The Problem With the U.S. Economy is Clear: U.S. Voters are Blind

How can political dogma blind so many U.S. voters to facts? When did 50 percent of America go blind? In recorded history, has there ever been a time that the causes of a major economic problem are so clear, with so few  willing (or able)to see it?

Greece, who’s entire GDP is roughly equivalent to Delaware, had the economic world on the edge of its collective seat this weekend. Spain is in a full-blown depression and is the euro zone’s 4th largest economy. Italy, Portugal, and Ireland are not far behind. The UK has made a pronounced slide back into a double-dip recession after two years of an “Austerity Experiment”, and the USA has been experiencing a slow recovery. The euro currency is in deep trouble and 4 or more nations in the Euro zone could easily cause a domino-effect world-wide depression. Yet, according to the GOP, Obama is to blame because the USA doesn’t yet have a robust economy. Three years to fix what 40 years of increasingly radical Republican roll-backs of every Great Depression safe guard enacted. I just do not get it.

Despite what “Morning Joe” or “Fox and Friends” would have you believe, these are not the chief reasons this recovery has been so anemic:

  1.  It’s not due to taxes being too high on the wealthy or corporations. Corporate profits are at an all-time high
  2.  It’s not Wall Street’s excesses with no consequences. Wall Street is back to 2008 pre-crash levels
  3.  It’s not Europe’s debt crisis
  4.  It’s not Japan’s nuclear nor tsunami troubles
  5.  It’s not the War on Christmas
  6.  It’s not because safety nets are being exploited by lazy no-good bums or welfare queens
  7.  It’s not even because the Obama administration hasn’t spent enough on a stimulus package

The Real Reason

It’s because American middle class consumers, whose spending is 70 percent of U.S. economic activity, don’t have the money, or don’t want to take a chance on borrowing the money, to buy sufficient goods or services to boost the economy.

Simply stated…it’s a lack of demand! DUH!

It’s a crisis in confidence, but not in the present administration or President Obama. It’s because OBSTRUCTIONISM BY THE GOP is making the middle class poorer. According to the Survey of Consumer Finances, from the Federal Reserve, median family income was $49,600 in 2007. By 2010 it was $45,800 – a drop of 7.7 percent.

All of the gains from economic growth have been going to the richest 1 percent. It really is that simple.

That’s not “class warfare”! It’s not “politics of envy”! It’s a fact! And it’s FACTS that the GOP abhors. And it’s FACTS that the propaganda machine of Fox News, Rupert Murdock’s vast media empire, Joe Scarborough, David Gregory, Andrea Mitchell, and all of the Republican talking heads they can muster do not want you to know.

The same 1 percent mentioned above spends less than half of what they take in. Additionally, much of what the 1 percent buys is neither made nor bought in the U.S. How can reasonably intelligent Americans keep allowing the GOP to pee on them and believe that it’s raining just because it is being repeated so often?

I honestly don’t how to make this clearer. The earnings and spending of the 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 American economic collapse.

Starting around 1980, globalization and automation began exerting downward pressure on wages in several ways:

  1. Employers, with the help of Reagan conservatives in the U.S., began busting unions in order to enhance their profits and weaken the only economic power of the middle class worker( see: GOP Myths On The Economy)
  2. Increasingly deregulated financial markets began taking advantage of the lack of transparency by literally screwing the U.S. middle class in order to take over the real economy (Don’t Be Fooled-The GOP is Anti Capitalism)
  3.  Ronald Regan raised the Social Security rate to “PRE-COLLECT” sufficient Social Security to provide for the Baby Boom that is starting to hit retirement age right now, but instead Reagan spent the excess collections on tax breaks to the wealthy who did not need it back then anymore than they need it now. It is the single largest defrauding of the U.S. middle class in our history (Do Not Believe the GOP: Social Security Is Running A Surplus)

*Note*:  In 1983 President Ronald Reagan sponsored an increase in Social Security taxes. He changed the program from pay-as-you-go to one that began pre-collecting a vast surplus over current payouts in benefits. His considerable talents in propaganda resulted in convincing the public to have the “baby boomers” prepay a large portion of their collectible benefits.

Official Portrait of President Ronald Reagan.

 

Reagan’s sales pitch for the program was that the extra tax revenue was supposed to a) hold a sufficient amount to keep the SS fund funded throughout the “baby boomers” retirement, b) to pay off the federal debt, and c) with the surplus to be invested in federal bonds. Instead, Reagan ran huge deficits, violating his 1980 promises (a-c above) while spending not only the “Pre-Collected”  Social Security but spending 10 times more and running up the largest deficit in the previous 30 years.

 

Women began pouring into the work force in order to prop up family incomes. After 9/11 GWB famously advised Americans not to let the attack on New York City change their shopping habits and said during a public address afterwards to,”Go shopping. Go to the mall.” This helped for a time, but the median wage kept flattening, and then, after 2001, began to recede. The result has been obvious, yet progandized successfully by conservatives, in slower or negative wage growth for the vast majority of U.S. households, (a trend which continued throughout GWB’s two terms).

