 Good morning, thank you. On behalf of the New America Foundation, I'd like to thank James K. Galbraith and Economist for Peace and Security, our partners in this morning's event, as well as Bernard L. Schwartz, without whom we couldn't be gathered here today. We're meeting in Washington in a lull between manufactured crises. There will be another one possibly in December or January or February, and as in the first half of October, when the government was shut down, the conversation will be dominated almost exclusively about debts and deficits and what to cut and how fast. That's a conversation worth having, but there's another conversation which the American people want people in Washington to have if you look at polls, and it's fairly consistent that the top priorities are jobs, wages, employment, investment, economic growth, and so we're pushing against the consensus here in Washington by focusing on these issues, and we're very fortunate to have a panel of people from different parts of the political spectrum with different views to try to talk outside of the very narrow bandwidth on economic issues in Washington, D.C. First we will hear from Dr. Alan Sinai, CEO, co-founder and Chief Global Economist and Strategist of Decision Economics. He's formerly at Lehman Brothers in the Boston Company and Data Resources. Dr. Sinai has advised various government agencies, including past presidential administrations, House and Senate committees, holds a Ph.D. in economics from Northwestern University and an A.B. from the University of Michigan. He'll be followed by Michael Tomaski, a columnist, journalist, and author, a very leading public intellectual based here in Washington, as editor-in-chief of Democracy, a special correspondent for the Daily Beast, a contributing editor of the American Prospect, and the New York Review of Books, as well as the author of Left for Dead, and another book, Hillary's Turn. Cheryl Schweninger, my colleague and co-founder of the New America Foundation, is a director of the New America's Economic Growth Program and its American Strategy Program of the World Economic Roundtable based in New York, and formerly was with the World Policy Institute and the World Policy Journal. Finally, Ron Unce, a physicist by background, is the founder and chairman of Unce.org, a very innovative content archiving website that I encourage you to look up. He's a former publisher of the American Conservative and just recently has founded The Unce Review, a new online journal of opinion. He holds graduate and undergraduate degrees from Harvard University, Cambridge, and Stanford, and is a past first place winner in the Intel Westinghouse Science Talent Search, which I for one find very intimidating. So we'll begin with the comments by Dr. Sinai. Thanks very much. My comments go right to the heart of jobs and joblessness, a little bit different from the title on your program, jobs, joblessness, and the mantra of maximizing shareholder value. We had this past Friday, belatedly, a jobs market report on the surface. Everybody cheered, 204,000 new jobs, which by historical standards is really pretty lousy, in the non-farm payroll headline number. But a rise in the unemployment rate to 7.3%, if you look under the unemployment rate result, it was horrible, even if you allow for the shutdown, 720,000 people on the statistics, not right, but the directions right, dropped out of the workforce, and 735,000 people did not find work. Jobs, and this is one of the better months, if you saw the media interpretation of this, the labor market's a big deal. Substantial improvement is a necessary condition for the Federal Reserve in the labor market to begin to exit from quantitative easing. It's one of three conditions. The second is a lift up in real economic growth. The third is that the very low inflation we're seeing is transitory, because the Fed has, as you know, a 2% inflation target. The labor market is important for more than Federal Reserve policy and the financial markets as they react to that. It is that jobs and income quantitatively are the number one fundamental of consumer spending. Agri-consumer spending in the United States economy is 70% of real GDP if you throw in residential construction at 73, 74%, three-quarters of the U.S. economy directly related to the consumer. Jobs and income, the number one fundamental. Well, jobs and income haven't been doing well for years. Neither has consumption for years, and neither has the U.S. economy growing on average consumption, one and a half to 2% a year in real terms, and the economy a little bit more. I have to say, I don't think there's any way out of what we see, and what we see of what we got is what we got. I'm not going to go through all the labor market statistics in that report Friday that demonstrated that it was not indeed a good labor market report. It was indeed not a good labor market report. And, you know, this is not a one-time thing, because if one goes back to the business cycle upturns after the recessions, going back to 1990-91, the one after 2000-01, and this one, what we see in joblessness and slow growth in jobs, except for a couple of notable periods, has been around for quite a while. There are numbers of charts that we have done, others have done, that show if you index the first month of recovery at one and look at the jobs growth, both for non-farm payroll and both for the civilian employment and for the labor force, in this episode, it's the worst ever for any recovery slash expansion that's lasted 52 months long. It's the worst ever. And you can see a structural break in the behavior in the labor market going back to the early 1990s in these charts where the tendencies that we see now, which are so pronounced this time around, were there back then. Indeed, joblessness and jobless recoveries for me as a forecaster and analyst, I first noted back in the early 1990s. And for a long time, I've been seeking to ask why, because knowing why ought to lead to policy prescriptions that might ameliorate the situation. The whys certainly include a lack of aggregate demand. But of course, low-week jobs growth is part of the lack of aggregate demand because consumption is basically 75% of the U.S. economy, and if jobs aren't growing much, incomes aren't growing much, aggregate demand isn't going to grow much, companies aren't going to hire