This fall I was invited to cover the the Keep It Made In America Tour put on by the Alliance for American Manufacturing.  I spent a week driving around Michigan, Ohio, Pennsylvania and West Virginia, ejoying the fall colors and visiting small towns all along the way.

I live in Silicon Valley where in spite of the high unemployment — still 10.6% — it’s still pretty nice here, so the extent and especially breadth of the decline of so many cities and towns was a shock.  Everywhere you go you see America’s infrastructure crumbling!  Of course I know this has been going on, but when you actually come from somewhere that is still pretty nice and see it firsthand – and everywhere – you really see it.

As I drove around these states I saw pretty much the same thing in town after town. As you approach the town on the highway the first thing you encounter is what I will call the vulture circle that surrounds it. This is the circle of Wall Street-owned chains emulating the Wal-Mart model of sucking cash out of the area and sending it away to the wealthy elites who own … almost everything now. These are the national chains that are all the same in every town, all selling the same stuff, all made in China, all putting the local small businesses out of business.

As you drive into town the next thing you encounter is the circle of home equity extraction, with newer houses that have taken on big first and second Wall Street mortgages. These houses mostly look OK — except the foreclosures with the brown lawns and grass growing in the cracks in the driveway. This area has car dealers and strip malls that used to sell expensive cars or nice goods.  These dealers and stores feasted on those “take money out of your house” refinancings or second mortgages. Now they have nail and hair salons or are just “for lease.”

As you get closer to the center of town you come to the areas of older houses, more of them boarded up than you want to see, with old, boarded-up stores on a few of the corners of the larger streets. Where there are still-occupied houses they have bars on the windows.

Finally you come to the old, crumbling downtown where there are many empty storefronts, some boarded, the lost dreams of the local small business-owners.  Here and there you see, between the vacant lots, a few government buildings.

And then somewhere is what they always call “the old plant.” This is one or more closed-up, fenced-off, rusting old factories or mills.  They are fenced off, with lots of broken windows, and maybe part of a building is falling down.  This is where the people used to work but the jobs moved to Mexico or China.

Much of the country is like this now. So many of the older small towns, crumbling, the money sucked out by the Wall Street elite. The factories sold off, closed. The people can’t make a living, the towns can’t make a living, the country can’t make a living, the Wall Street elite making a killing.

You can see the process starting here in Silicon Valley, too.  As you drive around this area you see that one of every four or five office or light-industrial buildings has an “Available” sign. The region has the same number of manufacturing jobs as it had when the “tech revolution” began.  The rest have moved to China.  We don’t make cell phones here.  We don’t make flat-screen TVs here.  We don’t make computers here.  We certainly don’t make iPads here — even though Jobs is his name!  

Even exclusive Palo Alto has empty storefronts on the main drag. (You know the economy is bad when the rug stores on University Avenue are actually going out of business!)  It is even happening here. It will get worse.

In July Intel’s retired CEO and Chairman Andy Grove wrote an important opinion piece,

How to Make an American Job Before It’s Too Late, in which he warned,

Clearly, the great Silicon Valley innovation machine hasn’t been creating many jobs of late — unless you are counting Asia, where American technology companies have been adding jobs like mad for years.

[. . .] As time passed, wages and health-care costs rose in the U.S., and China opened up. American companies discovered they could have their manufacturing and even their engineering done cheaper overseas. When they did so, margins improved. Management was happy, and so were stockholders. Growth continued, even more profitably. But the job machine began sputtering.

Please take the time to read Grove’s entire piece.

The storm that created the rust belt is heading our way, and we need to pay attention.  What will it take for American companies to create American jobs rather than jobs outside America?

This post originally appeared at Speak Out California.

Dave Johnson, Speak Out California

The following letter appears in today’s San Jose Mercury News:

State not geared up for high-speed rail

Is high-speed rail really the answer in California? I think not. I originally thought, great, let’s match Europe’s and Japan’s advanced transportation with our own high-speed trains.

However, California is not Europe or Japan. We do not have convenient trains and buses running everywhere you could possibly want to go in every city.

