Why Is The Economy So Bad?

The American Dream ^ | May 28 2011

[GonzoII]

Why Is The Economy So Bad?

Millions of Americans have lost their homes, tens of millions of Americans can't find a decent job and 44 million Americans are on food stamps. This is causing an increasing number of Americans to ask this question: "Why is the economy so bad?" There are some Americans that are old enough to remember the Great Depression, but the vast majority of us have never known hard times. All our lives we were told that America was the greatest economy on the planet and that we would always experience endless prosperity in this nation. That was easy to believe because even though we had a recession once in a while, things always bounced back and got even better than ever. But now something seems different. The current economic downturn began back in 2007 and yet here we are in 2011 and there seems to be no end in sight for this economic crisis. So what in the world is going on? Can anyone explain why the economy is so bad?

The following are some of the kinds of questions that the American people are asking about the economy these days....

Why does it seem like it is harder to get a job today than it used to be?

Well, it is because there are far fewer jobs available and far fewer people are getting hired. According to the U.S. Bureau of Labor Statistics, an average of about 5 million Americans were being hired every single month during 2006. Today, an average of about 3.5 million Americans are being hired every single month.

Is there much hope that the unemployment rate will start to decline significantly?

Unfortunately there does not appear to be much reason for optimism. Initial weekly unemployment claims have been above 400,000 for 7 weeks in a row. The "jobs recovery" we have been promised simply is not materializing. Only 66.8% of American men had a job last year. That was the lowest level that has ever been recorded. At the rate we are going things are going to be about the same this year.

So where did all of the jobs go?

They are being sent overseas at a blistering pace. The United States has lost an average of 50,000 manufacturing jobs per month since China joined the World Trade Organization in 2001, and the U.S. trade deficit with China is now 27 times larger than it was back in 1990. Amazingly, the United States has lost a staggering 32 percent of its manufacturing jobs since the year 2000.

Why does it seem like nearly all of the jobs that are available right now are crappy, low paying jobs?

Well, because most of the jobs that are available are crappy, low paying jobs. The following is a brief excerpt from a recent article posted on Tomdispatch.com.....

According to a recent analysis by the National Employment Law Project (NELP), the biggest growth in private-sector job creation in the past year occurred in positions in the low-wage retail, administrative, and food service sectors of the economy. While 23% of the jobs lost in the Great Recession that followed the economic meltdown of 2008 were “low-wage” (those paying $9-$13 an hour), 49% of new jobs added in the sluggish “recovery” are in those same low-wage industries. On the other end of the spectrum, 40% of the jobs lost paid high wages ($19-$31 an hour), while a mere 14% of new jobs pay similarly high wages.

Why are so many Americans afraid to start businesses?

Maybe it is because the overregulation of business in this country has now reached extreme levels. For example, the U.S. Department of Agriculture recently slapped a fine of $90,000 on one family from Missouri because they sold more than $500 worth of rabbits in a single year. The $4,600 in rabbits that they sold ended up netting the family only $200 in profits.

If people are not able to make a decent living, then how are they providing for their families?

Sadly, an increasing number of Americans are simply not able to put food on the table anymore. Today, one out of every eight Americans is on food stamps and one out of every four American children is on food stamps.

For the first time ever, more than a million American homes were repossessed during 2010. So is there any sign that this will turn around in the years ahead?

Sadly, things could get even worse. Today, there are 6.4 million homeowners that are delinquent on their mortgages or in foreclosure. Of those, 675,000 have not made a payment in at least two years.

Will the U.S. housing market ever recover?

Hopefully we will see some sort of a recovery at some point, but right now things don't look good. In April, signed contracts to buy homes fell to a 7-month low. There are 120 million more people in the U.S. than there were in 1963, but home purchases are currently at about half the level they were back then. The truth is that there are dozens of indications that the U.S. real estate crisis may get even worse before things start getting better.

Why does it seem like health care costs so much these days?

Sadly, it is because the entire U.S. health care industry has become a giant money making scam. According to the Bureau of Economic Analysis, health care costs accounted for just 9.5% of all personal consumption back in 1980. Today they account for approximately 16.3%. One study found that approximately 41 percent of working age Americans either have medical bill problems or are currently paying off medical debt. Health care costs continue to increase far faster than the general rate of inflation and so this crisis is going to continue to get worse.

