Robert Reich: The Heart of the Economic Mess

[marmar]

via AlterNet:




The Heart of the Economic Mess

By Robert B. Reich, Robert Reich's Blog. Posted August 4, 2008.

Most Americans can no longer maintain their standard of living. And the core problem isn't the housing crisis or rising oil and food prices.




The Federal Reserve Board's "beige book" for June and July offers a clear explanation for why the economy has slowed to a crawl. It shows American consumers cutting way back on their purchases of everything from food to cars, appliances and name-brand products. As they do so, employers inevitably are cutting back on the hours they need people to work for them, thereby contributing to a downward spiral.

The normal remedies for economic downturns are necessary. But even an adequate stimulus package will offer only temporary relief this time, because this isn't a normal downturn. The problem lies deeper. Most Americans can no longer maintain their standard of living. The only lasting remedy is to improve their standard of living by widening the circle of prosperity.

The heart of the matter isn't the collapse in housing prices or even the frenetic rise in oil and food prices. These are contributing to the mess, but they are not creating it directly. The basic reality is this: For most Americans, earnings have not kept up with the cost of living. This is not a new phenomenon, but it has finally caught up with the pocketbooks of average people. If you look at the earnings of nongovernment workers, especially the hourly workers who comprise 80 percent of the work force, you'll find they are barely higher than they were in the mid-1970s, adjusted for inflation. The income of a man in his 30s is now 12 percent below that of a man his age three decades ago. Per-person productivity has grown considerably since then, but most Americans have not reaped the benefits of those productivity gains. They've gone largely to the top.

Inequality on this scale is bad for many reasons, but it is also bad for the economy. The wealthy devote a smaller percentage of their earnings to buying things than the rest of us because, after all, they're rich. They already have most of what they want. Instead of buying, the very wealthy are more likely to invest their earnings wherever around the world they can get the highest return. ..........(more)

The complete piece is at: http://www.alternet.org/story/93729/the_heart_of_the_economic_mess/

[LiberalEsto]

1. Their plan is working

Their goal is to eliminate the middle class, and so far it's proceeding according to plan.

[spin]

2. Education is the key...

The rich children have the advantages of a really good education but the middle class and poor children have only enough education to serve as wage slaves for the wealthy.

[Alcibiades]

12. All on purpose, of course

Our current funding system seems designed to create inequality in the performance of schools.

That being said, educational outcomes vary greatly between schools, however, even when funding parity is achieved. I think that there are a number of things that effectively hamstring poor students from reaching their potential, many of which are actually in the home, not the schools. I don't know what can be done, but, even if we were to fund schools equally (or even give more to schools with disadvantaged students), it seems like schools must struggle against the home environment in many cases, particularly in those communities where parents are forced to use TV as a babysitter, where kids don't have books in the home or anyone to teach them to read, where parents cannot afford quality preschool and enrichment activities, and where parents have been taught that they cannot get ahead through education.

[spin]

30. I believe we need to move education into the 21st century...

High school students I talk to are turned off by the educational experience. We need to bring more computers into the classroom with programs that allow students to move at their own pace. We too often use educational techniques that haven't changed in over 100 years.

The company I worked for was using a lot of computer courses to educate employees subjects such as workplace safety or ethics. These programs usually contained video segments which were interesting and made a more effective point than an instructor in front of a blackboard. Employees seemed to enjoy these courses and believed they were superior to classroom based education.

Such classes would not eliminate the need for teachers, and might allow teachers to better direct their skills to help students.

[bbgrunt]

15. education may help some, but when

good jobs keep disappearing and we are competing against millions of well educated from India, China, and other countries with much lower costs of living, getting a good education does not do squat to change the pressure to reduce wages and benefits.

[spin]

29. True, even engineering jobs are being outsourced...

Ever since the offshore shift of skilled work sparked widespread debate and a political firestorm three years ago, it has been portrayed as the killer of good-paying American jobs. "Benedict Arnold CEOs" hire software engineers, computer help staff, and credit-card bill collectors to exploit the low wages of poor nations. U.S. workers suddenly face a grave new threat, with even highly educated tech and service professionals having to compete against legions of hungry college grads in India, China, and the Philippines willing to work twice as hard for one-fifth the pay.
http://www.businessweek.com/magazine/content/06_05/b3969401.htm

[lostnotforgotten]

3. The Bush Tax Cuts Have Slain The Goose That Laid Golden Eggs!

eom

[Phoebe Loosinhouse]

4. Yes! But Bernacke's great fear is that (gasp!) salaries might RISE!!!

He's just as big an idiot as Greenspan.

[marmar]

5. All those corporatists pigs look (and sound and act) alike.....

n/t

[Mira]

6. What a good choice Bill Clinton made with him. They left a surplus

and understood that trickle down leaves brown spots on your shoes. Now people are forced to sell their bootstraps to buy gasoline.

[moondust]

7. Bingo.

Reich has it and Obama gets it. If you pile up all the money in the accounts of a small number of people who already have everything nobody else will have the money to buy things they need or want. The places that make stuff or provide services will flounder from a lack of business and lay off their workers. Everything ends up collapsing under the weight of all that greed and concentration of wealth. Today's economic troubles are the result of 7 years of Republican feudalism which does not work in a consumer economy.

