Blog

Robert Reich

By Robert Reich
Former U.S. Secretary of Labor, Professor at Berkeley

Why aren’t Americans being told the truth about the economy? We’re heading in the direction of a double dip — but you’d never know it if you listened to the upbeat messages coming out of Wall Street and Washington.

Consumers are 70 percent of the American economy, and consumer confidence is plummeting. It’s weaker today on average than at the lowest point of the Great Recession.

The Reuters/University of Michigan survey shows a 10 point decline in March — the tenth largest drop on record. Part of that drop is attributable to rising fuel and food prices. A separate Conference Board’s index of consumer confidence, just released, shows consumer confidence at a five-month low — and a large part is due to expectations of fewer jobs and lower wages in the months ahead.

Pessimistic consumers buy less. And fewer sales spell economic trouble ahead.

What about the 192,000 jobs added in February? (We’ll know more Friday about how many jobs were added in March.) It’s peanuts compared to what’s needed. Remember, 125,000 new jobs are necessary just to keep up with a growing number of Americans eligible for employment. And the nation has lost so many jobs over the last three years that even at a rate of 200,000 a month we wouldn’t get back to 6 percent unemployment until 2016. (more…)

Scott N. Paul

By Scott Paul
Executive Director of Alliance for American Manufacturing (AAM)

When IHS Global Insight revealed this week that China has passed the United States to lead the world in manufacturing output, the response from some in government and manufacturing was to quibble with the data. The correct response is to develop a national manufacturing strategy, so that we can once again lead the world in manufacturing, which is a position we’ve held for 110 years.

Why a strategy? Well, Germany has one. China has one. South Korea has one. In fact, every other industrialized nation has a network of currency, trade, tax, investment, innovation and skills policies that promote domestic manufacturing. We stand alone in allowing our jobs to be freely outsourced overseas. Our economic and training policies spur on a service and financial sector economy at the expense of investments in manufacturing.

First, let’s consider the data on the size of manufacturing. Manufacturing accounts for one-third of China’s economic output. For most of our industrial competitors, the number is somewhere between 15 and 20 percent. In America, manufacturing accounts for less than 13 percent of our GDP, and that figure is falling every year.

The rate of growth in manufacturing in China has averaged over 20 percent per annum over the past three years. In the U.S., despite a recent rebound, that figure is only 1.8 percent. We’ve shed 50,000 factories and 5.5 million manufacturing jobs over the past decade. Meanwhile, one company in China — Foxconn — created more manufacturing jobs last year than the entire U.S. economy. (more…)

Robert Reich

By Robert Reich
Former U.S. Secretary of Labor, Professor at Berkeley

Are we making progress on the jobs front? The Bureau of Labor Statistics reports 192,000 new jobs in February (220,000 new jobs in the private sector and a drop in government employment), and a drop in the overall unemployment rate from 9 to 8.9 percent.

We’re heading in the right direction but far too slowly to make a real dent in unemployment. To get the unemployment rate down to 6 percent by 2014 we’d need over 300,000 new jobs a month, every month, between now and then.

Overall, the number of unemployed Americans — 13.7 million — is about the same as it was last month. The number working part time who’d rather be working full time — 8.3 million — is also about the same.

But to get to the most important trend you have to dig under the job numbers and look at what kind of new jobs are being created. That’s where the big problem lies. (more…)

Robert Kuttner

By Robert Kuttner
Co-founder and co-editor of The American Prospect

As events in Egypt showed, you never know what will set off mass protest.

Here at home, over-reaching by a novice Republican governor of Wisconsin has finally triggered the protest marches that have been eerily missing during the more than three years of an economic crisis that has savaged the middle and bottom and rewarded the top.

It’s not as if we lack a politics of class. As mega-investor Warren Buffett famously said, there is plenty of class warfare in America, but the billionaire class is winning.

This economic crisis, after all, was brought on by excesses on Wall Street. Yet with the rest of the economy still mired in high unemployment and fiscal crises of public services, Wall Street was first to be bailed out, the first to return to exorbitant profitability, and the last to be held accountable.

Month after month, progressives have been asking each other, where are the mass protests?