Households tried to keep up by going deeply into debt, most using the rising values of their homes as collateral. This also helped for a while. But when the housing bubble, enabled by de-regulating the banking and insurance industries, popped, the entire house of cards came crashing down. That kind of collapse cannot be “corrected” in 3 years by a President who is hobbled by an obstructionist Republican majority in the House, and a Senate whose minority leader has stated publicly that his primary goal is NOT the American people nor their welfare, but “bringing down President Obama no matter the cost”.

That Sound You Heard

The latest report out of the Fed illustrates how deafening 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.

There Are Simple Solutions That You Will Never Hear

I live in the reddest of red states, and I have helped open and close businesses for 30 years years as a CPA. I have been Controller for Fortune 500 companies. And in all my years I have NEVER heard ANYONE say that they’re not going to open a new business or fund new projects because of the typical Conservative boogeymen :

  1. Uncertainty over future taxes
  2. Uncertainty over future healthcare cost
  3. Too many regulations

Never. Not once. There is only one reason I hear for not opening a new business or adding employees or adding a new product line…..ONLY ONE.

Not………enough………..demand.

The ONLY reason the American economy is still struggling is that the vast American middle class can’t spend more to get the economy out of first gear.

No demand? No hiring and no employer capital investment. It’s just that simple.  Over the longer term the only viable answer is to make sure the middle class gets far more of the gains from economic growth.

  • THAT is what the GOP is fighting so hard against.
  • THAT is what billionaire after billionaire is funding the GOP to fight.
  • THAT is why they are doing their DEAD LEVEL BEST to keep you poor and compliant

Historical Perspective Bears This Out

During the 1920s, income was 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 Emmanuel Saez (Professor of Economics and Director of the Center for Equitable Growth at the University of California, Berkeley) and Thomas Piketty(Professor of Economics at the Paris School of Economics).

At that precise moment in history, the same bubble that we popped in Bush’s 2008 term also popped then,  and we fell into the Great Depression.

As the U.S. electorate found themselves in the midst of a prolonged and vicious era of abject poverty, the Wagner Act was eventually ratified requiring employers to:

  1. Bargain in good faith with organized labor
  2. Help fund Social Security and unemployment insurance
  3. The Works Projects Administration and Civilian Conservation Corps
  4. A national minimum wage

Also enacted to restrain Wall Street from gambling with the public’s money: The Securities Act and Glass-Steagall Act (Forget Dodd-Frank: Reenact Glass-Steagall). All have been already repealed by the GOP.

Yes, in 1941 America went to war resulting in a vast mobilization that employed every able-bodied adult American, and put money in their pockets. But afterwards, the U.S. also embarked on the continuation of restoring the middle class by:

  1. Enacting the GI Bill, sending millions of returning veterans to college
  2. A vast expansion of public higher education
  3. Huge infrastructure investments, such as the National Defense Highway Act
  4. 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.

We won’t get out of this rut, and we may sink much deeper, unless 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. The marvel of propaganda is that the GOP has so many voters casting ballots directly against their own interest.

Tax CUTS to the already wealthy, has NEVER IN HISTORY spurred economic growth. I personally don’t mind low corporate rates because what we lose in corporate tax should be made up in personal tax.

But the GOP simply offers up one myth after another to keep the middle-class believing that just a little more profit in the pockets of CEOs, shareholders and politicians will bring about the Great American Recovery. It hasn’t worked. It won’t work. It can’t work.

It is an abject lie and they know it.  Always has been.  Always will be.  And the GOP is going to keep telling it as long as you keep believing it.

Harvey Gold

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  1 comment for “The Problem With the U.S. Economy is Clear: U.S. Voters are Blind

  1. Pro_Obama2012
    August 5, 2012 at 11:21 am

    Perfetly well said, and 100% true. If the middle class doen’t do well, neither does the economy. The middle class are the true job creators, rich people don’t create jobs out of the goodness of their heart, they create jobs to meet demand. So it’s insulting that the GOP is hijacking that title of job creator for themselves and acting like they’re some gods to be worshiped
    The whole you build that circus w/Myth is a perfect example of this ego trip the 1% has been doing ever since Reagan glorified greed and wealth, that’s when we started to lose our morality and honor.
    Business owners create jobs to meet demand, so like Obama said you don’t build it alone. Without customers with money to buy your product, ssafe road, teachers, regulation, all the personal achievement in the world will not make you successful, so you owe your success to your hard work, but also in part to the community as a whole: Your loyal clients, good employees, and the community helping you through good roads, infrastructure, etc are all helping.
    The jobs report came out friday and we gained 172 k jobs but still there are 12.5 million people who are unemployed, so what is Myth RobMe discussing? Not ways to create jobs & jumpstart the economy via public sector job growth and ending obstructionism, instead he’s out supposedly celebrating personal achievement. LOL. Can this moron be more out of touch, & careless? We don’t care about his need to feel superior and stroke his ego, we need jobs not some symbolic celebration of personal ahievement. One observation comes to mind, for a guy supposedly so proud of his success, who wants to celebrate his personal ahievement he sure is running away ashamed from his Bain record & his personal tax returns –a snapshot into his success.

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