Latest on the Fundamentals of Our Economy
The Politics
John McCain assured Americans on September 17—as he has at least 20 times before—that the “fundamentals of our economy are strong.” [The Hill, 20 times video] Can he be any more out of touch? Putting aside the cratering of Wall Street, consider three recent economic indicators that haven’t gotten much attention. They show that the fundamentals are crumbling.
The Facts
The trade deficit has worsened. The trade deficit has thrown about 400,000 Americans out of work every year for the last few years. [Dean Baker] Today, the Commerce Department reported that the trade deficit worsened in the second quarter of 2008, increasing by 4.3 percent—despite the decline in the value of the dollar. The second-quarter trade deficit of $183.1 billion means that every day the United States must raise more than $2 billion by borrowing or selling off assets. The trade deficit with China increased by 15 percent in the first half of 2008. [Associated Press]
Housing construction starts continue to decline. Sinking housing starts means fewer construction jobs and a weakened economy. The Commerce Department reported today that both housing construction starts and permits for future construction fell by more than 6 percent in August. August was the worst month for housing construction since January 1991. [Reuters] Housing values—which have dropped 16 percent over the past 12 months—are continuing to decline.
The misery index has risen. Nine million Americans are now unemployed as prices for food, clothing, medical care, and education continue to rise. Yesterday, the Labor Department reported a new inflation rate of 5.4 percent for the 12 months ending in August. [Bureau of Labor Statistics] The unemployment rate for August was 6.1 percent. [Bureau of Labor Statistics] So the misery index (unemployment plus inflation) is now 11.5 percent—worse than any month since June 1991, more than 17 years ago. June 2008 was the first time the monthly misery index hit double digits since June 1993. [Misery Index fact sheet]
Progressive Solutions
Kick start the real economy, don’t just bail out the banks. We need a public investment initiative to get the economy moving, investing in renewable energy, rebuilding green, extending unemployment insurance, helping cities and states avoid deep cuts in health care, police and fire services, and more.
We need a long term agenda that will ensure that the profits and productivity of the next recovery are widely shared. Empower workers to organize. Forge a public social contract to replace the private one that corporations are shredding. Put the full force of the American government behind the goal of full employment.