Consider that if you traveled from San Francisco to Los Angeles by high-speed train in 2½ hours, what do you do when you arrive? Catch a bus or light rail to your destination? Sorry, too inconvenient and time-consuming. Rent a car? Sorry, now you have lost the economy of train travel as well as the time savings.

Either alternative adds at least two hours to your trip making the time equivalent to driving.

I say, “no on high-speed rail.” Let’s save the money and reduce our debt in California!

Let it sink in what the writer is saying here: We should not even try to catch up to the rest of the world, because we have already fallen so far behind that it will cost too much.  Instead let’s just try to pay off some of the accumulated debt.

The writer is bearing witness to the results of many years of tax cutting and cutbacks in our government.  After the tax cutting started in the 70s and 80s we stopped maintaining the infrastructure, so now we do not have convenient trains or buses or mass transit to use after the high-speed rail reaches your destination.  We instead accumulated debt.  

So here we are.  The consequences of decades of cutbacks are arriving.  The rest of the world leaps ahead of us.  China has nearly completed a network of 42 high-speed rail lines connecting the major cities, and we can’t even get one project off the ground.

It’s certainly not going to get any better until we start asking corporations and the wealthy to pitch in and pay back some of what they gained from the infrastructure that we built in California, back in the decades before they got tax cuts.

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Dave Johnson, Speak Out California.

“But” Watch is when you see Republican junior propagandists write letters to the editor, call radio stations, etc. and begin them with, “I’m a Democrat, but…”

Today we have this comment to the post: Senator Reid: Why Should We Help You Win Re-election? | California Progress Report,

I’m a Democrat, but I appreciate that we have an opponent party. It’s too bad that both parties cannot work more harmoniously together. Bi-partisan is a funny word the way it’s usually interpreted…when one party is in the majority, it says that bi-partisanship is for the other to roll over dead.   

If it were not for the Republicans, we would be in a worse financial mess than we are with “pork” gong hog wild.Of course, they did not to a very good job of balancing the budget when they were in power under Bush.

More and more “pork” comes to the surface everyday. E.g., BART wants billions to build a not-needed train to the Oakland airport. Or, Fremont wants $385,000 federal dollars to study how to use the about-to-be empty NUMMI plant. If the city fathers and city staff are not capable of doing that, then they should be voted out of office or fired.

It’s interesting the liberal media don’t use the word “pork” anymore; they use the cleaner word: “earmarks;” or , more recently “stimulus.” In any case, it’s all “pork.”

This is from a “Democrat”?  Seriously, how many Democrats talk about “the liberal media?”  

And considering that Republican deregulation caused the financial crisis this line is astonishing: “If it were not for the Republicans, we would be in a worse financial mess than we are.”

Nice try.  Didn’t work.

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Dave Johnson, Speak Out California.

Remember last year when the Republicans laid out the price of a budget deal and it was a giant tax cut for the biggest corporations?  So in the middle of a revenue crisis they forced … less revenue.  Well, imagine that you are a struggling small or medium business in California, and the Republicans gave your nemesis even more power to crush you.

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Dave Johnson, Speak Out California

You hear it over and over again from California conservatives, “Cut taxes and cut spending,” and “government spending is too high.”

So what does this mean to YOU?  How does this affect your life?

Simple answer, cutting spending means that your schools, roads, police and fire protection, lines at the DMV, parks, environment, food safety inspections, services to help small businesses and courts all deteriorate. It means that it costs more – much more – for you to send your kids to college.  That is what “cut government spending” means.  

And in spite of what you think, their promise of cutting taxes rarely means your taxes.  There is a huge concentration of income and wealth at the very top, which means that tax cuts really mostly benefit the very, very wealthy.  Even the well-known Prop 13, thought of as helping homeowners, shifted the tax burden from the corporate owners of commercial property to middle class citizens.  From, Corporate loopholes make Prop. 13 crippling for state:

Thirty years ago, commercial property owners contributed 59 percent of property tax revenues and residential property owners contributed 41 percent. Today, we see a virtual flip: commercial property owners contributed just 43 percent of property taxes in 2008, while residential property owners contributed 57 percent.

