Listening to Thom Hartmann's radio program, the only halfway-interesting program that is broadcast during the day where I live, is literally like a practicing ground for economic fallacies. It has strengthened my ability to find them, and has given me fresher examples for future usage. Hartmann (who like most of the media folk around him, believes "deregulation" and "capitalism" caused the current economic depression) subscribes to the "demand drives the economy" nonsense that unfortunately made John Maynard Keynes one of the most celebrated economists of the 20th century.
Hartmann recently post a blog on the Huffington Post (read it here: http://www.huffingtonpost.com/thom-hartmann/want-to-stimulate-the-eco_b_267517.html) which recommended that, since he believed our stimulus plan wouldn't work because it wasn't adequately protectionist, we should lower the retirement age to 55.
Such an idea is literally insane, not to mention anti-labor. What Hartmann is recommending as a policy to help workers get new jobs is to forcibly limit individuals' entry into the market and kill off future productivity -- read: new wealth, new jobs, etc. In other words, create new jobs by killing off jobs. This sounds quite similar to when FDR attempted to stimulate the economy by destroying food supply in the 1930s. In short, insane.
Here, I will explain why, by responding to remarks of Thom's op-ed column (Thom’s comments in bold):
"Instead [of bankrupting social security and destroying the economy], [lowering the retirement age to 55] would eliminate the problem of unemployment in the United States. All those Boomers retiring would make room in the labor market for all the recent high-school and college graduates who are now finding it so hard to find a job."
First off, Hartmann's own support of the minimum wage shows he fails to realize that the minimum wage is a hurdle that is not jumpable by the types of high-school/college graduates that he specifies here. Without the minimum wage, these types -- who are unemployed for a reason: because employers do not value their services more than the minimum wage rate government makes them pay -- would be employed at lower wages. They could then begin earning new skills, building a résumé and moving up in the work world and gaining higher wages.
This idea of Hartmann's would lower productivity and increase the costs of goods because of lower productivity AND because of the increased volume of spending chasing the already more-expensive goods.
On Hartmann's show today he debated John Lott (author of the book "Freedomnomics") and dismissed Lott when Lott stated that it would lower productivity by saying that the 20-somethings would merely take the jobs, and productivity would then be the same or better.
But this ignores two things: 1) the people over 55 are no longer creating goods and services -- ie wealth. They are merely collecting government benefits and spending them. 2) If the 20-somethings were the best for the jobs that people over 55 held, they would have been hired instead of the older people . In short, we can a priori know that a worse person for the job now holds the job, thanks to a limiting of the labor supply by the government.
Also, Hartmann ignores the fact that the jobs that those 20-somethings would have taken had government not given a disincentive for 55+ year olds to retire will now either not be filled (less productivity) or be filled by less competent people (also less productivity). As you can see, this retirement age change has now disrupted the entire division of labor and the entire economy for the worse.
"If enough Boomers left the job market, it would even flip the current dynamic of too-many-people-chasing-too-few-jobs upside down, and create a tight labor markets. Tight labor markets drive up wages."
Hartmann needs to ask himself why there are fewer jobs than people right now. He blames Reaganomics and NAFTA/GATT for outsourcing labor jobs, as if the only way to ensure good jobs exist is not freedom and voluntary exchange but government forcing citizens to ONLY buy stuff made in America (which is exactly what protectionism does). Free trade drives prices down and allows individuals in different countries to specialize in what they excel in. Without free trade, government is arbitrarily forcing a cartel with objectively less productive operations to form to benefit a single “class” (the working class) at the expense of all of society. It is special interest policy at its worst.
The truth is that right now the economy is vomiting out the malinvestment caused by the boom created by Alan Greenspan's Keynesian interest rate cuts in the early 2000s. Once the economy rebounds and readjusts itself to voluntary consumer preferences, more jobs will be created -- which is what happened in 1920-1921 thanks to Warren Harding's laissez-faire response to the 1920 economic crash (which was worse than the 1929 crash) The only thing that will get in the way of this is the types of interventions that Hartmann proposes.
"Additionally, these new-into-the-workforce people can then pay off student loans, buy new houses and cars, and otherwise drive the economy from the bottom up."
In other words, create the very sort of insane spending that got our country into the economic crisis and into so much debt in the first place. And the economy is never built from the bottom up, unless you believe that somehow supply can magically catch up with demand. Ever heard of savings, Thom?
"To further tighten the job market and drive up wages (and tax revenues), modify the Fair Labor Standards Act of 1938 -- which tightened the labor market and reduced unemployment by establishing the 40-hour work week - to include all hours worked by a person. We could also, like in France, drop the 40-hour maximum-workweek threshold to 35 hours (used by the Mitterrand government to successfully lower unemployment and stimulate the French economy). A final step would be to emulate the rest of the developed world and require by law that every worker get at least two to four weeks a year of paid vacation -- further tightening the labor market."
