Sunday, December 28, 2003

Low-wage workers, Wal-Mart, China and the progressive agenda

I went shopping at Target yesterday and was amazed at how cheap these China-made products are. Nice looking shoes for ten bucks! A wooden bookshelf for fifteen! If I were paid just to put the bookshelf together the price would be more than fifteen dollars. How can we ever compete with the Chinese labor market when they are capable of producing products for such an incredibly cheap price?

Well, we can't. So what are we going to do about it?

First, I think we should look on the bright side. For the people buying the products (like me), it's great that they can get decent things for such a cheap price. I'm glad that people can get a decent pair of shoes for ten bucks. I'm glad that I can buy a decent bookshelf for fifteen. (I'll never forget this heartbreaking anecdote: I was shopping for a dresser at a 24-hour store in L.A., and asked the clerk who was working the midnight shift where there were good deals to get one, as they run about $100 for the low-end dressers. She told me that I could take some of the cardboard boxes that the store had in the back, and with duct tape, put together a dresser at home for next to nothing. That's what she did, and she was kind enough to show me how to get into the back of the store to get whatever boxes I needed).

It's a good thing that decent products are available to low-income Americans for very low prices. That increases purchasing power and raises our standard of living.

It also eliminates manufacturing jobs in the U.S., and there isn't a good answer to that problem.

One new part of the progressive agenda which ought to get implemented, because of the shift toward low-wage workers and low-price products, is to stop taxing low-wage workers.

Progressives tend not to focus on tax cuts as a core part of our agenda. But we should. A tax cut for working people and low-income people is basic social justice. And it's good for the economy, as low-income people spend the money they earn. (Wealthier people tend to invest some of their rmoney, which might ultimately finance investments in other countries, which isn't particularly helpful to the U.S. economy).

I'm trying to build the consensus in Illinois to end the taxation of any income earned below $12,000. Currently we tax income earned over $2,000. So minimum wage workers pay state income tax -- which should not happen. To raise the level of income that triggers taxation from $2,000 to $12,000, and to have the state break even, we'd need to raise the state income tax from 3% to 4%. That's an increase of 20 hours of work per year. But because the level is raised, anyone earning $40,000 or less gets a tax cut. Everyone else gets a tax hike. However, the state income tax hike of 20 hours per year is subsidized by the federal government, as state income tax is deductible from federal income tax. Anyone earning more than $40,000 is paying at least 25% in federal income taxes, so that state income tax increase of 20 hours is really only a 15 hour increase, as 5 of those hours are deducted from federal income tax paid. And those numbers turn out to be about $200 million for the entire state (if we did this smart switch). I think that's a good trade-off: we help to ensure equal opportunity by cutting taxes on anyone earning less than $40,000 and we bring in $200 million to the state from the feds every year.

Any other project that brought in to Illinois a billion dollars every five years in federal spending -- forever -- would be embraced by any civic group worth its salt. I hope this one will be too.

Email me at if you want to help. I'm going to put this on the primary ballot in the 17th precinct in the 43rd ward (an affluent part of Lincoln Park) to see if wealthy people will support the policy. And I hope we can win this advisory referendum to prove support to legislators. Maybe we can get some press out of it and build the consensus. I need some help so email me to get involved.

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