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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Like 9/11 the only thing that was confusing was how confused everyone else was about what was happening.
The same silly ignorance is alive and well today when it comes to wages, entitlements, and governance in general in the era of globalization.
To think americans can retain their $25 an hour income and lifestyles when most other workers abroad averages $25 a week is shear delusion..
IF WE NEEDED EVIDENCE for McCain's ignorance about economics---among other things--it certainly became patent this Fourth of July week-end. He proposes DECREASES in taxes for those lovely
folks in corporations so they may "stimulate" the economy. After ripping off the middle-class at will
and grinding down the "lowers"--they may now receive aidd to become richer by taking tax money away
from our government so we can continue to slash medicare benefits to save money--nice for 70 yr
olds like me.
The man's name rhymnes with insane which spells not just trouble but rubble for everyone this side
of corporate life. J Gorman 12
Right on, James!
OUR GREED WILL DO US IN IF WE KEEP BEING BRAIN WASH BY BIG OIL THE PUPPET MSM AND THE WARS THEY GOT US IN ON LIES AND WE STILL TAKE IT AND NOW THEY DOING IT AGAIN NOT WITH JUST FEAR BUT RACE BATING AND WE WILL LET IT HAPPEN WAKE UP AMERICANS WE ARE GOING DOWN THE HILL FAST AND WE HAVE NO ONE TO BLAME BUT OUR SELF AND THE CAPITALISTS WILL FOOL US IN BELIVING THAT IT WAS SOME OTHER RACE OR COUNTRY AND WE WILL BELIVE THEM BECUASE WE DON'T LIKE TO FACE THE TRUTH UNTIL IT'S TO LATE TO DO ANYTHING ABOUT IT
Please stop YELLING!!
How about those corporate taxes that were cut to increase the job market and yet lost 68,000 jobs in June?
Perhaps the only cure is to put massive pressure on our members of Congress and Senate to make the necessary changes. We will have to stop demanding pork spending to get our votes. We will have to say we will not vote for them if they continue the war in Iraq, fail to fix the financial crises, fail to fix our health care access crises, raise taxes on the 'rich' and deal realisticly with energy and the enviroment. We need 1000's of voters in each Congressional District to write letters, send e-mails, appear at district meetings with their Congreess members and Senators to get the message across. We also need to carry out that threat at the polls by choosing new people in the primaries and in the General election, even if it means kicking out a multi-term member or chosing someone of the 'other' party.
We are at October 1, 1929. We need radical change now or we will all be ruined.
Not even Obama will make much of a dent in the pork spent by Congressmen/women.
That is what worries me, because we need to get our house in order, get some programs done, and the people in Congress need to wake up and get a Universal type Health Care package done asap.
Whoever said economists were good communicators.
Ponder these random observations:
- We're a demand-pull economy.
- When people are scared about jobs, security safety nets, their health, rising prices etc., they stop buying things and the economy grinds to a halt.
- When things are bad, the private sector ain't going to bail you out. Say what you will about the evils of big government
- Because the supply sider Bush people don't believe in government, when things go south (translation: Katrina, Midwest Floods, Recession), they have no experience in governing and, if they act at all, act incompetently.
- One blogger made a good point when he said that a big part of the problem is "us." But the challenge we face is "how to motivate and organize us to act more responsibly, make some sacrifices and buckle down as a society.
- This is where leadership comes in. Sen. Obama has it. This is why words (and speeches matter). We need someone who will give it to us straight, point us in the right direction and get us off our respective butts.
Now THIS I can understand. Thank you.
All good jjeff....w
on the Democratic side behind our newly Obama President. The American voters need to make
it happen and lets see if much of what you are saying will be accomplished. Not for pushing
programs down peoples throat but a positive forward looking legislative branch to help all of
us rather than THE TOP FEW. We need to give a majority a try....the only way we can go is up...
