Business & Economics

Slouching toward a double dip or a lousy recovery at best

Robert Reich

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.

Cross-posted from Robert Reich’s blog.

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Comments to "Slouching toward a double dip or a lousy recovery at best":
    • Claudia Avery

      Professor Reich’s words ring loud in my ears … a little too loud. I am so scared about the future. I am scared about my family and our small business maid service in Jacksonville that while growing is still dependent on the disposable income of others in the community.

      What is strange in this economy is we are having a tough time finding people to work for us. I don’t know if this is the result of the government’s continuing the “unemployment benefits” or just that unemployment is high in our city (I think the former).

      [Report abuse]

    • Anthony St. John '63

      QUESTION: Why didn’t American colleges produce enough graduates who were dedicated to economic stability, equality of opportunities, integrity, producing technological innovation and production, and protecting the environment to guarantee acceptable quality of life into the long term future?

      Specifically, why didn’t UC build upon the Golden Age of Opportunities produced by the greatest generation by producing enough graduates with these cultural values to prevent our current decline and fall condition of “Slouching toward a double dip or a lousy recovery at best” in California at least?

      Instead we are now experiencing the consequences of our greatest failures that threaten California, America and humanity most today.

      And the truth is that we really don’t seem to have the brainpower to prevent the current decline and fall, or we would have prevented it in the first place.

      Tragically for the newest and future generations, presidents Clinton who was supposed to be one of our best and brightest and Bush who was one of our not so brightest will most certainly go down in history as the worst post-WWII presidents who put America into the slouching and crashing mode.

      So today our only hope is that President Obama is some kind of miracle worker in spite of the failures of all the leaders of both the republican and democratic parties to do the right things for We The People instead allowing themselves to be owned and controlled by special interests in spite of unacceptable consequences that are out of control today.

      But if UC doesn’t learn to deal with the challenges of change at last, nothing will be permanent except calamity.

      [Report abuse]

    • Anthony St. John '63

      You should have also admitted that “failure of public officials and the greed of large bankers” are just a couple of the culprits.

      The truth is that “a large portion of our population suffers immensely”
      because we are in a state of denial and fingerpointing created by a condition of intellectual and political chaos where every group is attacking every other group, while America’s new aristocracy is enabled to refuse to accept responsibility and accountability.

      Ironically, Jefferson was right the first time, “a large portion of our population suffers immensely” today because we have indeed become “subjects” once again.

      Haven’t we learned anything from failures of all civilizations before ours? And/or are our cortical layers short circuiting already due to the pollution we increasingly ingest and breath, even in the Ivory Towers of academia that have failed to prevent economic, environmental, political and social problems from threatening our long-term future?

      [Report abuse]

    • WilliamS

      When my 50+ y.o. brother calls we can hear it in his voice, his mid-management position was eliminated a year ago, the 600+ resumes which he sent out were rejected or received no response and it is breaking his spirit. My daughter who graduated w/honors in 2008 always the A student who never skipped a day of school, is shut-out of the workforce, because she lacks work experience, she has sent out over a 1000 resumes.
      Friends, neighbors and myself included are working longer and harder for less benefits and pay. Yet daily, we see and hear stories about prominent business leaders and politicians, who see nothing wrong with giving themselves: raises, bonuses and lavish perks at the expense of their clients, employees and taxpayers.
      It’s time to for our leaders/politicians to be held accountable for their lack of vision and/or corruption. Vote with your money and support, one by one we can make a difference.

      [Report abuse]

    • Ramon Quintero

      Recovery! Not really, if you believe in “Recovery” — a word that is being given much publicity and little analysis. The problem is that most people do not begin to understand that the “recovery” word is loaded with false assumptions. First, it is believed that people behave in their best interest. (Darwin) Second, it is believed that people understand their best interest. (Malthus) Third, it is commonly believed that individual people can change the economy around. (Smith) All of these assumptions are not just false, but part of the problem, they all centered on individual reductionism. Robert Reich said it correct, the recovery is not working for the average working class American, I say that the recovery is just a slogan to create political consensus from the American public. The word “recovery” needs further analysis and also inclusion of more substantive words that go beyond individual “Superman” syndrome. The creation of more Bill Gates rich people of the world will not save us this time. This is a crisis of accumulation, too much money in a small number of people.

      [Report abuse]

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