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The Awful, Unsaid Truth: We’re Heading Back Toward a Double Dip
The Truth About the Economy that Nobody In Washington Or On Wall Street Will Admit
Why 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, G.E.’s offshore profits have risen $92 billion, from $15 billion (which is one reason it pays no U.S. 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, 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, an e-book, 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.
88 Comments so far
Show AllA double dip courtesy of the corporatist policies of your hero Barack Obama, Professor Reich.
Most working class Americans never came out of the first dip, so it won't be a double dip for us.
Noetheless, Team Obama is second to none when it comes to relabeling anything that might make them look bad.
The double dip will soon be relabeled to put a positive spin on Team Obama's serial regressive policies and actions.
Wonder of wonders, I agree with you.
The fact that the average price of a home is now at the Spring 2002 level means even more. The DIP started when the market dot-com bubble crashed in March of 2000. It's been smoke and mirrors ever since. There was, as we now have found out, no vaunted wealth effect from housing equity that Greenspan mendaciously touted. It's just been one long string of lies bouyed by the fact that we have a corrupt fed bank using the power of fiat currency to keep crooked corporations, Wall Street and War profiteers afloat at the expense of 90% of Americans.
If we had a currency based on a basket of precious metals, none of this slight of hand could have occurred. Consequently our crooks in congress make damn sure that we have the legal tender laws forced down our throats.
Reich won't touch the legal tender laws. He isn't into real solutions.
"The fact that the average price of a home is now at the Spring 2002 level means even more."
Indeed it does. Over the last century, the price of homes was directly related to their wages. With corporate America doing everything they can to lower wages, I wouldn't count on housing prices to recover or even stay where it is.
You forgot, inflation! it's still outthere! since 2002 the dollar is worth less. all thing being equal lol the fact is we have fewer dollars, worth less, to try to do the same job!
All Fuel in CA is over $4 anybody for $5 more! the summer hasent even started yet!
>^^<
No matter how many times you change your ID, your inability to comprehend what you read always reveals who you are. To wit, from the article that you read, but failed to understand:
"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."
From the 2nd para of the article.
I can't tell we've comeup, Sure Wall St looks good but that's mostly Corporate Welfare, (an endless supply of free 0% money from the fed proping up the banks, who won't lend to anyone!) As the real world goes I see few new cars on the road. Same MT homes, and a few new faces this week on the homeless side. The police no longer have the resoueces to make them dissapear as fast as usuall.
And if you have a Civil Service job you are holding you breath waiting to see if your state is next on the austerity bandwagon! Certinally not spending!
>^^<
from the article:
~ I’m sorry to have to deliver the bad news, but it’s better you know. ~
you were intimately involved in intentionally creating our current situation, sir...
difficult to believe your remorse without your confession...
double dip because americans voted for the tea party
lets be real here
hey, djb!
voting? no, this game is much bigger than voting...
this man, Robert Reich, was behind NAFTA...the employment picture he decries in this piece is of his own making...
an abuser expressing sadness over his victim's injuries...
voting has nothing to do with anything in this country...
gotta go...
Robert Reich was not behind NAFTA, in fact he resigned in protest of it.
That is correct. The commenter is probably confusing Robert Reich with Robert Rubin. Rubin was/is an evil corporatist banker-suit. Reich means well, but gets all uncritically starry-eyed when in the presence of a Democrat with good dental work.
Seems to be a common mistake!
Nope, Reich was for it. I remember this very clearly. I watched him address a meeting of union members (USW or UAW) where he came out in support of NAFTA, was booed and tried to defend his support. He has always been an ardent 'free trader', like Tom Freidman.
I like to see some substantiation for your claims.
q
Incorrect!
>In 1996, between Clinton's re-election and second inauguration, Reich decided to leave the department to spend more time with his sons, then in their teen years. He published his experiences working for the Clinton administration in Locked in the Cabinet. After publication of the book, Reich received criticism for embellishing events with invented dialogue. The paperback release of the memoir revised or omitted the inventions.[9]<
Try to read more! He's just another Corporatist shill,, out to confuse you with facts! Corporate facts!
>^^<
"Corporate facts",heh?
Are these different from other facts in some way?
It would be nice if we could all write in English when we are engaged in writing in English.
"spending more time with my family" is an oft-repeated phrase by politicians to avoid being honest about why they're leaving office. Seriously, it's used A LOT. It's used at a local level; I've had a colleague who used it. It's a common joke in government offices - "gonna 'spend more time with the fam?'"
How strange. During his first two years in office, with no Teabaggers in Congress, Obama followed precisely the same economic policies he's following now.
Care to try again?
Well yea, it's the "Tea" party. You drop the bag in the cup, pick it up and push it down a few time, squeeze it out, then throw it in the compost pile to rot.
Perfect analogy for the fate of the US economy.
The teabaggers are a group created by Wall Street to evade the fact that the "Conservative Republican" brand was so damaged by 20 years of Reagan-Bush that it couldn't be sold anymore. The complicit corporate media went along with this subterfuge because it gets its marching orders from its owners. 90% of the teabaggers voted for GWB twice.
p.s. I call them teabaggers because that's what I saw dangling from their silly hats.
There is no "tea party" - I think there were 200 people at their rally in Washington the other day, though the media covered it as though there had been 200,000 - and voting does not control the people in power, nor can it lead to social and political change.
That is being real.
Reich supported NAFTA, WTO and PNTR with China. He was (still is?) an ardent free-trader and Obama supporter.
