Double-dip watch: Retail sales in May took their biggest nose-dive in eight months, according to Friday's report from the Commerce Department. Remember: Consumers account for 70 percent of the nation's economic activity.
American Corporations are sitting on huge piles of cash but they're not investing, and they're creating only a measly number of new jobs. And they won't invest and create jobs until they know there are customers out there to buy what they sell.
For three decades, starting in the late 1970s, the biggest economic problem America faced on an ongoing basis was inflation. Demand always seemed to be on the verge of outrunning the productive capacity of the nation. The Fed had to be ready to raise interest rates to stop the party, as it did on several occasions.
During this era of inflation economics, it appeared that John Maynard Keynes - and his Depression-era concern about chronically inadequate demand -- was dead. So-called "supply siders" told policy makers that if they cut taxes on corporations and the wealthy, they'd unleash a torrent of investment and innovation - thereby increasing the productive capacity of the nation. The benefits would trickle down to everyone else.
But the pendulum may now be swinging back to the earlier era in which demand always seems on the verge of trailing the nation's productive capacity. The biggest ongoing threats are chronic recession or even deflation, because consumers don't have enough money to what the economy is capable of selling at full or near-full employment. Despite gains in productivity, little has trickled down to America's middle class.
John Maynard Keynes is being exhumed because his Depression-era worry about inadequate demand is once again the nation's central economic problem.
Keynes prescribed two remedies -- both of which are now necessary: Government spending to "prime the pump" and get businesses to invest and hire once again. And, as Keynes wrote, "measures for the redistribution of incomes in a way likely to raise the propensity to consume." Translated: Instead of big tax cuts for corporations and the rich, tax cuts and income supplements for the middle class.
This post originally appeared at RobertReich.org
Grover Norquist has succeeded: they've starved the beast, there IS no more money to "prime the pump". Welcome to Cheneyville, I mean Potterville.
1) The government has invested about as much as it can in infrastructure. Helping people tread water until they can find a new job is straining the budget and drawing resistance from one-dimensional conservatives.
2) Banks are not lending to small businesses the way the economy needs them to, hurting small business growth.
3) Corporations are not hiring within the American economy the way they need to. Too many middle class jobs are going overseas. Workers cannot live in the American economy and compete with third-world and developing nation economies, yet we cannot prosper as a nation without a prosperous middle class.
4) Small businesses can only go so far in replacing corporate jobs. Statistically, average salaries are proportional to the size of the company - big companies pay better. A substantial shift from big to small business would represent a reduction in current and future purchasing power - weakening the economy. Nor do small businesses lead world markets the way corporations do.
There are other problems with the economy that result from mismanagement, not failure of the model.
Our current crisis is a referendum on the state of capitalism, and so far it is getting failing marks. Fraud, negligence, corruption, and greed have done more real harm to this country than terrorism.
The problem is not lack of projects, it is that we are reaching the end of what we can and should borrow. The cost of servicing the debt is becoming too high.
pay d for just like the 2 wars !
Bush just put the final nail in the coffin.
Changing the players without changing the system is useless. Campaign Reform would heal the split of the American people that big money has encouraged in order to weaken us and keep us fighting with each other.
Any politician HAS to play ball. Find a politician who does not take money. If he does not he will not win. He will join us little people whining about how we would do it if we were in power.
It is the fault of lying politicians, our media, and most of all our ignorant, stupid citizens whose line of thought is no longer than a bumper sticker.
Blaming this and that politician does no good. The blame lies ultimately on American citizens.
Until EVERYONE starts talking and blogging and marching for Campaign Reform we are just spinning our wheels discussing anything that might challenge the special interests. Lets fight together as Americans.
http://www.fairelectionsnow.org/volunteer/petition (FENA)
http://change-congress.org/
http://movetoamend.org/
campagin finance is no answer if it's not going to ever happen. Layla1 is right. "campaigns" mean nothing. Stop buying what the corporations and rich people are selling. Buy from local business, local friends, barter, use less, make it last, start a cash business - something like a fiscal general strike - that will get their attention.
Have you learned NOTHING? This will only lead too MORE debt DEBT DDDDEEEEEBBBBBBTTT!
You now have choice: create a NEW market around 'needs' or continue on the road to nowhere called 'wants' which we have well travelled.
A government loan program for American made solar panels could be a good thing, for instance.
Starting the construction of 50 or 100 nukes would certainly get things cooking.
IOW, they are tools. If you have high taxes and high regulation and businesses are being stifled, then Supply Side works. If you have low government debt and high unemployment, Keynes is an obvious solution.
We have a MAJOR problem right now, because we have a potentially fatal array of problems stacked against us.
1. The recession is world wide. Even if we fix some of our problems, it won't help if the world isn't buying our goods and keeping our trade deficit manageable.
2. We don't build anything here any more, so even if consumer spending goes up, it doesn't create many jobs.
3. High unemployment. That is not an easy fix without massive tax cuts.
4. We have high consumer debt, so we are not likely to spend if our jobs aren't secure.
5. The government has high debt, so it is not a great idea to go on a Keynesian spending binge.
6. We seem to hate immigrants for some reason yet we need them here, paying taxes and helping to keep low wage, but critical manufacturing jobs here.
7. States are screwed 6 ways to Sunday economically, so they're relying on a broke Federal government to borrow money and give it them.
8. We have *massive* entitlement liabilities both now and looming.
9. Barack Obama.
An excellent example is the right wing "understanding" of reality that drives the rest of your points.
But otherwise, you're just a liberal and can't talk about "understanding" to anyone.
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Unfan Aside from this, how many "goods" does the public need? At what point on the curve do people just say "well, thanks, don't need any more?"
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In a normal free market, the demand wanes and the producers move toward other invests. POR is taking us toward a socialist system economic system. In those systems, consumers take whatever the appointed producers generate. The consumer then has to enter into a barter economic system to satisfy their needs. This is another example of why the socialist style systems are so incredibly inefficient.
Just curious what POR is though.
Sorry for the slow reply. Got to work.
The truth is that for the last 30 years or more our tax system and our economic system has been geared towards the financial elites extracting the wealth of the nation through profits and hoarding it.
Now there's no money left for workers to spend.
Socialist has never worked.....
Consider this. When I lived in NYC back in the 80's there was a proposal to repair all seven major bridges for a cost of 7 million dollars. Got voted down, too expensive. Ten years later the City was forced to repair the Williamsburg Bridge because it had gotten so bad they had to. Cost? 7 million dollars. Waiting is very, very expensive.
I know those (the oil companies) are currently private enterprises and not government entities, but I think the allusion holds nonetheless.
I completely agree that we need to be investing in our infrastructure.