The whiners' recession

[Pixsurguy]

The whiners' recession

By Dean Baker
truthout
September 8, 2008

JOHN McCAIN and his friends no doubt still believe that the economy's fundamentals are strong, but Friday's jobs numbers clearly show how bad things have gotten. The 6.1 percent unemployment rate reported for August is almost as high as the worst levels from the last recession. A broader measure of labor market weakness, that includes people who can only find part-time work or who have given up looking for jobs, is higher than at any point in the last recession.

When the labor market weakens, workers have less bargaining power with their employers. As a result, wages are trailing more than 2 percentage points behind inflation over the last year.

Wages are virtually the entire income for most workers. If the purchasing power of their wages falls by 2 percent, this is the equivalent of a 2 percentage point increase in their tax rate.

Worth Thinking About

This is worth thinking about. Most workers in the country have just seen the equivalent of a 2 percentage point increase in their tax rate, and it has gotten almost no attention. By contrast, McCain is claiming that the economy will collapse if we increase the tax rate by 3.6 percentage points for people who can't remember how many homes they own.

It is easy to understand how a typical family experiences real hardship when their wages don't keep up with the price of food, gas, and heating oil. It's a bit harder to understand how the folks who can't keep track of their homes will suffer by restoring tax rates to the Clinton-era levels.

This brings us to the other important point about the Friday jobs numbers. The economy is in bad shape and getting worse. This disaster is happening while we are experimenting with the tax policies advocated by McCain. We have an economy that is now shedding jobs at the rate of almost 100,000 a month. There is no prospect of turnaround in sight. We could have half a million fewer jobs by the time the next president is sworn into office than we do today.

Falling Wages

This is the Bush-McCain economy. McCain may have forgotten, but George W. Bush already tried his economic policies and the results are not good. We have just been through a business cycle in which the wage of the typical worker and the typical working family fell. This is the first time that has ever happened.

As bad as the situation is, it will surely get worse as the recession deepens. Wages and incomes will fall further behind inflation as the unemployment rate continues to rise. By contrast, the Clinton-era tax rates were associated with the most prosperous period since the early seventies.

Strained Credulity

As I have written many times, Bill Clinton's policies do not deserve all the credit for the prosperity of the late 90s, and Bush's polices do not deserve all the blame for the economy's poor performance in the current decade.

However, it strains credulity to argue that the Clinton-era tax rates are a recipe for stagnation, while the Bush-McCain tax cuts for the rich are the road to prosperity. When he pushes his tax cuts as a remedy for the economy's ills, McCain is effectively imitating Groucho Marx's famous line: "what are you going to believe, me or your lying eyes?"

At this point, McCain should be embarrassed to even say that tax cuts for the rich help the economy. Tax cuts for the rich help the rich, they don't help the economy. It's that simple.

Years to Create, Solve

This economic catastrophe was many years in the making. There is no painless way to recover from the collapse of the housing bubble and the correction from an over-valued dollar. We do know that McCain's plan to keep giving the rich more money is not a road to prosperity because that is exactly what we have been doing.

[The plain facts are that the so-called "conservatives" have for YEARS refused to rein in the greed and risky behavior of the large corporations and the barons of Wall Street. Greed drove the corporations and investment bankers to invest in more and more risky investments, because they got huge commissions on every purchase and sale. They did not worry about the investors, since they got their commissions regardless of the result to the investor. The VERY SAME mechanism is what brought down the housing market. Real estate brokers got their commissions on home sales regardless of whether the loan made sense. They didn't care if the deal fell through a year down the road. They did NOT do reasonable investigation as to whether the purchase made economic sense for the buyer and could not have cared less.

In any event, despite years of warnings from economists and others (regardless of party and including some of the responsible Republicans) that Wall Street, big business and the real estate people needed regulation to control their greed, the "conservatives" refused to allow it. Of course, as they have been for the last 100 years, they are in the pockets of big business and Wall Street.

Bottom line - the conservatives dogmatic obsession with deregulation is the direct cause of the present mess. They did it with the S&L deregulation and learned not a thing. So here we are once again - in a horrible economic fix that rewards the greedy pigs for their misbehavior by bailing them out. These are the very same people who paid themselves multiple millions even when the companies were losing money and had the balls to set up golden parachutes for themselves if they got dumped.]

We can't know exactly how Barack Obama will address the economy's problems if he takes office in January in part because we don't know exactly where the economy will be. However, a plan that focuses on supporting ordinary workers and promoting clean technologies, is likely to produce much better results than policies that are focused on redistributing even more income to the wealthy.

© 2008 truthout

Dean Baker is the co-director of the Center for Economic and Policy Research CEPR). He is the author of The Conservative Nanny State: How the Wealthy Use the Government to Stay Rich and Get Richer (www.conservativenannystate.org). He also has a blog, "Beat the Press," where he discusses the media's coverage of economic issues. It can be found at the American Prospect's website.

[Pixsurguy]

The era of greed and irresponsibility on Wall Street and in Washington has created a financial crisis as profound as any we have faced since the Great Depression.

Congress and the President are debating a bailout of our financial institutions with a price tag of $700 billion or more in taxpayer dollars. We cannot underestimate our responsibility in taking such an enormous step.

Whatever shape our recovery plan takes, it must be guided by core principles of fairness, balance, and responsibility to one another.

• No Golden Parachutes -- Taxpayer dollars should not be used to reward the irresponsible Wall Street executives who helmed this disaster.
• Main Street, Not Just Wall Street -- Any bailout plan must include a payback strategy for taxpayers who are footing the bill and aid to innocent homeowners who are facing foreclosure.
• Bipartisan Oversight -- The staggering amount of taxpayer money involved demands a bipartisan board to ensure accountability and oversight.

[Don'tLikeStinkingThinking]

I am so glad the blank check no balance wasn't passed....that was close he almost got away with the biggest scam in the world. Well he has at that regarding the Immenent Thread of Sodaminsane and Iraq, this would have been his latest scam.