The Antidote to Our Pessimism: Change
In decades of tracking such sentiments, I've never seen people so pessimistic about the economy. And remember, we haven't even had a quarter of contracting GDP yet.
Of course, rising gas prices, the deteriorating job market, and paychecks that are barely making it past gas and groceries are the major drivers of these poll results. But they're not the whole story. Well before gas prices spiked, majorities were telling pollsters that something fundamental was wrong in the economy, and that it had to do with the fact that most of the folks who were baking the economic pie were ending up with thinner slices.
These latest economic stressors have simply served to turn this underlying feeling that the game was rigged into a much more urgent sense that something's got to change.
First, what's so unique about where the polls are pointing right now? It's this: it actually doesn't take all that much for people to feel lousy about the economy, but it takes a lot of hurt for them to feel that way about their own situations. Folks will often say, "the economy's doing badly, but my personal circumstances are OK." It's their way of saying they recognize something is off out there, but it's not really affecting them so much.
Well, it's affecting them now. For the first time in the 32 years over which they've been asking the question, Gallup reports that a majority of respondents believe they're losing ground. Both of the main consumer (lack of) confidence surveys show the same equally rare finding, i.e., people expect their income to fall in coming months.
One of the most precise questions in this regard comes from a CNBC poll that asks people about their expectations regarding both wages and prices. Last month respondents reported that they expected their wages to grow by 2%, on average, compared to 11% for inflation. Inflation's been growing at a much lower rate than that, about 4%, but their estimate reflects the cost of energy, which is up 17% over the past year.
Last Thursday, we learned that they weren't too far off on the wage side either. Weekly earnings for most workers were up 2.8% over the past year, well behind overall inflation, and miles behind energy costs.
So, you're thinking...what fun. The economy's in the tank, people know it, and here's just what we need: another dismal scientist to fill us in on all the gory details.
Not so. There's no denying the downbeat news. Even the Bushies have stopped intoning their monotonous meaningless mantra: "the fundamentals are sound." But there is hope embedded in this current state of affairs.
First, the structural fissures in the US economy -- the bubble and bust macroeconomy, over-leveraged households consuming beyond their means, inequality levels not seen since the late 1920s -- had to come to light at some point. We're fortunate that they've done so a few months before a general election between the two candidates with starkly different economic visions. More on that in a moment.
Second, on the energy side, despite all the talk about what somebody else can do to bring gas prices down -- poke more holes, beat up on oil execs, enact feckless tax holidays -- the only person who can make a difference in the short run is you. And, in fact, to be deeply wonky about it, the price elasticity of demand has finally kicked in, which is a fancy way of saying people are driving less in response to higher prices at the pump. The evidence is really quite eye-popping (see chart of page 9 here). It's been a long time coming, but people are doing exacting what the price signals are telling them too: conserve energy.
It's not without pain. People are driving less because they can't afford to drive as much as they used to, and that can be costly in terms of family well-being. But good things may well come as a result of this change, assuming it persists, including much higher mpg standards, more public transit, and a whole set of greener outcomes, from home insulation to city planning.
Then there's this bit of good news: these economic developments, from the current downturn, to the sharp growth in inequality, to the energy price spike, are amenable to policy, assuming we can muster the wisdom to make the right choices. Here again, recent history is extremely useful.
If supply-side economics/market fundamentalism worked, the economic landscape would look quite different than it does now. The last eight years have served as something quite rare in economics: a natural experiment of the effectiveness of market forces, goosed liberally (wrong word, but you know what I mean) with high-end tax cuts, to address the challenges we face. Health care would be on a sustainable trajectory, energy policy would exist (subsidies to big oil don't count), tax policy would help to offset inequality, not exacerbate it, financial markets would speculate less, price risk more accurately, and be much less bubbly, and the benefits of productivity growth would be more broadly shared with the working men and women responsible for creating them.
