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Slouching Toward a Double Dip or a Lousy Recovery at Best
The economy is still in the gravitational pull of the Great Recession and all the booster rockets for getting us beyond it are failing. The odds of a double dip are increasing.
In June the nation added fewer jobs than necessary merely to keep up with population growth (private hiring rose by 83,000 after adding only 33,000 jobs in May). The typical workweek declined. Average earnings dropped. Home sales are down. Retail sales are down. Factory orders in May suffered their biggest tumble since March of last year.
So what are we doing about it? Less than nothing. The states are running an anti-stimulus program (raising taxes, cutting services, laying off teachers, firefighters, police and other employees) that's now bigger than the federal stimulus program. That federal stimulus is 75 percent gone anyway. And the House and Senate refuse to pass another one. (The Senate left Washington for the July 4th weekend without even extending unemployment benefits for millions of jobless Americans now running out.)
The second booster rocket - the Fed's rock-bottom short-term interest rates - are having almost no effect. That's because jobs and wages are so lousy that consumers don't have enough money to buy much of anything, making small businesses bad credit risks and causing big ones to sit on the huge pile of cash they've accumulated.
Wall Street and the other biggest global banks, meanwhile, are making piles of money betting against government debt all over the world. These were the same banks and financiers, remember, that were bailed out by government not long ago. But now they're demanding fiscal austerity, and politicians are once again doing their bidding - cutting deficits in every rich economy that should now be doing the reverse.
The people who are suffering the most from the failure of public officials and the greed of large bankers are the least able to endure it. Unemployment among people with four-year college degrees is barely over 5 percent; among high-school dropouts it's over 25 percent. Those who have been jobless the longest or who have left the labor force altogether are men over fifty who are least likely to get back in. Families most in need are losing the services - state-supported Medicaid, child dental care, after-school programs for the kids, public transit - they most depend on.
The irony is that had there been no bank bailout in 2008 and 2009, no large stimulus, and no extraordinary efforts by the Fed to pump trillions of dollars into the economy, we'd have had another Great Depression. And because it would have sucked almost everyone down with it, the nation would have demanded from politicians larger and more fundamental reforms that might well have lifted everyone, and set America and the world on a more sustainable path toward growth and shared prosperity: A stimulus that financed the rebuilding of the nation's infrastructure and alternative energies, single-payer health care, a cap on the size of big banks and resurrection of Glass-Steagall, earnings insurance, an Earned Income Tax Credit that extended into the middle class, and a truly progressive tax coupled with a price on carbon to pay for all of this over the long term.
No one in their right mind would have wished for another Great Depression, of course. But we seem to have got the worst of all worlds. The bank bailout, the stimulus, and the Fed brought us back from the brink just enough to dampen zeal for anything more. As a result, we are now slouching toward a tepid recovery that could just as well fall into a double dip recession, while a large portion of our population suffers immensely.
Robert Reich, one of the nation’s leading experts on work and the economy, is Chancellor’s Professor of Public Policy at the Goldman School 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. Time Magazine has named him one of the ten most effective cabinet secretaries of the last century. He has written thirteen books, including his latest best-seller, Aftershock: The Next Economy and America’s Future; The Work of Nations; Locked in the Cabinet; Supercapitalism; and his newest, Beyond Outrage. His syndicated columns, television appearances, and public radio commentaries reach millions of people each week. He is also a founding editor of the American Prospect magazine, and Chairman of the citizen’s group Common Cause. His widely-read blog can be found at www.robertreich.org.
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102 Comments so far
Show AllState and city governments are either running out of money or will very shortly. How about the governors, mayors, city managers get together and march on Washington demanding an end to these wars that are bankrupting this country? Instead these people continue to downsize important things like closing health care clinics, laying off police and fire fighters, etc. all the while keeping their pay and the legislatures keeping their pay. In case the whole country goes down, they always have their second home or yacht to escape to. Even if half of them took to the streets, perhaps the citizens would also and MAYBE we could see some CHANGE coming.
Schools are being closed by the shipload.
Agreed. Maybe they & we the people can march right in to congress, declare an emergency people's council, & enact all the reforms that Mr. Reich just named (oh yeah, & fire the sens, the reps, the prez, & the supremes too). Also fire the FED & instruct the US treasury to start printing greenbacks (oh yeah, & tell wallstreet/cityoflondon that our phony indebtedness to them is repudiated. THEY are bankrupt & no longer exist; their charters burned). Battleline drawn. See who blinks.