Bob, it's too late you screwed up. Why don't you call out Obama by name and say what he really is?
I hear the Koch brothers have hired Blackwater to shoot poor people.
So, at least someone is hiring. (/sarcasm). On an honest note, have you seen how many bright, shiny, new TSA agents they have in the airports? America is a police state, and the only bright employment in such a state is in security. They are going to need more jails, and jailors, too, for all the new 'criminals' whose crime is opting out of this tragedy with a mind-altering substance, and, later, when the laws get changed, for all the miscreants who tried to get out of their debts by ignoring them.
ubrew - totally unrelated but since I see you on here. I have taken a suggestion you had made a while back, and started "turdtrade.org" - it's in the very beginning stages, but it's a framework of an idea. I would like to get your input on what I have sketched out so-far on it since you made the original proposal of the idea, as far as I know. (A new currency called a "turd" to discourage hoarding of it...)
The new turd currency will have lots of negative appeal because its' nickname will be Fukushima water.
The nickname comes from the fact that this currency is really shit because, like it's Fukushima water counterpart, it flows downhill.
I've always belived if you coin money out of spent uranium people will spend it faster, especally if you ban checks, and credit cards!
>^^<
Just think how rich the Japenese will be then!
Wow! I checked out your website and it looks like a good start. I haven't had too much time to look at it, but what is there looks good. Let me consider it some more and get back to you.
'They are going to need more jails,...'
...and for all the protesters and the whistleblowers (Riker's Island for the former; Guantanamo for the latter).
Maybe but the two top private prison contractors are starting to have financial trouble. It seems the states are starting to demand that the privates provide the same Medical, and rehabilitation programs the state run prisons have too, also they have to serve at least two real meals a day none of this baloney sandwich crap!
Try to make a profit under those rules!
>^^<
We have this 'double dip' argument over here in the UK too, but I cannot help but wonder if it isn't just the same dip, but with the artificial stimulus of the quantitive easing (for that read public subsidising) coming to an end.
how is a government stimulus plan artificial?
This growth in GDP--I wonder how much of it is due to growth in the financial sector. About 21 percent of the economy is made up of financials--and those guys--the ones that make money off interest payments and not off producing goods--are making plenty of money. The other companies outside that sector are making money most outside the United States--as Reich says. Subtract the money the paper shufflers are making and our economy is probably dead in the water--and about to start sinking from the looks of things.
The growth in GDP doesn't benefit the vast majority of us. It only means that the rich continue to get richer while the rest of us lose ground. I read this morning that productivity growth doubled from 2008 to 2009, then doubled again in 2010. Corporate earnings were 12 percent higher than when the recession began. Don't count on these gains trickling down to those who make those profits possible.
blessthebeasts,
Exactly right. GDP is another one of those economist shell game terms used for the benefit of the elite. The fact that the allocation of weight to various aspects of the GDP have been modified over the years is the biggest red flag. They were jacking with that one even before they started on the CPI. Anyone that takes anything printed out by the government on the economy is the victim of a fiction novel. Government expenditures are a drain on GDP but are figured as contributing to a rise in GDP. What utter bullshit. Of course that makes it so much easier to game the GDP figure.
Williams at shadowstats is one of the few places that tells it like it is.
We are in a depression disguised with massive government spending a fiat currency (on War, not people) which is frantically trying to kick the can down the road with fake stats.
gains trickling down to those who make those profits possible?!!
That is why everyone should seek to unionize.
And don't put up with folks demonizing unions around you.
Reich is another neo-liberal Clintonista/Third Way/ Reaganite. They have destroyed the economy and the Democratic Party.
Yes, a freetrader all the way.
Thank you Robert Reich. Even though the News is bad, it's better to be informed. Hopefully one day this nightmare will end.
We need truth tellers like Reich or Assange of Wikileaks. Wall Street prospers while ordinary people suffer.
Fix the ecology and the economy will be fixed
But that would be giving up the love of power for the power of love for Mother Earth. And these guys are Motherf****rs, so they're proud to screw the rest of us.
Because I'm coming to this late in the day, I'm surprised that no economists have weighed. I'm not one, so won't myself, other than to say that I hope some economists do comment, because I trust Professor Reich and mistrust the Government, and I note Obama's choice of the CEO of GE to be his presidential connection to the corporate world.
Economist: One who lies by the numbers.
I notice that the little blurb at the end of the article describing Reich lists as his last book, "Supercapitalism," which was published in 2007. His actual latest book, "Aftershock," published in 2010, includes a few modest proposals to tax the rich a little -- better than nothing, I suppose -- as well as his astonishing proposal that to fix our education system all we have to do is embrace charter schools and give everyone vouchers. Just sayin'
Reich continued dismantling of America's unions as labor secretary under Clinton.
Why aren't progressives concerned about conservatives who want to cut "non-defense" spending when the Pentagon Budget is the biggest rathole by far?
By all means BRING THEM HOME!
War is part of the GDP!
That will be a shock, but the sooner the better.
Elected official are scared to even mention defense cuts because, among other things, the defense budget is a jobs bill. A lot of people would be out of work if defense spending was cut. I still think it should be done, but congresspersons with big production facilities in their districts wil be hard to get on board, progressive or conservative or whatever.
Like Roosevelt turned car factories into tank and airplane factories in months, "defense" production facilities could be turned into manufacturing facilities for high speed trains, renewable energy and other green technologies to fight the real enemy, global warming.