Robert Reich: The Truth About the American Economy (II)

[ProSense]

The Truth About the American Economy (II)

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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.

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Under normal circumstances, this would be the time for the federal government to take bold action to ward off a double dip.

For example, it could put more cash in peoples’ pockets while giving employers an extra incentive to hire by exempting the first $20,000 of earnings from payroll taxes, for a year or two. It could lend money to state and local governments. It could launch a new WPA (modeled after its antecedent during the Great Depression) to put the long-term unemployed to work on public projects.

(It) could amend the bankruptcy law to allow people to include their prime residences in personal bankruptcy, thereby giving homeowners more leverage to get mortgage lenders to mitigate the terms of their loans. It could enlarge and expand the Earned Income Tax Credit so that the bottom 60 percent got a wage subsidy instead of a tax bill.

But these aren’t normal circumstances. America has been through a devastating recession that poked a giant hole in the federal budget. And with a presidential election coming up next year, both parties are already maneuvering for tactical advantage.

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[OHdem10]

1. Both are seeking a Republican Agenda so fasten yourself in

tightly the cliff is bumpy.

[JayhawkSD]

2. "The problem is on the demand side."

Reich is full of it. The problem with the economy is structural. The statement, "American consumers, who constitute 70 percent of the total economy, sums up the nature of the problem, stating as it does that consumption is larger than production in the economy which resulted in this recession. By it's very nature, that economy is producing an ever increasing amount of debt. Simply restoring the ability to consume is not going to solve the problem. Too large a portion of what we consume is imported, and that consumption does more to improve the economies of other nations than it does to improve our own.

We can blame the recession on the housing bubble, or the financial chicanery, or anything we want to, but the bottom line is that this nation was maintaining an artificial lifestyle by increasing debt, both public and private. The economy crashed in 2008 because the private debt load became unsustainable, and it will crash again when the public debt load becomes unsustainable.

We simply have to restore our ability to produce, and I'm not even entirely certain that can be done. Whatever the solution, it lies in looking at a structural change in the way we manage our economy.

[zalinda]

3. What he is saying is that we need JOBS

He has said over and over again that we need the government to create jobs, ala WPA, just like FDR did. Obama will not do it. He believes fully that it is not the governments role to create jobs.

When you have jobs, the demand side increases. This then causes the domino effect of money being passed around, and the loosening up of money, now being held by corporations. Yes, we need to start making things too.

zalinda

[ProSense]

4. This:

"We simply have to restore our ability to produce, and I'm not even entirely certain that can be done."

Adjust U.S. trade policy, fix the tax code and raise the minimum wage.

[ej510]

5. That and spend 5.5 trillion dollars on our infrastructure and power grid.

Rebuild the roads, bridges, renovate schools, and build new ones. We can turn each high way into an energy source by installing solar panels, and fiber glass panels that are harder than steel to protect the solar panels.