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Entries tagged "great recession"

The Biggest Losers: Big Bird and the American People

October 4, 2012 ·

Who won the first 2012 presidential debate between Mitt Romney and Barack Obama? If you ask the Twitterverse, Big Bird nailed an easy victory.

Debate memeHuh? In case you missed it, the sole quasi-joke either candidate cracked came when Mitt Romney vowed to choke off the government funding that pays some of Sesame Street's bills. But really, there were no winners tonight.

Moderator Jim Lehrer blew it too, although he seemed to be off to a decent start when he opened the debate with the night's most pressing question of the night: What are you gonna do about jobs?

Obama answered that he loved his sweetie. Romney tried to sound populist but just sounded weird. Things just got worse from there. More lies and insincere etch-a-sketch moments from Romney. More strangely absent and disconnected reactions from Obama.

Lehrer proceeded to let the candidates run roughshod over him, then lost us all when he said "we've lost a pod" as he reprimanded the candidates for taking too long. In an evening devoted to domestic issues, none of the three men ever mentioned women's rights, civil rights, immigration, poverty, climate change, or any other environmental issue.

Most importantly, nobody dared to breathe the truth, lest it actually get out — America Is Not Broke.

That's right, the debate was an exercise in ridiculousness that produced no insight, no plan, no inspiration, no leadership, no truth. We are rich. We have enough money to put nutritious food on the tables of the one in five U.S. kids who are hungry and undernourished. We have enough money to help the laid-off moms and dads make ends meet until they get another job.

We have enough money to keep grandma, sister, and even every child ("future people," as I believe Romney put it) taken care of through their hard-earned benefits of Social Security and Medicare. We have enough money to help the down-and-out in times of sickness and emergency through Medicaid and help low-income families through refundable tax credits and the last shreds of welfare available to some.

We do. We're a rich country. We're not broke. Not only are we not in an economic position, recovering from the Wall Street-induced Great Recession to be able to tolerate the austerity trumpeted by Romney and half-conceded to by Obama, but we don't need to resort to it.

Here's what someone should have said tonight. Here is the truth denied to the American People...and to Big Bird:

1. We can bring in over $325 billion per year if we simply put a tiny tax on risky stock and derivative transactions; tax corporations and stop tax have abuse; and, tax the wealthy fairly, such as Warren Buffet suggested by taxing CEOs at the same rate as their secretaries

2. We can bring in almost $90 billion per year by actually making our environment more green and sustainable through: taxing the polluting carbon content of fossil fuels; and, ending fossil fuel subsidies.

3. We can save about $130 billion by making our country and globe safer through: closing out our war operations completely in Iraq, closing a third of our global military bases and ending drone attacks; and by ending military waste

AH Neill/FlickrThese commonsense approaches would garner savings of over half a trillion a year — far more than either candidate or any Bowles-Simpson scheme would save and would allow us to preserve our earned benefits, safeguard our safety net, keep our nation secure and create millions of good-paying green jobs.

America Is Not Broke. That is the missing story. Until we admit this, we all lose...and, you can definitely kiss Jim Lehrer and that big ol' yellow bird goodbye.

Karen Dolan is an Institute for Policy Studies fellow. For more details, please see the IPS report, America Is Not Broke.

Happy Days Here Again, 21st Century-Style

March 13, 2012 ·

We can wait all we want, but sometimes history never gets around to repeating.

The equalizing that began in the 1930s didn't just happen. Average Americans made it happen.History — more specifically, the history of the Great Depression in the 1930s — has been a constant presence in America’s political discourse ever since the Great Recession started slamming us in 2008.

Analysts have drawn all sorts of useful and entirely appropriate parallels between the run-up to the Great Depression and the years before the Great Recession. And inequality — the gap between America’s rich and everyone else — has figured prominently in those parallels.

In 1928, the year before the stock market crash, America’s richest 1 percent were taking in just shy of 24 percent of the nation’s income, a modern-day high.

In 2007, the year before our Great Recession's Wall Street meltdown, America’s top 1 percenters were pulling in 23.5 percent of the nation’s income, the top's highest share since 1928.

But the parallels go even deeper.

The early years of both the Great Depression and the Great Recession hammered incomes at America’s economic summit. In 1928, the nation's top 1 percent were averaging just over $400,000, in today's dollars. Two years later, that top 1 percent average income had dropped by half, to just over $256,000.

The early years of the Great Recession had much the same impact. America’s top 1 percent averaged $1.44 million in 2007, the year before Wall Street's epic meltdown. In 2009 top 1 percenters averaged over $520,000 less, more than a 36 percent dropoff.

Back in the Great Depression, after the initial income shock for the super rich, the shocking would continue. Top incomes kept dipping as the Great Depression wore on. Average top 1 percent income didn’t reach the $256,000 level of 1930 again until 1936 and didn’t regain 1928’s $400,000 level — the inflation-adjusted pre-Great Depression high-water mark — until decades later, in 1965.

By that time, the incomes of America’s bottom 90 percent had jumped from just over $9,400 — their 1928 level — to nearly $28,000.

In other words, in the three decades after the onset of the Great Depression, the incomes of America’s top 1 percent — after you take inflation into account — essentially didn’t rise at all. Over those same years, Americans in the bottom 90 percent saw their average incomes triple.

No gains for America’s rich. Big gains for average Americans. By the 1960s, those average Americans were sharing in the wealth their labor created. The United States had become a fundamentally more equal and prosperous place.

A history worth repeating? Absolutely. But this history, new data released earlier this month indicate, isn't repeating. Not at all. Our contemporary rich have already resumed their rocket ride to ever grander fortune.

The rich back in the 1930s were still reeling three years after the Great Depression hit. The rich today, we now know from the newly released data, are reeling no longer.

The new data comes from University of California at Berkeley economist Emmanuel Saez, the scholar who has revolutionized our understanding of America’s highest incomes with his work over the last decade.  

Saez has spent this last decade parsing IRS statistical records to tease out the incomes of America’s richest, over time, and compare the incomes of these rich — in the top 1, top 0.1, and top 0.01 percent — to the incomes of much more average Americans.

Earlier this month, using newly available IRS data, Saez updated his numbers, to take the U.S. income story through 2010. The Great Recession, Saez found, is most definitely no longer following the Great Depression script.

Back in the early 1930s, incomes for America’s top 1 percent were still dipping two, three, four, and more years into the Great Depression. In our Great Recession, the dipping of high incomes hasn't even lasted two years.

In 2010, the incomes of America’s top 1 percent did not decline. These incomes rose sharply — by an average $105,638, or 11.6 percent, over 2009 levels.

Incomes for America’s bottom 90 percent? These incomes did continue to dip in 2010 — by $127, to $29,840. Some perspective: In 1973, after adjusting for inflation, America’s bottom 90 percent took home an average $33,795.

So where do all these numbers leave us? Back in 1929 Coca-Cola filled the airwaves with what would prove to be an all-time classic advertising slogan, “the pause that refreshes.” Our Great Recession, if current income trends continue, may prove to be the pause that refreshes . . . inequality.

The Great Depression began a hammering of incomes at the top that left the United States more equal. The Great Recession, the new Emmanuel Saez data suggest, will have nowhere near that impact. Our rich appear about to regain most all the ground they lost in the Great Recession's early stages.

But we need some caveats here. The equalizing that began in the 1930s didn't just happen. Average Americans made it happen. They marched and rallied and staged walkouts and sitdowns. They elected candidates who fought to level up America’s least fortunate and level down our most fortunate and powerful few.

All this mobilizing would take years to make a significant equalizing impact. We today can make a significant equalizing impact, too. We just need to get going. History will only repeat if we make it.

Today Is A Good Day To Break Up with Your Mega Bank

February 16, 2012 ·

Protesters at a Move Your Money action in Wisconsin. Photo by Karen Hickey.Last week's announcement that the Obama administration had reached a $25 billion settlement with five of the nation's largest banks over charges of systemic and widespread mortgage fraud does not mean you should keep your relationship with those banks going. 

As Rebuild The Dream President Van Jones pointed out, the settlement is a rather small first step in his op-ed, "$25 Billion Down, $675 Billion to Go": 

Millions of homeowners and families are still suffering under the tremendous weight of a debt blanket that is smothering the economy. This $25 billion settlement helps only a fraction of those homeowners and addresses only a very limited set of fraudulent behaviors.

The behavior of the mega-banks has been hurtful to American society. That's what the folks at Green America have been saying for months, as they work to get people to move their money out of tax dodgers and prison profiteers such as Bank of America and Wells Fargo. 

