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Robert Reich

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

Put your ear to the ground and you can almost hear the bulls stampeding. The Dow closed above 12,000 Tuesday for the first time since June 2008. The Dow is up 4 percent this year after increasing 11 percent in 2010. The Standard & Poor 500 is also up 4 percent this year, and the Nasdaq index, up 3.7 percent.

“The U.S. economy is back!” says a prominent Wall Streeter.

Ummm. Not quite.

Corporate earnings remain strong (better-than-expected reports from UPS and Pfizer fueled Tuesday’s rally). The Fed’s continuing slush pump of money into the financial system is also lifting the animal spirits of Wall Street. Traders like nothing more than speculating with almost-free money. And tumult in the Middle East is pushing more foreign money into the relatively safe and reliable American equities market.

It’s simply wonderful, especially if you’re among the richest 1 percent of Americans who own more than half of all the shares of stock traded on Wall Street. Hey, you might feel chipper even if you’re among the next richest 9 percent, who own 40 percent. (more…)

Robert Creamer

By Robert Creamer
Political organizer, strategist and author

Last week’s employment report served to reinforce the utter bankruptcy of Republican economic policy — and the absolute necessity of remembering the lessons of the last century of economic history.

The private sector job market is slowly stumbling out of the economic ditch into which it was steered by the policies of the Bush Administration. Sixty-four thousand private sector jobs were created by the economy last month — well short of what is necessary to allow the job market to achieve lift-off velocities and long-term sustained growth — but a least a positive number.

But that growth was entirely offset by the loss of 159,000 government jobs. Some of them were temporary census jobs. But the bulk — including the loss of 26,000 teachers — came from layoffs caused by the fiscal crunch of state and local governments. State and local governments cut jobs at the fastest rate in almost 30 years. The loss in jobs would have been even more massive if Democrats in Congress had not passed a bill to aid state and local government before they adjourned for the August recess. That bill was passed over virtually unanimous Republican opposition.

The Republicans have traditionally offered four major elixirs as their prescriptions for economic growth:

1) Cut taxes — especially for the wealthy. In fact, of course, tax breaks for the rich are mainly about giving more money to the Republicans’ major constituency — the wealthiest of our citizens. The fig leaf they have used to cover this self-serving policy used to be described as “supply-side” economics: the idea that if you give the wealthy and big corporations more money they will automatically invest it in new economic ventures that generate jobs.

Of course this proposition completely ignores actual economic history. The Bush tax cut policy was in place for much of the last decade. But his administration created a net increase of zero new private sector jobs — zero. In fact, of course, it is still in place today — due to expire at the end of the year, unless Republicans have their way — and it has done absolutely nothing to create new jobs. In fact, just the opposite. (more…)

Robert Creamer

By Robert Creamer
Political organizer, strategist and author

Ever wonder how Wall Street bankers manage to make tens — and sometimes hundreds — of millions of dollars? How do people who really don’t produce anything manage to siphon such gigantic sums from the pockets of the people who produce goods and services — who actually create the wealth?

The answer is that they have managed to gain almost monopolistic control of the keys to world financial markets, to sources of capital that are necessary to finance equity investments and bonds for everyone from the largest international corporations to new start-ups.

But, you may ask, how can this be? In the kind of competitive financial markets envisioned by Adam Smith, competition should create multiple gateways to these capital markets. What’s more, price competition should prevent massive overcharges by the underwriters of big financial deals.

On Friday, Aug. 20, Washington Post financial columnist Steven Pearlstein published an insightful article examining the reasons why there is so little price competition on underwriting deals between Wall Street’s big banks.

He points out that the big investment banks would normally stand to make almost $450 million in fees on the $15 billion stock offering by General Motors. In this case, though, the federal government owns most of the stock. Goldman Sachs — convinced that it would never be named lead underwriter because of its legal and PR issues — decided to do something that is never done on Wall Street: undercut the fee structure. It shocked its rivals by violating an unwritten law of the investment banking world — it engaged in price competition. (more…)

Robert Borosage

By Robert L. Borosage
Co-Director Campaign for America’s Future 

Rep. John Boehner, the perpetually tanned House Minority leader, unveiled his plan to get the economy going today in a speech before the Cleveland City Club. Hold on to your job; if he becomes speaker, things will get worse.

Understandably, Boehner said not a word about the policies that led to the Great Recession. In fact, he said not a word about the economic collapse. Instead, he argued only that America’s economy was in trouble because business was scared to death. It isn’t the worst recession since the Great Depression, the lack of demand and customers that is plaguing businesses; it is the fear of tax hikes and regulation.