Which brings us to politics. McCain can run from Bush, but as long as he doubles down on both Bushonomics and the war, he can't hide. His tax cuts tread even further into supply-side fantasy land than Bush's, transferring another $300 billion to the wealthiest households. His health care plan is designed not to tap the power of pooled risk sharing and single payer, but to incentivize individuals to go out and shop for coverage in the non-group market. His chief economic policy architect is Phil Gramm, that cowboy deregulator who brought us the Enron loophole and sponsored banking legislation that put us solidly on the path to where we are today, bailing out investment banks that failed partly from lack of oversight.
Obama's economic agenda is very different. He recognizes the failures noted above and, as I've written before, seeks to reset the balance between market forces and effective government intervention in all of these areas.
I think his agenda will make a positive difference, but I don't know that. Moreover, if he wins, none of us can foresee what will come of that agenda, once Congress gets involved. But I do know this: our current economic system is broken. I've known it for awhile. I've written numerous books about it. I like them okay, but they're not important. What's important is that everybody else knows it now too.
And so it is a time of uniquely deep economic pessimism. Forgive me if I'm uniquely optimistic about our chances to do something to change that.
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Yes, a rising tide does lift all boats especially the yachts of the wealthy. The trouble is nobody else can afford a boat anymore but the wealthy.
Without an economcially viable middle-class, and without economically viable employees, over time, it will begin to affect the American CEO's compensation, because the broader economy will begin to contract.
The attitude among a growing number of American companies seems to be that if they pay an above average wage, that they will lose ground to overseas competitors. With prices rising at the gas pump and the grocery store, its only a matter of time until a large number of American workers will be unemployable, due to falling behind on their bills, which will dramatically lower their credit status. When Joe Q. Public applies for a job, and his credit report is pulled by a potential employer, the hiring manager will not likely hire someone who is a credit risk. As time goes on, Mr. Joe Q. Public will eventually file for bankruptcy, even though his creditors may try and get blood out of a turnip.
In Atlanta, the employment section of several newspapers consistently run the same ads week after week, and month after month. It appears the companies running these ads are mere repositories for resumes, and nothing more. Several companies have listed ads claiming an hourly or salary based pay package, with benefits, but they are in fact straight commissioned opportunities only, its the "Bizarro World". In the Atlanta area, companies that post on the internet typically offer 1099 and commission-based only pay. I mean, whoever heard of a straight commissioned receptionist, was it a misprint?
"Obama's economic agenda is very different. He recognizes the failures noted above and, as I've written before, seeks to reset the balance between market forces and effective government intervention in all of these areas." Typical Dem solution. Government intervention will not solve these problems. It will only make certain lobbyists and contributors wealthier.
And what WILL solve these problems? We've witnessed what the 'free market' has done when left to a bunch of crooks the past 7 years. Not all government is bad. Government oversight can be good, as long as it's actually efficient and carried out properly, instead of the FDA caring more about the drug companies than our safety, and the EPA actually having some regulations adhered to instead of brushed aside by this cowboy administration. People who want small government only want small government until it comes time to use the system for themselves or their families.
Economic inequity is at this moment perhaps the greatest detriment to the "average American's" quality of life. Yes, things will change, as change is the only constant. Perhaps we have "hit bottom", and although we have a loooooooooong way to go, perhaps we will now begin ascending rather than descending. Hope so.
Ain't that somethin', the terrists have been hidin' in plain sight in Washington all along.
Where's the stimulus for this economy going to come from? Bush's tax plan is already in place. McCain wants to continue it. Interest rates are already low. What else can the Republicans do for the economy?
We have a huge deficit. Can we afford to cut tax rates across the board again?
Low interest rates cause inflation for the average consumer, who is struggling to pay for gasoline.
Mortgage companies need capital and will not cut rates - they just got their heads handed to them from the defaults over the past 7 years. You won't see lower mortgage rates any time soon. Home values are a huge source of consumer confidence....or un-confidence. Consumer spending is 70% of GDP.
Policy makers are running out of arrows to shoot.
Barack Obama will inherit a huge mess, thanks to the Republicans. They have taken their eyes off the ball domestically and internationally. During the pursuit of Al Qaeda, they decided to pick a fight with Saddam Hussein - what idiots. Iraq can blow themselves up with their civil war for all I care.