much, and the loop goes on. But certainly that's part of it. If we could magically grow the economy at 4% or 5%, then a lot of what I'm saying might, some of what I'm saying might go away. I don't think it would, though. That's how strongly I feel about maximizing shareholder value and its implications, which is rooted in business behavior, and that's giving us a lot of what we see. But in the literature and research on the labor market, the uncertainties over the future, Washington dysfunctionality, Obamacare, questions on the efficacy of quantitative easing, that's all cited for our recent performance, disincentives to work because government support is providing disincentives to work. That's another one. Potentially hysteresis, that's an economist's invention. Structural unemployment and structural declines in the labor force, and in the labor force participation rate coming from demographics, yet another one. Shift in the beverage curve and the relationship between job openings and hiring is yet another one. It's a lot of labor market literature on the issue of inadequate aggregate demand or structural unemployment. But you know, I think what's being overlooked is a phenomenon rooted in the reality of company behavior and its motivation. It's called, and I call it a mantra, it's a religion in corporate America now, maximizing shareholder value. That is the mantra of company motivation. This is not textbook companies in the theory of perfect competition that I'm talking about. This is the real world where virtually every executive you talk to and every corporate pronouncement will talk about maximizing shareholder value. What does it mean? Well, it doesn't mean maximizing profits or the expected value of profits, which is what we are taught in teaching our classrooms. It is literally maximizing shareholder value, which is the number of shares times the stock price. The stock price. The stock price. It's maximizing the stock price. Shareholder value maximization leads to intense cost minimization in the name of maximizing the stock price. And the biggest expense is labor. And labor expense is looked at in reality by companies, not as W, the wage rate, not the wage rate, or W over P, the real wage rate. It's a W, it's total comp, all in. It includes health care costs. It includes pension costs. It includes administrative costs. And when you look at that lump, the cost of labor defined in that way under a maximized shareholder value goal. I think it becomes a kind of no-brainer for companies not to hire workers unless they have to, and to find all kinds of ways to reduce the cost of labor, pension, health care, cutting labor, outsourcing in order to keep expenses down, keep profits up, and profit margins up. I'm not saying this is the wrong behavior. I'm talking about the motivation for effects that I see and have seen over a long time. And we know that stock prices are priced on earnings and interest rates fundamentally. And so these days, it has also happened that for various reasons, corporate compensation is now heavily skewed toward variable comp. And of the variable comp, and this is in the work of Steve Kaplan at the University of Chicago, the Boo School, in the variable comp, the biggest comp is restricted stock and stock options tied to the stock price. There's also quite a bit of tax favoritism that goes toward that. So I think it's very natural to want to maximize shareholder value. It's very natural to look for other ways to do it than by adding workers. It's very natural to substitute technology, the new information technology, which is labor saving, productivity enhancing, and very cheap. Easy to use and install, not like somebody like Alan Sinai. You don't want him to work for you. He's terrible. He's a pain in the neck. And to substitute capital for labor, to keep productivity, profit margins up, and that doesn't help hiring. Now, only very briefly because time is short, the evidence for the implications of the hypothesis that maximizing shareholder value and its religious nature is giving us at least qualitatively and quantitative much of what we see in our poor performing labor market and economy includes the following. One is that non-farm payroll jobs used to be a coincident indicator with the National Bureau of Economic Research data recoveries. It no longer is. Jobs go down for many months now after the turning point in the economy. Bob Hall has noted that. He's also noted the change in the ratio of output to workers. I look at it in terms of GDP per job. And of course, technology has helped that a lot. But GDP per job should go up under this notion. And indeed, it's going up a lot. You should also expect to see, and we have seen, or I would rationalize what we've seen in a disconnect between Wall Street and Main Street. The latest example, new highs in the equity market, repeatedly so, on an economy that's hardly growing and a jobs market, at least on Friday and over the past year, since September, since the advent of QE3, hasn't really substantially improved. Despite all that stimulus, I don't think it's really substantially improved. We would expect to see profits and profit margins higher under this hypothesis. Indeed, that's what we see. In the great recession, fewer than 10% of the S&P 500 companies lost money. That was the lowest percentage ever in any recession. And that was the biggest downturn in crisis we ever had since the 1930s. Profit margins since 1990 have been rising in a trendway. And in the most recent company data in the S&P 500, profit margins ran 10% to 11%. That's a new high, despite the slow growing economy. The progression of company behavior and benefits, you remember the pension funds, defined contribution, then defined benefits. And now we workers pay most of that on our own and handle those accounts ourselves. That's a big expense item for companies, tied in with labor. And then there's health care costs, really the biggest cost. Originally, it was insured by insurers. Then it became self-insured by companies. And then the employees began to pay more of the bill. As companies, again, this is perfectly rational behavior by companies. Behavior I have been predicting and expecting for years on the notion of maximizing shareholder value. It absolutely follows from that. What startled me is how many places I see this, which is why, in part, I'm speaking