Thursday, July 31, 2008
There’s a debate in the media about the recession. On the right are those who say that the economy has never been better. Not so fast, says the official left: we’ve (just) started a recession. Phil Gramm, Sen. John McCain’s former economic advisor, leads the School of Sunny Optimism. “This is a mental recession,” Gramm said. “We may have a recession, we haven’t had one yet. We have sort of become a nation of whiners.” Given his day job, you have to admire his attitude. UBS Investment Bank, which employs Gramm as its vice chairman, was recently forced to write off $38 billion in bad debts because of its exposure to the sub-prime mortgage meltdown, wiping out all its profits since 2004.
Economists are mildly pessimistic. In April, Fed Chairman Ben Bernanke conceded that a recession was possible. Stuart Hoffman, chief economist at PNC Financial Services Group, believes unemployment and other data for the first quarter of 2008 mark the official start of a recession. “It is now very clear that the fat lady has sung for the economic expansion. The country has slipped into a recession,” he said, articulating the mainstream view that we’re about to embark on a bumpy ride.
Recession? We’ve been in a recession since 2000.
Forget the experts. They think telling the grisly truth about the state of the U.S. economy could make things even worse– and they’re probably right. But Americans know the truth.
BUSH HAS BROUGHT US BACK TO 1992, WHEN HIS FATHER LOST OVER HIS OWN RECESSION.
Every major indicator– jobs, wages and cost of living– has trended downward since the dot-com crash of 2000. Since then it has become nearly impossible to sell a home, find a job, or get a raise. Rising inflation is tightening the squeeze. Whoever takes over as president next year will inherit an economy beginning its ninth year in a downward spiral.
The official inflation rate of 2 to 3 percent is a lie, and it has been for years. Presidents Reagan and Clinton ordered the Bureau of Labor Standards to change the way it calculates the Consumer Price Index. Previously, they compared the prices of the same items from one year to the next. Now, the government uses a “substitutions” analysis. “The consumer price index assumes that if prices get too high, consumers will start buying cheaper products,” reports The San Diego Union-Tribune. “For instance, if steak gets too expensive, they will switch to ground beef.”
Steve Reed, an economist at the Bureau of Labor Standards, freely concedes that the change makes inflation look lower than it is. He also admits its motivation: “Even if the CPI was 1 percentage point higher, it could cost the government hundreds of millions of dollars,” he says.
John Williams, an economic consultant who publishes the monthly newsletter “Shadow Government Statistics,” calculates that “inflation is actually running at an annualized rate of 9.95 percent.” Inflation has been rising since 2002.
The U.S. economy must create 150,000 new jobs a month just to keep up with population growth. Anything less represents a net jobs loss.
The Clinton years saw the creation of 236,500 new jobs per month, a net increase of more than 8 million over eight years. As of 2007, the Bush era saw just 70,000 jobs per month, a net loss of more than 7 million. Bush has brought us back to 1992, when his father lost re-election over his own recession.
Among those who still have jobs, they’re not getting raises that keep up with Williams’ inflation rate. Median household income, adjusted for the government’s lowball inflation rate, is down since 2001.
Even white-collar workers, traditionally insulated by advanced degrees, are getting slammed by the eight-year-long recession.
“Wage stagnation, long the bane of blue-collar workers, is now hitting people with bachelor’s degrees for the first time in 30 years,” the Los Angeles Times reported in 2006. “Earnings for workers with four-year degrees fell 5.2 percent from 2000 to 2004 when adjusted for inflation, according to White House economists… [people with master’s and other advanced degrees] have found that their inflation-adjusted wages were essentially flat between 2000 and 2004.” There’s no reason to believe that this trend has reversed.
It takes two consecutive quarterly drops in the GDP, economists say, to make a recession official. But, as with porn, Americans know a recession when they see one.
There are only two real questions. The first is whether Russian President Dmitri Medvedev is right. The Unites States, he said recently, is in “essentially a depression.” The second is whether presumptive Republican presidential nominee McCain, and presumptive Democratic presidential nominee Barack Obama, or anyone else, is willing to do something meaningful about it.