Loading ...
Sorry, an error occurred while loading the content.

Why The Economy Can’t Get Out of Fir st Gear:

Expand Messages
  • bdpoe@aol.com
    I ve been reading articles by Robert Reich, Paul Krugman and Chris Hedges as well as Dylan Ratigan s blogs and combined they paint a bleak picture for the
    Message 1 of 1 , Jun 15, 2012
    View Source
    • 0 Attachment
      I've been reading articles by Robert Reich, Paul Krugman and Chris Hedges
      as well as Dylan Ratigan's blogs and combined they paint a bleak picture
      for the poor, chronically ill, those living just above the poverty line,
      the lower middle
      class and working poor. We all had better write our state and federal
      legislators,
      protest like hell and despite their short comings campaign for Democrats in
      every way possible.

      keep up the good fight



      Why The Economy Can’t Get Out of First Gear: The Rich Have Sucked It Dry

      by _Robert Reich_ (http://www.commondrby _Roberby _Robert Rei

      Rarely in history has the cause of a major economic problem been so clear
      yet have so few been willing to see it.Wealthy inequality and a generation
      of stagnant wages has left a tattered middle class unable to save the US
      economy from the ravages of a top-down economy.
      The major reason this recovery has been so anemic is not Europe’s debt
      crisis. It’s not Japan’s tsumami. It’s not Wall Street’s continuing
      excesses.
      It’s not, as right-wing economists tell us, because taxes are too high on
      corporations and the rich, and safety nets are too generous to the needy.
      It
      ’s not even, as some liberals contend, because the Obama administration
      hasn’t spent enough on a temporary Keynesian stimulus.
      The answer is in front of our faces. It’s because American consumers, whose

      spending is 70 percent of economic activity, don’t have the dough to buy
      enough to boost the economy – and they can no longer borrow like they could

      before the crash of 2008.
      All of the gains from economic growth have been going to the richest 1
      percent – who, because they’re so rich, spend no more than half what they
      take in.
      If you have any doubt, just take a look at the _Survey of Consumer
      Finances_ (_http://www.federalrhttp://www.http://www.fhttp://www.fehtt_
      (http://www.federalreserve.gov/econresdata/scf/scfindex.htm) ) , released
      Monday by the Federal Reserve. Median family income was $49,600 in 2007.
      By
      2010 it was $45,800 – a drop of 7.7%.
      All of the gains from economic growth have been going to the richest 1
      percent – who, because they’re so rich, spend no more than half what they
      take
      in.
      Can I say this any more simply? The earnings of the great American middle
      class fueled the great American expansion for three decades after World
      War
      II. Their relative lack of earnings in more recent years set us up for the
      great American bust.
      Starting around 1980, globalization and automation began exerting downward
      pressure on median wages. Employers began busting unions in order to make
      more profits. And increasingly deregulated financial markets began taking
      over the real economy.
      The result was slower wage growth for most households. Women surged into
      paid work in order to prop up family incomes – which helped for a time.
      But
      the median wage kept flattening, and then, after 2001, began to decline.
      Households tried to keep up by going deeply into debt, using the rising
      values of their homes as collateral. This also helped – for a time. But
      then
      the housing bubble popped.
      The Fed’s latest report shows how loud that pop was. Between 2007 and 2010
      (the latest data available) American families’ median net worth fell
      almost
      40 percent – down to levels last seen in 1992. The typical family’s
      wealth is their home, not their stock portfolio – and housing values have
      dropped by a third since 2006.
      Families have also become less confident about how much income they can
      expect in the future. In 2010, over 35% of American families said they did
      not
      “have a good idea of what their income would be for the next year.” That’
      s up from 31.4% in 2007.
      But because their incomes and their net worth have both dropped, families
      are saving less. The proportion of families that said they had saved in the

      preceding year fell from 56.4% in 2007 to 52% in 2010, the lowest level
      since the Fed began collecting that information in 1992.
      Bottom line: The American economy is still struggling because the vast
      American middle class can’t spend more to get it out of first gear.
      What to do? There’s no simple answer in the short term except to hope we
      stay in first gear and don’t slide backwards.
      Over the longer term the answer is to make sure the middle class gets far
      more of the gains from economic growth.
      How? We might learn something from history. During the 1920s, income
      concentrated at the top. By 1928, the top 1 percent was raking in an
      astounding
      23.94 percent of the total (close to the 23.5 percent the top 1 percent
      got
      in 2007) according to analyses of tax records by my colleague Emmanuel
      Saez
      and Thomas Piketty. At that point the bubble popped and we fell into the
      Great Depression.
      But then came the Wagner Act, requiring employers to bargain in good faith
      with organized labor. Social Security and unemployment insurance. The
      Works
      Projects Administration and Civilian Conservation Corps. A national
      minimum wage. And to contain Wall Street: The Securities Act and
      Glass-Steagall
      Act.
      In 1941 America went to war – a vast mobilization that employed every
      able-bodied adult American, and put money in their pockets. And after the
      war,
      the GI Bill, sending millions of returning veterans to college. A vast
      expansion of public higher education. And huge infrastructure investments,
      such
      as the National Defense Highway Act. Taxes on the rich remained at least
      70
      percent until 1981.
      The result: By 1957, the top 1 percent of Americans raked in only 10.1
      percent of total income. Most of the rest went to a growing middle class –
      whose members fueled the greatest economic boom in the history of the
      world.
      Get it? We won’t get out of first gear until the middle class regains the
      bargaining power it had in the first three decades after World War II to
      claim a much larger share of the gains from productivity growth.
      This work is licensed under a Creative Commons License

      [Non-text portions of this message have been removed]



      [Non-text portions of this message have been removed]
    Your message has been successfully submitted and would be delivered to recipients shortly.