Then why are people renting tires?
Category: The New Depression
Bernanke to Congress: WTF?
Ben says Congress is the reason for the fiscal drag.
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The Long Depression
Rich Eskow on the Depression that just won’t go away:
The Long Depression is deep. The official unemployment rate is 7.7 percent, while the official U6 rate (which includes the under-employed) is 15.6 percent. An alternate methodology which includes long-term discouraged workers brings the figure up to 23 percent.
Nearly 50 million Americans lived below the poverty line as of the last census. And wealth inequality in the United States is higher than it is in Egypt.
The Long Depression is long. We’ve had abnormally high unemployment for four years now, and the numbers are still dismal.
Poverty in the United States increased for the fourth year in a row in 2011 (the last year for which statistics are available), and now includes one out of every five American children.
High earners have taken more than their share of the lopsided “recovery,” with the top 1 percent capturing 121 percent of the post-crisis income increases while the rest of the country fell behind. The minimum wage would need to be between $.9.22 and $10.25 an hour to keep pace with inflation, but the president’s very modest proposal (which would raise it to $9.00 by 2015, when the gap will be even greater) faces an uphill battle.
This growing inequality stifles growth and points to long-term stagnation in both wages and hiring.
And yet, as DS Wright reminds us (as if reminders were necessary),the topic du jour in Washington is deficits. That’s prolonging the Long Depression. Jobs programs have been declared “politically impossible,” despite the widespread public support seen in most polling data. Less aid is available for the growing ranks of the impoverished.
The sequester will make the situation even worse, with Head Start among the programs facing severe cuts. And tax programs which favor the wealthy and corporations, widening the inequality gap even further, are the topic of compromise rather than challenge.
Our grim economic fundamentals haven’t stopped the stock market from reaching record highs, as speculators and Fed-driven bubbles cash in on the short-term opportunities created by a two-tiered economy. Wall Street and Main Street don’t “rise and fall together,” presidential assertions notwithstanding.
Events of the last four years suggest that we’ve learned nothing from experience. As DeLong says, political leaders at home and abroad are summoning “the same ritual incantations … that were made by the Herbert Hoovers and Andrew Mellons and Ramsay McDonalds” of earlier generations.
They’re taking our economy apart, one piece at a time. Unlike the prisoner in that joke, we have a way out: through concerted action. But there’s no World War-sized event looming that could summon our will — or our willingness to accept government spending. There’s no sign of a new “Greatest Generation,” either.
Until one or the other comes along, welcome to the Long Depression.
Business as usual
We’ve been sold a bill of goods and the American dream has turned into a nightmare. Oh well!
We are on the precipice of the greatest retirement crisis in the history of the world. In the decades to come, we will witness millions of elderly Americans, the Baby Boomers and others, slipping into poverty. Too frail to work, too poor to retire will become the “new normal” for many elderly Americans.
That dire prediction, which I wrote two years ago, is already coming true. Our national demographics, coupled with indisputable glaringly insufficient retirement savings and human physiology, suggest that a catastrophic outcome for at least a significant percentage of our elderly population is inevitable. With the average 401(k) balance for 65 year olds estimated at $25,000 by independent experts – $100,000 if you believe the retirement planning industry – the decades many elders will spend in forced or elected “retirement” will be grim. (Update: In response to readers’ questions about the lower number, Teresa Ghilarducci, a professor of economics at the New School for Social Research, estimates that 75% of Americans nearing retirement in 2010 had less than $30,000 in their retirement accounts.)
Corporate America and the financial wizards behind the past three decades of so-called retirement innovations, most notably titans of the pension benefits consulting and mutual fund 401(k) industries, are down-playing just how bad things are already and how much worse they are going to get.
Jobless benefits
I wish to God they’d stop citing this statistic as if it means something positive. It means that people aren’t working long enough stretches to be eligible for unemployment benefits, is what it means. And they’ve already tapped out the ones they had.
Ben the hippie
So here’s my question: Will it make any difference that Ben Bernanke has now joined the ranks of the hippies?
Earlier this week, Mr. Bernanke delivered testimony that should have made everyone in Washington sit up and take notice. True, it wasn’t really a break with what he has said in the past or, for that matter, with what other Federal Reserve officials have been saying, but the Fed chairman spoke more clearly and forcefully on fiscal policy than ever before — and what he said, translated from Fedspeak into plain English, was that the Beltway obsession with deficits is a terrible mistake.
First of all, he pointed out that the budget picture just isn’t very scary, even over the medium run: “The federal debt held by the public (including that held by the Federal Reserve) is projected to remain roughly 75 percent of G.D.P. through much of the current decade.”
He then argued that given the state of the economy, we’re currently spending too little, not too much: “A substantial portion of the recent progress in lowering the deficit has been concentrated in near-term budget changes, which, taken together, could create a significant headwind for the economic recovery.”
Finally, he suggested that austerity in a depressed economy may well be self-defeating even in purely fiscal terms: “Besides having adverse effects on jobs and incomes, a slower recovery would lead to less actual deficit reduction in the short run for any given set of fiscal actions.”
So the deficit is not a clear and present danger, spending cuts in a depressed economy are a terrible idea and premature austerity doesn’t make sense even in budgetary terms. Regular readers may find these propositions familiar, since they’re pretty much what I and other progressive economists have been saying all along. But we’re irresponsible hippies. Is Ben Bernanke? (Well, he has a beard.)
Scarborough
I can’t stand him. He’s the Reasonable Face of Wingnuttery, wrong about almost everything, but selling it in that “reasonable” package. So no, this does not surprise me even a little.
Retirement
What’s that? I’ve never seriously considered it. I can’t afford to stop working. How about you?
Generation Squeeze
I think we can all relate to this, yes?
In the current listless economy, every generation has a claim to having been most injured. But the Labor Department’s latest jobs snapshot and other recent data reports present a strong case for crowning baby boomers as the greatest victims of the recession and its grim aftermath.
These Americans in their 50s and early 60s — those near retirement age who do not yet have access to Medicare and Social Security — have lost the most earnings power of any age group, with their household incomes 10 percent below what they made when the recovery began three years ago, according to Sentier Research, a data analysis company.
Their retirement savings and home values fell sharply at the worst possible time: just before they needed to cash out. They are supporting both aged parents and unemployed young-adult children, earning them the inauspicious nickname “Generation Squeeze.”
New research suggests that they may die sooner, because their health, income security and mental well-being were battered by recession at a crucial time in their lives. A recent study by economists at Wellesley College found that people who lost their jobs in the few years before becoming eligible for Social Security lost up to three years from their life expectancy, largely because they no longer had access to affordable health care.
“If I break my wrist, I lose my house,” said Susan Zimmerman, 62, a freelance writer in Cleveland, of the distress that a medical emergency would wreak upon her finances and her quality of life. None of the three part-time jobs she has cobbled together pay benefits, and she says she is counting the days until she becomes eligible for Medicare.
In the meantime, Ms. Zimmerman has fashioned her own regimen of home remedies — including eating blue cheese instead of taking penicillin and consuming plenty of orange juice, red wine, coffee and whatever else the latest longevity studies recommend — to maintain her health, which she must do if she wants to continue paying the bills.
“I will probably be working until I’m 100,” she said.
As common as that sentiment is, the job market has been especially unkind to older workers.