Hey folks - - the MOST IMPORTANT THING TO REMEMBER HERE is that Bush/Cheney did not make this mess all by themselves. Our, greedy, gutless, lobby-loving lawmakers are as much to blame
as Bush. If we want change, and even a shot at a better future - - -
then we must VOTE OUT - - - ALL THE OLD CRUD, not just the crud at the top.
For all the mismanagement of the Bush administration, I think the real culprit is the American People. We borrowed too much, drove too large of cars, built over-sized homes, ate too well and walked too little. We've allowed our government to mislead us and voted them in - TWICE. (Not me and maybe not you, but a majority) Our "entitlement" philosophy is just as much to blame as the lack of effort on this President's side to inspire a culture to change so that all might benefit. What looms most largely above our very perilous state is the avoidance of personal responsibility.
Well said.
Not just the last eight years. We've been voting for crooks to send to Congress for a very long time. Don't believe the snow job that the democrats have been giving out about how they are for the people. They're not. The only difference between the average democrat and the average republican is that a democrat will say he loves you before he screws you, the republican just screws you. Either way it hurts. It's time to do away with both of these non-representative parties. Neither Obama nor McCain should be leading the country and the "leadership" in the House and the Senate changes in name only. There is no opposition party. We effectively have one party rule.
I'm sorry while thats always true to some point In this case its a lot like blaming the Rape victim instead of the rapist.
It over looks the role of good government and the effect of very, very bad government. BUSH in 2000 ran on.. we were not using enough gas and not consumming enough. In fact thats what the stimuli package is all about. Spend more.. and not on capital investments.
On borrowing none of the citizens held a candle to the example set by the Government over the past 8 years. All of the governments borrowing is no money down, no assets to secure the loans and based on phoney income numbers.
At least when a person over borrowed on a house, you could see the house.... 2 trillion in Iraq and what do you see... what did you get for your money?
Rep. Dingle .. yes a Democrat has fought increased CAFE stds for autos for decades.
He did that in his mind to help GM /Ford/Detriot and in the end he helped shoot them in the foot.
The over paying on houses.. the bubble only happened because of the securtizing of mortages, the lack of regulation, the massive deficits of BUSH which increased the money supply. If you bought a house, in the last 8 years, you paid more because of that climate. We all over paid! We are all victims.Re
I totally agree, and I would suggest at taking a strong look at those non bid contracts for the government and also the 40% increase in government that came with the Bush/Chenney administration. America needs a fresh start.
One of the problems, I think, is that you "economics" folks speak a language the rest of us don't understand. I have three Masters degrees and as I read your words my eyes glass over and I start to drool.
I know simple things...
Tthe value of my house is five times greater than when I bought it 30 years ago and the property taxes have kept pace, if not exceeded that margin. My salary has not.
I am living now on Social Security and a Pension... those are fixed amounts.
The price of everything is going through the roof... fortunately, I, unlike so many other Americans, have a roof.
So what are the simple folk, like me, supposed to do to help?
You can't expect Americans to jump in and try to rectify the miserable mess we are in unless we understand the options and can choose a course of action. We don't care about Marx or Keynes, socialism, progressivism or any other economic theory. We care about feeding our kids, keeping our homes, and doing our best not to make things worse.
"It's about the economy, stupid" Well fine... so show us a way to make it better. And keep it simple.
Grrrrrr
Looking for simplistic solutions is what got us here.
That is as it may be, but most of us out here need clear directions rather than a trail of esoteric crumbs. The shrugging off of the real concerns of middle class Americans does not help us avoid the economic disaster quickly approaching. Whatever solution is finally chosen will have to have the support of 300 million non-economists, and to support/implement that plan, we have to understand it.
I do appreciate your responding to my seemingly inane post, but while I speak edu-ese and grant-ese, and psycholo-ese, I do not speak economic-ese. And most of us don't, which leaves a lot of concerned people fumbling around in the dark sans flashlight.
