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]

Only on imported things.

No increase in cost for anything made, grown or drilled in America.

[Scotsman will be Free]

It ain’t the taxes that are the big killer. Regulation is a big choke point.

[Cringing Negativism Network]

Ah. You seem quite conversant on Chinese trends.

So your motive in this discussion in to advance Chinese imports.

Thought so.

[Scotsman will be Free]

Regulations are a business killer. Do tariffs all day long and it will still be cheaper to make crap in china than here because of regulations. All you will accomplish without reducing regulations is make things more expensive which will end up with us sending more of our money to china.

[bert]

You make the mistake of assuming my argument is for free trade. It is not. We have trade that is regulated in many aspects.

The point is that those who can sell at a profit will prevail and those who can not sell at a profit will fail. To artificially prevent the failure is not capitalism but some modified socialism.

You seem to approve this socialism when it meets your needs for maintaining a status quo that is no longer possible and ignores the fact that there is a big world.

[central_va]

The primary flaw in your thinking is the concept of Chinese Slave Labor. The labor is made by those who desire to exit the oppressive poverty of the countryside and improve the quality of their lives.

Hey Cathay Pacific has flight there every day, I encourage you to go live in the Red Chinese economic miracle.

[Yet_Again]

I’ve already said that the regulatory load needs to be lightened. However this will not in any way compensate for the wage differential between the two countries. As far as tariffs resulting in more money going to China this is also incorrect because every dollar of a collected import duty remains within the United States. Will imported products become more expensive? Perhaps.

Business will have 3 choices (1) Accept reduced profit margins for products made in third world communist ratholes, (2) Increase their retail prices and thereby lose the marketing edge they’ve gained over domestically manufactured products through the use of cheap overseas labor, or (3) Return production to US borders.

[central_va]

It’s amazing the Free Traders have the cojones to infiltrate a FREE REPUBLIC thread which pretty much sums up the economic disaster we are living in. I wish they would all move to China. I wish these economic Judas Iscariots would go count there silver in private.

[Yet_Again]

You seem to approve this socialism when it meets your needs for maintaining a status quo that is no longer possible and ignores the fact that there is a big world.

This really captures in a sentence the difference. I am an American patriot, a nationalist. My loyalities are to America, to her citizens, to the conservation of her wealth, and her future prosperity. I care nothing for Chinese workers, Chinese markets, or for the future of that nation. The free trader is a trans-nationalist, or globalist. He may harbor some feelings for America, but his true loyalty lies with America's currency (and, if it profits him more, another currency). America is merely a tool to exercise the profit motive in such a world view, not a homeland.

[marktwain]

Very simply, the solution to all of this is immediate, across the board import tariffs.

Your "solution" will kill more jobs than it creates.

It sounds simple and easy. It is not. When people sell us stuff from other countries, they buy stuff here. The stuff they buy from us creates jobs here.

We still make more stuff than any other country on earth, it is just that we do it more efficiently with less workers.

There are plenty of studies that show that international trade makes more jobs here than it destroys.

Nothing is permanent. We are in the process of moving from labor intensive manufacturing to information intensive manufacturing. More robots, less drudge labor. Any change makes it hard on those who are forced to change with the technological changes.

We could make it much easier on those impacted by the change by reducing our regulatory burden, or even making the rules easy to follow and transparent.

The Obama administration has done the opposite. People will not invest and create jobs when they do not know what the new regulations will be or how much they will cost.

It is the uncertainty and bumbling incompetence of the current administration, and the nagging doubt that maybe it is malevolence rather than incompetence, that is keeping the economy in the doldrums.

You see lots of retail, relatively low tech stuff made overseas in our stores, such as Wal Mart, because relative low tech countries can compete with us in those areas.

[Cringing Negativism Network]

Keep at it.

We’re winning. Far too slowly, but we are on the right side. Never give up.

America ain’t done yet.

[1rudeboy]

Return production to the U.S., and fight over a smaller market that the price increase caused in the first place. Sell fewer goods at artificially inflated prices—a ticket to prosperity. Why can’t folks understand?

[Will88]

Glad you are so positive - experts differ on that.

I just agree with the analysis presented in the articles I linked in #58. It is now generally acknowledged that the GD was caused by decreases in the money supply.

But maybe you can link some articles by these experts you mentioned who disagree. Tariffs are never mentioned as a cause of the GD in the two articles I linked.

And here is a link with graphs which show the change in GDP and the change in the money supply during the GD.

GDP and Money Supply during the Great Depression

[central_va]

You seem to approve this socialism when it meets your needs for maintaining a status quo that is no longer possible and ignores the fact that there is a big world.

Komrade bert, It seems to me you are the socialist as Karl Marx thought free trade was a quick way to destabilize the middle class.

[1rudeboy]

I don't think anyone mentioned that Smoot-Hawley caused the GD. That's just the tangent that people take when they cannot disprove that it made things worse.

[Yet_Again]

It sounds simple and easy. It is not. When people sell us stuff from other countries, they buy stuff here. The stuff they buy from us creates jobs here.

Except they don't.
http://www.nytimes.com/2011/02/12/business/economy/12econ.html
??

There are plenty of studies that show that international trade makes more jobs here than it destroys.

Studies come, studies go, but the economic facts in the OP are real.

The Obama administration has done the opposite.

Obama has a lot of faults, but the wage-disparity based drive to outsource everything has been going on for much longer than his 3 years in office.

[bert]

-——So your motive in this discussion in to advance Chinese imports.——

No, I merely observe rather than bury my head in the sand and not see the world as it is.

If I have a trade related motive, it is to advance American exports because it helps my personal business.

As an aside, I see the movement of plants abroad first hand close up. Last year I visited a closed cotton yarn mill in North Carolina. The equipment automatically turned the baled raw cotton into yarn for knitting plants. It was of Japanese origin and state of the art completely automated.

The plant was bought by a Bangladeshi company. This means grief for the Bangladeshi workers who lose their jobs in some ancient mill to younger better skilled workers capable of operating the technical processes of the new plant. America is not the only country subject to change in the jobs structure. The change is global

[central_va]

Return production to the U.S., and fight over a smaller market that the price increase caused in the first place. Sell fewer goods at artificially inflated prices—a ticket to prosperity. Why can’t folks understand?

Selling out your county for profit is something that should be done in private, in a humble way. Go away Judas.

Start a Free Trade thread, I won't even open the link.

[1rudeboy]

u mad?

[Cringing Negativism Network]

All our “partners” have policies which unapologetically help their nation, to adapt, acquire and absorb American technologies and jobs.

Those sorts of policies are working for them.

We’re asleep.