The Latest: An Economy for All

You’ve heard this before: The government is holding the economy back. And it’s true. But exactly what the government is doing to hold the economy back might surprise you. Typically, when people say the government is hurting the recovery, they mean that deficits are too high and uncertainty over future policy is scaring businesses. But there’s little evidence of that. It’s not because government is spending too much, or because of concerns over future policy. It’s because government, at all levels, is spending and investing too little. Despite the stimulus and various other policies we’ve passed to help the recovery, and despite the large deficits the government has been running, government spending and investment have, at all levels, been contractionary since 2010.

A new report reveals a fact that too many Americans are familiar with first-hand: nearly half of the nation's residents have no safety net to protect them from falling into poverty in the event of a layoff or other financial misfortune. The recently published Assets & Opportunities Scorecard from the Corporation for Enterprise Development (CFED) shows that "[n]early 44 percent of Americans don't have enough savings or other liquid assets to stay out of poverty for more than three months if they lose their income," as NPR summarized. At the same time, nearly a third of Americans live with no savings account at all.

The Conference Board reported Tuesday that the preliminary January figure for consumer confidence in the United States fell to its lowest level in more than a year. The last time consumers were this bummed out was October 2011, when there was widespread talk of a double-dip recession. But this time business news is buoyant. The stock market is bullish. The housing market seems to have rebounded a bit. So why are consumers so glum? Because they’re deeply worried about their jobs and their incomes – as they have every right to be. The job situation is still lousy. We’ll know more this coming Friday about what happened to jobs in January. But we know over 20 million people are still unemployed or underemployed.

In the current political climate, immigration reform is broadly popular, with both parties eager to win over the Hispanic electorate in 2014 and 2016. But that doesn't mean that a bipartisan effort will pass a good law -- especially if long-time opponents of immigration reform are only cynically vying for votes. For the Democrats, the challenge will be to avoid simply jumping at the first deal offered by newly converted conservatives. Instead, for the first time in decades, promoters of reform have the opportunity to hold America to its promise of being a land of liberty and justice for all. Most centrally, that comes down to the issue of work. Holding America to its promise will mean ensuring that immigrants have pathways for securing just and meaningful employment in this country.

President Barack Obama's jobs council, a panel formed in January 2011 to gather outside expertise on job creation, is set to expire Thursday. It appears unlikely that the president will renew it for another term, but experts say that the council has been such a loser that its death might actually be a good thing. The jobs panel, officially called the President's Council on Jobs and Competitiveness, is made up of 26 important people from industry, labor, and academia, and was "created to provide non-partisan advice to the President…on ways to create jobs, opportunity, and prosperity for the American people," according to itswebsite. But the panel failed to accomplish much over its two-year life span, and a lot of what it did turn out was more friendly to business than to regular people.

One of the more darkly entertaining things to watch in Washington right now is the dance of those who are alarmed about the pending March 1 “sequestration” of defense funds trying to make their case without admitting the underlying principle that public-sector austerity (defense or non-defense) is bad for a still-deflated economy. The job of reconciling these points of view got harder today with the release of databy the Commerce Department suggesting that drops in federal spending were mainly responsible for plunging the four quarter GDP numbers into the red. First quarter GDP estimates are already being depressed by the growing impact of the payroll tax increase that hit on January 1, which a lot of people just didn’t anticipate. It’s awfully tempting to argue for a delay in the defense sequester on “stimulus” grounds—if you are the kind of politician who hasn’t abundantly estopped any such argument with prior shrieks about deficit spending being the economy’s main problem.

The growing progressive coalition that helped elect President Obama has emerged at the end of a failed and exhausted conservative era. The media now chronicle the flailings of Republican leaders slowly awakening to the weaknesses of a stale, pale and predominantly male party in today’s America. But the central challenge to this progressive coalition is not dispatching the old but rather defining what comes next. Will it be able to address the central challenge facing America at this time and reclaim the American Dream from an extreme and corrosive economic inequality?

Let’s make no mistake about it: as the years pass, America is becoming a “browner” nation. With the present discourse over immigration reform, we have an extraordinary opportunity to mix our understanding and appreciation for race, culture and language with public policy. We, the people of America, have been wrestling with our self identity, and will continue to do so in the near future. With Black History Month imminently upon us, we can not only celebrate our history, heritage and culture, but we can also insert ourselves in a critical national debate on how to fix our broken immigration system. Likewise, this immigration debate provides the black community an opportunity to learn more about the stories and challenges of black immigrants who increasingly populate our states as asylees, refugees, legal immigrants, and undocumented persons.

As President Obama said in his inaugural address last week, America “cannot succeed when a shrinking few do very well and a growing many barely make it.” Yet that continues to be the direction we’re heading in. A newly-released analysis shows that the top 1 percent of earners’ real wages grew 8.2 percent from 2009 to 2011, yet the real annual wages of Americans in the bottom 90 percent have continued to decline in the recovery, eroding by 1.2 percent between 2009 and 2011. But the President is exactly right. Not even the very wealthy can continue to succeed without a broader-based prosperity. That’s because 70 percent of economic activity in America is consumer spending. If the bottom 90 percent of Americans are becoming poorer, they’re less able to spend. Without their spending, the economy can’t get out of first gear.

The news that the UK, with negative growth in the fourth quarter of 2012, faces the prospect of a triple-dip recession, should be the final blow to the intellectual credibility of deficit hawks. You just can't get more wrong than this flat-earth bunch of economic policy-makers. They're pretty much batting zero. They failed to foresee the collapse of housing bubbles in the US and Europe and its consequent downturn. They grossly underestimated its severity after it hit. And their policy prescription of austerity has been shown to be wrong everywhere that applied it: in the US, the eurozone and, especially, the UK. By all rights, these folks should be laughed out of town. They should be retrained for a job more suited to their skill set – preferably, something that doesn't involve numbers, or people.