We have a domestic crisis here in America.
Obama may start the process of transforming our economy away from foreign oil, but it's such a huge undertaking that two more Presidents will need to continue the cause.
Gasoline is headed to $7 per gallon, no matter who the next President. The question is who can keep this country unified and focused on solving the domestic issues facing the country.
"We have a huge deficit. Can we afford to cut tax rates across the board again?"
Yep. But in order to do that we have to cut, and I mean truly cut spending. Bush is a big disappointment in that area. He spends like a Democrat. We cannot tax ourselves into prosperity. It has been proved time and time again. Obuma is going to give it a helluva try again if he is elected.
Obama won't be able to make major changes alone, but he is a door that is open to change. We, the people have to organize, petition, reach agreements and insist on change using the power of the consitution that the lobbyists and congress can't really overrule.
These Comments are a wishing well where everybody comes along and tosses in their two cents. The moderation/ reload lag interferes with conversation. This is a major progressive website, with hundreds of thousands of hits a day. What if HuffPo provided conversation comment pages, with links at the top to activist organizations and comments on the vanity and competence of the different organizations and plans?
"Obama's economic agenda is very different. He recognizes the failures noted above and, as I've written before, seeks to reset the balance between market forces and effective government intervention in all of these areas."
It doesn't take great wisdom to see that the economy isn't great but it does take wisdom to come up with a solution. Obama's very vague policy which as you stated would "reset the balance between marked forces and effective government intervention" is nothing more than an empty declaration. Here's something real for you to ponder. Take someone making ninety thousand a year. Instead of six percent taken out of their check for social security, the amount withheld is doubled. Twelve Percent. That's a lot of money down the drain (because they'll never recoup it in social security retirement payments) and that's what will happen if Obama has his way. Is that your version of a "reset"? Because I call it theft. While Obama stokes his ego in stadium events, the middle class can look forward to more scarcity and depression. Rock on, Obama while the rest of us suffer.
Great. Then you vote in McCain and see how well those Republican "trickle down" promises resonate for *another* four years! I'm tired of hearing about Obama's supposedly "vague" policies from people who clearly have never bothered to read his quite detailed plans. My bottom line is that he *clearly* will not put prioritize the "needs" of corporations and wealthy people over the needs of people who do the work that allows them to thrive. The middle class is being destroyed. Lower-income families have no where to go for help. Yet my friend who builds ultra high-end homes tells me his business is still booming. Yacht sales are booming. WHERE IS THE PROMISED TRICKLE-DOWN?! (Yes, I know I'm yelling.)
If you are making 90g a year, what are you worrying about? How many pairs of pants can you wear at one time? How many cars and houses do you need? The more people make, the greedier they get. You can just pay your fair share into Social Security. You will still have enough money left over to do all the things you want.
Zisyphus
You don't get it. Not only is 90 thousand a year not a lot of money in L.A. or NYC, I'm already paying my fair share of taxes. It's been my experience that the more people make, the more aware they are of just how hard it is to make money. The less people make, the more they think the government owes them. Obama is trying to get the "government owes me" voters on his side and once he does he'll turn around and announce he's refined his position to "I don't owe you a thing". You can't say you haven't been warned.
Very well said.
The GOP told us years ago, "a rising tide lifts all boats." Y'all got boats, dontcha?
The actual term they used was "YACHTS."
Obama is going to part the waters and lead us into the Promised Land? Hardly.
Not until the American People insist on stopping the oil and food manipulations by the Wall Street crowd and the military agenda of garrisoning oil. Risk has become globalized and profit has been privatized. Deregulation, opaque markets, and granting jurisdiction over trading in oil to the British through the Enron loophole. What appears to be the market in Atlanta, is controlled through London because British jurisdiction is foreign.
Face it. The prices are NOT GOING to go down as they were formerely. Take care of yourself. Buy a piece of land, several acres, grow and garden, raise chickens and other animals and take care of yourself and your family, if you can. That, horrific as it sounds, may include caring for your devoted , now, elderly parents, who nourished you, who changed your diapers, who worried when you were sick and who saw to it you grew up healthy and ready to go on your own as best as they could. But we do not have that kind of devotion in this country. Stick them in a nursing home and visit them once a month if at all. Discarded. Sorry but I see a change that many desire, only coming when there is a great disaster, such as a depression greater than the last great depression.