In this example, just like the last one, Hartmann is recommending lowering productivity and increasing raw spending. In other words, he is recommending lowering supply and increasing demand , which kills living standards by forcibly subsidizing inefficiency and waste. It is the polar opposite of what is helpful for an economy. He and other "progressives" may quip that the inflated wages spent by the workers will in turn create more jobs and thus stimulate more supply, but the fact is that this is never sustainable -- this can only stimulate little tiny offshoots of economic growth which do not spread throughout the economy, and even then they are offset by the reduced amount of productivity.
And the 40-hour work week and 8-hour workday reduced unemployment? That always increases unemployment, because the individuals who would voluntary work more are barred from doing so by the government.
"This is the main reason why the labor movements of the 18th and 19th centuries fought so hard against child labor; they knew that if children were removed from the labor marketplace, then the supply of labor (the number of people available to work) would decrease and the price of labor (wages) would increase. And, sure enough, that's exactly what happened - and it began the creation of a blue-collar middle class."
Precisely -- one of the key reasons that unions fought so hard for restrictions on youth entering the marketplace was not for social justice like the high school history books say, but it was to protect their own bloated wage rates. And Hartmann views this as a good thing? It's forcing these youth out of a job so other workers can protect their own inflated wage rates -- again, special interest policy at its worst. This is not what led to the creation of a middle-class -- this is a nonsensical post-hoc-ergo-propter-hoc fallacy (I'll add here that Hartmann has stated previously that "the ‘middle class’ is not a normal result of ‘free markets.’" [4] and that it has to be created by government -- in other words, he believes that freedom would naturally create a bunch of rich people and the rest of people poor, starving, and begging for mercy – a reading of Rothbard's and Mises' writings on monopoly may be in order for Thom).
"It's also why the labor movement pushed for an 8-hour day and a 40-hour maximum workweek. By reducing the amount of labor available from each worker from the average 60 hours a week or so people were working before 1938, the labor market tightened up, increasing the number of people who could be employed and raising wages."
Again, this lowers productivity. As I stated before, the 40-hour workweek and the 8-hour day are ceilings that forcibly prevent people from voluntarily choosing to work more, which would actually give them more money to spend anyways. Unemployment increases as a result.
"Of course, this is the exact opposite of American labor policy ever since the Reagan/Bush/Clinton/Bush era. Reagan drove down wages by busting unions (which tighten a labor marketplace); declared an amnesty for millions of then-illegal immigrant workers to increase the supply of labor and depress wages (particularly whacking the carpenters and other construction trades unions); and began the process (completed in a big way by Bill Clinton with NAFTA and GATT/WTO) of dismantling tariffs, taxes, and laws that made it expensive or illegal to export American jobs."
More of the same. Here, he even decries amnesty for illegal immigrants (!), a standard progressive political position, simply because it would bring down the wages of carpenters and construction workers. But last time I checked, those people need food and jobs too. There's a reason, after all, why they're coming over here.
What is really happening here, if the immigrants are indeed hired, is that the companies are getting better workers for a lower price, thus increasing productivity and living standards. In turn, it is up to the newly-unemployed construction workers/carpenters to realign themselves in the division of labor in a manner that is most productive to consumer wants. Taking down the government's fiat labor restrictions like the minimum wage would be a simple way to get that ball rolling.
On tariffs -- here is Thom Hartmann, who constantly slams "corporate dominance", yet advocates tariffs which force a protected cartel to form within our country. These measures ensure corporate dominance as well as, like before, lower supply and increase demand, which is terrible for economies and living standards for ALL people, including the working class (in order to understand this, you need to understand the long run effects, not just the short run effect -- in essence, you need to see "that which is unseen", to quote the title of a famous essay by Frédéric Bastiat--but I'm sure Hartmann would simply label Bastiat a right-wing ideologue or something).
"Reagan also put into the chairmanship of the Fed Alan Greenspan, who openly declared that his most important job as chairman of the Fed was to prevent "wage inflation" -- a term which he exclusively applied to working-class people. Greenspan is still preaching that now-discredited and anti-American philosophy he learned from Ayn Rand, in fact."
In a previous blog Thom Hartmann referred to Alan Greenspan as an "anti-regulation Libertarian" [1]. Saying that there is a libertarian running the Federal Reserve is akin to saying there is a libertarian running the DEA or the FDA. If you're in charge of one of them, you've proven you’re not a supporter of even basic libertarian principles.
