Citizen Action Monitor

Why the US economy has not recovered, will not recover

Successive duplicitous US governments have abandoned everyone except the rich.

No 1596 Posted by fw, February 17, 2016

“The US economy died when middle class jobs were offshored and when the financial system was deregulated. In the 21st century, jobs offshoring has depleted consumer demand’s ability to maintain US full employment…. Jobs offshoring benefitted corporate executives and shareholders, because lower labor and compliance costs resulted in higher profits. These profits flowed through to shareholders in the form of capital gains and to executives in the form of “performance bonuses.” Wall Street benefitted from the bull market generated by higher profits…. As an economist, it is a mystery to me how any economist can think that a population that does not produce the larger part of the goods that it consumes can afford to purchase the goods that it consumes. Where does the income come from to pay for imports when imports are swollen by the products of offshored production?”Paul Craig Roberts

Dr. Paul Craig Roberts, former US Assistant Secretary of the Treasury for Economic Policy, and associate editor of the Wall Street Journal, explains why the US economy declined and will not recover. His conclusion points the finger of blame squarely at the US government for deceiving the public:

Most certainly these Americans have no political representation. As Republicans and Democrats work to raise the retirement age in order to reduce Social Security outlays, Princeton University experts report that the mortality rates for the white working class are rising. The United States government has abandoned everyone except the rich.

Roberts’ article is reposted below, with added subheadings. To read the original essay, click on the following linked title.

**********

The US Economy Has Not Recovered And Will Not Recover by Paul Craig Roberts, paulcraigroberts.org, February 17, 2016

The US economy died when middle class jobs were offshored and when the financial system was deregulated.

Jobs offshoring benefitted corporate executives and shareholders

Jobs offshoring benefitted corporate executives and shareholders, because lower labor and compliance costs resulted in higher profits. These profits flowed through to shareholders in the form of capital gains and to executives in the form of “performance bonuses.” Wall Street benefitted from the bull market generated by higher profits.

Promises of new and better jobs were never realized

However, jobs offshoring also offshored US GDP and consumer purchasing power. Despite promises of a “New Economy” and better jobs, the replacement jobs have been increasingly part-time, lowly-paid jobs in domestic services, such as retail clerks, waitresses and bartenders.

Job offshoring halted growth of US consumer demand, decimated middle class

The offshoring of US manufacturing and professional service jobs to Asia stopped the growth of consumer demand in the US, decimated the middle class, and left insufficient employment for college graduates to be able to service their student loans. The ladders of upward mobility that had made the United States an “opportunity society” were taken down in the interest of higher short-term profits.

Growth in consumer debt took the place of growth in income

Without growth in consumer incomes to drive the economy, the Federal Reserve under Alan Greenspan substituted the growth in consumer debt to take the place of the missing growth in consumer income. Under the Greenspan regime, Americans’ stagnant and declining incomes were augmented with the ability to spend on credit. One sourcre of this credit was the rise in housing prices that the Federal Reserves low interest rate policy made possible. Consumers could refinance their now higher-valued home at lower interest rates and take out the “equity” and spend it.

Debt expansion collapsed when deregulated financial system crashed in 2008; corporate bailouts inflicted more pain on victims

The debt expansion, tied heavily to housing mortgages, came to a halt when the fraud perpetrated by a deregulated financial system crashed the real estate and stock markets. The bailout of the guilty imposed further costs on the very people that the guilty had victimized.

Federal Reserve injected massive increases in money to bail out banks “too big to fail”

Under Fed chairman Bernanke the economy was kept going with Quantitative Easing, a massive increase in the money supply in order to bail out the “banks too big to fail.” Liquidity supplied by the Federal Reserve found its way into stock and bond prices and made those invested in these financial instruments richer.

Corporate CEOs boosted their stock valuations by buying back company stocks with borrowed money

Corporate executives helped to boost the stock market by using the companies’ profits and by taking out loans in order to buy back the companies’ stocks, thus further expanding debt.

A few rich people cannot drive the economy

Those few benefitting from inflated financial asset prices produced by Quantitative Easing and buy-backs are a much smaller percentage of the population than was affected by the Greenspan consumer credit expansion. A relatively few rich people are an insufficient number to drive the economy.

Feds zero interest rate policy decreased incomes of retires, left no safety net for heirs

The Federal Reserve’s zero interest rate policy was designed to support the balance sheets of the mega-banks and denied Americans interest income on their savings. This policy decreased the incomes of retirees and forced the elderly to reduce their consumption and/or draw down their savings more rapidly, leaving no safety net for heirs.

Government under-reported inflation and unemployment, spun lies of economic recovery

Using the smoke and mirrors of under-reported inflation and unemployment, the US government kept alive the appearance of economic recovery. Foreigners fooled by the deception continue to support the US dollar by holding US financial instruments.

How Bill Clinton government cooked official inflation measures, halting cost-of-living adjustments

The official inflation measures were “reformed” during the Clinton era in order to dramatically understate inflation. The measures do this in two ways. One way is to discard from the weighted basket of goods that comprises the inflation index those goods whose price rises. In their place, inferior lower-priced goods are substituted.

For example, if the price of New York strip steak rises, round steak is substituted in its place. The former official inflation index measured the cost of a constant standard of living. The “reformed” index measures the cost of a falling standard of living.

The other way the “reformed” measure of inflation understates the cost of living is to discard price rises as “quality improvements.” It is true that quality improvements can result in higher prices. However, it is still a price rise for the consumer as the former product is no longer available. Moreover, not all price rises are quality improvements; yet many prices rises that are not can be misinterpreted as “quality improvements.”