Look out for yourself and your family if you have one.
if they steal this election away (again)
the New Mentality may very well become: Every Man For Himself
Its been proven the election was not stolen, just as Bush did not bring down the twin towers. If anything Gore and the democrats were prevented from stealing it.
I completely agree. America is now a nation of brats. Young people who have been given the best of everything, and I mean GIVEN. They have not had to work for it, don't know the meaning of the phrase "save for a rainy day", and could care less about it.
The mantra of the under 40 crowd is "I want it all, and I want it NOW." They spend every dime they make, or can borrow, with no concern about tomorrow. All you have to do is look at the mortgage mess. A bunch of people who could not otherwise qualify for a home loan were ignorant enough to take on houses were way out of the range they could afford. Now they are screaming for the government to bail them out. I am afraid that gen Xers and whatever they call todays generation are going to have a helluva wakeup call.
Good lord! You must know an entirely different set of young people than those I know (daughter's and nephew's friends). The 20-somethings I know work two or three jobs (in addition to going to school in some cases), have savings accounts, volunteer in a variety of ways, and talk to their parents frequently. I'm sorry you know such horrible people, but you're mistaken in your belief that everyone under 40 is that way. BTW, I'd be fascinated if you could provide a link to information that supports your opinion about young people being behind the mortgage mess -- I haven't seen any demographic info like that.
My mother doesn't even deserve for me to pay for a nursing home. Maybe some parents don't deserve that 'devotion' - ever think of that? Maybe you were lucky enough to have a nurturing mother. I got a psycho.
Jared, I believe that neither one of these "so-called candidates" will have, or truly intends to have, any difference at all.
How do I know? Voting records. Courtesy of the Librarians of Congress at http://thomas.loc.gov.
All three of these people are ... sitting United States Senators. Their every sneeze is on-the-books when Congress is in session.
"By their fruits shall ye know them." People one-and-all need to learn about that site, surf to actual records, actual bill texts, and learn exactly what those "fruits" are. You can be certain that, no matter what someone says before an election, and no matter how many billions of dollars they spend or collect to get elected, when they are in-office they will continue to produce the same fruit.
This ->to incentivize individuals to go out and shop for coverage in the non-group market
The transition from McCain to McBush is nearly complete.
Today, MSNBC reported that McBush wants to attack entitlements "like Social Security" by having younger workers contribute their money to a fund that would invest in the (pure and honest) stock market.
MSNBC, continuing to give McBush a pass on all his failures, did not find the courage to call it what it is--privatization of Social Security. Same journalistic cowardice that got us into Iraq.
Paul Wertz
Eugene
I have two comments:
"It's been a long time coming, but people are doing exacting what the price signals are telling them too: conserve energy."
The line quoted above was in reference to driving, but what about heating oil? How are we supposed to use less heating oil? Driving is the least of my worries in Connecticut - the winters are long!
My other comment has to do with your optimism. With nearly half of voters, according to the polls, willing to vote for McCain, how can you be optimistic? And then there are the corporate-owned media suppressing the truth about virtually everything - how can the people get reliable information?
Your optimism is wildly unrealistic.
darcy said:
The line quoted above was in reference to driving, but what about heating oil? How are we supposed to use less heating oil? Driving is the least of my worries in Connecticut - the winters are long!
Darcy, we need a renewable energy plan that creates new ways for you to heat your home. We've needed one since the 50s. We've had a government institute (the National Renewable Energy Laboratory) in this country since President Carter established it (as the Solar Energy Research Institute). It has been systematically starved and ignored by most of the administrations (Repubs and Democratic) since it's inception.
Now everyone is flurrying around as if this is a new idea. Again.
We have turned the dial down as low as we can, and have saved quite a bit of money on our heating and electric bills. Have you at least tried that?
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