• Rodney

Government shutdown or the symptom of a larger problem

Updated: Feb 13, 2019

My time in DC has been relativity brief. But over the past few years, I have actually started to get use to government shutdowns. In some ways, they have become the new norm.

In spite of this fact, this one feels different, more like a hostage situation. Depending on what side of the fence you’re on, you may feel like the 2010 government shutdown over funding Obamacare is similar.

Admittedly I am a bit bias. I did not vote for President Trump, and my vote for Hillary was cast with a degree of anxiety. Let’s just say her peace keeping mission in Libya was, well troubling to say the least along with a host of other red flags. But back to my point, answer me this:

What does the political stalemate and shutdown say about the efficiency of our political system?
Are the Executive and Legislative branch so dysfunctional that checks and balances have become mere exercises in political posturing?
Is this how the political process works in the greatest democracy in the world?

After some time pondering these questions, I started to wonder if there was a bigger picture I was missing? Instead of looking at this singular issue, maybe there are other factors to consider. Is it possible that the inability of our government to build consensus is due to slow, but steady political decay across many areas? Or, is this an example of executive branch overreach?

In Karl Polanyi’s 1944 book, “The Great Transformation”, he lays out disruptive strains across four areas as indicators of comprehensive decay. He used different labels, but I summarized them as such:

Now, hang in there. I know this doesn’t specifically discuss the shutdown.

However, I believe the shutdown is merely a symptom of a larger condition.

Polanyi’s framework mentions some big topics, so let’s start from the first area: Domestic Economy disruptive strains. This is a bit broad to address in a blog, so let’s briefly touch on a few points to consider, namely US wage stagnation and the steady decline in the US labor force participation rate.

The current unemployment rate is very low, right? According to the news, the economy is doing great. However, a closer look reveals some interesting things to watch:

  • For most workers, real wages have been stagnant for years. Today’s real average wage after accounting for inflation has the same purchasing power it did 40 years ago. Where wages have increased, they have mostly flowed to the highest-paid tier of workers. This stagnant wage growth has been cited as a key factor behind the widening income inequality in the US. In a 2017 report and again in November of 2018, the OECD reported that over the past two decades, aggregate labor productivity growth in most OECD countries has decoupled from real median compensation growth, implying that increased productivity is not sufficient to raise real wages for the typical worker.

  • What is interesting is that in spite of stagnant wages, profitability seems to be doing well. Catherine Rampell from the Washington Post wrote an article, entitled, “The great decoupling” in October of 2018 stating basically the same. This has been going on for some time and it is not getting any better. This could be attributed to technology supplementation or other factors. In any case, a job with minimum wage increase is not good. It doesn’t look like the cost of living is remaining the same.

  • There has been a steady decline in labor force participation rate within the age of 25-54 age group. Many people are falling out of the job market and consequently not included in our unemployment rate calculations.A quote from the U.S. Bureau of Labor Statistics states, "it seems that the persistent declines in participation for some demographic groups are not cyclical but appear to have their root in longer changes in the labor market.”

  • We are witnessing the decline in workforce quality. As Dambisa Moyo stated in a very interesting book entitled, The Edge of Chaos, where she mentions several economic hurricane headwinds that are indication of failing liberal democracies. According to Ms. Moyo after decades of underinvestment in quality education, the US has a working-age population ill-equipped to work or contribute effectively to this new economy. A quote noted from her book,

The persistence of these educational achievement gaps imposed on the United States the equivalent of a permanent recession.

In spite of recent reports of positive GDP growth and low unemployment rates, there has been a decline in the labor force participation rate coupled with wage stagnation. Additionally, it is quite possible that the growing workforce skill gap is a contributory factor.

On the surface this is just another shutdown. However, just below the surface there are gradual disruptive indicators that we should examine to get a comprehensive picture of our situation.

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