out today, because I'm absolutely convinced that this mantra has now reached a point where it's counterproductive for our economy and our society, maximizing shareholder value. That's a rather radical statement from a fairly cautious economist. That kind of comment. Well, what's going on now with companies? Obamacare provides an opportunity to put your employees into health care exchanges, pay a fine, and get out of the health care payment business. And my prediction is we'll see lots and lots of that. It may work out well for people, it may not. And the capital labor ratios, we watch the information tech capital ratio includes intellectual property. It's soaring. Has been soaring relative to labor as capital for labor is substituted. I want to close with two quick stories, which illustrate the point. And the timeline of what I believe I have seen as a trend that's been going on for 30 years, I first spotted this after the jobless recovery of 1991. I may have been one of the two or three economists that called it that, because it didn't behave according to the textbook co-incident indicator. And I kid it, because Lou Gerstner, American Express great executive, was a colleague of mine. And when I was working for American Express, I worked with a terrific executive. He went to IBM. And I joked, because I had observed certain phenomena in the stock market. After costs were cut, the stock market would go up for companies that cut workers. And I joked and said, well, Lou, when he goes to IBM, Lou is going to fire his mother the first thing he does, because the next day, the stock market will reward him through his options, stock options, and the stock price by going up. So he'll get enough money when he gets paid that to take care of his mother the way his mother was entitled to be cared for. Usually gets a laugh, most audiences. And I told that story. And a few days later, somebody came up to me. Were you the economist who spoke the other night? I said, yeah. He said, you were wrong. It wasn't his mother. I thought he meant I had a wrong forecast. That's deadly for a forecaster. He fired his brother. I was there, his brother Richard. And the final one is for you golfers in the audience. I can't resist telling this. It's really the capital for labor is what I'm showing you. Everywhere you go, you know it's there. You know it's there. I'm telling you, it's in the capital labor ratios. It's rational for sureholder value maximizing companies, and they all say it, to substitute capital for labor, whether it's the cloud or whatever it is. But there we are on the golf course. My wife and myself tells us the yards to the hole. I don't mind that. It tells us how long we've been playing. And then it also tells us how far off the pace we are. Now my wife is, I think, always making us too slow. And she thinks I always making us too slow on the golf course. But there was no ranger. That was a gift. The machine told us how late we were on the course. We didn't need a ranger. They saved one person by getting rid of the ranger through technology, everywhere you see it, it goes on. I have no policy prescriptions. I conclude at this point in where we are in our society and in our politics and our policies. I have ideas of how to deal with it. But this is not the place to spring those. As a forecaster, what we see is what we got. We are not going to see big time jobs growth. Monetary policy will be disappointing in terms of giving us a lot more jobs growth. Fiscal policy is restrictive now. So that's a moot issue because one way or the other, the lay of the land is fiscal restraint. And the US economy still looks like it's going to grow very slowly, in part because of the feedback loop. I don't hire. You don't hire much. People don't get much money. They don't get much money. They don't spend a lot. They don't spend a lot. Economy doesn't grow. You don't hire. Positive feedback loop with negative results. Take more Mulligans. Oh yeah, well, we all do that. The game is hard enough. Good morning, everyone. Friends, economists, immunogeneticists who may have wandered in. I hope you'll stay with us. I want to thank Jamie for having me be a part of this otherwise very distinguished group up here on this stage. And I also want to take a second to thank Bernard Schwartz, who is a very important supporter of my journal, Democracy, A Journal of Ideas. I hope some of you know the journal and I hope those of you who don't know it perhaps will. And Bernard also is very important to our success. So I was told that I should be here to talk about the middle class. Now, I am not an economist. And so I don't think that I can tell this crowd a lot of things that you don't already know. Some of you, perhaps better than I. Some of you may indeed have developed and discovered the statistics that I spend a lot of my days reading. So I'm not going to stand up here and retail the usual grim statistical portrait of the immiseration of the American middle class over the last 30 or 40 years, or indeed over the last five. I think we all, since the meltdown, I think we all know what the picture is. We've all seen that horrible chart of middle class wages that look like the Plains of Kansas and the compensation that's gone to the top 2% that look like Mount Everest. We all know that the share of national income that has shifted dramatically over the last 30 years from wages and work to income. And so I don't need to go over all that. I did nevertheless prepare a few statistics, but then this morning my printer wouldn't work. So it must have been a message from the ghost of Keynes to tell me not to do that to you. And I also don't think that I need to retail in any really detailed, wonky way what the policy solutions for the middle class are. I think broadly speaking, I don't wanna make too many presumptions about the views of all the people in this room. I'm sure we have a range of views gathered here, but I think generally speaking, we probably all kind of agree on some general steps that we know need to be taken. We know that an increase in the minimum wage would actually be salutary, perhaps a rising tide that would lift all boats in the other direction from the rising tide that would lift all boats that we've been told about for the last 30 years. We certainly saw good things happen in that regard on election day last week, very encouraging