MSNBC's Thomas Roberts, filling for Ed Schultz after his suspension, talked to former Clinton Labor Secretary Robert Reich about the stalled talks on raising our debt ceiling and how the paralysis in Washington, D.C., is allowing the bigger problem to be ignored -- namely, the fact that our politicians have done little to nothing to address the situation with unemployment in the U.S.
I for one am sick of the hostage-taking by the GOP on this issue and their complete irresponsibility on taking Medicare and Medicaid hostage and demanding that either the poor and the elderly get hit as part of their deal, or they crash the world's economy. As Reich noted, there are very large problems our politicians are refusing to deal with in regards to our economy that they're completely ignoring due to ideological issues and making this ridiculous argument a centerpiece when they should be focusing on getting Americans back to work instead.
Reich has much more in his columns at his blog in a couple of his latest posts, some of which he discussed with Roberts here.
Finally, it seems, the economic burdens of America’s vast middle class may be catching up with the Street. The Dow lost 2.22 percent today; the Standard & Poor’s 500-stock index was down 2.28 percent. Both marked their worst declines since August 11, 2010. The Nasdaq composite index fell 2.33 percent.
We’re coming full circle: The stock market is dropping because corporate earnings are slowing. Corporate earnings are slowing because consumers are pulling back. Consumers are pulling back because they don’t have enough jobs or adequate wages.
The immediate cause of the sell-off was an announcement by ADP Employer Services, a payroll processing firm that estimates employment, that private employers added only 38,000 jobs in May. The economy needs 125,000 new jobs a month just to tread water, given that at least 125,000 people join the potential labor force every month. Simply put, if new hires are in the range of five digits, American consumers will not have enough purchasing power to buy what the private sector can produce. Read on...
The Stalled Recovery
The U.S. economy was supposed to be in bloom by late spring but it’s hardly growing at all. Expectations for second quarter growth aren’t much better than the measly 1.8 percent annualized rate of the first quarter.
That’s not nearly fast enough to reduce our ferociously-high level of unemployment. The Labor Department will tell us Friday whether the jobs situation improved in May, but there’s been no sign of a surge in hiring. Nor in wages. Average hourly earnings of production and non-supervisory employees – who make up 80 percent of non-government workers – are lower than they were in the depths of the recession, adjusted for inflation.
Meanwhile, housing prices continue to fall. They’re now 33 percent below their 2006 peak. That’s a bigger drop than recorded in the Great Depression. Homes are the largest single asset of the American middle class, so as housing prices drop many Americans feel poorer. All of this is contributing to a general gloominess. Not surprisingly, consumer confidence is also down.
The recovery has stalled. It’s unlikely America will find itself back in recession but the possibility of a double dip can’t be dismissed.
The Problem of Demand
The problem isn’t on the supply side of the ledger. Corporate profits are still healthy. Big companies continue to sit on a cash hoard. Large and middle-sized companies can easily borrow more, at low rates.
The problem is on the demand side. American consumers, who constitute 70 percent of the total economy, can’t and won’t buy enough to get it moving. They justifiably worry they won’t be able to pay their bills or afford to send their children to college or to retire. Banks, with equal justification, are reluctant to lend to them. But as long as consumers hold back, companies remain reluctant to hire new workers or raise the wages of current ones, feeding the vicious cycle.
The timing is unfortunate. Foreign consumers won’t help much even if the dollar continues to slide. Europe’s debt crisis and embrace of austerity, Japan’s tragedy, and China’s fiscal tightening have reduced global demand. At the same time, the federal stimulus here has about run its course. The Federal Reserve is about to end its $600 billion of purchases of Treasury bills, designed to bring down long-term interest rates and make it easier for homeowners to refinance. Worse yet, state governments – starved for revenue and constitutionally barred from running deficits – continue to cut programs. Local governments are now in worse shape, laying off platoons of teachers and fire fighters. Read on...