You might expect popular indignation to be focused on the banks. Instead, the economic unease of ordinary people has been substantially captured by the Tea Party right and directed against government, while Beltway politicians of both parties are outdoing one another to vie for the role of more austere deficit hawk, which will hardly win back popular support for the public sector.

Then the newly energized Republicans made a couple of big mistakes. One was trying to cut too deep, on the heels of a massive tax cut for the rich. But the other miscalculation was to declare war on the one bastion of organized economic representation of regular people — the labor movement. (more…)

Robert Reich

By Robert Reich
Former U.S. Secretary of Labor, Professor at Berkeley

Highlighting today’s summit between Chinese President Hu Jintao and President Obama is China’s agreement to buy $45 billion of American exports. The president says this will create more American jobs. That’s not exactly right. It will create more profits for American companies but relatively few new jobs.

Nearly half of the deal is for two hundred Boeing aircraft whose parts come from all over the world. The rest involves agricultural commodities that don’t require much U.S. labor because American agribusiness is highly automated, and chemical and high-tech goods that are even less labor-intensive.

General Electric and other companies are signing up for deals with China involving energy and aviation manufacturing. But much of this will be done in China. GE’s joint venture with Aviation Industries of China, to develop new integrated avionics systems (which presumably will find their way into Boeing planes) will be based in Shanghai.

Here’s the real story. China has a national economic strategy designed to make it, and its people, the economic powerhouse of the future. They’re intent on learning as much as they can from us and then going beyond us (as they already are in solar and electric-battery technologies). They’re pouring money into basic research and education at all levels. In the last 12 years they’ve built twenty universities, each designed to be the equivalent of MIT. (more…)

Robert Reich

By Robert Reich
Former U.S. Secretary of Labor, Professor at Berkeley

What will happen to the US economy in 2011? If you’re referring to profits of big corporations and Wall Street, next year is likely to be a good one. But if you’re referring to average American workers, far from good.

The two American economies — the Big Money economy and the Average Working Family economy — will continue to diverge. Corporate profits will continue to rise, as will the stock market. But typical wages will go nowhere, joblessness will remain high, the ranks of the long-term unemployed will continue to rise, the housing recovery will remain stalled, and consumer confidence will sag.

The big disconnect between corporate profits and jobs is likely to continue because America’s big businesses are depending less and less on U.S. sales and U.S. workers. Their big profits are coming from two sources: (1) growing sales in China, India, and other fast-growing countries, and (2) slimmed-down US payrolls.

In a typical recovery, profits lead to more hiring. That’s because in a typical recovery, American consumers head back to the malls — and their buying justifies more hires. Not this time. All the hype about Christmas sales over the last few weeks masked the fact that American consumers demanded bargain-basement prices. And the price-cutting dramatically reduced sellers’ margins. In short, profits aren’t coming from American consumers — and profits won’t be coming from American consumers in 2011.

Most Americans don’t have the dough. They’re still deep in debt, can’t borrow against their homes, and have to start saving for retirement. (more…)

By Robert Kuttner
Co-founder and co-editor of The American Prospect

On signing the tax-cut deal December 17, President Obama jubilantly declared “We are here with some good news for the American people this holiday season. This is progress and that’s what they sent us here to achieve.” So how have Republicans repaid Obama’s willingness to meet them three-quarters of the way?

Bipartisanship evidently lasted about as long as the signing ceremony.

First Republicans refused to approve the routine stop-gap bill to keep the government funded at current levels pending the budget resolution and next round of appropriations. They killed the DREAM Act, for decent treatment of well-behaved children of undocumented immigrants. Repeal of Don’t Ask Don’t Tell squeaked through the senate with the votes of a few socially moderate Republicans defying their leadership.

The Republicans on the Financial Crisis Inquiry Commission, in a massive denial of reality, issued their own separate report, denying that the financial collapse had anything to do with deregulation or speculation. Coming along next is a set of Republican demands in the budget resolution for much deeper cutting of public outlay.

So it’s clear that “bipartisanship,” even on heavily Republican terms, produces no follow-through and no reciprocity. This is bipartisanship in the spirit of Neville Chamberlain. You give, and immediately they are after you for more.