Robert Reich for president pro-tem at the citizens' emergency council, since he succinctly designated the reform package we so desperately need, like, yesterday.
Fire them? FIRE them? Arresting them is more like it.
Yes, I like that too...and a charge of treason, with a rope waiting for those found guilty, at fort leavenworth, since we're just thinking out loud. But like sun tsu would say, leave the enemy an exit since victory is desired, NOT all'round slaughter and destruction. But seriously, I think a march on DC heading for the congressional bldg, that step alone, would cause the poo-poo to hit the fan. We've got to be more desperate than we are now, to be willing to go through with it. That desperation is coming, & quickly.
Nice idea, but in my area most of the town councils and mayoral offices are occupied (literally and figuratively) by real estate developers who stay in office just long enough to grease the wheels of whatever long term "development" goals they have in mind and then it's back to making money! The locals don't seem to mind too much since they are all busy collecting contractor money or paychecks from the fed (hyper military town) while voting Republican (75% for McCain, one of our nations highest ratios!) and bitching about taxes. This will be one of the last places to fall under the bus, deserves it more than most, and will bitch the loudest. F#cking "conservative" bunch of g#damn hypocrites, sycophants, leeches and crybabies who whine constantly about welfare mothers (or whatever Rush told them to think most recently), but who couldn't wait to put in a claim for every unused tool or piece of lawn equipment in their garages last time a hurricane blew through.
Excuse me, I'm going to go grumble quietly in a corner for awhile...;)
The governors of both parties are indeed going to D.C. next week but, as Reich points out, it is the superbankers who are demanding the world follow the " austerity " plan enacted by the G20(read IMF/World Bank). The G20 banking group see austerity as a hedge(bonds) against mounting defaults on loans. They insist on getting to the front of the line before massive inflation hits in about 5-7 years. They are betting against a recovery and in so doing they will cause one. As for why we are in this place, well, everyone posting here has several very good points. Just have a good fourth and think of our country as the Titanic: while the band plays on, the rich gather on the lifeboats and those in steerage are drowning below. I'll be listening to Dave Alvin's " 4th of July " tonight with a cold beer and a lot of thoughtful resignation.
I acquired Alvin's Ashgrove not too long ago: good song, good cd. I believe capitalism is our horrible best alternative. I fear individual greed and idiocy may cause capitalism to implode in catastrophe one of these years or decades. I'll have a cold one too.
Dave's entire career is worth a look into. To sum up: Frank Zappa said, " In a perfect world we'd all be very liberal republicans. " His tongue couldn't have been further against his cheek but it does say how far we have not come in America. Thanks for the Ashgrove plug.
I thought the people in the USA voted for promised change with Obama?
How do you like him now? It was all just BS.
Instead of change, the USA got a continuation of the ruling elite, who, it should be evident by now, want to destroy the constitutional government of the USA and replace it with an empire run by business.
Good Grief.
Obama's true allegance was exposed during his campaign in September 2008 when he zealously promoted a quick, unconditional bankster bailout (TARP).
If hope and change had any real meaning Obama would have demanded that restoration of New Deal financial industry regulation (and then some) be attached to the TARP.
Obama's post 1/20/09 pro-corporate, supply-side actions turned what could have been a three year recession into what now appears to be neither recession nor depression...its a paradigm change.
I could easily vote right with the Republicans to end long-term unemployment IF we would spend what is needed to create jobs that would benefit our nation over the long run. I would guess the harsh silver lining is that more people will understand that consumerism is not a soul salvation. I do feel very bad for those many who are slipping under the wheels of our growing train wreck.
Lots of people voted for Hitler for exactly the same reason.
Right on chaokoh, I am amazed at the number of Americans who believe Hitler took over Germnay against the will of the Germans.
Hitler had broad support throughout his tenure and still has many followers. Rove and Rahm use the same tactics Hitler used to gain support for their fascist actions.
Yes, it seems only Ds can get away with the ever rightward march to tyranny. Since we have a de-facto one party state and elections that are largely just expensive PR stunts, I would argue that we don't have a functioning democracy to begin with. In a country with a corporate media run, big money, winner-takes all elections system where barely 50% of eligible voters bother to register and vote, a minority determine outcomes.