And Thom Hartmann is clearly an Ayn Rand illiterate. Ayn Rand decried central banking and the Federal Reserve, so even though she correctly thought it was wrong to artificially boost wages, she did NOT say that a central bank czar should do it. Hartmann is so wrong on this it's appalling.
Oh, and being "anti-American"? Isn't that the same stuff I heard from Bush and the neoconservatives?
"It's shocking that ideologues like Greenspan, Reagan, and Clinton believe this, but they do. And the only way to reverse the past 29 years of Reaganomics/Clintonomics is to tighten up the labor market again. While a great start would be to pull out of our insane trade treaties and begin again protecting American manufacturers, that will take a decade for the impact to be truly felt even if we were to go back to our 1980 tariff levels today."
Greenspan, Reagan, and Clinton are not free marketers (it was Greenspan's Keynesian reduction of interest rates that caused the boom/bust, not deregulation). A true free market ideology lies in natural rights, which is an objectively determinable ideology. As much as Hartmann criticizes ideology, he himself subscribes to one, as does everyone -- even a nihilist -- because even the nihilist has some sort of a priori objective belief that nihilism must be right. Ideology is inescapable, and is thus irrelevant in any sort of criticism because critics of ideology are themselves using ideology to critique ideology . It's like when David Hume attempted to refute reason -- he himself used reason in the attempt. So anyone, authoritarian or libertarian, who uses the term "ideologue" in a criticism is automatically a hypocrite no matter the example.
"But providing space for a good chunk of the 16 percent of the American workforce over 55 years old will immediately take us to nearly zero unemployment and dramatically stimulate the economy. Then we can begin to bring our manufacturing jobs back home from China and the other important steps”
Thom Hartmann believes that economies lead to wealth stratification unless government force steps in to regulate things in the name of the working class. Does he have an explanation for the quick recovery from the depression of 1920? Didn't think so. Does he have an explanation as to how anarchic Iceland lasted 1000 years? Didn't think so. Instead he subscribes to the public school textbook explanations, which he seems to have memorized.
The "zero unemployment" from a forced reduction of the retirement age to 55 would be a counterfeit one, since those retired 55-and-up people would still be working were it not for the disincentive that the government provided them.
True zero unemployment would only occur in a free society, without misguided policies propping up wages and preventing the supply of labor, as well as land and capital goods, to liquidate to normal levels. If you do not allow the liquidation to occur, and instead do little tricks like Hartmann's retirement age recommendation, you create massive disincentives for laborers that make it impossible for the economy to ever recover.
And even with all this aside, it is bizarre that Hartmann sees falling wages as a bad thing. Falling wages mean labor is becoming cheaper, and thus easier and easier for companies to afford to hire. Once wages are low enough, they are employed, productivity takes off, and more and more jobs are created.
This "liquidation of labor" is precisely what happened in 1920 when the economy crashed and government did nothing to prop up wages or demand. It was over a short time later. But it's not surprising that Hartmann doesn't know or understand this concept, because in a previous blog on the Huffington Post he stated this:
"In Hoover's world (and virtually all the Republicans since reconstruction with the exception of Teddy Roosevelt), market fundamentalism was a virtual religion........Hoover enthusiastically followed the advice of his Treasury Secretary, multimillionaire Andrew Mellon, who said in 1931: "Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate. Purge the rottenness out of the system. High costs of living and high living will come down... enterprising people will pick up the wrecks from less competent people." [2]
In fact, Herbert Hoover was a hyper-interventionist who instituted the first New Deal in 1932. Hoover's New Deal of 1932 set up public works, restricted immigration, granted loans to states for relief, etc [3]. Wow Thom, that really sounds laissez-faire to me!
In conclusion, Thom Hartmann's economic views are misinformation. He is correct that there is a corporatocracy in this country, but he advocates the very ideas that got them into that position of power. The only reason Hartmann retains any economic credibility among anyone is because he has weak supporters of the free market like Yaron Brook and Dan Geinor from the T. Boone Pickens Institute on as guests to debate on government control of markets vs. free markets. Were he to have someone of real economic wisdom on the program, this would change. Perhaps this is why such individuals are never on -- because keeping the illusion of Hartmann's economic wisdom alive props up his salary rate and prevents it from liquidating. Teehee.
Addendum: (I will add that Hartmann is decent on civil liberties, and at least is a consistent progressive/democratic socialist, something which I cannot say about most individuals in the Democratic Party and a good number of progressives).
Citations:
[1]: http://www.huffingtonpost.com/thom-hartmann/debt-is-not-money_b_186423.html
[2]: http://www.commondreams.org/view/2009/01/26-0
[3]: http://mises.org/rothbard/AGD/chapter11.asp
[4]: http://www.commondreams.org/views04/0312-08.htm
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