increase taxes on the “top 1%” and to fully implement the “Affordable Health Care Act” or Obama Care. So far, the latter appears to be a plan to get those who the government feels can afford to pay for health care to pay for the health care of those it feels can’t afford to pay for it, i.e. socialism.

What we don’t seem to be doing is taking the steps to create economic conditions favorable to re-establishing a healthy middle class – i.e. manufacturing. We don’t yet have a National Energy Plan. We do, however, have a plethora of laws and regulations that don’t always offer a piece of cheese at the end of the maze. On the brighter side, due to a “new” source of low-cost energy, we are seeing some manufacturers return to the US.

It’s not a matter of “fault” or “blame” for the disparity in wealth. In one way or another, we’ve all contributed to the problem. We shopped for less-costly goods. We sought higher wages. We protested energy development. Now we’re faced with the results. Let’s get on with doing what it takes to narrow that gap, fund our schools and build better roads – strengthen our economy.

MIKE ZAGATA is a former state Department of Environmental Conservation commissioner, Ruffed Grouse Society president and oil company executive.