The article that I was working on for tonight still is not finished. Vacation is more taxing than one might think, what with all the beach sitting, ocean swimming, and food eating. But I absolutely did not want to go another night without an article to discuss so I figured that I would find something interesting out there on the blogosphere and offer it up for consumption here. I went to my trusty standby for articles that would garner interest, The Huffington Post. They, of course, did not disappoint. I had my choice of several different interesting articles over there to think about. What I decided on was the article below that discussed the Secretary of the Treasury’s much maligned Op-Ed from last week. I have to admit that I was a bit stunned when I read the article when it was originally run over at the New York Times. After all, it was thoughts from Timothy Geithner under the title of “Welcome to the Recovery.” I don’t want to sound jaded, but I had to wonder whether Mr. Geithner had actually smoked some crack before offering up such a ludicrous statement. First the article from HuffPo and then my quick thoughts to get the discussion going…
Who Are You Going to Believe — Tim Geithner or Your Own Lying Eyes?
by Robert Kuttner
The jobs situation stinks, even as corporate profits keep rising. Another 131,000 jobs were lost to the economy in July, according to the Labor Department’s latest report released Friday. The measured unemployment rate stayed stuck at 9.5 percent.
The only reason it wasn’t worse was because more workers gave up looking for nonexistent jobs, leaving a smaller labor force to measure against the meager supply of work. Small comfort.
Meanwhile, another important government report, by the Social Security Trustees, showed only a trivial improvement in the gap between what Social Security owes the next generation of retirees and the tax receipts that it can expect.
There is, of course, a direct connection between rising unemployment, declining wages, and the condition of Social Security. That’s because Social Security is funded by payroll taxes.
If wages had continued to rise with the growth of the economy’s productivity, instead of profits and bonuses taking an ever larger share, Social Security would be enjoying an endless surplus.
Based on recent trends and a dismally pessimistic projection of our economic future, Social Security’s Trustees assume wage growth of just 1.2 percent a year. But that can be changed by better policies.
According to Monique Morrissey of the Economic Policy Institute, if wage growth were 2.3 percent, which is the actual long-term trend in the growth of labor productivity, then Social Security would be in clover. Here is EPI’s most recent full report on this, from 2005. (Since then, the screwing of workers has only intensified. An update is coming.)
The story is even more dramatic if you imagine a different history of the past two decades. If wages had risen with productivity, instead of nearly all the gains going to the top, Social Security’s surplus would be huge and we’d be talking about lowering the retirement age, not raising it.
Note the outrageous injustice of the current debate. The Wall Street crowd, led by Peter G. Peterson and his billion-dollar foundation, is clamoring for deep cuts in workers’ Social Security.
This crowd is the same people who have been making off with the lions’ share of the economy’s productivity gains for the past three decades instead of allowing ordinary people their traditional share; the same crowd that opposes a more progressive distribution of taxes and decent social spending.
Now this gang wants to whack workers a second time. You didn’t get your fair share of wages, goes the story, so there isn’t quite enough money in the Social Security accounts. And now you must take less money in retirement.
The alternative, obviously, is to get unemployment down and wages back up. And speaking of Wall Street and policy alternatives, what is the Obama Administration doing to alter this perverse trend? We need to look no further than the recent op-ed piece in the New York Times by Treasury Secretary Tim Geithner.
Now, you can be sure that this op-ed piece did not spring full grown from the pen of Secretary Geithner. It must have gone through the White House messaging machine several times. That makes it even more appalling.
The piece is titled, with no intended irony, “Welcome to the Recovery.”
Geithner’s story is essentially this: Don’t believe what you experience in your own life; believe us. The economy is really a lot better than it looks (true on Wall Street, but not on Main Street.) Geithner had the bad timing to write this just before the economy lost another 131,000 jobs.
This is Geithner’s variation on Marxist economics — in this case Groucho, who famously said in the movie Duck Soup, “Who are you going to believe, me or your own eyes?”