Another thing you constantly hear are calls to cut the number of government employees and their benefits.  If you think about it, layoffs and pay cuts for government workers (teachers, police, firefighters, road workers, etc.) translates into increasing pressure to cut your own wages as well, plus it means fewer customers for California’s small businesses, fewer teachers in our schools, increased crime rates, etc.  Cutting their benefits means that your own benefits come under pressure as well.

Conservatives promising that cutting taxes and spending are good for you have held sway for the last few decades. They are always promising that tax cuts will make things better for regular people. But they haven’t gotten better. The real tax burden keeps shifting further and further away from the wealthy and powerful and onto the backs of the middle class.  Meanwhile the things that our government does for us are reduced and reduced, so life gets harder.

The lesson to learn is: glowing promises of a free lunch usually mean that you are the lunch.

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Dave Johnson, Speak Out California.

A letter in the San Jose Mercury News the other day expresses the misguided but oft-repeated Republican “spin” that tax cuts and deregulation “create jobs”.  As usual it bears little resemblance to the truth.

Create jobs by helping business

The two ways government can affect the job market are by spending on projects through borrowing or by reducing the tax burden on families and businesses. If it borrows, it causes another tax through inflation and interest expenses that will go on forever. If it reduces taxes and regulations, the loss in revenue will be far less than the amount the Democrats are planning to spend, and without any interest.

You create jobs by making it easier for businesses to hire people through reductions in taxes and regulations, such as a tax break for every person they hire and retain. You don’t make it harder for them by raising their expenses. Let’s do what worked in the past.

The writer is correct about the tax through interest expenses that is the result of borrowing, but incorrect about the effect of tax cuts.  In fact, it is tax cuts that have caused so much borrowing without helping the economy.  Here is what is wrong about the idea that tax cuts create jobs:

1. Businesses hire the employees they need to hire to meet demand.  If demand is low no amount of tax cuts can induce a business to hire people. Why hire and pay people to have them just sit around?
2. The way to get more customers into the businesses – i.e. to create demand – is to get more money circulating in the pockets of regular people. Cutting taxes for the already well-to-do doesn’t accomplish this.  The way to do this is with government policies that increase wages and reduce working hours, like how raising the minimum wage and mandating 40-hour weeks and weekends off helped create America’s middle class. Helping regular people is good for business.
3. The writer says we should do what has worked in the past.  The fact is that the economy has always done better when the tax rates on the wealthy and corporations were highest.  Just look it up.  The reason for this is that our economic system when left to itself always becomes a low-age, everything-to-the-top system, because the wealthiest always game the system to get the most for themselves.  The way to fix that is to apply regulations to prevent this, and high taxes at the top so the government can implement policies that raise the wages of the rest of the public.  This is how we got out of the depression after the huge concentration of wealth that built up until 1929.
4. Taxes are not an “expense.”  Businesses pay taxes on the profits (revenue minus expenses) — so the businesses that need help don’t need tax cuts, they need customers.  It doesn’t make sense to try to help businesses that are not doing well by giving even more money to their profitable competitors.  We should be using that money to instead help the businesses that need the help.  Helping the already well-to-do is bad for business.

There are no examples in history of deregulation and tax cuts creating a better economy, but plenty of these steps creating worse economies.  And before you say it, Reagan’s tax cuts were followed immediately by huge tax increases, and still led to the tremendous borrowing and interest payments that the writer is worried about. And to make matters worse, Reagan’s deregulation almost led to economic collapse twice – first with the Savings and Loan crisis, and then with the recent financial crisis.

To fix California’s economy we need to ask the wealthy and corporations to start contributing their share again, and use that money to educate our students, rebuild our infrastructure and bring back the kind of state that created and attracted the semiconductor and electronics and biochem and other industries.  This all occurred when taxes were high, not low.

The only economy that is ever helped by tax cuts is the economy of the Cayman Islands, where many of the rich store their hoards of cash.

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