True - it takes a slick-talking "community organizer" to push through things that Bush couldn't even touch.
Thats why people voted for Obama. Fortunately we will be able to create a cure for our little Hitler at the end of 4 years.
I have to add that I'm not accusing Greg R of being a Nazi or of having any bad intentions. I'm just pointing out that it is dangerous to overlook the evil of the American right in the false hope of gaining economic security.
now that's a truly lame comparison, I feel bad for you.
No, it bears consideration.
Obama isn't Hitler but he is Herbert Hoover. Who do you plan to replace him with? Forget the Republicans. We need a reasonable Independent.
No, I'm afraid he's not even close to Hoover; maybe even worse than Bush.
Anyone else think the Hitler-Nazi comparisons are sometimes a wee bit overdone?
Yes, the Hitler-Nazi comparisons are a wee bit overdone, but they become a little less so every day as the USA strives to fulfill them. : )
On the one hand Mr. Reich writes:
"No one in their right mind would have wished for another Great Depression, of course."
On the other hand he writes:
"And because [a Great Depression] would have sucked almost everyone down with it, the nation would have demanded from politicians larger and more fundamental reforms that might well have lifted everyone, and set America and the world on a more sustainable path toward growth and shared prosperity..."
Let's be clear what we're talking about when we discuss the US economy: it is a system that deprives millions of Americans of health care, resulting in the deaths of 40,000 of them every year, it funds ongoing wars all over the planet, it redistributes wealth from workers to the idle criminal rich, and it's destroying the ecosystem. This is a very short list of the ills caused by the so-called "economy".
Who's in their right mind? Those who are willng to endure economic collapse in order to overthrow a criminal regime or those who wish fervently for its continued existence?
More than an all or nothing choice existed during the Sept. 2008 meltdown. Had a restoration of New Deal regulations been attached to the TARP, or if the Gov. had nationalized the big banks, we would not have had another great depression OR the total takeover of the global economy by the banksters that we are now experiencing.
Roosevelt knew that without the New Deal regulations, capitalism was on track to destroy itself.
Obama, an Ivy League dim bulb, blew his chance to re-regulate capitalism, thereby saving it as Roosevelt did.
There could be a "double-dip" recession or a lousy recovery... at BEST. But the best is not what's in store for the USA.
Yes. I was astounded to see obama acting immediately like pres hoover, listening to "mr.wallstreet banker guy" on how to save the nation from this, the 2nd great depression. Obama is the last failed president before the next great Lincoln/FDR, OR, our 1st franco/petain/pinochet/mussolini/hitler fascist leader.We could be heading for our own "spanish civil war" (democratic republicans vs corpo-fascists). God help us.
Lincoln? You fool he was the first Facist president a religous fanatic who said to the freely elected government of the South that they couldn't leave!! Get it stupid we can leave. We are slaves and there has been no America since Lincoln. I don't care what you think about the South or Slavery at this time. That was the smoke screen for the take over that continues to this day. Free men have the Right to leave!! Period.
(He sighs and rolls his eyes). I'll leave the refutation to others.This is wearisome.
We have a computer based world trading company. Cash is a commodity. In a matter of hours 10% of the the money(reserve) backing the banks could of been dumped around the world. An orderly flow could have been accomplished within days to Euro/Asian markets. You can argue this but I would posit that the real reasons the dollar was not destroyed in a week was the cost of oil being measured in dollars and that would of sent energy prices thru the roof: the futures contracts would of never been honored by oil-exporting countries and who could stop them. The only brake on this disaster, I would posit, is that our military couldn't and wouldn't allow it because they are by far the biggest single user of oil in the world by. With 800 bases around the world and a huge oil addiction none of the exporters who would of denied those contracts would be a country today. We would destroy them to applause by our own citizenry. As with oil so to are our multi-nat'l corporations operating around the globe with impunity and agressiveness, especially financial markets. They own our army for " protection " purposes and the politicians knew this in 2008 and know it today. There are no pacifists in F-22 fighter-bombers who are running out of fuel. We call them patriots in today's America. Bush/Cheney knew this and Obama/Biden know this. The best answer to this protection racket is to cut back the military costs and end their oil addiction. Either that or collapse: just like in 2008. What do you think?
I think you're essentially correct. The biggest supplier of oil to the Pentagon is BP. The Pentagon is not only the biggest single user of oil, but the biggest single polluter on the planet.