Here are choice extracts from Geithner’s op-ed:
- “Private job growth has returned — not as fast as we would like, but at an earlier stage of this recovery than in the last two recoveries. Manufacturing has generated 136,000 new jobs in the past six months.”
- “Businesses have repaired their balance sheets and are now in a strong financial position to reinvest and grow.”
- “American families are saving more, paying down their debt and borrowing more responsibly. This has been a necessary adjustment because the borrow-and-spend path we were on wasn’t sustainable.”
- “The auto industry is coming back, and the Big Three — Chrysler, Ford and General Motors — are now leaner, generating profits despite lower annual sales.”
- “Major banks, forced by the stress tests to raise capital and open their books, are stronger and more competitive. Now, as businesses expand again, our banks are better positioned to finance growth.”
But take these one at a time:
Private sector job growth, in fact, is stuck. And without a massive stimulus of the economy, it will stay stuck.
Business may be “in a strong position to grow,” but without growth of jobs and wages, nobody will buy their products.
Yes, American families are saving more — because they are scared stiff that they economy will get even worse. That private savings behavior, in a recession, deepens the deflationary spiral unless it is offset by more public spending.
The auto industry has added something like 50,000 jobs after recently losing several hundred thousand; Detroit’s market-share remains basically stuck compared to imports; and GM’s “Volt” is about to get its clock cleaned by better Japanese electric cars.
Banks are still in precarious shape. That’s why small businesses are having such a hard time getting credit.
Geithner concludes thus:
“These are considerable challenges, but we are in a much stronger position to face them today than when President Obama took office. By taking aggressive action to fix the financial system, reduce growth in health care costs and improve education, we have put the American economy on a firmer foundation for future growth.
And as the president said last week, no one should bet against the American worker, American business and American ingenuity.
We suffered a terrible blow, but we are coming back.”
Sorry, but this issue is not whether anybody is betting “against the American worker,” which is a lame metaphor. The issue is whether the Obama administration and Geithner have credibility as instruments of economic recovery going into a midterm election.
For Geithner to insist that things are actually better than working Americans experience their own lives is both insulting and guaranteed to backfire as politics. If the administration wants to bet on the American worker, both as a much abused contributor to the economy and as a voter, Geithner and his president need to do more to bring back jobs and wages.
You can read this article at its original posting at the Huffington Post: http://www.huffingtonpost.com/robert-kuttner/who-are-you-going-to-beli_b_675296.html
I have to tell you, fair readers, the pure cajones of the Obama administration in particular, although applicable in the case of both parties, stuns me. The way that they have fallen into the false belief that they can say whatever the hell they like, regardless of whether there is even a grain of truth to it or not, has gotten to the point of absurdity. I understand that politicians believe they can sway public opinion, but to just completely spout the opposite of reality and expect it to be believed is bold. What is even more bold in this case is the fact that he is telling the American public that everything is getting better despite the fact that those he is lying to are actually the ones experiencing the issue.
I don’t know how everyone else is feeling, but I still feel the economic hardships. I don’t see anything that makes me even begin to think that we are beginning a recovery. In fact, everything around me tells me that we are heading for much tougher economic times in the future than we are facing right now. Heck, just the impending health care legislation enactment and the ridiculous rate of increase of American national debt is enough to give us at least a 50/50 chance of complete economic meltdown if we aren’t careful.
So I am wondering what the mood is among the readers. I know that some of you are really feeling that economic collapse is imminent and unavoidable. But I know not everyone believes that. I am personally still on the fence as to whether it is going to happen in this particular cycle or whether we will have some form of recovery and continue down the path for a while longer. I know that the doomsday folks say this is it. But we have heard that before. So what does everyone here think? I offer a few questions for thought:
- Are we at the beginning of the recovery from the recession that we have been going through for the last couple of years?
- As a follow up, if you think the answer to #1 is yes, do you think it is getting better because of Obama’s policies?
- How many of you believe that a complete meltdown is going to happen?
- Of those, how many think it is within the next 5 years? 10 years? 100 years?
- Back on the topic of this article, how do people feel about the completely fantasy based declarations of recovery from Geithner?