08/09/2010 08:50 am ET | Updated May 25, 2011

Who Are You Going to Believe -- Tim Geithner or Your Own Lying Eyes?

The jobs situation stinks, even as corporate profits keep rising. Another 131,000 jobs were lost to the economy in July, according to the Labor Department's latest report released Friday. The measured unemployment rate stayed stuck at 9.5 percent.

The only reason it wasn't worse was because more workers gave up looking for nonexistent jobs, leaving a smaller labor force to measure against the meager supply of work. Small comfort.

Meanwhile, another important government report, by the Social Security Trustees, showed only a trivial improvement in the gap between what Social Security owes the next generation of retirees and the tax receipts that it can expect.

There is, of course, a direct connection between rising unemployment, declining wages, and the condition of Social Security. That's because Social Security is funded by payroll taxes.

If wages had continued to rise with the growth of the economy's productivity, instead of profits and bonuses taking an ever larger share, Social Security would be enjoying an endless surplus.

Based on recent trends and a dismally pessimistic projection of our economic future, Social Security's Trustees assume wage growth of just 1.2 percent a year. But that can be changed by better policies.

According to Monique Morrissey of the Economic Policy Institute, if wage growth were 2.3 percent, which is the actual long-term trend in the growth of labor productivity, then Social Security would be in clover. Here is EPI's most recent full report on this, from 2005. (Since then, the screwing of workers has only intensified. An update is coming.)

The story is even more dramatic if you imagine a different history of the past two decades. If wages had risen with productivity, instead of nearly all the gains going to the top, Social Security's surplus would be huge and we'd be talking about lowering the retirement age, not raising it.

Note the outrageous injustice of the current debate. The Wall Street crowd, led by Peter G. Peterson and his billion-dollar foundation, is clamoring for deep cuts in workers' Social Security.

This crowd is the same people who have been making off with the lions' share of the economy's productivity gains for the past three decades instead of allowing ordinary people their traditional share; the same crowd that opposes a more progressive distribution of taxes and decent social spending.

Now this gang wants to whack workers a second time. You didn't get your fair share of wages, goes the story, so there isn't quite enough money in the Social Security accounts. And now you must take less money in retirement.

The alternative, obviously, is to get unemployment down and wages back up. And speaking of Wall Street and policy alternatives, what is the Obama Administration doing to alter this perverse trend? We need to look no further than the recent op-ed piece in the New York Times by Treasury Secretary Tim Geithner.

Now, you can be sure that this op-ed piece did not spring full grown from the pen of Secretary Geithner. It must have gone through the White House messaging machine several times. That makes it even more appalling.

The piece is titled, with no intended irony, "Welcome to the Recovery."

Geithner's story is essentially this: Don't believe what you experience in your own life; believe us. The economy is really a lot better than it looks (true on Wall Street, but not on Main Street.) Geithner had the bad timing to write this just before the economy lost another 131,000 jobs.

This is Geithner's variation on Marxist economics -- in this case Groucho, who famously said in the movie Duck Soup, "Who are you going to believe, me or your own eyes?"

Here are choice extracts from Geithner's op-ed:

• "Private job growth has returned -- not as fast as we would like, but at an earlier stage of this recovery than in the last two recoveries. Manufacturing has generated 136,000 new jobs in the past six months."

• "Businesses have repaired their balance sheets and are now in a strong financial position to reinvest and grow."

• "American families are saving more, paying down their debt and borrowing more responsibly. This has been a necessary adjustment because the borrow-and-spend path we were on wasn't sustainable."

• "The auto industry is coming back, and the Big Three -- Chrysler, Ford and General Motors -- are now leaner, generating profits despite lower annual sales."

• "Major banks, forced by the stress tests to raise capital and open their books, are stronger and more competitive. Now, as businesses expand again, our banks are better positioned to finance growth."

But take these one at a time:

Private sector job growth, in fact, is stuck. And without a massive stimulus of the economy, it will stay stuck.

Business may be "in a strong position to grow," but without growth of jobs and wages, nobody will buy their products.

Yes, American families are saving more -- because they are scared stiff that they economy will get even worse. That private savings behavior, in a recession, deepens the deflationary spiral unless it is offset by more public spending.

The auto industry has added something like 50,000 jobs after recently losing several hundred thousand; Detroit's market-share remains basically stuck compared to imports; and GM's "Volt" is about to get its clock cleaned by better Japanese electric cars.

Banks are still in precarious shape. That's why small businesses are having such a hard time getting credit.

Geithner concludes thus:

"These are considerable challenges, but we are in a much stronger position to face them today than when President Obama took office. By taking aggressive action to fix the financial system, reduce growth in health care costs and improve education, we have put the American economy on a firmer foundation for future growth.

And as the president said last week, no one should bet against the American worker, American business and American ingenuity.

We suffered a terrible blow, but we are coming back."

Sorry, but this issue is not whether anybody is betting "against the American worker," which is a lame metaphor. The issue is whether the Obama administration and Geithner have credibility as instruments of economic recovery going into a midterm election.

For Geithner to insist that things are actually better than working Americans experience their own lives is both insulting and guaranteed to backfire as politics. If the administration wants to bet on the American worker, both as a much abused contributor to the economy and as a voter, Geithner and his president need to do more to bring back jobs and wages.

Robert Kuttner's new book is A Presidency in Peril. He is co-editor of The American Prospect and a senior fellow at Demos.