Is "retirement" rapidly becoming a luxury that only the wealthy can enjoy?

According to stunning new research, 54 percent of all American workers plan to keep working after they retire. A different study found that American workers are $6.6 trillion short of what they need to retire comfortably.

Why does it seem like U.S. companies are hiring so many temporary workers?

It is because American businesses are hiring them by the bushel. A whopping 26 percent of all the workers hired in 2010 were temporary workers. That is way, way above historical norms. Temporary workers are far cheaper and much easier to get rid of.

Is the gap between the rich and the poor growing in America?

Yes, it most certainly is. Between 1979 and and 2007, the average household income of the top 1% of Americans soared from $346,600 to $1.3 million. During that same time period the average household income for middle class Americans increased only slightly. At this point, the poorest 50% of all Americans collectively own just 2.5% of all the wealth in the United States.

Does how much money you make tend to alter your view of how well the economy is doing?

Well, according to recent Gallup polling, 46% of those Americans that make less than $30,000 a year believe that we are in a depression right now, while only 23% of those making $75,000 or more believe that we are currently in a depression.

Why do members of Congress seem to care so little about average American workers?

Perhaps it is because 58 percent of the members of Congress are millionaires while only about 1 percent of the general population is made up of millionaires.

So if the economy is in such bad shape why do we still have such a high standard of living?

Sadly, the truth is that we have only been able to maintain our incredibly high standard of living by going into massive amounts of debt. The U.S. national debt is now more than 14 times larger than it was when Ronald Reagan took office. America has become absolutely addicted to government money. Any politician that threatens to reduce government payouts usually gets voted out of office fairly quickly. 59 percent of all Americans now receive money from the federal government in one form or another. U.S. households are now actually receiving more income from the U.S. government than they are paying to the government in taxes. In 1980, government transfer payments accounted for just 11.7% of all income. Today, government transfer payments account for 18.4% of all income. As long as the American people continue to be addicted to receiving government payouts the federal government will continue to be drowning in debt.

But it is not just the federal government with a debt problem. State and local government debt has reached an all-time high of 22 percent of U.S. GDP. Many state and local governments are even closer to going broke than the federal government is.

U.S. households have been on a debt binge for decades as well. Average household debt in the United States has now reached a level of 136% of average household income.

The truth is that we are a nation that is addicted to debt. We are living in the greatest debt bubble in the history of the world and it was really fun while it lasted.

Unfortunately, the bills are starting to come due and nobody is quite sure how we can possibly pay for all of our mistakes.

We are drowning in debt at the same time that our economic infrastructure is being ripped to shreds. Tens of thousands of factories have closed over the last decade. There is a never ending parade of companies leaving the United States. U.S. workers are having a really tough time competing against slave labor on the other side of the globe. Thanks to "globalization", multinational corporations can hire workers for slave labor wages on the other side of the planet and nobody can stop them.

But if U.S. workers lose their jobs, they go from paying taxes into the system to being a drain on the system. This makes our government debt situation even worse.

Let there be no mistake - America is in economic decline.

So why is the economy so bad?

The truth is that decades of debt and really, really bad decisions are starting to catch up with us.

The economy is a mess right now and things are going to get a whole lot worse.

You better get ready.

[Cringing Negativism Network]

I have a theoretical for you:

Our trading “partners” (enemies waging war against America by other means) are keenly aware of what happens in America. Our society is quite open, so political trends here are understood around the globe.

If Americans begin actually to support import tariffs, those so called “partners” will see that, and realize their free lunch is about to end - and take real moves to head off support for tariffs when but only when forced this way.

Preemptively, offering concessions. It is an integral part of all successful negotiations - one must be willing to walk away. In fact, often the best deal will only be reached when literally, walking away.

Not only are we not negotiating this way - we are not even trying. We are simply being meek, and giving our country away. WTF?

As things are now we are simply surrendering, and our adversaries (yes, that’s what we’re dealing with) have absolutely zero incentive to stop plundering our economy.

America is rapidly heading for collapse. Right in front of our eyes. This is not a game.

[MeneMeneTekelUpharsin]

If someone gave a clear explanation of why it is so bad, who would listen? Huh?

