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The most acute threat to the economic recovery that has begun is the same as the biggest chronic problem for the middle/working classes for the last 45 years: a lack of real wage growth. Only twice in the last 45 years has there been real wage growth (that is, wages growing faster than inflation) for more than a year or so. In 2009, the bottoming of the Great Recession was helped by the fact that wage growth, although paltry, nevertheless was accompanied by a decrease in gasoline prices that gave consumers (the 85% or 90% who were employed) more disposable income.

That situation reversed in the last 6 months and now poses the most direct threat to the sustainability of the recovery.  I explain why, below.

Here is what I will show you below:

  1. There has been a long-term stagnation in wages
  2. American consumers have coped in two ways - refinancing and cashing in appreciating assets
  3. When neither coping mechanism has been available, recession has inexorably followed
  4. In this recovery, Wage growth is pathetic
  5. No widely held middle-class assets are appreciating
  6. Refinancing at lower interest rates is taking place but not at a great pace
  7. The price of Oil in particular will determine if inflation can remain in the "sweet spot" necessary, given low wage growth
  8. This is a very narrow needle to thread and the biggest ongoing threat to the sustainability of the recovery

Let's begin:

1. There has been a long-term stagnation in wages

The biggest threat to ongoing economic recovery now is the biggest chronic problem for the middle/working classes for the last 45 years: a lack of real wage growth. This is something I first described a year ago. Only twice in the last 45 years has there been real, sustained wage growth (that is, wages growing faster than inflation) for more than a year or so: once, in the post-war economic golden era of the 1960s and early 1970s; and again during the tech boom of the 1990s.

This is shown in the following graph. It takes average wages measured as year over year percentage change, and subtracts CPI. Thus, in those time periods where wage growth exceeded inflation are positive in the graph. Those where wage growth failed to keep even with inflation are negative:

Because the above graph uses average (i.e., "mean" wages) it can be distorted by a few number of very high income workers. A better measure of wages is something called the Employment Cost Index, which measures income for the "median" (i.e., 50th percentile) worker. The problem with the ECI is that it os less than 10 years old. With that limitation, here is the same graph showing wage growth as measured by the ECI (red) and wages + benefits (blue) vs. the inflation rate (green):

Notice that the ending of the Great Recession was helped enormously by the fact that wages grew substantially faster than prices (which actually fell for a while).

In the longer term, as you can easily see from the above graphs, real wage growth essentially stagnated in 1974, and ever since the Reagan revolution, almost all growth from productivity has been vacuumed up by the very top of the income scale:

2. American consumers have coped in two ways

As the American middle/working classes have been relentlessly squeezed, they have coped with this stagnation by resorting to a small bag of budgeting tricks. Chief among those coping mechanisms has been that there has been a generation-long decline in interest rates since they peaked at 15.21% for the 30 year US Treasury bond in October 1981. This has allowed consumers to refinance their debts at ever lower rates every few years, specifically by refinancing their mortgages. Here is a graph which compares real wage growth (from the first two graphs above) and adding average mortgage rates in red:

The graph shows that for most of the period of 1982-2007, mortgage rate declines were frequent enough for homeowners to refinanced their debt at lower interest rates, freeing up additional income for spending.

For awhile during the housing bubble, many people went further, taking equity out of their houses as they appreciated in value by way of home-equity loans (HELOCs). This of course came crashing down as thouse values vaporized, but the debts remained. Before that, in the 1980s and 1990s, some people were able to cash in on appreciation of stocks in their 401K's -- but of course that ended in the dot-com crash a decade ago.

3. When neither coping mechanism is available, recession has inexorably followed

I described this back in August 2007, I wrote a piece called Are Hard Times Near? The Great Decline in Interest Rates is Ending, in which I said:

In other words, since 1980, facing stagnated real wages, the only way American consumers have been able to significantly improve their lifestyles is either: - to take on more debt, using assets which have appreciated in value as collateral (stock investments, housing), or - to refinance their existing debt at lower interest rates.

