August 22, 2011
As we all now know, the United States is in economic and political turmoil. The Dow Jones Industrial Average is down 9.5 percent in August, partly because of concern about the health of the U.S. and European economies. Some of the causes of our economic woes are well known: eight years of deregulation or lack of regulation of the economy; Wall Street greed; dollar draining wars in Iraq, Afghanistan, and Libya; the growing income disparity in this country; a $14.6 trillion deficit; and the Standard & Poor’s downgrade.
What we need now is jobs, jobs, jobs. And not just low-paying jobs that are unlikely to provide sufficient wages to live on.
The following is a brief summary of where we are now.
According to the Bureau of Labor Statistics, in July 2011, the unemployment rate in the U.S. — seasonally adjusted — was 9.1 percent or 13.9 million unemployed persons. (It is 12 percent in California.) This figure does not include 2.8 million persons who wanted and were available for work, and had looked for a job sometime in the prior 12 months. They were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey.
The unemployment rate for teenagers is 25 percent and 8.2 percent for Asians. An Ohio State University study on unemployment and race showed the unemployment rate for Black Americans at 16.6 percent and Latinos at 12 percent.
The crisis in unemployment can only be overcome by more, not less, government stimulus beyond the recent one, which just matched the decline in state and local spending. But even that limited stimulus probably saved millions of jobs.
The U.S. income gap between rich and poor is the greatest among Western industrialized nations. According to U.S. Census data, the top 20 percent of American earners — those making more than $100,000 annually – received 49.4 percent of all income generated in the country, compared with the 3.4 percent earned by those below the poverty line. That is a ratio of 14.5-to-1, up from 13.6 in 2008 and almost double the low figure of 7.69 recorded in 1968.
Crime, ill-health, imprisonment rates, mental illness are far more common in unequal societies than ones with better economic distribution and less gap between the richest and the poorest.
A Washington Post-ABC News poll showed that a large majority of the population favor addressing the deficit by taxing the very rich (72 percent, 27 percent opposed). Cutting health programs is opposed by an overwhelming majority (69 percent Medicaid, 78 percent Medicare). The public also favored more spending on job training, education, and pollution control. The Pew Research Center for the People and the Press poll found that 60 percent of respondents want to keep Social Security benefits the way they are. Clearly, Congress is out-of-touch with the American public.
The economy is growing albeit at a very slow rate; it will take decades to bring us back to where it was before the economic crisis. The unemployment crisis can only be overcome with significant additional government stimulus. Given the current makeup of Congress, it is extremely unlikely that additional stimulus will be approved.
The main problem with solving our economic problems is that Tea Party-supported House members became beholden to the Tea Party platform, which in part means no new taxes even if the taxes are on the rich.. House members are up for election every two years. Thus, a vote for taxes on the rich would probably lose them Tea Party support in the next election and jeopardize their reelection chances.
In the August 11, Republican presidential debate, all eight of the candidates said they would refuse to support a deal with tax increases, even if tax revenues were outweighed 10-to-one by spending cuts. At a time when the richest 1 percent of Americans have a greater collective net worth than the entire bottom 90 percent, there are other ways we could raise money while also making tax policy more equitable. Yet, Republicans are refusing to close tax loopholes — not to help create jobs — but to protect some of America’s wealthiest financiers.
And Defense Secretary Leon Panetta convinced Congress to raise taxes and cut Social Security and Medicare before reducing the Pentagon budget beyond defense cuts already called for in the debt-ceiling deal. The budget deal actually adds $5 billion to the Pentagon’s budget.
Meanwhile, Tea Party members of Congress are against regulation that might prevent future financial fraud. The House Appropriations Committee cut the budget of the Securities and Exchange Commission, and are determined to de-fang the new Consumer Financial Protection Bureau.
Part of the latest budget deal, a bi-partisan, 12-member Congressional deficit “Super Committee” was established, which is supposed to deliver at least $1.2 trillion in across the board cuts or increases in income by November 23, 2011. The Committee’s proposals must be voted on by December 23. If the Committee fails to produce a debt reduction plan, as much as $1.2 trillion in across the board cuts kick in evenly divided between defense and non-defense spending.
It should be noted that Rep. Jeb Hensarling (R. TX), Sen. John Kyl (R. AZ), Sen. Pat Toomey (R. PA), and Rep. Dave Camp (R. MI) — members of this Super Committee — are on record as no-taxers. Thus, the chances of new taxes on the rich and closing tax loopholes are unlikely to be proposed by this Committee. Thus, across the board cuts will be the likely result. Across the board cuts will likely mean more reductions in the safety nets for the poor, unemployed, the elderly, and the sick.
As the final blow, Standard & Poor’s Ratings Services announced that it lowered its long-term sovereign credit rating on the U.S. to “AA+” from “AAA”. S&P lowered the rating because it does not believe the U.S., in the near term, will likely get its economic house in order. While S&P’s downgrade is controversial, its assessment of the state of the U.S. economy and the lack of political will to act responsibly is accurate. This downgrade may effect credit card and mortgage rates and consumer loans.
As you enter the Humphrey Building, the headquarters of the U.S. Department of Health and Human Services, these words are written there on a wall: “…the moral test of government is how that government treats those who are in the dawn of life, the children; those who are in the twilight of life, the elderly; and those who are in the shadows of life—the sick, the needy, and the handicapped.” So far, we as a country are flunking this moral test.
The U.S. has a chance with this Super Committee to raise our moral test score. I am hopeful, but not optimistic.