result in Seattle and Tacoma and in its way an even more encouraging result in New Jersey, even though the Seattle Tacoma vote was for a much higher minimum wage, the very important thing about the New Jersey vote of course was that it would index the minimum wage increase in that state to inflation, which is a victory that would be obviously scarcely conceivable here in this town. So we know about the minimum wage, we know about the additional help that could be given to families with children in college to encourage more college enrollment, tax credits and so forth. And we've written about all these things in my journal many, many times and the help that could be given to families with younger children, family leave, paid family leave, like they have in civilized countries. And the many, many other steps that could be taken in terms of public investment, infrastructure investment, and creating green jobs and fostering a green economy. So these are all things that we know need to be done. I think what I can talk a little bit about is why even though we know these things, we can't get them done at all. Dr. Sinai said that he used to think that knowing the policy prescriptions meant that we would know what to do and that we would go out and do those things. Well, we now know in this city it doesn't quite work that way and it hasn't worked that way for a while but it especially doesn't work that way here for these last few years. Will it ever work that way again? Well, you know, I'm not very optimistic about the near term to be perfectly honest but there is some work being done in terms of how we frame these ideas and how we talk about these ideas that I think is interesting and that my journal has been involved in and that I think is one of the reasons that I was asked to come here today and participate in this. And the idea is essentially that we need to think about investment in the middle class and talk about investment in the middle class not merely as a nice thing because it sounds good because most people are middle class people or not merely as a thing that will win votes but as a theory of economic growth, as an alternative theory of economic growth to supply side theory. We've been told for many, many years, 30 years or more that investing in the top one or 2% would work out for everyone and the benefits would trickle down to everyone and I think we've seen for many, many years that that theory has worked out rather nicely for the one or 2% but it hasn't worked out all that nicely for the people to whom the other benefits were supposed to trickle down. So middle class investment is not just a vote getting ploy and it's not just a slogan because I want to stay in line of Jamie's admonition in his opening remarks to be about the concrete and not just about slogans. So yes, middle class economics or middle out economics is a slogan but it's a slogan with a lot of substance behind it and it's a slogan that is meant to say to people, yes there is a theory here of growth that is not about investing in the top, it's about investing in the broad middle class and letting the benefits spread out from there. We've heard the president use this phrase, he uses it kind of intermittently, he doesn't use it that effectively to me because he doesn't posit middle class investment as an alternative to supply side, to the top one or 2% investment. He doesn't pit it as a choice for people. I think that if it is pitted as a choice for people, I think it could have resonance and help us perhaps move this political situation along in this city a little bit. Michael made reference to polls in his introductory remarks that show repeatedly and they do, as we all know, they show repeatedly. People want a different conversation to be happening in Washington. People want Washington to be thinking about jobs, about public investment, about some of the things that I talked about a moment ago, minimum wage, more investments in raising children in college and the rest of it. That's what people want. We can't get there for the reasons that we all know about that are slightly inappropriate to go into in great detail at a panel like this, but we all know what they are. But, and it's very hard to overcome those things, but those things can eventually be defeated, I think, through, you know, in the right economic circumstances and with the right way of thinking about and framing the conversation. And so the framing of investment in middle class needs to be done, I think, and as an alternative to supply side economics. We have done this in the pages of Democracy Eternal. A couple of issues ago, there was a special issue, but we sort of do it all the time. And I do hope you'll give it a look. Thank you very much. I think I may need some technical assistance. My thanks also to Jamie for inviting me and for including the Economic Growth Program with the New American Foundation and his, these wonderful policy symposium. In the time I have, I'm gonna highlight and underscore five trends, some of which Alan Sinai referred to, and then draw five broad policy lessons from them. The first, if I can do the technology here, relates to the pattern of investment in job creation over the last decade to 15 years. Essentially, we're having a phenomena where we have an asset bubble-driven investment that there's an asset bubble around a couple sectors. The tech bubble in the late 1990s, the housing bubble in the 2000, which generally lifts investment, it also modestly lifts jobs, but then that's followed by an investment bust and then a more serious jobs bust and an extended periods of jobless recovery. Now, the question going forward, are we going to move to this new normal, which is an investment stall and a permanent level of high unemployment, or are we gonna repeat one more bubble? I think the evidence increasingly is that there's gonna be one more, at least one more little bubble that is driving, is gonna lift a generally investment, although not general improvement in CAPX spending, generally, followed by a bust, and this is probably gonna be driven around the social media. There's also has been fairly exuberant investment in the real world in biotechnology and the energy sector that may outstrip demand at some point may create a problem. So that's the first trend. The second trend is that as we're all aware that what we've seen is that