When consumers were unable to do either of those things, they cut back on spending, triggering consumer-led recessions.

In a follow up piece a few months later, entitled Why American Consumers are Signaling Recession I also pointed out that:

You can see that for long periods of time in the 1980s, 1990s, and 2000s, consumers were able to spend more by refinancing their existing debt at lower interest rates. By contrast, when interest rates were stable, or even rising as in the 1970s, and wages failed to keep up with inflation, a recession ensued within several years (the only exception was the Y2K recession, which wss investment/tech led and was not a consumer recession)....

Only twice in the last 27 years has the consumer been unable to refinance debt or tap into his or her stock or house ATM. ... [T]he 3rd and final time is almost certainly near.

That's exactly what happened as squeezed consumers cut back, their ability to refinance debt terminated by the collapse of the housing bubble.

4. Wage growth is pathetic in this recovery

Now that we've looked at the long-term problem, let's describe the short term outlook.

While all the other indicators of recovery have turned positive -- including, in the last few months, jobs -- real income is still limping along the bottom:

Because of this, the economic recovery is in a very tight spot -- precisely because average American consumers also remain in a very tight spot. Look again at the first two graphs above. They show wage growth of about 1.5% for the last year. Under those circumstances, even 2% inflation is too much for them to withstand -- without the ability to refinance debt, their disposable income simply isn't keeping up. Outright deflation too is bad, because it only occurs if there is a decrease in demand, causing general prices to go down -- in other words, it will only happen if the economy rolls over again and there are more layoffs, wage cuts, and higher unemployment.

5. No widely held middle-class assets are appreciating

So with paltry income increases of about 1.5%, there are only two ways to sustain the recovery for very long: (1) the inflation rate remains in a very narrow window of 0-1.5%; (2) some asset held widely by average consumers appreciates in value. or (3) another opportunity arises to refinance mortgage debt.

I thik we can all agree that number (2) doesn't look like it's going to happen. That leaves either number (1) or number (3).

6. What about refinancing at lower interest rates?

As it happens, lo and behold, a window of opportunity in mortgage interest rates has opened: since the end of 2008. Here's the graph of mortgage rates overlaying real wage growth again:

Note that mortgage rates went under 5% for the first time at the end of 2008, and have stayed close to that rate since. Since that time, mortgage refinancings have risen, and have remained at least somewhat ahead of their 2008 nadir, although with rates rising over 5% in the last couple of months, as the graph below indicates, in the short term refinancings have fallen somewhat again:

7. The price of Oil in particular will determine if inflation can remain in the "sweet spot" necessary given low wage growth

Further, as indicated above, only a very narrow window of inflation is helpful to the recovery, and if the unlikely event of decent wage increases doesn't happen, that kind of extremely tame inflation is dependent most of all on energy prices. They have gradually risen in the last year to the poitn where they are within 0.1% of the 4.0% of GDP level (or 6% of disposable income) where historically they have triggered a recession, as shown from this graph current through February 2010:

With the problems in Greece in particular and Europe generally, the dollar has strengthened, and this has cause the price of Oil to decline from over $85 a barrel to $70 a barrel in only one week. Should that decline last for awhile, it will take a little pressure off the consume, and allow inflation to return to that very narrow "sweet spot" which will keep consumer spending -- the biggest engine of economic growth -- positive.

8. This is a very small needle to thread --> so the biggest danger to sustaining the recovery.

Simply put, from here on, we're not going to see any sustained recovery, nor long term growth in the American economy until average Americans see a real and sustained increase in their compensation for labor -- for the first time in over 35 years.

So long as real wages remain stagnant, any recovery which might start will be vulnerable to every uptick in inflation -- particularly increases in energy prices -- and interest rates. Without real and sustained wage growth -- without addressing the structural issues faciing the American middle/working classes -- recessions will be more frequent and deeper, and recoveries including this one will have problems being sustainable for too long a period of time.

Originally posted to New Deal democrat on Mon May 17, 2010 at 05:40 AM PDT.

