It's Still the Economy

...The problem is that if incomes in the real economy are flat or declining, credit conditions will not improve...

...From 1983, it shot upward, reaching 181 percent in 2007...

...The tragedy is that the failure of the bank bailout makes it more difficult to expand the successful stimulus program...

...This fairy tale continues to enchant some in Barack Obama’s administration...

...From 1948 to 1982, average compensation in the financial sector ranged between 99 percent and 108 percent of the average for all domestic private industries...

...Throughout the crisis the administration has provided unprecedented sums—$4.7 trillion and still climbing—in the various bailouts, bank rescues, and other economic lifelines—to support financial institutions...

...We need to stop worrying about the budget deficit and start putting people back to work...

...With wages falling and households having lost six trillion dollars in housing equity, consumers have nothing to spend...

...A reporter’s account of a worker speaking at a meeting (he is not identified but we can assume he is an Obama supporter) captures the public reaction to the contrasting fate of the big banks with that of those who work for a living: Comrades, he cried, and there was real anguish in his drawn face and despairing gestures...

...Wall Street took advantage of these opportunities...

...The story behind this catastrophe begins in the Reagan years, when finance was accorded a special place in the American economy...

...A much smaller but still significant amount—$800 billion over two years—has been allocated to counteract the recession...

...The problem is the economy will likely still shrink for the foreseeable future, and there is little likelihood of an uptick in consumption any time soon...

...The only way to prevent a continuing rise in unemployment will be another much bigger round of stimulus...

...In the 1990s, it oscillated between 21 percent and 30 percent, higher than it had ever been in the postwar period...

...The administration seems to think that if it provides enough money to banks, the banks will go out and lend...

...because the population has to be maintained on the dole...

...Obama can take credit for mitigating the freefall with his stimulus package, which added between 2.5 to 3.0 percentage points to the growth rate for the second quarter of 2009...

...In 1986, that figure reached 19 percent...

...then the investment banking house Merrill Lynch was forcibly merged into Bank of America...

...they are the wheels...

...What about the deficit...

...I believe the fate of this administration hinges on Obama’s answer to that question...

...Authoritative sources tell me that he was, in fact, writing about an earlier ten days that shook the world...

...If you add that to the number of jobs lost (6.7 million) the labor market is 9.1 million jobs below prerecession employment levels...

...So, although bank lending is in fact down, the profits and stock prices of many of the banks are back where they were before the crash, and the billions (that’s right, billions) of dollars in bonuses are flowing again...

...That is an average of 11,600 jobs lost every day for nineteen months...

...Should they prevail, what little progress we have seen in stemming the economic decline could be thrown into reverse, a recapitulation of Franklin Roosevelt’s balancethebudget recession of 1937-1938...

...and because the Treasury wishes, for no constructive reason, to rescue the big bankers...

...The people at the top are always calling upon us to sacrifice more, sacrifice more, while those who have everything are left unmolested….show me what I am fighting for…is it the democracy or the capitalist plunderers...

...the next day Lehman Brothers crashed, which was quickly followed by the nationalization of the American International Group, the world’s largest insurance company, which, unlike Lehman, was deemed too big to fail...

...From 1973 to 1985, the financial sector never earned more than 16 percent of domestic corporate profits...

...In this decade, it reached 41 percent...

...I apologize...

...They are all that stands between us and a full-blown depression...

...Next year, it is expected that more than one in three workers (over fifty million...

...As Lawrence Summers put it when he was Bill Clinton’s treasury secretary: “Financial markets don’t just oil the wheels of economic growth...

...The recession was on its way to becoming the longest and deepest downturn since the Great Depression...

...With growing economic wealth came political power...

...Republicans and the Wall Street wing of the Democratic Party are already on the attack...

...During this recession, the U.S...

...As credit froze, orders for new goods and investment halted, trade plummeted, and unemployment soared...

...To keep up with population growth the economy needs to add roughly 127,000 jobs a month...

...The percentage of properties “underwater” is forecast to rise to twenty-five million homes (48 percent of all homeowners) if property prices drop through the first quarter of 2011, according to some housing analysts...

...When I read this account I assumed that the reporter, John Reed, was writing about our current crisis...

...will experience either a spell of unemployment or underemployment (working part time involuntarily...

...This is the difference between the modest decline we saw in the second quarter and plunge in output the prior two quarters...

...economy has lost 6.7 million jobs...

...What was striking was not so much the theory that what was good for Wall Street was good for America, or Wall Street’s adherence to it, but the fact that both political parties bought into it...

...And now the deficit hawks are re-emerging, arguing that now is the time for tax increases and entitlement cuts...

...We should be thankful that they have increased...

...For the nineteen months of recession, that adds up to 2.4 million jobs...

...To go back to those ten days that shook the world...

...He has discredited the notion that fiscal policy can achieve anything positive, given that the bailouts have not served their intended effect of unblocking credit...

...To make matters worse, state and local governments will be forced into draconian budget cuts, firing workers who are among the most reliable in making their mortgage payments—firefighters, police officers, teachers, civil servants...

...As Nobel Prize-winning economist Joseph Stiglitz has pointed out, Obama has used too much political capital to give too much money with too few restrictions on too favorable terms to those who caused the economic mess in the first place, a policy that has dampened taxpayers’ appetite for more spending...

...Meanwhile, the foreclosure wave gives every indication of getting worse...

...Policies promoting the free movement of capital across borders, the deregulation of finance, and the repeal of regulations separating commercial and investment banking became conventional wisdom...

...Some 24 percent of owner-occupied homes (sixteen million homeowners) had mortgage debt that exceeded the values of those homes at the end of June...

...government nationalized Fannie Mae and Freddie Mac...

...Mark Levinson is the book review editor at Dissent...

...It’s Still the Economy MARK LEVINSON The recession that started in December 2007 was already in its ninth month when a tumultuous ten days in September 2008 shook the world...

...As James Galbraith has rightly pointed out, the choice is between running up debt while creating jobs and rebuilding America or running up debt because revenues collapse...

...What about the debt...

...First the U.S...

...As the Economic Policy Institute points out, the hole in the labor market is actually much bigger than that...

...Pay rose just as dramatically...

...It is likely that unemployment will rise for the rest of 2009 and the first half of 2010...

...What about them...