government investment as a percentage of GDP has been on the decline, and it's now at the lowest percentage of GDP since 1948. Now, it did improve and increase a little bit with the American Recovery Act in 2009 and 10. As you see, there was a bump up in construction, but now that is coming down. So government investment, this is government investment type, is declining, which is a worrying trend because government investment is not only important for productivity, but it's also important for employment. If we look at what has happened to government versus private employment, again, it shows that government employment has been essentially steady for the last 20, 30, 40 years. While most of the increase in employment has been in the private sector. Now, what we see in terms of the increase in employment growth, especially since the Great Recession, we saw a plunge in the private sector, but and then a fairly not robust, but be respectable recovery. But we actually saw a dip in government jobs because of the attack on government, the cutbacks at the local state level and continuing problems because of the sequester. So a huge gap has opened up between private sector growth and government growth. Now, if government was growing at the same level of jobs as it did in 2002 to three, our employment picture would look much healthier. So the jobless recovery in this case is a jobless recovery in government. Finally, the fourth trend, and one that I wanna underscore for Alan Sinai, because what it shows is that we have the rise of what I call the post-employment companies. Now, this is just not a matter of companies substituting capital for labor, which is an important trend, but there's a whole new group of companies and the far right. Now, this is the amount of capital that per employee. So it's somewhat mis-titled and sort of job-intensity. It's really sort of capital intensity. So you have the old line, the lead industries of the past, like Eaton, Lockheed, Dupont, Dow, Chemicals, oil and gas companies like Chesapeake, General Mills, they all have an enormous amount of jobs per capitalization, per capital. But if you look at the new range of companies, if Alan, if you see that, the new range of companies on the right, the Apple, Googles, the Facebooks, the Twitters, there's enormous amount of, they've captured an enormous amount of capital in investment but employ very few people. They also pay very few taxes. So we're not just in the case of the companies that are replacing capital or labor with capital, we're in a new mode of company to some degree. Now some of that may be because I think there's a bit of a bubble in the Facebooks and the social media so that will come down just as Cisco's did. Now the next chart compares sort of the first and second generation of tech, Cisco and Microsoft with the new generation of tech. The old generation tech was actually fairly healthy in terms of its capital structure to labor market and the jobs created. The final slide here shows the sort of the Walmart which has its own problems obviously creates a lot of jobs with a lot of low wage jobs in Amazon which again substitutes in this case capital for labor. The final trend is that the preponderance of jobs being created are essentially in low wage industries in spite of the mantra for education to solve our jobs problem. This is the chart from the BLS Bureau Labor Statistics analysis of projected employment growth for the 10 years from 2010 to 2020. The actual performance of the economy in 2013 is actually even worse. Eight of those first 10 are in sort of low wage sectors. In a study that we published with Dan Alpert from Westward Capital, he calculated that over 57% of the jobs created in the first half of 2013 were in the three lowest wage sectors of the economy, retail trade, administrative services and leisure and hospitality. So in other words, when we do have job creation it is a result of often jobs being created in those low wage sectors, that's not new of course. The one, the record would be even worse if it wasn't for the shale oil and gas revolution which has created a lot of medium skilled, medium to high wage jobs. I don't have that chart but it counts for a disproportionate amount of the good jobs created in the last three to five years. So there's five policy conclusions that I wanna draw out from these trends. The first is that our finance system generally is still broken. I mean part of that is the sharehold, problem of shareholder capital. As Alan Sinai pointed out, part of it is the way our debt and equity markets operate and part of it of course is this sort of asymmetrical reliance on easy money versus fiscal policy, sort of a increasing reliance on extraordinary easy money. The second policy is that public investment, you know, and this is where the dilemma come in, public investment is needed to crowd in, smooth out and to absorb extra capital at this point if we're going to have a healthy investment. We have investment that is driven generally by asset bubbles which spreads out but is concentrated. Public investment is needed to smooth that out, absorb the extra capital. So the consequence of these first two policy options suggests that we need, we're going to have to supplement our current finance and banking system with a lot of more public purpose, public finance, public bank vehicles, whether it's the infrastructure bank or a variety of other public purpose, public finance vehicles that Mike Lind has analyzed in the paper for the New America Foundation. I think the most promising idea we have in light of the fact that we face a general government political resistance to increasing government public investment by year-to-year government allocations and in any case one be appropriate for infrastructure investment is that we need to be able to use a severance tax on shale oil and gas for example or expatriated corporate profits to essentially capitalize a variety of state infrastructure, state investments, state public banks to be able to supplement the existence of the private banking and finance system. The fourth point I would make is that our industrial policy and we do have an industrial policy is heavily tilted towards these new post-employment companies. They don't pay any taxes, they're given huge breaks for the intellectual property they generate and they also benefit from capital market