The very rich have made SO much money that they have their own economies. Measured wealth going down by ten, twenty, even fifty per cent (hell, even 90 per cent) doesn't take them out of the category of being able to afford virtually anything. Many of them have a sense (I have personally seen it) that they are worth more if others have less, so depression for the rest of the people is simply a good buying opportunity. There is so much money that it has changed gravity. Most of the new money flows to it. This kind of money will weather anything except the kind of family turmoil that it is so good at creating. It will take more change than is currently being talked about to change this equation.
the zeitgeist for dramatic change was first displayed by the people that were entranced by Sen. Obama's rhetoric during the primary campaign. Other than the obvious change from the historical precedent of electing a white man to the office, I was never convinced that he was going to change much. His recent position restatements, refining statements, and explanation of same have only served to solidify my opinion. The unfortunate thing about all of this is that we really do need someone who will lead us in a movement of fundamental changes so that this country can get back on track. I just don't think Sen. O is that guy -- he's way too interested in just getting elected. Sen. McBush certainly isn't that guy. So, I guess that for yet another general election I will be voting for the Dem candidate without much hope that anything will actually be different, just that it won't get any worse.
"...he's way too interested in just getting elected. "
Exactly! One must get elected before one can be in a position to carry out changes.Wh
let's give Obama the benefit of the doubt before we pass judgment.
One hopeful note is that Obama knows poverty first hand while working in Chicago as a community organizer.
Let's hope Obama is smart enough to perceive the urgency of the economic situation.
He is elected! He's in the Senate! If he wants to show America that he really means change for the better, then he could show real leadership in the Senate. He could start by introducing real meaningful bills. Will they get shot down? Most likely, especially if they don't give any money to the already wealthy. But that doesn't mean he shouldn't try. Furthermore, he could use the shooting down of a positive bill down by the republicans as fuel for the fire. The point is that he doesn't. He is showing his true form and real ambitions now, such as by reversing himself on FISA and "rethinking" his plans for Iraq.
O is "just interested in getting elected". Wow, certainly the brightest statement to come across my desk this bright, sunny Monday morning. Do you think he'll be better at instituting change if not elected??? Right now it is a battle to get elected, not a battle for actually making change. If O started writing bills for consideration right now that were all about change and then they got shot down, how good would his chances be at getting elected? Your post was just plain stupid...
speakeasy Senator O didn't get us into this mess put the blame on
Bush boys, put the Blame on Bush! He did it and he should
be made to fix it. But like everything else in this country they
will expect this Black president to work miracles in thirty days.
OBama will change nothing -- I was once a believer, and now I am not. Just wait till one year into his term -- and see what "change" he will enact -- nothing, nothing, nothing
In 1932 the American people voted change not knowing what to expect. The New Deal was about psychology as well as government programs. Although feeling better is not the same as getting better, it was certainly a needed relief.
If Obama can manage to restore some sense of fairness to our economic system, it might be a necessary start to real change.
And what will Obama do to restore a sense of fairness?
Most of the 4th of July stuff I have read says we are fed up with this form of leadership in our Government.
The truth is that, it is a rigged system run by a bunch of rich guys and gals that don’t give a damn about us. The public needs to wake-up and demand some changes or these greedy monsters will turn us all into slaves. Americans need to get out of their comfort zones.
We live in an age where propaganda is rampant and truth is non-existent. Believe very little that you here from the media. It is controlled by special interests. Moneyed interests control the Government. Our M.I.C. has it’s own agenda which is controlled by moneyed interests. In short we are screwed!
Inflation is up considerably more than even 17%. To get a true indicator of how far citizens have fallen you need to go back to the 70's when people were able to save no less than 30% of their one person income after everything including the mortgage was paid. The wool was slowly pulled over the eyes of the populace except under this administration. Every year wages increased only 1 or 2 % while inflation kept creeping up 4,5,6 and higher percentage points. Over the years the balance gets entirely out of whack. Only during the Clinton years did average Americans see an increase in salary and the deficit reduced which was quickly abolished by the Bush administration.
