A recovery for the one percent

Going forward, Democrats will continue to tout the magical ‘recovery’ brought on by American Recovery and Reinvestment Act of 2009 (also called the ‘Recovery act’ or ‘the stimulus’) and other measures. It is important to challenge this idea head on and tell the truth about the ‘recovery’ itself. This article is not a full analysis of every single article out there, but it hopes to explain to some degree how the recovery has benefited the one percent

In April 2012, Ezra Klein wrote about the ‘recovery.’ He said that while early in the “recession, there was some talk that the economic crisis would, among other things, slow or even reverse the run-up in inequality,” it in fact did the opposite: “the recovery, such as it is, has made inequality worse.” Klein went on to write that “financial markets and corporate profits…have recovered far faster than the labor market or the housing sector” but that the “middle-class American family that owns your home” has not really felt a recovery. Over one year later, another article about the recovery was published in the Washington Post, using data from inequality researchers showed that [1]:

while only 49 percent of the decline in incomes during the recession was born by the top 1 percent (whose income share fell to 18.1 percent due to the recession), 95 percent of income gains since the recovery started have gone to them. This is a big change from past recessions and recoveries.

As Paul Taylor and Richard Fry of the Pew Research Center told the Washington Post, “It has been a very good recovery for those at the upper end of the wealth distribution. But there has been no recovery for the lower 93, which is nearly everybody.”Now this should be no surprise since Obama admitted himself in his horrid liberal rhetoric here , here and here:

we’ve seen a two-decade to three-decade-long trend where increases in profitability, expansions of markets, increases in corporate profits, rises in the stock market don’t translate into higher incomes and higher wages for the ordinary person — at the same time that their costs for sending their kids to college have skyrocketed.

Corporate profits have skyrocketed to all-time highs—but for more than a decade, wages and incomes have barely budged.

We know that despite economic growth and close to record corporate profits, despite the fact that folks at the very top are doing better than ever, that there are too many families all across the country who are still struggling to get by, who work hard every day but have trouble making ends meet at the end of the month.

Yet Obama says this but he has never pushed any policies that try to seriously tackle what he calls a ‘trend’ or to stop the hurt  and suffering of the working and middle classes.

Beyond this, some may still have their substantive claims about the ‘recovery’ that has too place. I looked into some articles in alternative publications to see if I could find something substantive and as it turned out, there was a good body of criticism. Zoltan Zigedy in the publication Against the Current wrote that the Jack Rasmus’s book, Obama’s Economy: Recovery for the Few demonstrates that:

“Obama — the candidate — drew his financial support from Wall Street, surrounded himself with corporate-friendly, free-market-oriented advisers, and preferred caution and compromise to any bold, new vision…once Obama had all but sewn up the nomination, he began an even further rightward shift…Beyond Rasmus’ account and well before the presidential candidacy, Obama’s career was marked by sycophancy to power and wealth and by opportunism…As Rasmus demonstrates, Obama’s economic course was largely predictable from his campaign promises…Rasmus sifts through the seeming chaos and improvisations of the last four years to find three distinct Obama recovery programs implemented in 2009, 2010, and 2011. In addition, he identifies “two and a half” Federal Reserve actions (Quantitative Easings) meant to revive the slumping economy. It is his considered opinion that all these efforts failed to restore the economy to anything like a sustainable vitality…After reading Rasmus’ new book, one will find little to justify praise for the Obama administration. While the three trillion dollars of recovery programs (as tabulated by Rasmus) from March of 2008 until September of 2011 — more than two-thirds of these federal dollars allocated on Obama’s watch — may have staved off an even deeper downturn, they have done little to revive the economy. Certainly from the perspective of capital and a wealthy and powerful tiny minority of our citizens, the recovery has been satisfactory, if not a rousing success…But for the vast majority wages are stagnant or dropping, benefits shaved or eliminated, living costs rising, home ownership in jeopardy, and employment tenuous; most of us are still looking for the recovery. And the economic data promise little improvement.”

In another review of the same book in CounterFire, Henry Parkyn-Smith writes that the book is “framed [in] terms of who the downturn is damaging and what the recovery is supporting” and it: “focuses on the lack of recovery, how deep the crisis is, as well as how and why there seem to be few signs of the crisis abating…[how the] recovery there has been is unequal, and how Obama’s regime has acted to support the rich at the expense of the majority of working Americans.” In Smith’s opinion, Obama, “Within the Democratic Party…in fact one of the most conservative figures: not only were his pre-election promises neo-liberal and pro-business, the policies he actually implemented during his first term could be seen as being even more so.”

Without going through book reviews all day, there are a number of articles written during and after the ‘recovery’ was beginning to be implemented. Writer Alan Farago said in January 2009 that if the fiscal stimulus, as he called it, is

“not applied to rebuilding our nation’s productive capacity, it is money down a black hole. For certain, it is important to provide some floor under this free-fall. But government spending on infrastructure serves a temporary purpose. a limited purpose. Fiscal stimulus that fails to provide for new productive capacity—jobs making products that people need—will bleed out the economy like a slow suicide.”

