|
The Bubble Economy vs Economic Triumphalism.
Reviewing the latest GDP, deficit and wage numbers ahead of the State of the
Union speech next week, I heard business commentary today that confirmed what
some economists have been saying for some time now: it depends on which
American economy you live in – there are two – whether you think all is well or
not. The Council of Mayors are
worried, as are most Governors, but the White House and Wall Street are
pleased. That tells you something
right there. And the Gallup
poll cited here was conducted before
the anemic Q4 2005 growth numbers and final announcement by Ford of larger
layoffs and plant closures. Local numbers cited in the evening news confirm
what everyone knows: that the new jobs people are getting pay significantly
less: in some states, 21% less or $9,000 a year income loss. For too many
families, that translates into lost mortgages, investment, consumer spending,
and college plans because not only have wages not kept up with inflation, the average
working middle class family has had a household income pay cut for the last 5
years in a row. - kwc Prosperity in George Bush's Economy
By
Joshua Holland, AlterNet, Posted on January 6, 2006 The economy the cable news networks gush about is going
gangbusters. We're hearing about 10 straight quarters of strong growth in gross
domestic product, and jobs being created at a clip of over 2 million per year.
Unemployment is down, and more Americans own their homes than ever before. And
don't forget, Americans' net worth is at an all-time high! And all this
prosperity, the corporate media will tell you, is thanks to five years of
President George Bush. But that's an economic picture you won't find hanging on the
wall in any normal American house. Most of us know that we're not doing as well
today as we were a few years ago. According to a recent Gallup Poll, almost two-thirds of those asked said
the economy was "fair" or "poor," and almost six in 10
thought it was getting worse. That disconnect has left many commentators -- especially on
the right -- either scratching their heads with befuddlement or raging apoplectically
at the bias of the "liberal media." National Review author Victor Davis Hanson scolded those who read the New York Times for living "in an
alternate universe where everything is supposedly going to hell." In
"the real adult world," Hanson wrote, "the economy is red-hot,
not mired in joblessness or relegating millions to poverty." But in fact,
there are 5 million more
Americans living in poverty today than there were four years ago. Gerard Baker, the U.S. editor for Rupert Murdoch's Times of London wrote, "when it
comes to economics, all but America's most fervent critics can still only
marvel." "Everything in
the American garden is lovely," Baker continued, "So why the long
face, buddy?" I'll tell you why the long face: The economy most of us
experience from day to day has been nothing short of painful over the past five
years. Consider these numbers from the Economic Policy Institute -- a left-leaning think-tank (this essay
leans heavily on EPI's excellent research):
That
last figure means that Joe and Jane Average American -- the household smack in
the middle of the booming go-go American economy -- have gotten a pay cut for 5
years in a row.
Small wonder they're sporting long faces.
And that hasn't occurred in a bubble; health care costs for that same family (with
kids) rose over 40% -- yeah, 40% --between 2000 and 2003. Here's a brief guide for sorting out the economy we live in
versus the one we're supposed to feel fuzzy and warm about. Go-go GDP It's not just that the growth in GDP over the past four
years has been skewed towards investors -- it has -- it's that much of it is a
chimera. Defense spending, consumer spending -- financed largely by debt -- and
rising home values have been the growth engines for the current recovery.
Author James
Howard Kunstler estimates that from "2001 through 2005, consumer
spending and residential construction had together accounted for 90 percent of the total growth in GDP."
[italics mine] That growth hasn't been free and isn't sustainable. U.S.
household debt, adjusted for inflation, rose by more than a third over the last
four years. Mortgage
and consumer debt equals 115 percent of after-tax income, and the amount American families spend
paying off those debts is at an all-time high of almost 14% of their paychecks.
