LARRY Kudlow in his opinion-editorial piece which appeared in the Marianas Variety – Guam Edition of nationally syndicated Townhall (Jan 2, 2007) said that the middle-class is shrinking because America’s families are getting wealthier and that lower class jobs are vanishing because our technology driven, knowledge-based economic pie keeps expanding.
The question then is how does the United States which produces fewer scientists and engineers than China and India do and whose 8th and 12th graders lag their counterparts in those and other developed nations been able to keep the edge? Immigration, a bane of conservative existence. While the U.S. imports highly educated and trained labor, America exports middle-class jobs typically in manufacturing, thereby flooding its shores with cheap— or cheaper—imports to keep inflation low or so it seems. But a knowledge-based and technologically driven economy by its very nature is one that requires fewer people to do a certain task and therefore cannot create jobs fast enough or well paying enough to offset the loss of jobs in manufacturing and keep pace with population growth.
The unemployment rate is low because it does not measure folks who have quit looking for work and have resorted to work out of their homes— on eBay, for example. Moreover, many have a second “low-paying” job to augment their first “low-paying” jobs which means that underemployment is life. Moreover, thanks to immigration once again, demand for service remains high in the retail sector, health and financial services.
Much of the rise in ‘spending levels’ can be attributed to the housing bubble which was set up by the Fed to pump liquidity into the market. And ‘total consumption’ level is high because it includes fringe benefits that have since started to disappear. I would argue that the great new economy which conservatives say is owed to the pro-growth, market oriented policies (or supply-side economics) launched by Ronald Reagan 25 years ago (when Nixon of all people said Reagan’s policies were unduly harsh) is but a mirage of an oasis for many Americans who are still thirsting and hungering for investments in human capital.

MATT PHILIPS
Mangilao, Guam