These two “reforms” resulted in no reported inflation and a halt to cost-of-living adjustments for Social Security recipients. The fall in Social Security real incomes also negatively impacted aggregate consumer demand.

Rigged understatement of inflation deceived people into believing that the US economy was in recovery

The rigged understatement of inflation deceived people into believing that the US economy was in recovery. The lower the measure of inflation, the higher is real GDP when nominal GDP is deflated by the inflation measure. By understating inflation, the US government has overstated GDP growth.

Mainstream financial press does not question government propaganda

What I have written is easily ascertained and proven; yet the financial press does not question the propaganda that sustains the psychology that the US economy is sound. This carefully cultivated psychology keeps the rest of the world invested in dollars, thus sustaining the House of Cards.

In the 21st century, jobs offshoring has depleted consumer demand’s ability to maintain US full employment.

US government unemployment measures are meaningless; do not count unemployed who have given up job search

The unemployment measure that the presstitute* press reports is meaningless as it counts no discouraged workers, and discouraged workers are a huge part of American unemployment. The reported unemployment rate is about 5%, which is the U-3 measure that does not count as unemployed workers too discouraged to continue searching for jobs. [*presstitute — a blend of press and prostitute].

The US government has a second official unemployment measure, U-6, that counts workers discouraged for less than one-year. This official rate of unemployment is 10%.

When discouraged workers are counted, US unemployment rate is 23%

When long term (more than one year) discouraged workers are included in the measure of unemployment, as once was done, the US unemployment rate is 23%. (See John Williams, http://www.shadowstats.com/ )

Stimulus measures can’t work when jobs have been offshored

Fiscal and monetary stimulus can pull the unemployed back to work if jobs for them still exist domestically. But if the jobs have been sent offshore, monetary and fiscal policy cannot work.

Only corporations and shareholders benefit when jobs are offshored

What jobs offshoring does is to give away US GDP to the countries to which US corporations move the jobs. In other words, with the jobs go American careers, consumer purchasing power and the tax base of state, local, and federal governments. There are only a few American winners, and they are the shareholders of the companies that offshored the jobs and the executives of the companies who receive multi-million dollar “performance bonuses” for raising profits by lowering labor costs. And, of course, the economists, who get grants, speaking engagements, and corporate board memberships for shilling for the offshoring policy that worsens the distribution of income and wealth. An economy run for a few only benefits the few, and the few, no matter how large their incomes, cannot consume enough to keep the economy growing.

Economists misrepresent offshoring jobs as “free trade”

In the 21st century US economic policy has destroyed the ability of real aggregate demand in the US to increase. Economists will deny this, because they are shills for globalism and jobs offshoring. They misrepresent jobs offshoring as free trade and, as in their ideology free trade benefits everyone, claim that America is benefitting from jobs offshoring. Yet, they cannot show any evidence whatsoever of these alleged benefits. (See my book, The Failure of Laissez Faire Capitalism and Economic Dissolution of the West.) http://www.amazon.com/Failure-Laissez-Faire-Capitalism/dp/0986036250/ref=sr_1_1?s=books&ie=UTF8&qid=1455746560&sr=1-1&keywords=paul+craig+roberts-the+failure+of+laissez-faire+capitalism

How can workers who do not produce goods afford to purchase goods produced offshore and then shipped back home?

As an economist, it is a mystery to me how any economist can think that a population that does not produce the larger part of the goods that it consumes can afford to purchase the goods that it consumes. Where does the income come from to pay for imports when imports are swollen by the products of offshored production?

Better-paid replacement jobs were never provided by this promised “New Economy”

We were told that the income would come from better-paid replacement jobs provided by the “New Economy,” but neither the payroll jobs reports or the US Labor Department’s projections of future jobs show any sign of this mythical “New Economy.”

There is no “New Economy”, just an “Americana Third World Economy”

There is no “New Economy.” The “New Economy” is like the neoconservatives’ promise that the Iraq war would be a six-week “cake walk” paid for by Iraqi oil revenues, not a $3 trillion-dollar expense to American taxpayers (according to Joseph Stiglitz and Linda Bilmes) and a war that has lasted the entirely of the 21st century to date and is getting more dangerous.

The American “New Economy” is the American Third World economy in which the only jobs created are low productivity, low paid nontradable domestic service jobs incapable of producing export earnings with which to pay for the goods and services produced offshore for US consumption.

Massive debt arising from Washington’s endless wars has devastated Americans

The massive debt arising from Washington’s endless wars for neoconservative hegemony now threaten Social Security and the entirety of the social safety net. The presstitute media are blaming not the policy that has devastated Americans, but, instead, the Americans who have been devastated by the policy.

Too many Americans have been left behind

Earlier this month I posted readers’ reports on the job situation in Ohio, Southern Illinois, and Texas. In the March issue of Chronicles, Wayne Allensworth describes America’s declining rural towns and once great industrial cities as consequences of “globalizing capitalism.” A thin layer of very rich people rule over those “who have been left behind”—a shrinking middle class and a growing underclass. According to a poll last autumn, 53 percent of Americans say that they feel like a stranger in their own country.

The United States government has abandoned everyone except the rich

Most certainly these Americans have no political representation. As Republicans and Democrats work to raise the retirement age in order to reduce Social Security outlays, Princeton University experts report that the mortality rates for the white working class are rising.

The United States government has abandoned everyone except the rich.

FAIR USE NOTICE – For details click here

%d bloggers like this: