Where’s the Recovery?

Paul Krugman hits the nail on the head again with his Op-Ed this morning, This Is Not a Recovery. He points out we need 2.5% GDP growth just to keep unemployment from rising, and instead, the latest figure out this morning for the second quarter is 1.6%! Instead of treading water with a 2.5% growth we’re being swept backwards, as though in a Pakistan flood, with a mere 1.6% growth.

Here’s the most popular comment, twice as many votes as the next most popular, on Krugman’s article:

As enlightening as your commentary always is, it assumes that policy makers have the interest of the average American, and in particular the unemployed, at heart.

The name of your blog is quite revealing here: you indeed appear to have a conscience, and as a liberal (and further as one freely admitting to the same) you possess a small healthy dose of naivete about your fellow man, generally believing in good intentions. I’m afraid the same can not be said about the majority of those at the Fed or otherwise controlling the reigns of the broader economy.

As an economist, you really should know better than anyone: whenever an inexplicable behavior arises, the best way to find an explanation is always to simply “follow the money”. So who stands to benefit from high unemployment?

If you look at the last ten years of US economic history, you see repeated rises and falls that all follow a similar pattern: when the economy is growing, the average worker fails to benefit. When the economy falls, the worker always loses the most, in terms of both buying power and job security. The benefit to large business owners, who control the majority of wealth and political power in the US, is substantial. The shakier the labor market, the more workers worry about their job security and the less compensation they are willing to work for. Eventually most workers are simply happy to have a job at all and are forced to settle for less and less.

What other explanation, for example, in the government’s complicity in allowing US jobs to be shipped increasingly overseas?

The political and the wealthy in the US are well enough intertwined to form a well-oiled machine. The working class is increasingly powerless. The federal officials you seem to hope for see things in terms of what is most beneficial for them, and increasingly this is to work in alignment with the very wealthy, who contribute most to their election and who stand to offer most in the private sector when they cycle back out of government.

As long as labor is weak and nervous, with the promise of better times always around the corner, unrest is kept at bay enough to permit the rich to keep getting richer with little or no downside.

As nice as it would be to believe in a government with the interests of the little guy at heart, it’s about as much based on hard evidence as Santa Clause. Let’s grow up and either decide to stop complaining about it or talk about some way to fight back.
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Yes, this is a pretty cynical comment, but unfortunately it may in very large part be true. The question is, How do we fight back?

Thanks to “Klark, New York, NY” for the comment in red.

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  1. Greg’s avatar

    The commenter has a valid point, who benefits from the economic problems we’re facing? The rich, they were all bailed out, we lose our houses and they get bailed out from the bad debt they had.

    What about bailing out the everyday man? mmmm..Not going to happen.

    Many corporations are growing, but they aren’t hiring, they’re just making those of us whom still have a job work harder as they rack up the profits and we get less time off, less compensation and are told at least you have a job.

  2. Mardé’s avatar

    Thanks for your comment, Greg. I think it’s right on the mark. The corporations and the politicians that support them and are supported by them have the workers right over a barrel. The question is How can we fight this?

  3. algarve’s avatar

    Joblessness or formally known as unemployment is becoming a universal problem and needs to be sorted out as soon as possible. People really need to make some space for the talented and deserving instead of filling the rich and famous all the time.

  4. Mardé’s avatar

    Thanks for your comment, algarve. One way to sort out this problem in America would be to return the tax structure back to the way it was in the 1940′s and 50′s. Then the rich were taxed appropriately and the economy boomed!

  5. Eric Castelli’s avatar

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  6. Mardé’s avatar

    Thanks, Eric, I registered.

  7. Mar Matthias Darin’s avatar

    Right now the only one benefiting if the government. The problem isn’t the tax rate directly. The problem is the wealthy (democrats included) have found ways to cheat the system. Warren Buffett found a way: Give 90% of your money away, write it off and get it back at the end of the year TAX FREE.

    Charlie Wrangle should have paid levies and fines, why didn’t he? Geithner should have as well… Lets not forget, John Kerry parking his yacht in a lower tax bracket so he could dodge the taxes. There are plenty of the other side too that have cheated the system. The point is, why aren’t they fined and levied like everyone else? The IRS has no problems taking the home of an 80 year old woman for $400, but they do nothing to Wrangle with $1.6 mil is his freezer? That is seriously messed up.

    Anyone else would have been railroaded up the backside like Wesley Snipes. Raising the tax rate doesn’t hurt the wealthy as long as they can get write offs and tax credits back from the government.

    An effective tax system would do away with all the freeloading exemptions the wealthy take advantage of.

  8. Mardé’s avatar

    Excellent points, Mar. But how are we going to change the tax system? Yes, blame Democrats too, but are they the worse offenders? There actually are some progressive Senators in the Senate and they’re all Democrats. Yes, John Kerry is a tax dodger. The few progressives that might want to change the tax system will be stopped by the conservative Democrats and all Republicans. So, I see no way out except incrementally over a long period of time, or if the public can somehow get off talk radio and Fox News. This won’t happen any time soon.