An Update on the US Economic Crisis

by Randy Shannon

Treasurer, PA 4th CD Chapter of Progressive Democrats of America

Rampant speculation, asset bubbles and corruption led to a crash of the Japanese economy in 1990. Like the U.S. government today, the government of Japan was controlled by the banks. The government of Japan liquidated the savings of the people of Japan, most of which were in Postal Savings accounts, to bail out the crooked banks. This bailout wrecked the economy and took ten years to overcome. The economy of Japan is still struggling at a very low growth rate.

The U.S. government bailed out the crooked banks with $13 trillion of debt that obligates future generations to a long term economic recession. The bankers oppose any measures that would require the U.S. government to increase its debt beyond the debt already incurred to rescue themselves.

Thus stimulus spending to get production and employment going is opposed or gutted with tax cuts. Businesses with debt that they are able to service are seeing their debt called by the banks, forcing the businesses into bankruptcy.  Infrastructure projects are not funded or underfunded while millions of construction workers are idle. Over 840 small and community banks are official “problem banks” facing foreclosure, not rescue. The Republican and Blue Dog Democrat neo-liberal majority is reluctant to extend unemployment benefits.

Even social security and medicare are under the gun of the Deficit Commission. Social Security has a $2.5 trillion surplus that it has invested in U.S. government bonds. When the Social Security Administration cashes in the bonds to pay recipients, the U.S. Government, which has already spent the money on war and tax cuts for the wealthy, will have to float new bonds.

In order to boost corporate profits, businesses are speeding up their workers and delaying rehiring laid off workers. Public workers in schools, transit, healthcare, emergency services, and law enforcement are experiencing layoffs and speedup. The Tea Party is targeting public workers for wage cuts and demonization as overpaid leeches on the public purse.

Now that productivity has peaked, the next gambit will be a broad corporate attack on wages and benefits. We are already seeing this in the Honeywell lockout of uranium workers over their refusal to accept benefit cuts.

Unemployment statistics do not tell the whole story because so many long term unemployed workers are giving up looking for a job and are no longer counted. The chart at right of the labor force participation rate shows a new low in employed workers. The blip was mostly the short term census employment.

The talk of recovery is designed to hide the neo-liberal majority’s intent to impoverish American workers with a severe austerity regime. The new low in employment means that there will be new bankruptcies in business and housing. It is no surprise then that existing home sales have hit a new recession low and that new home sales are still falling.

Again, this is evidence that this time is different. This is not a recovery of anything but short term corporate profits. The banks are not finished liquidating the public purse. Individual savings are increasing but the safety of those savings is open to question in an austerity regime.

As outlined in “Its Time to Fight for Full Employment” (linked at the top of this website) there is only one solution to the economic crisis. That solution is a political realignment that puts minorities and workers in Congress who will go after the Goldman Sachs and JP Morgan choke hold on the White House, the Treasury, and the Federal Reserve. We need a massive economic stimulus to not repair but upgrade our infrastructure. We need a financial transaction tax to carve a large chunk of money from Wall Street. We need a green industrial policy to crack the hold of the carbon energy cartel on our society. We need a trade policy that will guarantee that the U.S. enjoys a manufacturing base. We need an employer of last resort program that puts every person willing and able to work in a public job if a private job is not available.

We need a society that is at peace with the world and investing in our future. We need hope,peace, and prosperity. We must oppose fear, war, and austerity. That is why we all need to unite our voices in Washington DC on October 2nd with the One Nation Coalition for Jobs, Peace and Justice.

All charts from http://www.calculatedriskblog.com/