On July 25, 2012, David Wessel of The Wall Street Journal posed the question:
Is the U.S. economy headed for a recession before it fully recovers from the last one? Unfortunately, it’s a timely question.
Divide the answer in two parts: What we know. What might happen.
We know growth is painfully slow, and slowing. Federal Reserve Chairman Ben Bernanke last week suggested that the American job-creation machine is “stuck in the mud.” The economy expanded at a 1.9 percent annual rate in the first quarter. The second quarter was worse. Analysts expect the government estimate, due Friday, to be between 1 percent and 1.5 percent despite a boost from housing and auto sales.
A few CEOs are sounding alarm bells. “A lot of weak numbers over the past two months caused us concern for the next six months,” Scott Davis of United Parcel Service Inc. told analysts Tuesday. He predicted the U.S. will grow at close to 1 percent in the second half of 2012. “It’s going to get tougher before it gets better,” he said. He doesn’t see a recession, though.
In a recent Wall Street Journal survey, forecasters put the chances of a recession in the next 12 months at a reassuringly low 21 percent. But economists rarely foresee recessions. In August 2007, they put recession odds at 28%. Within four months, the economy had fallen into what became the worst recession in more than half a century. In the recent survey, 39 forecasters said risks to their slow-growth forecasts were on the downside; only four said risks were on the upside.
To use another metaphor heard in the corridors of the Fed, the U.S. economy is barely flying at stall speed. It wouldn’t take much to push it down.
What’s on the horizon? Not much good.
Government in the U.S. is a minus, too. State and local governments are squeezing spending and raising taxes as federal stimulus aid wears off. Washington is on track to do the same, abruptly if Congress fails to avoid spending cuts and tax increases set for year-end, less abruptly if a compromise is found to avoid this “fiscal cliff.”
One solution is to reform the Federal Reserve to act as a purveyor of economic growth.
Influencial economists and business leaders, as well as political leaders, should read Harold Moulton’s The Formation Of Capital, in which he argues that it makes no sense to finance new productive capital out of past savings. Instead, economic growth should be financed out of future earnings (savings), and provide that every citizen become an owner. The Federal Reserve, which has been largely responsible for the powerlessness of most American citizens, should set an example for all the central banks in the world. Chairman Benjamin Bernanke and other members of the Federal Reserve need to wake-up and implement Section 13 paragraph 2, which directs the Federal Reserve to create credit for local banks to make loans where there isn’t enough savings in the system to finance economic growth. We should not destroy the Federal Reserve or make it a political extension of the Treasury Department, but instead reform it so that the American citizens in each of the 12 Federal Reserve Regions become the owners. The result will be that money power will flow from the bottom up, not from the top down––not for consumer credit, not for credit that doesn’t pay for itself or non-productive uses of credit, but for credit for productive uses to expand the economy’s rate of growth.
The systemic injustices of monopoly capitalism can only be addressed by comprehensive reforms to the tax, monetary and inheritance policies favoring the top 1 percent at the expense of the 99 percent. The current system perpetuates budget deficits and unsustainable government debt, underutilized workers, a lack of financing for financing advanced energy and green technologies, and outsourcing of U.S. industrial jobs to low-wage countries, trade deficits, shrinking consumption incomes among the poor and middle class, and conventional methods for financing productive growth that increase the ownership and power gaps between the top 1 percent and the 90 percent whose combined ownership accumulations are already less than the elite whose money power is widely known as the source of political corruption and the breakdown of political democracy.
The unworkability of the traditional market economy is evidenced by the diverse and growing deficits––federal budget deficit, trade deficit, city, county and state budget deficits––which are making it increasingly impossible for governments at every level to function. The increasing deficit burden is the result of the growing numbers of people who cannot earn, from legitimate participation in production, enough income to support themselves and their families. Thus government is obliged to “redistribute” to starve off economic collapse. The key means of redistribution is taxation––taking from the legitimate producers and giving to the non- or under-producers––to make up the economy’s ever wider income and purchasing power shortfalls.
The fact is that political democracy is impossible without economic democracy. Those who control money control the laws that foster wage slavery, welfare slavery, debt slavery and charity slavery. These laws can and should be changed by the 99 percent and those among the 1 percent who are committed to a just and economically classless market economy, true equality of opportunity, and a level playing field in the future for 100 percent of Americans. By adopting economic policies and programs that acknowledge every citizen’s right to become a capital worker as well as a labor worker, the result will be an end to perpetual labor servitude and the liberation of people from progressive increments of subsistence toil and compulsive poverty as the 99 percent benefits from the rewards of productive capital-sourced income.
The question that requires an answer is now timely before us. It was first posed by binary economist Louis Kelso in the 1950s but has never been thoroughly discussed on the national stage. Nor has there been the proper education of our citizenry that addresses what economic justice is and what ownership is. Therefore, by ignoring such issues of economic justice and ownership, our leaders are ignoring the concentration of power through ownership of productive capital, with the result of denying the 99 percenters equal opportunity to become capital owners. The question, as posed by Kelso is: “how are all individuals to be adequately productive when a tiny minority (capital workers) produce a major share and the vast majority (labor workers), a minor share of total goods and service,” and thus, “how do we get from a world in which the most productive factor—physical capital—is owned by a handful of people, to a world where the same factor is owned by a majority—and ultimately 100 percent—of the consumers, while respecting all the constitutional rights of present capital owners?”
