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Friday, March 12, 2010

"The Sham Recovery"

Robert Reich is not very optimistic about the "recovery":

The Sham Recovery, by Robert Reich: Are we finally in a recovery? Who’s “we,” kemosabe? Big global companies, Wall Street, and high-income Americans who hold their savings in financial instruments are clearly doing better. As to the rest of us – small businesses along Main Streets, and middle and lower-income Americans – forget it. ...
Look more closely and the only ones doing better are the people and private-sector institutions at the top. Many of America’s biggest companies are sitting on huge amounts of cash right now, but that says nothing about the health of the U.S. economy. ... America’s biggest companies are also showing fat profits and productivity gains because they continue to slash payrolls and cut expenditures. ...
(None of this, by the way, is stopping supply-side fanatics from arguing government needs to cut taxes on big corporations in order to spur the recovery. Their argument is absurd on its face. Big companies don’t know what to do with all their cash they have as it is. They aren’t investing it in new plant and equipment and new jobs. So why should the government cut their taxes and enlarge their cash hoards even more?)
The picture on Main Street is quite the opposite. Small businesses aren’t selling much... Americans still aren’t buying much. Small businesses are also finding it difficult to get credit. ... Small businesses ... are responsible for almost all job growth in a typical recovery. So if small businesses are hurting, we’re not going to see much job growth any time soon. ...
Some cheerleaders say rising stock prices make consumers feel wealthier and therefore readier to spend. But to the extent most Americans have any assets at all their net worth is mostly in their homes, and those homes are still worth less than they were in 2007. The “wealth effect” is relevant mainly to the richest 10 percent of Americans...
Add to all this the joblessness or fear of it that continues to haunt a large portion of the American population. Add in the trauma of what most of us have been through over the past year and a half. Consider also the extra need to save as tens of millions of boomers see retirement on the horizon. Bottom line: Thrifty consumers are doing the right and sensible thing by holding back from the malls. They saved a little over 4 percent of their disposable income in fourth quarter of 2009. In the months or years ahead they may save more.
Right and sensible for each household but a disaster for the economy as a whole. American consumers accounted for 70 percent of the total demand for goods and services in the American economy before the Great Recession, and a sizable chunk of world demand.
So what happens when the stimulus is over and the Fed begins to tighten again? Where will demand come from to get Main Street back, create jobs, raise middle class wages? Not from big businesses. Certainly not from Wall Street. Not from exports. Not from government.
So, where? That question is the big unknown hanging over the U.S. economy. Until there’s an answer, an economic “recovery” for anyone other than big corporations, Wall Street, and the wealthy is a mirage.

There's another consequence of the lagging recovery for labor markets. Here's Paul Vigna:

Meet The New Welfare Queens, by Paul Vigna: There’s a new profligate in town, one that isn’t working, isn’t looking for a job, but is just sucking off the government teat while productive citizens slave away. This new welfare queen can be found in living rooms across the country, her (or his) feet up on the coffee table, sucking down a Fuze and turning down job offers while they waste time watching The View. They’re almost, go ahead and say it, European.
“Continuing to pay people unemployment compensation is a disincentive for them to seek new work,” Sen. Jon Kyl said... That’s right, you 11 million or so unemployed Americans collecting benefits: you’re being “disincentivized” to work by a government handout. And in the process, you’re robbing decent productive, working Americans. It’s only a matter of time before Mark Levin or somebody starts screaming about unemployment queens.
This is so wrong on so many levels, I’m not sure where to start with it. The worst economic meltdown in our lifetimes has thrown more than 8 million Americans out of work. The jobs have simply vanished. ... When employers are losing money because they can’t hire enough people to keep up with demand for their products, and people are on the dole for two years, then come to talk to me about lazy Americans. Not before then.
Right now, there are precious few jobs, and for each of those precious few, there are more than five unemployed people. Employers aren’t adding jobs because people still aren’t sure how this whole thing’s gonna turn out. And until real, concrete demand starts showing up, that’s going to remain the case. ...

Then, of course, unemployment benefits are only a slim percentage of your previous wages, so I find it very hard to believe there’s anybody out there living it up on the dole. ... At the best, you may have some two-income families that are making due on one income and the unemployment checks for the time being. ... So let’s hold off on all the joyriding jobless talk, shall we?

If Congress had instituted the job creation programs that were needed, and done so in a timely manner instead of dragging their feet on the false hope that recovery was just around the corner, there wouldn't be so much resentment of those receiving government help since many of them would have jobs. There would, of course, still be irritation from the deficit hawks over the deficit spending that would have been required to create the needed jobs, much more deficit spending than Congress was willing to put in place was needed, but at least their ire would have been directed at the government and Congress rather than the unemployed.

Conservatives whine about everything, and the noise they make is often quite disconnected from the importance of the problem, so the mere fact that they are making noise doesn't say much. The real problem is those who refused to give the help that was needed, people like Jon Kyl. The people sitting at home jobless as a consequence of this failure, people just trying to get by until there are jobs again, are not the ones to blame.

    Posted by on Friday, March 12, 2010 at 01:26 PM in Economics, Social Insurance, Unemployment | Permalink  Comments (29)


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