Farago in this article said that “the Obama administration should consider preemptive measures to nationalize sectors of the economy.” What Farago said did not exactly happen, instead there was what Forbes, The New York Times, Pew Research Center, the Washington Post, and many others called a “jobless recovery” since 2009, when jobs have not really grown but there has been an economic ‘recovery.’ The International Labor Organization even had a report released in January of this year about “the risk of jobless recovery” on a global scale. After all, the Recovery Act itself was not as effective as it seems, in the view of Doug Henwood:

“What we got was a bill that did some good things – extending unemployment benefits, picking up health insurance costs for the laid-off, etc. – but one that also was too loaded with tax breaks and other indirect mechanisms that are supposed to create jobs. If you divide the amount of cash spent, according to Recovery.gov, by the administration’s estimate of jobs “created or saved” – whatever that means exactly – by the StimPak [Stimulus package], you find that the cost per job is something around $250,000…Yes, and if you allow for multiplier effects – someone whose job is saved spends more money than someone on the dole, which saves other jobs that would have otherwise evaporate – then it’s maybe $150,000-175,000 per job. That’s still preposterously inefficient, however…The Obama people like The Market, and want to nudge it into creating more private sector jobs…And there’s a bias among neoliberals, like Obama & Co., that sees public sector jobs as phony and private sector jobs as real…they’re going to emphasize tax breaks and other minimalist strategies. They won’t do much to create jobs.”

An article I almost forget to include was published this May in the New York Times about the “Obama-Bernanke financial rescue.” In the article, Binyamin Appelbaum writes that

Atif Mian and Amir Sufi [in a new book titled House of Debt] are convinced that the Great Recession could have been just another ordinary, lowercase recession if the federal government had acted more aggressively to help homeowners by reducing mortgage debts…Mr. Geithner wrote in his book that the administration had tried to help homeowners — and that doing more wouldn’t have changed the trajectory of the recession…The Obama administration considered several ways to reduce mortgage debts during the heart of the crisis. It promised to pursue a few, too, including empowering bankruptcy courts to forgive debts, paying lenders and buying up loans. But ultimately, the administration adopted a limited aid program and gambled that an economic recovery would take care of the problem. Mr. Mian and Mr. Sufi are not particular about which method of reducing debt would have been best; their point is simply that the government, by failing to do more, inhibited the recovery.

In a blog on their website, the writers of the book clarified what their book was talking about, and their objections to what they called the ‘Geithner view of the world’:

“In some of the early reviews of our book, our argument is caricatured as saying we should have let the banks fail and we should have saved homeowners. We do not make such an extreme claim. In fact, we commend both Ben Bernanke and Tim Geithner for some of their policies that were directed at stopping dangerous runs in the banking system. We agree that bank runs threaten the payment system and the entire economy, and policies should be undertaken to prevent such runs. The problem we have with the Geithner view of the world is that it is far too extreme — it is a “save the banks, save the economy” view which has been thoroughly discredited in both the United States and Europe. The fact that Geithner still adheres to this view despite all the evidence to the contrary is truly remarkable. The problem with the economy in 2008 and 2009 is not that banks are not lending enough. It’s absurd to argue that we need more bank lending when demand is collapsing throughout the economy.”

Rather than going through every article on the subject, its better to shift the focus to who the recovery has benefited. As quoted in an opinion piece published on Reuters by Chrystia Freeland, Emanuel Saez said,

“The evidence suggests that top income earners today are not ‘rentiers’ deriving their incomes from past wealth, but rather are ‘working rich,’ highly paid employees or new entrepreneurs who have not yet accumulated fortunes comparable to those accumulated during the Gilded Age.”

There is more. In an article in CounterPunch criticizing the Federal Reserve’s ‘stimulus,’ Mark Vorpahl writes that

“the Federal Reserve is keeping interest rates ultra-low in order to encourage businesses to borrow money and expand their operations. The Fed’s alleged desired outcome is to encourage banks to make more loans to the private sector, thereby encouraging economic growth and job creation. To reach this goal, however, these policies have to be set out on the right path. Currently, they are not. On the contrary, today’s policies are guided by supply side, trickle down theories which essentially claim that the problem with the economy is that the rich aren’t rich enough…There has been a weak upturn in job creation, falling far short of what is needed to return to the employment rate prior to the crash of 2008. In addition, the stimulus has been too weak to counter the accumulating impacts, including layoffs, of sequestration as it starts to gather steam. What’s more, it is a very dubious proposition that this slight and temporary job upturn has anything to do with Bernanke’s extraordinary measures at all.”

The New Statesman noted the same is happening in the UK, with the top one percent having their income rise and the bottom 90 percent having their income decline. Even the housing recovery itself seems to be a joke. As Forbes contributor Richard Green notes,”the housing market at the top is doing much better than the housing market at the bottom (it is doing better than the middle, too).” None of this should be of any surprise since the real size of the bailout was not the reported $700 billion given to the big banks, but was tabulated to over $14 trillion as noted by Naomi Prins (Federal Reserve and the Treasury Department) and $29 trillion from the Fed alone as explained by L. Randall Wray in the Huffington Post. Lest us not forget that Ben Bernanke defended the bailout of the banks. Such measures explain even more why Americans doubt the benefits a stimulus from the Fed.

As noted in an article in the The New Republic, Timothy Noah writes that “the U.S. economy’s current ability to expandno matter who is presidentwithout benefiting the 99 percent is something new. Perhaps we should do something to change that.” While he is right about making sure the 99 percent benefit, the best way to do so is to not choose solutions coming out the two establishment parties, but rather to look for robust alternatives.

[1] Later, even Joe Scarborough reflected this sentiment on MSNBC, the channel which cheers Democrats all day long, saying that “since Barack Obama became president of the United States, 95 percent of economic gains have been made by the richest 1 percent.”

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s