Corporatism-Militarism, with its enablers/tools in all three branches of the Corporatist-Militarist U.S. government, will soon destroy what shreds are left of pseudo-democracy here, along with most of our ecosystem.
Unless we find ways to dismantle this Death State Empire, most of us will suffer horribly for the remainder of this century.
Well said, Chaokoh--and an interesting way of looking at our plight.
My friends and I are some of those people enduring the economic collapse and certainly are trying to break the backs of the criminal class using gov't to steal us blind. Collectively, we've lost nearly 280K from our retirement, lost wages, unemployment, etc. We know the feeling very personally. However, remember that Bush/Paulson came to the congress with the storyline of " bailout or burn and die " and gave them 72 hours to decide. No adult, under these circumstances, responsible for the lives of 300+ million would have much differently. I don't deny things were handled poorly and crookedly but if the only doctor available happens to work for a loan shark and you need emergency surgery: the question is still could you respond any differently at the time?
It was apparent to some in Congress and even more of us on the outside that the 72 hour fear factor was bogus.
Even if the 72 hour scare was real, dusting off the New Deal could have been done in one 8 hour shift with today's powerful computers.
No new ground needed to be broken until what should have been TARP II (adding regulations to deal with newer "innovative financial products" during the first 100 days of the Obama administration.
"So what are we doing about it?"
Well, we've still got a couple of illegal occupations going, funneling $1.3T annually into the MIC, we still believe the "free market" will solve all ills, and we have a leadership that neither leads nor listens to common sense at the expense of their re-election bids.
The economic crash started under Bush and a republican dominated government, and it continues under a democratic president and a democratic congress (but not Supreme court).
And what will "the people" do? Why, they will elect more republicans to punish the democrats for a bad economy, and everything will get better. So there!
No matter how much evidence or scientific reasoning supported with facts you present about the problem, at least 75% of the population will violently assert that if you are unemployed, "it is your own damn fault."
After every major depression, the running unemployment rate is higher than it was before the depression. This is called "recovery."
"No matter how much evidence or scientific reasoning supported with facts you present about the problem, at least 75% of the population will violently assert that if you are unemployed, "it is your own damn fault."
Absolutely! They will blame the victim until they themselves become unemployed due to downsizing or whatever.
Then of course they will demand every scrap of social assistance that is rightfully due them because *they* paid taxes for them, even though the taxes they did pay had to be pried from their greedy fingers while they kicked and screamed like a two year old child throwing a temper tantrum.
"The irony is that had there been no bank bailout in 2008 and 2009, no large stimulus, and no extraordinary efforts by the Fed to pump trillions of dollars into the economy, we'd have had another Great Depression. And because it would have sucked almost everyone down with it, the nation would have demanded from politicians larger and more fundamental reforms that might well have lifted everyone, and set America and the world on a more sustainable path toward growth and shared prosperity"
Finally, economists are starting to get it. They still need to realize that sharing, not growth, should be the focus.
Unfortunately the president and congress realize that they are owned by the banksters who are not going to let them apply any populist ideas.
You make it sound as if our elected officials are conflicted and trying to fight the oligarchy, albeit unsuccessfully.
The real problem is that our government is run by the WILLING and COMPLICIT. They are indeed owned by the corporations, but don't seem in the least troubled by this. They have deliberately sold themselves off -- not so they can fight the fight as statesmen -- but to live the cushy life they've always dreamed of. Government is their cash cow.
A good example is the great and historic health care debate. If O and friends had any interest at all in providing for the common good, they would have fought for single payer or expanded Medicare. But of course they work for the insurers so they didn't even try. This legislative horror that guides the oligarchy directly into our pockets should tell us all we need to know about where their loyalties lie and what they really care about.
Of course, let's not forget their debt to big oil, so clearly seen in their astonishing, unhidden deference to BP.
"The second booster rocket - the Fed's rock-bottom short-term interest rates - are having almost no effect."
They are having a positive effect for the banksters who have been handing themselves and employees somewhere in the vicinity of 40% of its revenues in salaries and bonuses. The Fed's borrow at near-zero interest and then loan it back to the government at about 3-4% interest rate, in addition to using it at the Wall Street Casino.
Have you heard about the group of concerned economists, lawyers, etc. in Great Britain that is trying to get their government to adopt this http://www.bankofenglandact.co.uk/ legislation? The true culprit in the world’s financial problems is the fact that the global monetary system is one of paper fiat debt-money....and this group is well aware of it!