In response, Boehner detailed a five-point plan to “break the ongoing economic uncertainty.” Three of the five points are basically rhetorical. He calls on Obama to pledge to veto any future tax increase. He calls on Obama to fire his economic team. And he promises to eliminate the 1099 tax return mandate that requires small businesses to report any expenditure on goods and services over $600, an aggravation that Democrats are also intent on reversing.

The last two points have greater substance. Boehner would keep tax rates where they are, opposing Obama’s plan to let the Bush tax cuts expire for couples making more than $250,000 a year, or the top 2% of Americans. The Center for Budget and Policy Priorities estimates this would add about $1 trillion to the deficit over the next 10 years. (more…)

Robert Reich

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

It’s nonsense to think of the economy heading downward again into a double-dip recession when most Americans never emerged from the first dip. We’re still in one long Big Dipper.

More people are out of work today than were last year, counting everyone too discouraged even to look for work. The number of workers filing new claims for jobless benefits rose last week to the highest level since February. Not counting temporary census workers, a total of only 12,000 net new private and public jobs were created in July — when 125,000 are needed each month just to keep up with growth in the population of people who want and need to work.

Not since the government began to measure the ups and downs of the business cycle has such a deep recession been followed by such anemic job growth. Jobs came back at a faster pace even in March 1933 after the economy started to “recover” from the depths of the Great Depression. Of course, that job growth didn’t last long. That recovery wasn’t really a recovery at all. The Great Depression continued. And that’s exactly my point. The Great Recession continues.

Even investors are beginning to see reality. Starting in February the stock market rallied because corporate profits were rising briskly. Investors didn’t mind that profits were coming from payroll cuts, foreign sales, and gimmicks like share buy-backs — none of which could be sustained over the long term. But the rally died in April when investors began to see how paper-thin these profits actually were. And now the stock market is back to where it was at the start of the year. (more…)

Jared Bernstein

By Jared Bernstein
Chief Economist and Economic Policy Adviser to Vice President Joseph Biden

John Boehner wants a lot of people to lose their jobs.

We were awfully surprised to hear Rep. Boehner come out for killing jobs en masse in his own state and district by stopping the Recovery Act on last Sunday’s news shows.

Though we’re sure he didn’t know it, the Congressman is advocating to kill the expansion of the Butler County Community Health Center and bring some of the twenty-five highway projects across the district to a grinding halt. Across the state of Ohio, he said that approximately 4 million working families should get an unexpected cut in their paycheck as the Making Work Pay tax credit disappears, unemployed workers should go without unemployment benefits, and major Ohio road projects like the US-33 Nelsonville Bypass project and the Cleveland Innerbelt Modernization project should be stalled or stopped. Oh, and some of the more than 100 clean energy Recovery projects employing workers across the state should be shut down.

That would be the direct consequence of his suggestion that we shut down the Recovery Act: “There’s still about $400 billion or $500 billion of the stimulus plan that has not been spent. Why don’t we stop it?” Now if you have been following this blog, you know that the notion there is “$400 billion or $500 billion” in Recovery Act funding unspent couldn’t be further from the truth. In fact, we’re right on track to hit the goal set when the Recovery Act passed: that 70% of the $787 billion in funds would be “outlaid” or provided in tax benefits by September 30, 2010. But you don’t have to take our word for it — independent fact-checker Politifact.com recently rated Rep. Boehner’s claim flat-out false. As they noted:

[R]ight off the bat, Boehner’s $400 billion to $500 billion figure is much too high. (more…)

Robert Borosage

By Robert L. Borosage
Co-Director Campaign for America’s Future 

“I still believe that this will be largely a referendum on the administration’s policies,” said Senator John Cornyn of Texas, chairman of the National Republican Senatorial Committee, explaining why the primary successes of wingnut tea party conservatives may not hurt Republican chances this fall.

With the economy in dire shape, Cornyn may be right — but what he doesn’t say is that that’s virtually the only way Republicans make dramatic gains this fall. If the election becomes a choice of direction, conservatives will be in trouble — even with foul economy.

An opinion poll released today by the Campaign for America’s Future and Democracy Corps reveals that Americans are strongly opposed to conservative ideas about cutting the deficit — and far more sophisticated about what is needed for the economy than the right-wing anti-government rant would suggest. The poll results, Democracy Corps memo, and slide presentation are available here (The poll was done with the support of Moveon.org, the SEIU and AFSME).

