Over at the Huffington Post, a left-of-center economist is tells the truth about America’s economy: it’s not getting better for most people. See, Robert Reich: Don’t Listen to the Cheerleaders, the Main Street Economy Isn’t Improving.
Reich notes that
Today’s most important economic news: U.S. household debt fell for the seventh straight quarter in the first three months of 2010 as Americans continued to respond to the recession’s fallout.
But like all economic news, its significance depends on where you’re standing — whether you’re a typical American or someone at the top.
The common wisdom is that excessive debt-financed spending was one of the causes of the recent recession, so the news that household debt is dropping is being celebrated by business cheerleaders as reason to believe we’re on the mend.
Baloney. The reason so many Americans went into such deep debt was because their wages didn’t keep up. The median wage (adjusted for inflation) dropped between 2001 and 2007, the last so-called economic expansion. So the only way typical Americans could keep spending at the rate necessary to keep themselves — and the economy — going was to borrow, especially against the value of their homes. But that borrowing ended when the housing bubble burst.
So now Americans have no choice but to pare back their debt. That’s bad news because consumer spending is 70 percent of the economy.
Reich concludes — erroneously but predictably — that more government spending is the answer. That’s both wrong and nearly impossible — additional spending will drive debt to impossibly high, growth-killing levels.
Reich is right that the economy’s showing no improvement for ordinary people. No happy talk will turn this economy around. The solution, however, isn’t more of what got us here, but less of it. Only a massive reduction in government spending, and the return of the saved tax receipts to the productive people who earned them, can turn this economy around for ordinary Americans.
Locally, in Whitewater, where poverty is chronically high, every public works project under the sun has been tried, and each has failed to generate more than headlines and photo opportunities. Unless we’re spending millions to keep fawning reporters employed, we’re on the wrong path.
Reich is correct about our current malady, however: We’re struggling and there are no credible excuses or lies left to tell.