[Jonty30]

One of the big reasons for our situation is that we have too much unsupportable debt on the books: government, corporate, and consumer debt.

until this is worked out, it is going to keep everything down.

[GregoryFul]

Tariffs crumpled the economy into a decade of depression in the 1930's. And it will not work now.

The answer is to free up individual Americans to become industrious and competitive again, we could rule the world for another decade; get rid of the incredibly burdensome government regulation (easy - just words to change), over taxation of enterprise (easy), social welfare programs up the wazoo (easy), outright attacks on entrepreneurs (easy), and the lying, cheating, thieving, government bureaucrats (hard).

Most changes are up to politics, would only the even corrupt politicians see the advantage in a wealthy America... Aside: Hey, stupid, you can get more! And you might not have to provide you and your family to ride around in an armored car! Idiot!

[Cringing Negativism Network]

In the 1930’s we made things.

[Spktyr]

Address our legal inability to make products first. Even if you cut off ALL imports to the US we STILL can’t make things without imported parts because of the stupid EPA!

[Mister Da]

Yes, the banks are scared. But so are businesses & consumers.

Obama, Reid, McConnell, Boehner, Pelosi, & company are like a tornado in Kansas: You don't know where it will go next, but it is sure to leave a trail of destruction.

Thinking people have ZERO confidence that the above group will get responsible about the debt, the deficit, taxes, & gross over-regulation. Businesses & entrepreneurs are too scared to start new ventures or hire new employees. Consumers are afraid to spend money not knowing what may happen tomorrow. Inflation is making us all poorer.

Given that about half of voters will vote to continue the madness, I am not encouraged.

This is too depressing to continue, so have a nice day.

[PGalt]

Socialism/Totalitarianism

Terminate totalitarian regulations/mandates. Reduce federalism and mini-me state federalism by 1/2. 1/2 pay, zero benefits in part-time federal and state legislatures.

Defund ALL socialist collectives foreign/domestic/corporate. The U.S.A. becomes financially solvent and we become very low-taxed prosperous/productive citizens in a country which acts as a beacon for individual liberty.

From, Frederic Bastiat 1801-1850...The Law...

Men naturally rebel against the injustice of which they are victims. Thus, when plunder is organized by law for the profit of those who make the law, all the plundered classes try somehow to enter — by peaceful or revolutionary means — into the making of laws. According to their degree of enlightenment, these plundered classes may propose one of two entirely different purposes when they attempt to attain political power: Either they may wish to stop lawful plunder, or they may wish to share in it.

Woe to the nation when this latter purpose prevails among the mass victims of lawful plunder when they, in turn, seize the power to make laws! Until that happens, the few practice lawful plunder upon the many, a common practice where the right to participate in the making of law is limited to a few persons. But then, participation in the making of law becomes universal. And then, men seek to balance their conflicting interests by universal plunder. Instead of rooting out the injustices found in society, they make these injustices general. As soon as the plundered classes gain political power, they establish a system of reprisals against other classes. They do not abolish legal plunder. (This objective would demand more enlightenment than they possess.) Instead, they emulate their evil predecessors by participating in this legal plunder, even though it is against their own interests.

It is as if it were necessary, before a reign of justice appears, for everyone to suffer a cruel retribution — some for their evilness, and some for their lack of understanding.

It is impossible to introduce into society a greater change and a greater evil than this: the conversion of the law into an instrument of plunder.

[Cringing Negativism Network]

Who said anything about cutting off imports?

Imports will simply cost more. Anything made here won’t cost more. Ergo, more Americans will decide freely to buy things made in America.

You can still buy anything from anywhere, contrary to what you are attempting to distract readers by claiming. Even imported red colored herring, to paint on your glock. :)

[bert]

......are crappy, low paying jobs.......

The jobs that are gone overseas apparently were the uncrappy high paying jobs. Perhaps there is something important there. The jobs actually paid too much. The high paid workers were uncompetitive and lost their jobs to those working at lower rates.

In the case of China as opposed to many other places to which the jobs migrated, it is Chicaps not Chicoms that have made the economic gains by revolutionizing what and how things are done. The China of today is nothing like the old stodgy communist nation of say 40 years ago.

High paying jobs exist where there is a competitive margin. We have such margin and many such jobs but complacency can erode the margin and place those jobs at risk.

It is worthy to note that New England using the power generated by it’s rivers established vast textile industries and took well paying jobs from England. Much later, the high paying jobs were lost to southern states where there was electricity and lower cost work force. Most of those jobs have migrated off shore. The Competition from abroad did them in.

There of course other factors in the total cost equation. California is a case in point where the entire state was regulated to raise business and manufacturing costs to the point where the competitive margin was lost, Detroit suffered the same fate.

Until the anti business climate is abolished, there will be no recovery and in fqct will be continued decline.

[Spktyr]

Er, no. You are being deliberately obtuse.

1. Critical parts of many goods have to be made outside the US because the EPA says we cannot make them here.
2. These parts will cost a lot more if such a tariff is enacted.
3. The manufacturers needing these parts cannot set up a new US factory to make these parts as the EPA will not allow their manufacture here.
4. Therefore, the cost to the manufacturer is now up at least 100%.
5. Manufacturers pass costs on to the customer in the form of increased prices.

Address this issue, please. Tariffs will not encourage US manufacture until this enormous stumbling block is removed.

Now, if you want to talk about a law to mirror the tariffs of other countries right back at them, I’m all for that. But just a flat 100% tariff on anything imported? Won’t even begin to accomplish your stated goal.

[Cringing Negativism Network]

A company-blind across the board import tariff would have one additional benefit.

A blanket import tariff would apply to everything imported. Thus the “American” car factories in the south, piecing together cars from components made in Korea or Japan would pay tariffs on the amount of content in those “American made” cars which was not actually made in America.

This would immediately create a powerful incentive to bring the manufacture of all those parts here as well.

[TwelveOfTwenty]

Actually, four words. The other three are "Democrat Controlled Congress."

[Cringing Negativism Network]

Your constant repetition is at attempt to foist upon this discussion a false premise.

That import tariffs, would prevent American manufacturing.

That’s Orwellian.

[bert]

I prefer a less expensive car to paying more and getting the same or less.

The purpose of business, that is capitalism, is to make money, not provide wages to over paid workers.

Your brand of industrial control socialism is not wanted

[Cringing Negativism Network]

Nowhere in anything I support has anything whatsoever to do with control, or socialism.

Import tariffs. Nothing more, nothing less.

The free market, capitalism and individual Americans making free decisions, will take care of the rest.

[scooby321]

I really remember looking and listening to stock analyst before the crash on how all we were was a service economy and 70% of our GDP was spending by Consumers.

Why in God's name didn't someone see this as it was unsustainable.

[Will88]

Tariffs crumpled the economy into a decade of depression in the 1930's. And it will not work now.

Total nonsense. The GD was a result of Fed policies which shrunk the money supply by 30% during the four years after the stock market crash in 1929.

The great depression and its offspring, the New Deal, could both have been avoided if the Federal Reserve had performed the task assigned to it. All the Federal Reserve had to do to avoid the Depression and the subversion of the American constitutional order was to purchase $1 billion in government securities during the 10-month period from December 1929 to October 1930. The result would have been an increase, instead of decrease, in high-powered money, and the banking crisis that began in the autumn of 1930 would not have occurred.

The Fed's "Depression" and the Birth of the New Deal

The Great Depression According to Milton Friedman

The Great Depression Could Have Been Avoided if the Fed Had Not So Badly Botched Its Monetary Policy

The Smoot-Hawley boogieman has been thoroughly debunked. It had little or nothing to do with the GD and isn't even mentioned in the above articles. Fed inaction caused the GD. Bernanke sure believes it and seems to be going to the other extreme by constantly increasing the money supply with easy money.

[GregoryFul]

Total nonsense - it would cripple economic activity and destroy another 50% of the jobs in this country - we would never recover from such a stupid idea!

[Will88]

The purpose of business, that is capitalism, is to make money, not provide wages to over paid workers.

Lol, and which Americans are overpaid and which are not?

We used to call that the high American standard of living and take great pride in it. Now it's "overpaid workers".

What do you do? Are you overpaid?

If you work in the USA, you're overpaid compared to the rest of the world, not matter what you do. Let's get your earnings in line with global averages.