Why Americans Are Fed Lies
31 March 11
The Truth About the Economy That Nobody In Washington or On Wall Street Will Admit: We're Heading Back Toward a Double Dip
hy aren't Americans being told the truth about the economy? We're heading in the direction of a double dip - but you'd never know it if you listened to the upbeat messages coming out of Wall Street and Washington.Consumers are 70 percent of the American economy, and consumer confidence is plummeting. It's weaker today on average than at the lowest point of the Great Recession.
The Reuters/University of Michigan survey shows a 10 point decline in March - the tenth largest drop on record. Part of that drop is attributable to rising fuel and food prices. A separate Conference Board's index of consumer confidence, just released, shows consumer confidence at a five-month low - and a large part is due to expectations of fewer jobs and lower wages in the months ahead.
Pessimistic consumers buy less. And fewer sales spells economic trouble ahead.
What about the 192,000 jobs added in February? (We'll know more Friday about how many jobs were added in March.) It's peanuts compared to what's needed. Remember, 125,000 new jobs are necessary just to keep up with a growing number of Americans eligible for employment. And the nation has lost so many jobs over the last three years that even at a rate of 200,000 a month we wouldn't get back to 6 percent unemployment until 2016.
But isn't the economy growing again - by an estimated 2.5 to 2.9 percent this year? Yes, but that's even less than peanuts. The deeper the economic hole, the faster the growth needed to get back on track. By this point in the so-called recovery we'd expect growth of 4 to 6 percent.
Consider that back in 1934, when it was emerging from the deepest hole of the Great Depression, the economy grew 7.7 percent. The next year it grew over 8 percent. In 1936 it grew a whopping 14.1 percent.
Add two other ominous signs: Real hourly wages continue to fall, and housing prices continue to drop. Hourly wages are falling because with unemployment so high, most people have no bargaining power and will take whatever they can get. Housing is dropping because of the ever-larger number of homes people have walked away from because they can't pay their mortgages. But because homes the biggest asset most Americans own, as home prices drop most Americans feel even poorer.
There's no possibility government will make up for the coming shortfall in consumer spending. To the contrary, government is worsening the situation. State and local governments are slashing their budgets by roughly $110 billion this year. The federal stimulus is ending, and the federal government will end up cutting some $30 billion from this year's budget.
In other words: Watch out. We may avoid a double dip but the economy is slowing ominously, and the booster rockets are disappearing.
So why aren't we getting the truth about the economy? For one thing, Wall Street is buoyant - and most financial news you hear comes from the Street. Wall Street profits soared to $426.5 billion last quarter, according to the Commerce Department. (That gain more than offset a drop in the profits of non-financial domestic companies.) Anyone who believes the Dodd-Frank financial reform bill put a stop to the Street's creativity hasn't been watching.
To the extent non-financial companies are doing well, they're making most of their money abroad. Since 1992, for example, GE's offshore profits have risen $92 billion, from $15 billion (which is one reason it pays no US taxes). In fact, the only group that's optimistic about the future are CEOs of big American companies. The Business Roundtable's economic outlook index, which surveys 142 CEOs, is now at its highest point since it began in 2002.
Washington, meanwhile, doesn't want to sound the economic alarm. The White House and most Democrats want Americans to believe the economy is on an upswing.
Republicans, for their part, worry that if they tell it like it is Americans will want government to do more rather than less. They'd rather not talk about jobs and wages, and put the focus instead on deficit reduction (or spread the lie that by reducing the deficit we'll get more jobs and higher wages).
I'm sorry to have to deliver the bad news, but it's better you know.
Robert Reich is Chancellor's Professor of Public Policy at the University of California at Berkeley. He has served in three national administrations, most recently as secretary of labor under President Bill Clinton. He has written thirteen books, including "The Work of Nations," "Locked in the Cabinet," "Supercapitalism" and his latest book, "AFTERSHOCK: The Next Economy and America's Future." His 'Marketplace' commentaries can be found on publicradio.com and iTunes.
Comments
First, drop the God stuff. It is unconstitutiona l, and reeks of trouble bigger than any that you may sove.
The rest of your details, I would hope can be negotiated. Some are great, others such as a consumption tax and term limits are not my preference.
In general, we do have to something beyond talking to ourselves.
We need real fundamental, soul searching change.
But, unfortanetly he cannot win. He is too short and too Jewish.
In that great Communist stronghold (sic), the Commonwealth of MA, he could only muster 25% of the Democrats when he ran for Governer.
No, original thinking is not encouraged in America anymore.
We need an active Progressive Democrat party. We will support Progressive Democrats and recruit viable candidates to replace those that are not progressive.
We need leadership for this movement.
I am sick of talking, lets do it!
http://www.truemajority.org/oreos
It funds that job creation by absorbing the excess income that is not being used to grow the economy. In other words, tax the rich.
This is not complicated. Only stupid Republicans have not figured it out.
Professor Reich, we are not being told the truth, because the government is split between 3 factions. 1) Stupid Republicans 2)Those that think most Americans are stupid 3) Persons that want to control all wealth and power, or at least be seen as their allies.
I see that we're repeating the 1937 mistake. (Did I get the date right, Professor?) Yes, the deficit spending seems OTT but we can't wimp out now!
We voted in 2008 for the party of Roosevelt and the memories of MLK and JFK and we got the party of Coolidge instead. Be it war, the economy, education or energy policy there is absolutely nothing this administration had done or ignored that I can support or agree with.
They are presiding over and facilitating the economic destruction of more than half this country's population. Far from even illuminating the damage done to our lives, the Obama administration is paving our crises over for the benefit of their corporate campaign contributors.
Enough is enough! If they won't defend our interests, we need new leaders!
The separation of the financial opinion from the US manufacturing opinion is an important gauge.
I think that statistics by sector on hiring would be useful at this poit to see where gains really are and are not.
Unemployment among college professors is very low (3%) but more than half are now adjuncts, making - on average - less than 20,000 a year, no benefits and, in many places, no social security payments made. 30 years ago, 7% of the faculty were adjuncts, now most college professors are adjuncts. An entire job market is being destroyed as we speak, while the cost of tuition continues to skyrocket.
So to look at one job sector - that requires very high educational qualifications - we have low unemployment AND collapsing wages.
I'm sure this pattern is repeated across a host of sectors, even when they are employed.
What say you? Of the many things that we could spend our time on, which are most important in order to right this ship?
I remember that Carter tried honesty and it failed miserably.
As Nixon said to a member of his staff who wanted to run for office, "You are not a good enough liar."