It is astonishing how the Beltway echo-chamber, most egregiously the editorial page and news columns of the Washington Post (hard to tell the difference), thinks this deal is good for the Republic. The Post has become a cheerleader for policies that fail to cure the economy and show off Obama as a weakling waiting to be rolled again.

The tax deal, re-branded as a stimulus program, is paltry and ineffective as economic tonic. What hardly anyone seems to have grasped is that the deal basically continues the status quo with almost no stimulus.

If the tax rates on the books in 2010 did not produce a recovery, why should we expect that the very same rates will change the economy in 2011?

The deal not only continues 2010 income tax rates into 2011 and 2012. It actually increases estate taxes slightly, since estate taxes lapsed entirely for one year in 2010.

It also basically continues current unemployment benefits. Even the temporary 2-point tax break on Social Security taxes is a substitute for a more progressive and effective Obama tax break from the original stimulus of February 2009 that the Republicans refused to extend — the Making Work Pay tax credit.

About the only new stimulus in the bill is a business tax break that increases the value of tax write-offs for new investment, valued at about $55 billion.

Does anyone seriously believe that a $55 billion net tax cut in a $15 trillion economy will have more than trivial effect?

Using Congressional Budget Office estimates of GDP growth, the deal might produce as many as two million jobs if businesses respond by investing more and consumers feel more confident about increasing their spending. Lovely, but the economy is currently short at least fifteen million jobs.

The small stimulus effect will soon be undermined by the spending cuts that are already the Republicans’ next demand. Even the stopgap spending measure to continue spending next year at this year’s levels, which Republicans just blocked, is already a cut when you factor in inflation. Deeper spending cuts, about to be imposed by incoming Republican House leaders, will overwhelm any stimulus effect of the tax deal.

Obama, according to well-placed sources, plans to introduce a “tax-simplification” scheme in the State of the Union address — get rid of tax preferences and lower tax rates, as proposed by the Bowles-Simpson commission, with no net stimulative effect. This is a classic case of trying to change the subject. This might or might not be sensible policy depending on the specifics. But what ails the economy has little to do with the particulars of the tax code.

I don’t understand how Obama’s political advisers think this formula can produce his re-election. The tax deal was popular at a superficial level. Voters, when asked about the deal in a vacuum, apart from other economic issues, approve of bipartisan cooperation and they like tax relief when nothing else is on offer. (In that context, it’s noteworthy that the one part of the tax deal that respondents to the ABC-Washington Post poll did not like was the temporary cut in payroll taxes. The vast majority of Americans don’t want to weaken Social Security, even when the bait is tax relief.)

But such polls tell us nothing about the President’s prospects for 2012. The 2010 off-year election was the second largest swing away from the incumbent party in the past 130 years (1930 produced a slightly worse swing against the Republicans), according to the political scientist Walter Dean Burnham. It was the worst mid-year swing against the Democrats ever.

Ground Zero of this disastrous defeat was the Midwest. This is hardly surprising, because the working middle class in the industrial heartland, which provisionally voted for Obama in 2008, is facing devastation in states like Ohio, Pennsylvania, Michigan, Wisconsin and Minnesota. The 2010 swing there was huge. Without carrying the heartland of the Midwest, Obama does not stand a prayer of re-election, even if the broad public says it approves of his bipartisanship.

But bipartisanship to what end? There is simply no way that the combination of upwardly tilted and puny tax breaks, spending cuts, and a re-jiggering of tax rates and loopholes is going to make a serious dent in either unemployment rates or underwater housing values in the Midwest.

Joblessness and losses of household assets in these states will continue at depression levels, even if the national unemployment comes down modestly.

Obama and his advisers are left with the vain hope that Republicans will nominate someone so lunatic that Obama will somehow squeak through. But be careful what you wish for. I vividly remember 1980, when some Democrats cheered the nomination of Ronald Reagan because he was too rightwing to get elected.

The watershed year 2008 was a political moment when an incoming Democratic president had all the raw material for a dramatic break with the old order — when Republicans, Wall Street, and laissez-faire ideology were primed to take a richly deserved fall for the economic collapse.

Obama chose not to pursue that course. Instead, he identified himself with reviving Wall Street and pursued a feckless bipartisanship and a feeble recovery program.