Perhaps the crisis we are in is a good thing as long as Americans finally stand up. Housing is overpriced well beyond what anyone can afford, energy cost are skyrocketing, Health care as become unaffordable and the list goes on and on. Americans need to stand up now, implement regulation on companies and if they won't abide by the rules instead of greed they go. Other people are more than willing to start new companies to take their place who will follow the rules. Farmers need to take back their farms from these people and go back to paying Americans to do the job at fair wages instead of hiring illegals. Greed must stopped at every turn and companies as well as our elected officials must be held to a higher standard.
"Oh, the horrors of the free market!"
Except, we don't have a free market.
Am I the only person here who thinks Keynes and Marx were idiots?
Keynes and Marx are anything but idiots. Many things they wrote were correct. The problems come from how ideas are applied. If the intention is to subvert the economic system by inventing a false theory like supply-side economics, then what does this have to do with real economic theory?
The point is (as when David Stockman described the real intentions of Reagan and his followers) that political agendas can use academics and writers like anything else: a means to destructive ends.
Reagan and his pals lived quite well back in their time. They were either to stupid or apathetic to see where it was heading in the long run.
I find socialism abhorrent.
That being said, if a hundred million American Marxists want to secede to create their own socialist society, I have no problem with that. Just as they should have no problem with me moving to Galt's Gulch...
"Except, we don't have a free market."
The closer things get to Friedman's vision, the worse things get for most citizens.
Not just in the US, but anywhere they've tried it - Chile, Poland, Russia. Read Shock Doctrine by Naomi Klein.
I understand it's an article of faith among Friedmanites that complete deregulation will produce prosperity. But what about the corollary - less regulation means more prosperity. That never held true unless you measure prosperity by only looking at how rich the wealthy are. If the corollary doesn't hold true, why does the principle hold true?
A cynic might think that the appeal of Friedmanism among its adherents has less to do with how much prosperity the general populace gets, and how much profit large corporations will reap.
There is no denying the two measures are separate.
I am not a "Friedmanite". He still believed in government intervention. As far as government helping corporations, I don't believe in corporate welfare.
Consider me...Rothb
At any rate, the problem isn't capitalism OR socialism in themselves, the problem is governments, or people, forcing their views on other people.
Who was it that said to beware of "the tyranny of the majority".
Change... Its been a few weeks since Kudlow said Goldielocks economy... Not too hot;not too cold.
He has stopped pointing out positives where they didn't really exist. He now looks at the price of oil, the credit problems, the bailouts and sees deep down somehtings not quite right; the dollar pluments and people chose goods over holding dollars or his beloved stock.
He must realize that the great DEREG Market/free trade over common sense repubs/ and his village idiot President have left his stock market priced lower than when BUSH came into office, and after adjusting for currency devaluation is below half... which means the lower cap gain rates he loved were paid on not real gains... a tax rate of more than 100 percent..O
The free trade/supply side economic experiment beginning with Reagan has been a failure by any measure, Kudlow got everything he wanted in the last 8 years but in real dollars everything is down.
The tax cuts to the rich did stimulate the economy, not here but in China as they chose to invest in low wage markets promising the greatest return even if communist. The assets built there resulted in 4 million U.S. manufacturing jobs flowing to there.
While railing against communism, they invested in it. While decrying government
Regards
You've got it pretty much right, Viper. Congratulations.
An important aspect of the Reagan revolution which you neglected to mention specifically was his willful destruction of the union movement, initiated when the air traffic controllers tried to strike. This was cheered on by the Reagan Democrats, fools all because it foretold the beginning of the end of their own middle class prosperity.
I've seen Jared arguing often on Kudlow's program on CNBC, usually to little avail against the "Free Capitalists" Larry usually stacks up against him. Must bring him a little satisfaction, now, having those smug experts eating a little crow, even though we're all paying the price of their economic foolishness.
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