REICH: "normal remedies are not likely to work this time, because this isn’t a normal downturn"

[El Pinko]

http://www.nytimes.com/2008/02/13/opinion/13reich.html?_r=2&ref=opinion&oref=slogin&oref=slogin

Totally Spent

By ROBERT B. REICH
Published: February 13, 2008
Berkeley, Calif.

WE’RE sliding into recession, or worse, and Washington is turning to the normal remedies for economic downturns. But the normal remedies are not likely to work this time, because this isn’t a normal downturn.

The problem lies deeper. It is the culmination of three decades during which American consumers have spent beyond their means. That era is now coming to an end. Consumers have run out of ways to keep the spending binge going.

....

Much of the current debate is irrelevant. Even with more tax breaks for business like accelerated depreciation, companies won’t invest in more factories or equipment when demand is dropping for products and services across the board, as it is now. And temporary fixes like a stimulus package that would give households a one-time cash infusion won’t get consumers back to the malls, because consumers know the assistance is temporary. The problems most consumers face are permanent, so they are likely to pocket the extra money instead of spending it.

....

The underlying problem has been building for decades. America’s median hourly wage is barely higher than it was 35 years ago, adjusted for inflation. The income of a man in his 30s is now 12 percent below that of a man his age three decades ago. Most of what’s been earned in America since then has gone to the richest 5 percent.

[Lasher]

1. Good article

For those who have been living in a cave the past several years, this trend has gotten much worse under the current administration. For example, median household income was $49,163 in 2000 and $48,201 in 2006, based on 2006 dollars.

http://www.census.gov/hhes/www/income/histinc/h06ar.html

[snagglepuss]

2. Thanks for posting. k&r

[eridani]

3. One very significant beef

"The answer is not to protect jobs through trade protection. That would only drive up the prices of everything purchased from abroad. Most routine jobs are being automated anyway."

His proposed answer of increasing tax credits is helpful but completely inadequate. If jobs are being automated, what we have to do is to cut work hours while keeping compensation steady. Having fewer and fewer folks make more and more stuff, while not allowing the unemployed to have any of it is clearly unsustainable. As the Italians say, lavorare meno, lavorare tutti!!

[Ghost Dog]

4. Americans must consume less

and contaminate less. Period.

Forget the usual skewed measures of 'standard of living' (quantity) and go for more significant 'quality of life'.

And don't forget to maintain the motorcycle, rather than just trashing it and buying a new one.

[cloudythescribbler]

5. Focusing on the SOLUTIONS Reich proposes, they are either vague or minimal ...

Increasing the earned income tax credit is a good idea, but obviously won't suffice. It's a once a year thing. Another tax measure he does NOT mention is a shift from PAYROLL taxes both on the worker AND on the employer to other spheres, such as taxing higher brackets, (more than was the case under Clinton), taxing pollution and scarce resources (eg a HUGE tax on each redwood cut down, more than 100%), etc.

He also suggests that the incomes of the bottom 2/3 of Americans be increased, especially with greater professional opportunities for women, educational improvement, and with the strengthening of unions (reducing or eliminating the anti-union bias of government). But like many of the other ideas Reich focuses on, the kind of direct connection to the problems at hand, and the timing of the benefits of these changes (which are in the right direction), seem to sidestep the problems faced THIS YEAR and next.

[El Pinko]

6. kick for a very good article by Robert Reich

nt