Robert Reich on the current economy:
When the Great Recession wiped out $7.8 trillion of home values, it crushed the nest eggs and eliminated the collateral of America’s middle class. As a result, consumer spending has been decimated. Households have been forced to reduce their debt to 115% of disposable personal income from 130% in 2007, and there’s more to come. Household debt averaged 75% of personal income between 1975 and 2000.
We’re in a vicious cycle in which job and wage losses further reduce Americans’ willingness to spend, which further slows the economy. Job growth has effectively stopped. The fraction of the population now working (58.2%) is near a 25-year low—lower than it was when recession officially ended in June 2009.
Wage growth has stopped as well. Average real hourly earnings for all employees declined by 1.1% between June 2009, when the recovery began, and May 2011. For the first time since World War II, there has been a decline in aggregate wages and salaries over seven quarters of post-recession recovery.
Shorter Reich (no pun intended): We have fewer workers devoting smaller paychecks to reducing greater household debt. This economy can’t improve until more people are working and making better money — and that can’t happen so long as the leviathan Regulatory State continues to strangle entrepreneurs.
On top of that, of course, we have record debt coming out of Washington, with no end in sight. The budget submitted by the President in February was so deeply cynical that the Democratic Senate rejected it, 97-0. Obama’s April “budget” was so blithely unserious that the CBO refused even to try and score it. The President then went on this week to bravely propose paltry $2 billion — yes, with a B — in spending cuts for this year, while refusing to even talk about returning the unspent remainder of the “stimulus.”
And this is the man leading the Democrats’ side of the debt ceiling negotiations.
Obama doesn’t even have a bluff to call. He’s sitting at the poker table amongst the serious adults, wearing a party hat, pounding his fist and demanding his cake.