Green America has created a ten-step guide for people to move their money to a new community development bank or credit union. 

Good News and Bad News about GDP Growth

January 27, 2012 ·

The U.S. economy grew at an annualized rate of 2.8 percent in the fourth quarter of 2011, the Bureau of Economic Analysis reported.

With Europe in crisis and the world teetering on the brink of a new global recession, that quarterly growth figure is a welcome ray of sunshine in an otherwise bleak outlook. The nation accounts for 23 percent of total world GDP.

The 2.8 percent headline figure represents the real (adjusted for inflation) growth in gross domestic product (GDP) between the third and fourth quarters of 2011, adjusted to account for ordinary seasonal variability and converted to an annual growth rate.

It compares favorably with both the 1.8 percent figure for the third quarter and the economy's long-term average annual growth rate of 2.5 percent over the past two decades.

Unfortunately for the United States and its trading partners, the news isn't as good as it seems.

Final sales — defined as GDP less change in private inventories — increased at a rate of only 0.8 percent in the fourth quarter.

In other words, only 0.8 percent of the fourth quarter's growth came from actual sales of goods and services. The other 2 percent came from businesses building up their inventories.

What does that mean? Here are two possible interpretations.

The optimistic interpretation is that businesses were accumulating inventory in late 2011 in anticipation of high sales figures in 2012. Seen in this light, inventories can be a leading economic indicator. They suggest stronger economic growth in 2012.

The pessimistic interpretation is that inventories rose in the fourth quarter of 2011 because businesses couldn't sell their goods. With sales slowing, inventories pile up. This view doesn't bode well for 2012.

While either interpretation could be correct, there's strong circumstantial evidence for the pessimistic interpretation.

When measured in actual dollars, without adjusting for inflation, nominal GDP rose at an annual rate of 3.2 percent annual rate in the fourth quarter, compared with a 4.4 percent rate in the third.

The only reason that real GDP (which is adjusted for inflation) rose faster in the fourth quarter was that inflation declined from 2 percent to less than 1 percent.

This means that GDP growth actually slowed in the fourth quarter of 2011, but inflation slowed even more, resulting in a net increase in real GDP growth.

Strong demand causes inflation to rise; weak demand causes inflation to fall. Falling inflation indicates that demand is weak. This suggests that the pessimistic interpretation of rising inventories is probably the right one.

The 27 January fourth quarter GDP figures are only "advance" estimates, not final results. Revised figures will be released on Feb. 29 and final figures on March 29.

GDP figures are often revised downward after the initial estimates have been published. Inventory statistics in particular have been a source of error.

The U.S. economy has shed more than 6 million jobs since the beginning of the recession in December 2007.

Due to a rise in part-time employment, the number of Americans employed in full-time jobs is down more than 8 million.

According to the Bureau of Labor Statistics, the economy is currently creating about 150,000 net new jobs per month. Even accounting for retirees, that barely keeps pace with the rate of new graduates entering the labor market each year.

There is little relief in sight. At the Fed's latest Federal Open Market Committee (FOMC) meeting January 24-25, expectations were muted.

The FOMC said in its official statement that it "currently anticipates that economic conditions — including low rates of resource utilization and a subdued outlook for inflation over the medium run — are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014."

In promising to keep interest rates "exceptionally low" the FOMC indicates that it expects the US economy to remain sluggish for at least the next three years.

Officially, the economy entered recession in December 2007 and emerged into recovery in July 2009. The recovery, however, has been slow and relatively jobless.

In the experience of most ordinary Americans, the recession that started at the end of 2007 is not yet over. If the FOMC expects current economic conditions to continue through the end of 2014, that suggests a grand total of seven years of slow going.

This raises the question: when does a recession become a depression? There's no "official" definition of a depression used by U.S. or international authorities, but the current experience must come close.

Full-year 2011 real GDP growth for the United States stood at 1.7 percent. Factoring in population growth, real GDP-per-capita was roughly the same last year as it was in 2005.

It's certainly good news that the U.S. economy is growing again, but if the Federal Reserve forecasts are right it will be a long time before Americans have anything much to cheer about. Depression or no depression, Americans are in for a long, hard slog.

Salvatore Babones is a senior lecturer in sociology and social policy at the University of Sydney and an associate fellow at the Institute for Policy Studies. An earlier version of this post appeared on the inequality.org website. www.ips-dc.org