In other words Americans are all paying a hefty monthly debt tax to banks and
creditors on top of what we already pay the government. Wealth, wealth everywhere The National Review's
Jerry Bowyer blames the "mainstream
media"
for "obsessing over the level of debt of the average American family,
which they only look at in a vacuum, [and] completely ignoring the growth of
family net worth." If they were honest, he argues, they'd have to
acknowledge "the highest level of household wealth in our nation's
history." But much of that newfound wealth is in our homes, and all
signs point to a bubble in the sky-high housing market (although it varies
widely by region). According to the Center for Economic Policy
Research
[PDF] -- a progressive think tank -- the current market "has created more
than $5 trillion in bubble wealth, the equivalent of $70,000 per average family
of four." Housing prices are way above their historic pattern when you
look at demand, population and earnings. What's more, the price for home sales
has been way out of step with the rental market -- something one wouldn't
expect to see if the high prices were based on economic fundamentals. The estate might be real, but its value
isn't. Unemployment The headline is that the unemployment rate is low and
holding steady at around 5 percent. But it's a tricky statistic: people who give up trying to find a
job aren't counted, nor are people who are underemployed. Private sector jobs
have increased by only about 1% since the start of the current economic
recovery.
Four years into previous recoveries, private sector job growth had averaged
almost 9% and it's never been
less than 6%. According to EPI, "The percent of the population that has a
job has never recovered since the recession and is still 1.3% lower than in
March 2001." The data tell the tale. While one can spin all day long
according to his or her worldview and offer up grand theories about Americans'
pessimism, the truth is that for about eight out of 10 people on American
payrolls, the economy sucks. Add in high fuel costs and large, highly visible rounds of layoffs in some of America's
leading firms, especially in the auto industry. Then consider the latest
tactic sweeping across corporate America: using bankruptcy to "seek
relief" from pension and health care obligations. As the Wall Street Journal reported: Whether an assembly-line worker or middle
manager, an employee can no longer assume that promises made earlier -- health
benefits or fully funded pensions -- will be there when he or she retires. The
loss of security arising from Chapter 11 reorganizations has introduced a new
element of anxiety into the lives of baby boomers who are approaching 60, not
to mention younger workers just starting out in their careers. That's just part of a growing trend. Of course, last year's bankruptcy reform
bill will prevent most working families from enjoying similar
"relief." None of these issues are of any concern to people earning a
couple of hundred grand to discuss the economy on Fox or MSNBC. Contra the
right's liberal media conspiracy theories, the major media from across the
spectrum are reporting the good news about America's booming economy with zeal. That endless drumbeat comes with social costs. First, it fuels the bubble mentality. If the economy's going gangbusters but
you're struggling, of course you want to get in on the latest
billionaire-creating wealth machine. That mentality infected anyone who bought
tech stocks in 1999 hoping to become a "dot-com millionaire," just as
it has them running around today buying houses at any price with the
expectation that they'll get a 10% annual return. Alan Greenspan characterized the mindset as being
one of "irrational exuberance." But what could be more rational than
piling onto the latest bandwagon after watching a half-hour of CNBC's economic
triumphalism? Less easy to quantify is the psychic cost this has on us.
The message we get all the time is that our unrivalled, dynamic economy affords
opportunities for us all. So, if you're one of the majority who is not doing so
well, it must be your fault. It is you, and not any external economic factor,
that is keeping you from profiting from the Ownership Society. You are a loser. A while back, I wrote an article about how the job outsourcing trend has
happened at the same time, as deep cuts in transitional training and assistance
came down from Washington. A reader sent me an email about how her middle-aged
brother had been laid off by the aircraft parts manufacturer where he had
worked for 20 years. "You know the hardest part," she wrote,
"has been how he's internalized everything. He has such a low sense of
self-worth." Despite our great wealth, we're an unhappy people; we lead the world in mental health
problems
year in and year out. It's impossible to know to what degree that results from
failing to live up to the economic expectations drummed into our heads every
time we hear about the wonders of the American economy. But the message to all
those families struggling to get by should be: You're not alone, it's all of
us. http://www.alternet.org/story/30447/ |
_______________________________________________ Futurework mailing list [email protected] http://fes.uwaterloo.ca/mailman/listinfo/futurework