rules and regulations that allow them to capture a large share of wealth in a very short period of time. On the other hand, we tend to actually penalize all those companies in the middle if you go back to all those old line companies. We tend to penalize them because they actually bear the cost of employing people and all those issues at Allen Sinai. Finally, we're going to have to, and again we run up against the political issue here, we're gonna have to increase public services as a way of tightening the labor market for private service employment. Unfortunately, the BLS is probably correct. The structure of the economy can be changed to some degree to create more middle-skilled jobs, but a lot of the jobs that are going to be created are high-touch jobs that can't be outsourced or can't be subject to technology. Those generally are low-wage jobs. The only way we're going to be able to solve that problem is tighten the labor market and to pursue ideas like creating a much higher minimum wage, which I believe Ron will probably talk about as a segue. Well, thanks a lot for the opportunity to speak before you here. My background is actually quite a bit different probably for most of you here in that not only is my background originally in the sciences, but until the last few years I was involved in lots of public policy issues, but almost none of them had any connection with economics. In other words, getting involved in economics, getting interested in economics is something of a new turn for me. Because I've been an outsider on that issue, sometimes that provides somebody with an opportunity to sometimes see insights that may have been lost by some of the people working in the trenches, and I think one of them really was the focus on the minimum wage. It seemed over the last couple of decades the issue of a higher minimum wage, a much higher minimum wage, has almost dropped off the political radar screen to some extent. And I think that really was something that struck me as being surprising when I started exploring the implications for lots of other issues, including immigration and things like that, which is how I got involved. Once I started thinking about it, it seemed to me that raising the minimum wage by a much higher amount would have a lot of advantages. And that's actually what I've been writing about a bit the last couple of years. When you look at, for example, the issue of the minimum wage, you're talking about something that directly affects exactly those sectors of the employment economy that have been most negatively impacted by all of these changes in the workforce and changes in labor markets over the last few decades. Furthermore, it would, a much higher rise in the minimum wage would have a lot of dramatic impacts on the overall economy. For example, if the minimum wage were boosted by a large amount, say to the $12 an hour figure that I've written about on a number of occasions, the impact would be to raise the amount of income going to that sector of the workforce by between $150 billion and $200 billion a year, which is a pretty sizable amount of money. That money would go towards households that spend every dollar they earn. So you're talking about an economic boost, a stimulus effect that could be approaching $200 billion a year. And it's a permanent stimulus effect. It's not one time it's permanent. And that could really have a lot of very positive impacts on the overall economy. One reason something like a much higher minimum wage might work now in the way that might've had difficulties 20 or 30 or 40 years ago is to be honest a negative effect on that America has lost almost its entire manufacturing sector that we had decades ago. The manufacturing sector competed with foreign countries, obviously. And it was subject to the sort of competition that a much higher wage level could not support. Those sectors of the American economy today that would be benefiting from a minimum wage of say $12 an hour tend to be the non-tradable low wage service sector. Those sectors that are essentially insulated from foreign competition. So the job loss under the right circumstances probably would not be very severe. It might almost be negligible. In a sense, when you're talking about raising the wages of those jobs by government requirement, the result would be that those industries would probably mostly raise their prices by some small amount, a one time raise of prices, probably of a couple of percent, a few percent, something like that. And they'd also trim back some of their profits, which are right now at record levels. It's unlikely that most of those jobs or many of those jobs would cease to exist, simply because if all of those different competitors raised their prices in unison, there really would be negligible job loss. And again, the stimulus effect would be enormous. For example, if you look at a company like Walmart, all it would have to do would be to raise its prices by a couple of percent, probably. All their competitors would be in the same position. And so you'd be talking about shifting probably $150 billion or $200 billion a year from the sort of people who don't shop at Walmart into the pockets of the sort of people who do shop at Walmart. And so on balance, logically, a company like Walmart probably would benefit from something like that, so long as it were a coordinate effect and all of Walmart's competitors had to raise their prices as well. Again, the benefits are tremendous and when you look at the polling numbers, enormous support for a much higher minimum wage. 60% among Republicans, 70, 80% among Democrats, it's a very popular issue. It's also a very simple issue. In other words, many of the economic proposals that have come out from Washington have sometimes been very intricate and complex. For that reason, as we see from a certain website, they many times don't work very well in practice and also they're very hard to explain to people. In other words, when you're talking about complex changes in the economy, setting up new types of financial structures, ordinary people don't understand them very well. When you explain that the government would simply require that the minimum wage rise to $12 an hour, people understand that. Now, I've been out of the political world for most of the last decade, but prior to that, I actually was involved in a number of