Last spring, Obama and his aides were on the road assuring everyone that the administration’s economic program would produce a “Recovery Summer,” which never came. Now, Obama is repeating the mistake. Adviser Larry Summers’ valedictory message is that the even weaker tonic of the tax deal will somehow restore economic jobs and growth. Crying recovery, when recovery doesn’t come, is even riskier than crying wolf.

Six months from now, when the economy is still in the doldrums, either Obama or some other Democrat had better stand up for a real economic recovery program — or no Republican will be too grizzly to be elected president in 2012.

***

Robert Kuttner is co-editor of The American Prospect and a senior fellow at Demos. His best-selling book is Obama’s Challenge. His new book is “A Presidency in Peril.“

***

This piece is re-published from The Huffington Post.

Robert Reich

By Robert Reich
Former U.S. Secretary of Labor, Professor at Berkeley

More than thirty years ago, Ronald Reagan came to Washington intent on reducing taxes on the wealthy and shrinking every aspect of government except defense.

The new tax deal embodies the essence of Reaganomics.

It will not stimulate the economy.

A disproportionate share of the $858 billion deal will go to people in the top 1 percent who spend only a fraction of what they earn and save the rest. Their savings are sent around the world to wherever they will earn the highest return.

The only practical effect of adding $858 billion to the deficit will be to put more pressure on Democrats to reduce non-defense spending of all sorts, including Social Security and Medicare, as well as education and infrastructure.

It is nothing short of Ronald Reagan’s (and David Stockman’s) notorious “starve the beast” strategy.

In 2012, an election year, when congressional Democrats have less power than they do now, the pressure to extend the Bush tax cuts further will be overwhelming. (more…)

Robert Reich

By Robert Reich
Former U.S. Secretary of Labor, Professor at Berkeley

Sarah Palin watched from the audience as daughter Bristol danced on ABC. Twenty-three million other Americans joined her from their homes. The next day, the former vice-presidential candidate started a 13-state book tour for her new book, America By Heart, which has a first printing of 1 million. Her reality show on TLC, “Sarah Palin’s Alaska,” is in its third week. Last week she was the cover story in the New York Times magazine.

It’s all part of The Palin Strategy for becoming president in 2012 — or 2016 or 2020.

Republican leaders don’t believe it. “If she wanted the Republican nomination she’d be working on the inside,” one influential Republican told me a few days ago. “She’d be building relationships with Republican Senators and representatives, governors, and state party officials. She’d be smoothing the feathers she ruffled by backing Tea Party candidates. She’d be huddled with GOP kingmakers.” When I suggested she has a different strategy, the influential Republican smiled knowingly. “That’s how it’s done — how McCain, Bush, and everyone has done it. That’s the only way to do it. But all she really wants is celebrity.”

The Republican establishment doesn’t get it. Celebrity is part of The Palin Strategy — as is avoiding the insider game. She doesn’t want to do what Huckabee, Pawlenty, Gingrich, or Romney have to do. She has an outside game. (more…)

Robert Reich

By Robert Reich
Former U.S. Secretary of Labor, Professor at Berkeley

Not only is income and wealth in America more concentrated in fewer hands than it’s been in 80 years, but those hands are buying our democracy as never before — and they’re doing it behind closed doors.

Hundreds of millions of secret dollars are pouring into congressional and state races in this election cycle. The Koch brothers (whose personal fortunes grew by $5 billion last year) appear to be behind some of it, Karl Rove has rounded up other multimillionaires to fund right-wing candidates, the U.S. Chamber of Commerce is funneling corporate dollars from around the world into congressional races, and Rupert Murdoch is evidently spending heavily.

No one knows for sure where this flood of money is coming from because it’s all secret.

But you can safely assume its purpose is not to help America’s stranded middle class, working class, and poor. It’s to pad the nests of the rich, stop all reform, and deregulate big corporations and Wall Street — already more powerful than since the late 19th century when the lackeys of robber barons literally deposited sacks of cash on the desks of friendly legislators.

Credit the Supreme Court’s grotesque decision in Citizens United vs. the Federal Election Commission, which opened the floodgates. (Even though 8 of 9 members of the Court also held disclosure laws constitutional, the decision invited the creation of shadowy “nonprofits” that don’t have to reveal anything.) (more…)