[Phoebe Loosinhouse]

9. I read a very interesting account of the collapse of the Mayan civilization

in the National Geographic a while ago. One of the posits was that Mayan civilization became too top heavy in the luxury classes and left too many feeding off of too few. I know that is not exactly what you're saying - related but different.

I guess a consumer economy like we are does not work when we don't have the jobs and wages to provide us the means to consume. We consumed future wages with our insatiable lust for credit and we also consumed our house equity in service to same. The really wealthy I am sure, have access to off-shore accounts and different currencies, but they too will see a lot of wealth evaporation as the whole system blows.

[elehhhhna]

10. The upper classes refused to be "burdened" with taxes at least once before -- it lead to the

French Revolution.

[HCE SuiGeneris]

8. Kick -- a very good article

[Lost4words]

11. K & R !

8643!

[KharmaTrain]

13. So How's That "Stimulus" Spending Going???

Recently I encountered an acquaintance who spewed the "we need to drill" crap...all I asked was about how well his "stimulus check" was doing. He spewed how "what little help that was"...went back onto his rant about "drill drill drill"...I then asked who got a lot of that "stimulus"...and he bitched about the rise in gas prices...and I then noted the Exxon/Mobil profits and hoped that he had lots of stock in the company so he could get a nice dividend. He said he didn't own any stock...lost his shirt, blah, blah...and I said well, so you will gladly pay them profits for the next 10 years, along with more tax breaks, so you might get cheaper oil in 10 years? You could just see the hard drive in his dittohead disconnect. :rofl:

This regime and its cronies are trying to fleece every last penny out of this economy and leave a massive mess that the corporate media is sure to blame on Democrats.

[bbgrunt]

14. A highly skewed income distribution also makes

it very difficult to maintain a civil society or the basis for a democratic consensus. We see evidence of the deep divides daily.

Unfortunately, more education is not the solution when there are fewer and fewer well paying jobs.

[Dreamer Tatum]

16. The entire premise of the article is consumption, not savings...interesting

If people saved more, investment would be more attractive, output would rise, prices would fall, and real incomes would rise.

I wonder why Reich is focused so much on consumption.

[marmar]

18. But how can an economy based 75 percent on consumer spending survive if people just saved?

There lies the dilemma.

[Dreamer Tatum]

21. It would survive, just with different priorities

And with lower prices. An economy based on people rushing out to buy things can't sustain itself forever without substantial
investment. Right now, someone else is providing that investment, and we don't see many direct benefits from it.

[endarkenment]

19. Gee I wonder why people CANT SAVE MORE

I am sure it must be because they are just weak, bad, lazy and stupid. It couldn't possibly be because they can't afford food clothing shelter transportation tuition healthcare etc., the basics of survival in our modern economy, on what they are currently earning.

[Dreamer Tatum]

20. You're missing the point entirely

He's saying, gee, why can't we produce more and more, and he's presenting a decent argument that demand is static yet the supply side is scaling up prices. Suppose, for a moment, that instead of being self-righteous about what people can and can't afford, that people take that, oh, $250 a month
they spend on:

Coffee
Cell phones
bottled water
manicures and pedicures
iTunes
Fast internet
video games


and sock it away. The shock to the money market would lower interest rates, and off we'd go. Another way to get where we want to be, rather than just moving cash around.

[endarkenment]

23. as I said. Keep blaming working people.

I did not miss the point at all.

[Dreamer Tatum]

24. Not only did you miss it, you can't see it, so I can't fault you. nt

[endarkenment]

17. earnings have not kept up with the cost of living - no duh

Sometimes the obvious has to be stated over and over and over again. Working families, hard working american families, families of all races, religions, and ethnic origins, all of us working stiffs, have been and are being screwed by 30 years of Refuglican Neoliberal economic misrule.

[stubtoe]

22. What a breath of fresh air! Reich is always worth a listen-to.

I love the concept of "widening the circle of prosperity".

[JHB]

25. Socialist! Communist! Utopian Egalitarian! Redistributor of Wealth!

...and those are only some of the names directed at those of us who've been pointing out that the extremes of wealth inequality that were ushered in by Reagan were not only immoral and bad for democracy, but would ultimately be bad for business.

And guess what! They're going to keep calling us those things, 'cause free marketology means never having to say "I was wrong".

[The2ndWheel]

26. They're only wealthy because the majority of people continue

to buy into their definition of wealth. It's just a green tinted piece of paper, or a digit on a screen. It's amazing the hold such an illusion has over us. We just keep chasing them for no reason other than that they tell us what they have is worth something. Not only that, but we keep trying to bring more people into the game, trying to bring more people into the mass illusion. I'm not sure if it's more scary or sad.

[Kaleko]

27. Pyramid Schemes - then and now

New Capitalist Pyramid





Old Capitalist Pyramid

[raccoon]

28. Thanks for posting, mar. Rec'd. nt