Sunday, November 2, 2008

Why I'm Voting for Barack Obama, Part 3: The Economy

I am by no means a brilliant economist. In fact, I scraped my way through MicroEconomics with a "C" in college. But there are two economic issues that I have opinions about in this election: taxes and regulation.


John McCain claims to be against increased taxes... there's even a link on the main page of his website called "Don't Tax Me Joe" (referring, of course, to the now infamous Joe the Plumber). McCain voted for the Bush tax cuts, and he's already said he wants to continue those cuts and expand them as much as possible. The economic theory behind this is that keeping money in the hands of the people encourages business growth and creates new opportunities, while also providing incentives for people to move up in the world.

From a purely economic standpoint, that sounds great. After all, it's easy to decry Obama's tax increases for the wealthy as socialist attempts to spread the wealth around, and what all-American citizen would want that?!?

Well, I would.

You see, I'm looking at the economy from the other side, as someone who's struggling to make ends meet. I have a great education (BA in Sociology and MA.Ed. in Elementary Education) and a job with a great company (teacher in Nike's Child Development Programs). I perform a service that is valuable for our society, a service that I am uniquely trained to do. I take care of people's most precious commodity - their children. Yet there are still months when I have a difficult time making ends meet.

For years before starting my current job, I had no health insurance because none of my employers offered it and I couldn't afford my own policy on my meager income. I've only recently started saving for retirement, and I know I'm not saving as much as I'll actually need (but it's a start). I live in an apartment, and - even in the current "buyer's market" - owning a home seems to be a long way away for me. And I would love to be a mom, but no matter how much I squeeze my budget, I can't afford to have a child anytime soon.

If I'm having a tough time on my salary, I can't imagine how people who make less than me are faring. I did the math... a married couple in which each person makes minimum wage takes home even less money than me - much less! And that's in Oregon, where the state-mandated minimum wage is much higher than in the rest of the country. Somebody's got to do those jobs. We all eat in the restaurants where the bussers and dishwashers make minimum wage. We all load our children onto school buses where the drivers make less than a living wage. We all eat produce that was harvested by people making dismal pay. We all rely on working class people every day. It doesn't make sense to me to create an economy in which a large portion of the population does honest work and still can't live a satisfying life.

The common rhetoric is "Well, if they'd gotten an education and made different choices, they could have worked their way to the top, too." But that makes no sense. In order for our economy to operate, somebody's always got to be at the bottom. We couldn't all "pull ourselves up by our boot straps." Who would wash the dishes, drive the school buses, harvest our vegetables, care for our children while we're at work?

So if a slight increase in taxes on the wealthiest people and corporations (for example, Obama is proposing a three-percent increase on any business's profit above $250,000 per year) will allow for the funding of social programs to help the vast majority of us who will never make that much money in our lifetimes, than I support it.

The gap between the poor and the wealthy in America is ridiculous. There is no reason for someone to make millions of dollars a year, not when there are entire families living in one-bedroom apartments and wondering whether they should pay their heating bill or their car payment that month. Here's an example: according to the SEC, the CEO of Exxon-Mobil made over $16 million in 2007. Of course, that's not much for a company whose net profits totaled over $40 billion that same year. If you do the math, I would have to work 444 years to equal the amount Rex Tillerson made in one year. And Exxon-Mobil brings in the same amount of profit each SECOND that I earn in gross income every two weeks. I don't mind people doing well for themselves, but that's kind of nuts.


The idea behind de-regulation is that when we leave free markets alone, they regulate themselves. And they probably do... over time. But the most compelling argument for regulation that I can think of involves the things that happen in the short run while the markets are balancing themselves out.

By their very nature, capitalist markets are driven solely by profit - corporations are designed to do whatever will make the most money. So ethical concerns become a factor only when they impact the bottom line. Here's an example to illustrate the point:

A toy company comes up with a bright new idea for a brilliant baby toy. They shop around for the least expensive means to produce and distribute the new toy in order to maximize its profit potential. Let's say that in this case, that means producing the toy in mass quantities in a large factory overseas. The factory is staffed and managed externally, so the original toy company has very little direct insight into the production process - but that's okay... after all, this particular factory was the cheapest bidder. They must be doing something right.

Only it turns out that the production was so cheap because it relied on poor quality materials, ones that hadn't been fully tested or approved for use in children's toys.

Eventually, the market will self-regulate. Children will begin to get sick and recalls will be necessary. The toy company will lose market share because parents will be afraid to buy their toys, so they'll switch to higher-cost factories or institute stronger internal oversight measures. They'll make sure their new toys don't contain the dangerous materials that caused the original problem, and they'll advertise like crazy to compensate for the decrease in sales. They won't do any of this because it's the morally correct thing to do - they'll do it to regain their market share and keep their profit rolling in.

But how many children got sick before this happened? And could stronger government regulation have prevented the problem in the first place by requiring oversight of all materials used in the manufacturing process? And what about the other problems that arise when cutting costs is the highest priority? Like dismal wages and working conditions in third-world factories... how will the market self-regulate those things if Americans never really find out about them?

Markets are designed around self-interest and profit maximization. I don't have a problem with that. But there are certain instances when the bigger picture needs to be considered... ethical issues, health issues, and other areas where the potential cost is just too high for any self-respecting society to pay. That's where regulators step in - to do what markets themselves are unwilling or unable to do.

Like Bush before him, McCain has always supported deregulation or worked to undermine the existing regulatory laws. They believe in giving corporations and the market free reign, something that I'm just not comfortable with.

While regulation may not be the biggest economic issue this country is dealing with right now, it does serve as a marker for the overall economic philosophies of the two candidates. And on this issue, like many others, Barack Obama has my vote.

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