Whoever is elected president on November 4th faces a "honeymoon" so troubled that he may sue for annulment before it's over.
Politicians seldom relish dealing with harsh realities, let alone dire economic straits. More often than not, they make tough choices only grudgingly, like the equivocating character in a Woody Allen short story who "hated reality - but knew it was still the only place to get a good steak sandwich."
The toughest reality the next president may face is rallying the support necessary to advance a national investment strategy that restores the long-lost wage growth of American workers -- especially with both parties still paying lip service to balanced budgets.
Unemployment is rising rapidly, and with output in America's basic industries plummeting, the possibility that it may reach double digits is growing. The most recent statistics from the Philadelphia Federal Reserve reveal the steepest decline in manufacturing output in 20 years.
Many manufacturers' order books are literally bare, a situation one industrial labor leader describes as "disastrous." Layoffs in the steel, auto and tire industries have already begun; more are inevitable.
But there is one statistic, seldom cited, that may say more than any other about what the future portends - and what is needed to improve the nation's prospects. That figure is 70 percent.
Economy's Twin Evils
Of late, 70 percent of America's economy has been dependent on consumer purchasing to sustain economic growth. The portion of workers in America who do not have a college education is also 70 percent.
The relationship between these two statistics is more consequential than coincidental; indeed, the declining purchasing power of the average worker and Washington's failure to develop meaningful employment policies to address the flat lining of real wages are the twin evils of a looming economic decline.
Recent administrations, Republican and Democrat alike, have been complicit in selling the public a bill of goods -- namely that globalization, in the form of unfettered "free" trade, would keep buying power on the rise by lowering the cost of imported goods enough to sustain a middle class increasingly dependent on service sector employment.
The approach of promoting global speculation served two purposes, neither of which has served the public interest of broadly shared income growth.
First, it provided incumbent candidates for federal office with a steady stream of Wall Street contributions to their reelection campaigns. Second, it whitewashed the speculative excesses of these contributors by claiming their global investments were lowering the cost of consumer goods.
Free Trade's Flaw
The flaw in this formula is that the consumer savings -- evident on the sales racks of any department store -- fall short of offsetting the constraint on wages being induced by U.S. corporations systematically exporting the nation's value-added manufacturing base.
As the rising costs of health care, food and energy have outpaced wage gains, personal debt has inevitably been substituted as a source of purchasing power, with unfortunate but predictable results. Today, credit card defaults are rising almost as fast as consumer confidence is heading for the exits - down nearly 20 percent in September - striking evidence of what happens when nearly five million family-supportive jobs, the lion's share of them in manufacturing, are sacrificed to the god of cheaper goods.
Credit card defaults are already on the rise, with some credit card companies charging default rates as high as 31 percent!
The manufacturing workers who are losing their earning power in this maelstrom are by and large among the 70 percent of the workforce without advanced educations and are unlikely to find their way into the elite ranks of knowledge workers alleged to be the nation's "bridge to the future." Thus, by turns, the preoccupation of policy makers with aggrandizing free trade to the detriment of domestic manufacturing is inadvertently paving the way toward an economic Bridge to Nowhere.
Renewing Job Growth
America didn't turn from production to speculation solely because of free trade. Globalization is a fact of contemporary life and couldn't be dismantled without doing serious harm. But the flat-lined incomes of American workers argue for reforms that focus investments on our natural and human resources right here at home, where there's more than enough work to be done and more than enough profit to be garnered investing in it.
The plight of an aging infrastructure and the plague of global warming argue for federal tax strategies that encourage public and private partnerships aimed at rebuilding America by pursuing clean energy economy and, in the process, restoring badly-needed domestic wage growth.
The Apollo Alliance, a coalition of labor, environmental, business and community groups now headed by former California State Treasurer Phil Angelides, has called for just such a strategy: a 10 year, $500 billion, "Make It In America" clean energy plan that the Alliance projects will result in the creation of five million jobs, many of them paying quality wages to the crucial 70 percent of the workforce in need of better earnings.
The advocates of such strategies are not limited to the usual progressive suspects. Presuming an Obama victory, Bill Gross, head of Pimco, the nation's largest bond firm, dismisses the "magical powers" of foreign governments buying Treasuries as a means of restoring the economy and urges, instead, "fiscal spending and lots of it.
"No ordinary Starbucks [stimulus] will do," Gross concludes, "you need a six-pack of Red Bull."
Funding infrastructure projects, says Eric Janszen, former venture capitalist and CEO of technology startups, "would enable thousands of new private companies, whether bootstrapped by entrepreneurs or backed by venture capital, to develop new technologies...Such new American technologies would be in demand worldwide, exports would boom, and within ten years the U.S. current-account deficit would reverse.
"Instead of creating new asset bubbles," he said, "the nation that invented the Internet - with the help of the government, one must always remember - would finally invent a New Economy deserving of the name."
Sounds like a real good steak sandwich, doesn't it?