political campaigns around the country on entirely different issues. And in effect, I worked as a political consultant, a self-employed political consultant during those campaigns. So shifting away from the policy side of a much higher minimum wage, which I think makes a lot of good sense to the politics of it, I think one thing that a lot of people in the political world, including in DC, have missed is the fact that from the political perspective, a small rise in the minimum wage is much, much more difficult to get through than a large rise in the minimum wage, which is exactly the opposite of, for example, the $9 an hour proposal that President Obama cited almost a year ago. And the reason for that is when you're talking about a small rise in the minimum wage, very few people feel they would directly benefit from that, the people who would benefit tend to be overwhelmingly for socioeconomics and demographic reasons, Democrats, when they vote. And many times, they're the sort of people who don't vote at all. So in other words, the political momentum behind a rise in the minimum wage of say 50 cents or a dollar or even a dollar 75 is relatively small. If on the other hand, you're talking about a rise in the minimum wage of 70% from 725 up to $12 an hour, the landscape becomes entirely different. The people who benefit would benefit from by thousands of dollars per year, which is something that gets their attention. Furthermore, the socioeconomic and political structure of the beneficiaries is entirely different. For example, the figures I've looked at show that nearly 40% of white southerners would benefit from that sort of rise in the minimum wage. In other words, if you're talking about raising their incomes by several thousand dollars a year, it gets their attention. And you're talking about the demographic base of the Republican Party. So if you have a policy proposal that essentially would only benefit Democrats and low voting Democrats, the support for it is narrowly confined to a certain sector of the market, the political market. If you're talking about suddenly something that would benefit enormous numbers of conservatives and Republicans, suddenly the impact on many of the people who they elect would be enormous. And it could be certainly there would be ideologically committed groups and individuals who would argue on the other side. But if Rush Limbo says one thing, but on the other hand, the people feel that they're gonna make $5,000 more a year or $8,000 more a year by this policy proposal, well, that time they won't probably ignore what Rush Limbo tells them. Now, from the point of view of American unions, relatively few unionized employees would benefit of a rise from something like that. But on the other hand, it would be a very powerful protective measure in support of the unions in that in effect, a lot of the pressure right now to break the unions or scale back unionization is because of the huge gap between union wages and the minimum wage. In other words, companies feel that they can save huge amounts of money if the unions were not there and if they could reduce wages to a much more competitive level. On the other hand, if the gap between the minimum wage and the lower ends of the union wage becomes much smaller, then the incentive for companies to try to break the unions or stop them from coming in becomes much less. In other words, if the service employees typically make $13 or $14 or $15 an hour and the minimum wage is $7 or $8 an hour, there's a massive incentive to keep them from unionizing a workforce. If on the other hand, the minimum wage is $12 an hour, the incentive disappears. And for that reason, I think something like this could be a tremendously important issue for unions to get behind. The problem, obviously, is the gridlock politics. In other words, getting something like this through Congress, getting something like this through the state legislatures is very difficult. Ideologically, it probably shouldn't be because obviously a much higher minimum wage suddenly means reductions in housing subsidies, food stamps, social welfare programs, tax credits, exactly the sort of things that many libertarian or free market advocates are really annoyed by. What we've seen in the last 20 or 30 years is the companies have been able to maximize their profits by shifting the cost of their low wage workforce onto the backs of the general taxpayer. And from any ideological perspective, that makes no sense at all. In other words, companies should be forced to pay their own workers rather than get the taxpayer to pay their workers. And for that reason, potentially, there might be an opening to conservatives or libertarians who may not like the minimum wage, who may not like regulations, but like the alternatives, even less than that. So anyway, it seems to me this is something that could be very beneficial economically for a lot of different reasons. It could spill over into different sectors of the economy. It's enormously popular, 70%, 80% support. And the question is how to put the pieces together to get it implemented. Thanks a lot. Thank you. We have a few minutes before our keynote speaker arrives. So we'll take some questions. We may take two or three questions at a time and let the panel respond to them. Yes. Please wait for the mic before you ask. Hi, I'll address the question to Dr. Sinai, but anyone please jump in. I keep thinking about how more people could own the machines in the sense, you know, you don't want to get rid of this mechanization, but how can the population at large benefit now, when I do, you know, invest the Social Security Trust Fund in stocks, taxing profits isn't so attractive. But I think of like in Alaska, I don't know the name, but it doesn't each resident get a dividend check each year from the oil. Okay, that's the question of ownership of capital. Yes, you're the profits. More widespread at capital ownership. We'll take a couple of questions. Yes. Yes, I would like to ask why we focus so much, sorry. I would like to ask why we focus so much on shareholder value. Shareholder value is a perfectly normal way that a company operates. I know that it has the problems that Dr. Sinai and others have mentioned, but I think we need to look behind this and ask why don't we focus instead on the exchange rate which drives a wedge between what is good for