On February 1, 2013, Robert Reich, Profession at the University of California, Berkeley writes an extensive analysis of the U.S. economy:
The Bureau of Labor Statistics reported this morning that American employers added only 157,000 jobs in January. That’s fewer than they added in December (196,000 jobs, as revised by the Bureau of Labor Statistics). The overall unemployment rate remains stuck at 7.9 percent, just about where it’s been since September.
The share of people of working age either who are working or looking for jobs also remains dismal – close to a 30-year low. (Yes, older boomers are retiring, but the major cause for this near-record low is simply the lack of jobs.)
And the long-term unemployed, about 40 percent of all jobless workers, remain trapped. Most have few if any job prospects, and their unemployment benefits have run out, or will run out shortly.
Close to 20 million Americans remain unemployed or underemployed.
It would be one thing if we didn’t know what to do about all this. But we do know. It’s not rocket science. We are in the most anemic recovery in modern history, yet our political leaders in Washington aren’t doing squat about it.
The only reason for employers to hire more workers is if they have more customers. But American employers have not had enough customers to justify much new hiring.
There are essentially two sources of customers: individual consumers, and the government. (Forget exports for now; Europe is contracting, Japan is a basket case, China is slowing, and the rest of the world is in economic limbo.)
American consumers – whose purchases constitute about 70 percent of all economic activity – still can’t buy much, and their purchasing power is declining. The median wage continues to drop, adjusted for inflation. Most can’t borrow because they don’t have a credit record sufficient to allow them to borrow much.
And now their Social Security taxes have increased, leaving the typical worker with about $1,000 less this year than last.
The Conference Board reported last Tuesday consumer confidence in January fell its lowest level in more than a year. The last time consumers were this glum was October 2011, when there was widespread talk of a double-dip recession.
The only people doing well are at the top – but they save a large part of what they earn instead of spending it.
Overall personal income soared by 8 percent in the final three months of 2012 compared to an increase of just over 2 percent in the third quarter, but this income didn’t go into the pockets of the middle class. It went into the pockets of people at the top.
Wages and salaries grew a measly six-tenths of one percent.
Most of the rise in personal income in the last quarter was from companies rushing to pay dividends before taxes were hiked in 2013, and from an upturn in personal interest income. Both these sources of income went mostly to the well-to-do.
This explains why consumer spending is dropping. The Commerce Department said Thursday consumers’ spending rose 0.2 percent last month. That’s slower than the 0.4 percent increase in November.
So if we can’t rely on consumers to stoke the economy, what about government? No chance. Government spending is dropping, too.
The major reason the economy contracted between the start of October and end of December 2012 was a major reduction in government spending in the fourth quarter.
Government spending has declined in nine of the last ten quarters, but it took a precipitous drop in the last quarter. This was mainly because military spending fell 22.2 percent. That’s the largest fall-off since 1972 (mainly due to reduced spending on the war in Afghanistan, and worries by military contractors about further pending cuts). State and local spending also continued to fall.
Personally, I’m glad we’re spending less on the military. It’s the most bloated part of the government. Major cuts are long overdue. But the military is America’s only major jobs program. Cutting the military without increasing spending on roads, bridges, schools, and everything else we need to do simply means fewer jobs.
What’s ahead? More of the same. So what possible reason do we have to suspect the recovery will pick up speed? None.
Don’t count on consumer spending. Wages and benefits continue to drop for most people, adjusted for inflation. States are hiking sales taxes, which will hit the middle class and the poor hardest. Deficit hawks in Washington are contemplating additional tax hikes on the middle class.
Housing prices are stabilizing, thankfully. But one out of five homeowners is still underwater, and the ranks of people renting rather than owning are rising. Health-care costs are also rising for most people in the form of higher co-payments, deductibles, and premiums.
Don’t count on government, either. Government spending continues to head downward. The White House has already agreed to major spending cuts, some to go into effect this year. Coming showdowns over the next fiscal cliff, appropriations to fund government operations, and the debt ceiling will likely result in more cuts.
More jobs and faster growth should be the most important objectives now. With them, everything else will be easier to achieve – protection against climate change, immigration reform, long-term budget reform. Without them, everything will be harder.
Yet we’re moving in the opposite direction — following Europe’s sorry example of failed austerity economics.
Robert Reich has NAILED the reality facing Americans! This is the core of what I have been espousing for years now and during all of 2012 on Facebook and my own blog site at www.foreconomicjustic.org. This is also spelled out in my article “Democratic Capitalism And Binary Economics: Solutions For A Troubled Nation and Economy” at http://foreconomicjustice.org/11/economic-justice/ and “The Absent Conversation: Who Should Own America?” published by The Huffington Post at http://www.huffingtonpost.com/gary-reber/who-should-own-america_b_2040592.html
But Reich suggests no specific solutions other than “more jobs and faster growth.”
We need aggressive economic growth while simultaneously broadening private, individual ownership of FUTURE productive capital formation, enabling EVERY American to acquire via self-payment loans a viable income-producing capital estate over time.
Democrats and Republicans need to represent the well-being of ALL Americans with a priority on strengthening the economy and significantly generating income for ALL Americans.
Most Americans are not earning enough income to properly support themselves and their families. The country is experiencing a widening divide between an elite income class with well-paid salaries and dividend and capital gain income from stock ownership and low-pay wage earners and those dependent on taxpayer-supported government welfare funded by extracting taxes and incurring national debt. This situation will continue to worsen. Americans need to WAKE UP and realize that the FUTURE is one of technological unemployment. Private sector job creation in numbers that match the pool of people willing and able to work is constantly being eroded by physical productive capital’s ever increasing role. And as a result, most American incomes will decline, which will result in a downturn in the economy as there will be fewer and fewer “customers with money” to purchase the products and services society needs and wants. The result: no or significantly reduced opportunity for income.
This new reality is the result of technological innovation and invention, tectonic shifts in the technologies of production, and an obsolete union movement stuck in job creation and “more pay for less work” instead of bargaining for employee ownership and increased incomes resulting from dividends earned as stock owners in corporate America.
There is a solution, which will result in double-digit economic growth. The Just Third Way Master Plan for America’s future is published at http://foreconomicjustice.org/?p=5797.
The solution to broadening private, individual ownership of America’s future capital wealth requires that the Federal Reserve stop monetizing unproductive debt, including bailouts of banks “too big to fail” and Wall Street derivatives speculators, and begin creating an asset-backed currency that could enable every man, woman and child to establish a Capital Homestead Account or “CHA” (a super-IRA or asset tax-shelter for citizens) at their local bank to acquire a growing dividend-bearing stock portfolio to supplement their incomes from work and all other sources of income. As well national debt needs to be focused on growing the private sector of the economy simultaneously with facilitating private, individual ownership of FUTURE productive capital formation. Policies need to insert American citizens into the low or no-interest investment money loop to enable non- and undercapitalized Americans, including the working class and poor, to build wealth and become “customers with money.” The proposed Capital Homestead Act would produce this result.
The fundamental economic solution is to create income for EVERY American by simultaneously broadening private, individual ownership of FUTURE productive capital economic growth and fully paying the profit dividends to the new American owners of the income-producing capital assets of our corporations.
Support the Capital Homestead Act at http://www.cesj.org/homestead/index.htm and http://www.cesj.org/homestead/summary-cha.htm