I fully agree Rich, great comment.
I think the HOPE at least is that just enough regulative apparatus will be enacted to avoid total catastrophe. I think only a small minority truly want capitalism to collapse. Certainly many of the billionaires and their advisers are aware of the dangers and will make some efforts to avoid mayhem. I would think true conservatives would begin to increasingly see and demand more control over Wall Street.
That is Truth there is no other way a New American Revolution is now in order. Be a leader in your community people and take the loss of wealth that goes with it don't play this game any more. Keep your cash out of banks and don't work with people who do. Demand the change and be perpared for the fight that we all know is coming.
What I meant by total collapse is widespread sustained rioting, anarchy in the streets. The billionaires I mentioned and other super rich don't want to limit their freedom to fortresses and armies of guards. That's no way to live. Certainly there is a small minority on the far left that wants capitalism to collapse. I do not. And the vast majority do not. While most Americans hate the idea of regulation, those with some education or common sense understand the need. I've had to deal with government regulations a great deal in my life. I've often found it annoying, but I understand the need.
Outstanding posts RichM,
I've missed you greatly.
The grave breech of the social contract we had with our government was "self-government" via representative, which the fundamental essence of, is no longer functional. The Anti-Federalists tried to warn us in 1787-89 that it was nuts to put a senator in for six years and move him to another city, but we didn't listen.
In 1787, the Anti-Federalists (the first two-party system in America) saw this whole disaster coming. Luther Martin from Maryland protested loudly that having a Senate man vote for his own salary, not get it from the state he's representing, and not be recallable for any reason for SIX years was crazy. Under the previous Articles of Confederation the Federal Congressman was on a short leash, was paid by his state, could be canned for any reason, and only served ONE YEAR. (Source: "The Complete Anti-Federalist" by Professor Herbert J. Storing, Chicago Press 1981, sec. 2.4.42)
"Thus Sir, for six years the senators are rendered totally and absolutely independent of their States, of whom they ought to be the representatives, without any bond or tie between them: During that time they may join in measures ruinous and destructive to their States, even such as should totally annihilate their State governments, and their States cannot recall them, nor exercise any conroul over them....." - Luther Martin, Representative of Maryland 1789, dissenter who refused to sign the Constitution.
In fact, according to Ben Franklin, we shouldn't have an office of the president, but instead a council of several to make important decisions for the nation. But nobody listened to him, and now we have a despot King who's assumed powers not granted to him in the Constitution, e.g., the right to assassinate anyone one he dislikes (OFF WITH HIS HEAD!! - The tyrant Queen in Alice in Wonderland.)
And then the question is: do we even need a Supreme Court? Many of the Founding Fathers didn't think so. Jefferson opposed this huge legal empire that sprouted up under John Marshal, but lost this fight. Later he tried to get rid of crooked judges and discovered too late what a useless and clumsy instrument Impeachment is. George Mason, the author of the Virginia Declaration of Rights said in 1787:
"The Judiciary of the United States is so constructed and extended, as to absorb and destroy the Judiciarys of the several states; thereby rendering Law as tedious, intricate and expensive, and Justice as unattainable,by a great part of the Community, as in England, and enabling the Rich to oppress and ruin the Poor."
So in summary, we need to return to a weak central government, dissolve corporate welfare and personhood, and restore self-government by returning to term limits of one year only for all government posts.
A 90 day General Strike and National Boycott on everything would be most effective in re-asserting our rights as taxpayers and voters. What do you think?
TJ
We do have regulation and it will be stronger. Of course it will not be strong enough and regulators are human and will be compromised. The degree of future Wall Street problems is the question. Police repression can easily handle most problems in any one city with adequate preparation. If the Internet remains relatively free, massive nation-wide riots would pose a problem. What are the chances that a 1776 style revolution would give us better government? I have very serious doubts about that.
Tell me if I'm wrong, Greg, but you supported the old paradigm and likely voted for Bush twice. Probably, you got most of your information from FOX news. Generally, you consider yourself to be a 'conservative,' but lately the conservative--or rather neocon--worldview has become uncomfortable. You do not want to give up capitalism because you have benefited from it, and are somewhat well to do. Perhaps now you consider your more of a Liberation. Would you say this is an accurate description of where you presently stand?