a company and what is good for the public. Okay, thank you for that question. Right there, Josh. Yes. Hello, I'm Basil Scarles. I've been involved mostly with international economic issues, but I'm intrigued by Mr. Unce's proposal and the political support for it. There were such a dramatic increase in wages at the low end. I imagine there'd be some losers such as small businesses who cannot raise their prices. If I would appreciate it if you could elaborate on that and also the political opposition that would come from lobbyist groups. The fourth one right here. Yes, my question is for Dr. Sinai. He talks about shareholder capitalism and does he have an alternative frame to contrast that with? And I speak from a perspective of someone just having coordinated for the last week in New Hampshire, Hedrick Smith's book tour, which was very popular over 1,200 people, turned out 425 people signed up. His alternative frame is stakeholder capitalism and refers to the virtuous cycle in his book Who Stole the American Dream? And I'd urge Mr. Unce or Dr. Unce to read that book, particularly page 386, Behind Germany's Success, a Social Contract. I'm afraid we're running short on time. Thank you for the question about shareholder value. So we have a couple of questions. We're going to wrap it up now. Couple of questions about shareholder value, including exchange rates. And we have questions about the losers for the minimum wage. And finally, questions about is it possible for more Americans to enjoy the benefits of capital ownership? We'll begin with Dr. Sinai and go in the order in which people spoke. We should accept as the normal way of things. It began to become a religious mantra. I blame my friends at the Harvard Business School for getting this going back in the late 80s. I noticed it in the 90s. I think it's fine because it helps productivity. But when I see all of the implications, and I didn't mention all of them in my talk, inequality is one of them, and the societal effects of it, I think it's overdone. As far as sharing in the spoil, so to speak, of the capitalists, we're all capitalists. We all share, we all have stock. The only thing I would offer today here at the moment is that I would tax with a special tax the super duper ultra comp that lots of CEOs are getting from restricted stock and stock options, which are tax advantage to companies who give them, because that's the tens of millions of comp that's going out, and I would start there. And then take those funds and spend them in more productive ways, some of which we've heard here today from Sherrow in terms of the declining expenditures of the federal government on infrastructure in the economy, those that are productive. Michael Tomaski? No, I'll just say very quickly. I mean, we once in this country practice stakeholder capitalism more than we do now, certainly. And, you know, it's shareholder capitalism came into being in the late 1970s and 1980s probably. We had stakeholder capitalism to some extent, and we know the ways to get it back. Compensation is certainly a huge part of it, but changing the composition of corporate boards, I think is another part of it. That's probably a pretty radical idea from where we sit today, particularly here in Washington. But, you know, we know the path to get these things. It's probably not very politically possible right now, but it should be a very high priority and we should agitate and do what we can. Sherrow Schweninger? Two of the most important experiments going on right now are taking place in Ohio and Pennsylvania, which is a version of the Alaska, which is the introduction of severance taxes to be able to increase fairly significant infrastructure investment and spending on education and also to provide for a basic state-based social safety net. Interestingly, those both are taking place under Republican governors, so it's not immune. We could be taking much greater advantage of the shale oil gas wealth to create the functional equivalent of broader capital ownership. And on the other end, some form of financial transaction tax in order to be able to again capitalize a variety of public purpose vehicles for broad public government investment. With regard to the minimum wage, there certainly would be losers in terms of employment. But the likely concentration of those losers would actually be the low-wage manufacturing sector, the sweatshop industry, things like that. Because in a sense, those are the ones subject to the sort of foreign competition that could be priced out of the market if suddenly they were paying $12 an hour, and actually many times their operations right now are quasi-legal or even illegal. Now it seems to me a very wealthy country like the United States probably shouldn't really have a sweatshop industry, especially since so many of the people employed there require government subsidies to simply survive, which just doesn't make sense in our society. So other than that, there certainly would be some job loss, but it probably wouldn't be very severe. In terms of the political opposition, again the minimum wage had dropped off the ideological radar screen so long ago, it isn't really an issue that most conservatives focus on much. In other words, I've discussed it with some fairly prominent people in the sort of ideologically conservative sector. And they're the sort of people who would fight to the death over a 0.1% increase in any tax rate. But the minimum wage is just something they've never really thought much about. They think probably it would be a bad idea if it cost people their jobs. But since the people losing their jobs are the ones who support a higher minimum wage, and since they're not the sort of people who support conservatives, most of them don't really care much one or the other. And on the other hand, the fact that it would mean a huge decrease in all these government social welfare programs and government subsidies is something very ideologically attractive to people like that. So it seems to me it's more a question of just sort of packaging the issue in a way that is non-threatening to these people and suddenly makes them view it for the first time. And on the other hand, the fact that has such overwhelming support among ordinary voters, I think possibly makes it very popular under the right circumstances. So please join me in thanking our panelists.