For example, a majority of Americans (53-42) and a plurality of likely voters support the federal government providing aid to states and localities to avoid further layoffs and service cuts. (See slide on page 7). (more…)

Bob Cesca

By Bob Cesca
Author, “One Nation Under Fear”

We’re only three months away from the midterm election when a shockingly large number of American voters will inexplicably vote for Republican candidates. I have no idea if this will mean a Republican takeover of the House or Senate or both, but there will definitely be enough voter support for Republicans to significantly reduce the Democratic majorities in the House and Senate.

Why? Because too many voters tend to be low-information, knee-jerk Springfield-from-The-Simpsons types, and the Republicans have lashed their crazy trains to this new wave of inchoate roid-rage to help sweep them into more congressional seats.

Here are a few of the ongoing economic conditions facing a vast majority of Americans, many of whom are all revved up to vote Republican in November. According to Michael Snyder of the Business Insider:

• 61 percent of Americans “always or usually” live paycheck to paycheck, which was up from 49 percent in 2008 and 43 percent in 2007.
• 66 percent of the income growth between 2001 and 2007 went to the top 1 percent of all Americans.
• Over 1.4 million Americans filed for personal bankruptcy in 2009, which represented a 32 percent increase over 2008.
• The bottom 50 percent of income earners in the United States now collectively own less than 1 percent of the nation’s wealth.
• In America today, the average time needed to find a job has risen to a record 35.2 weeks.
• More than 40 percent of Americans who actually are employed are now working in service jobs, which are often very low paying.
• Despite the financial crisis, the number of millionaires in the United States rose a whopping 16 percent to 7.8 million in 2009. (more…)

Robert Reich

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

The Great Recession could have spawned another era of fundamental reform, just as the Great Depression did. But the financial rescue reduced immediate demands for broader reform.  

Obama might still have succeeded had he framed the challenge accurately. Yet in reassuring the public that the economy will return to normal he has missed a key opportunity to expose the longer-term scourge of widening inequality and its dangers. Containing the immediate financial crisis and then claiming the economy is on the mend has left the public with a diffuse set of economic problems that seem unrelated and inexplicable, as if a town’s fire chief deals with a conflagration by protecting the biggest office buildings but leaving smaller fires simmering all over town: housing foreclosures, job losses, lower earnings, less economic security, soaring pay on Wall Street and in executive suites.  

Much the same has occurred with efforts to reform the financial system. The White House and Democratic leaders could have described the overarching goal as overhauling economic institutions that bestow outsize rewards on a relative few while imposing extraordinary costs and risks on almost everyone else. Instead, they have defined the goal narrowly: reducing risks to the financial system caused by particular practices on Wall Street. The solution has thereby shriveled to a set of technical fixes for how the Street should conduct its business. (more…)

Robert Reich

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

The structural problem began in the late 1970s when a wave of new technologies (air cargo, container ships and terminals, satellite communications and, later, the Internet) radically reduced the costs of outsourcing jobs abroad. Other new technologies (automated machinery, computers and ever more sophisticated software applications) took over many other jobs (remember bank tellers? telephone operators? service station attendants?). By the ’80s, any job requiring that the same steps be performed repeatedly was disappearing–going over there or into software. Meanwhile, as the pay of most workers flattened or dropped, the pay of well-connected graduates of prestigious colleges and MBA programs–the so-called “talent” who reached the pinnacles of power in executive suites and on Wall Street–soared.

The puzzle is why so little was done to counteract these forces. Government could have given employees more bargaining power to get higher wages, especially in industries sheltered from global competition and requiring personal service: big-box retail stores, restaurants and hotel chains, and child- and eldercare, for instance. Safety nets could have been enlarged to compensate for increasing anxieties about job loss: unemployment insurance covering part-time work, wage insurance if pay drops, transition assistance to move to new jobs in new locations, insurance for communities that lose a major employer so they can lure other employers. With the gains from economic growth the nation could have provided Medicare for all, better schools, early childhood education, more affordable public universities, more extensive public transportation. And if more money was needed, taxes could have been raised on the rich.

Big, profitable companies could have been barred from laying off a large number of workers all at once, and could have been required to pay severance–say, a year of wages–to anyone they let go. Corporations whose research was subsidized by taxpayers could have been required to create jobs in the United States. The minimum wage could have been linked to inflation. And America’s trading partners could have been pushed to establish minimum wages pegged to half their countries’ median wages–thereby ensuring that all citizens shared in gains from trade and creating a new global middle class that would buy more of our exports. (more…)