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Comment Preferences

  •  Tip Jar (133+ / 0-)
    Recommended by:
    bink, JekyllnHyde, fladem, Joe Bob, rick, raboof, scribeboy, zubalove, melvynny, wu ming, mslat27, RFK Lives, mataliandy, ssgbryan, opinionated, TracieLynn, cosmic debris, JuliaAnn, Clues, wader, Dallasdoc, Winnie, GN1927, riverlover, barbwires, side pocket, Pozzo, Josiah Bartlett, oortdust, radarlady, 3goldens, jrooth, disrael, PBen, kamarvt, kefauver, terrypinder, KatGirl, drewfromct, Brooke In Seattle, Annalize5, jimstaro, Saxman, blue jersey mom, sodalis, Team Slacker, Land of Enchantment, DisNoir36, Liberal Protestant, MeMeMeMeMe, tonyahky, fromer, KozmoD, lao hong han, arbiter, Bush Bites, Dauphin, blueoregon, blueintheface, Nulwee, lams712, bigchin, phonegery, lightfoot, dotsright, Loudoun County Dem, Bob Guyer, dmh44, momoaizo, FishOutofWater, Matt Z, Jimdotz, rockfish, ilex, Unbozo, bobswern, jnhobbs, GeorgeXVIII, TomP, MKinTN, condorcet, SilverOz, lockewasright, brooklynbadboy, RiseUpEconomics, luckylizard, Robobagpiper, papicek, statsone, cameoanne, litoralis, Carol in San Antonio, Stranded Wind, dark daze, tr GW, Daily Activist, virginwoolf, MKSinSA, bfitzinAR, Mom in Maine, Livvy5, Johnnythebandit, stunzeed, Eddie L, gulfgal98, sullivanst, SlackwareGrrl, Benintn, elengul, HylasBrook, gobears2000, cultjake, DemDad, freesia, Bill from SC, thethinveil, sethtriggs, tardis10, Sark Svemes, EdgedInBlue, dmw97, jediwashuu, Atilla the Honey Bunny, Proleft, PrometheusUnbound, Azazello, Hookah, APA Guy, OHknighty, TheLizardKing, J Brunner Fan, Joieau, congenitalefty

    "When the going gets tough, the tough get 'too big to fail'."

    by New Deal democrat on Mon May 17, 2010 at 05:40:20 AM PDT

  •  Love reading your diaries (36+ / 0-)

    ... and, as always, wish I could see your graphs at work.

    Question:  How are real wages for most Americans to rise without reversing a lot of the anti-worker policies of the past 30 years?  From "free trade" agreements that push manufacturing to low-wage countries, to union-busting laws and policies, to low taxation on top earners, government policies broadly have pushed income to the top earners and devalued labor in our economy.  

    Without an explicit government policy goal of rebuilding the middle class, which would allow some of these reverses in policy to be marketed, I see no hope for a sustainable economic recovery.  Without a broad base of public prosperity, I see nothing but bubbles and further instability ahead.

  •  You're assuming there wont be a new credit boom. (5+ / 0-)

    I, however, considering the financial regulations currently passing through Congress, expect another credit-based bubble.

    •  Who's going to Lever UP? (4+ / 0-)

      (i) The consumer is as levered as he has been ever.  Right now he is benefiting from very low LT interest rates, but that can change rapidly.

      (ii) The corporate sector is able to lever up, as it has done a very good job of delevering over the past five years.  Still, if it doesn't see demand for its products, it's not going to invest.

      (iii) The government is levered.  Right now, marketable securities as % of GDP is about 58%, and headed higher.  Yes, it was much higher during WW@, but consider our demographics back then.  We were a start-up after WW2, with a very young population.

      Learn about Centrist Economics, learn about Robert Rubin's Hamilton Project.

      by PatriciaVa on Mon May 17, 2010 at 06:13:25 AM PDT

      [ Parent ]

      •  The consumer is defaulting. (1+ / 0-)
        Recommended by:
        Carol in San Antonio

        The consumer just isn't going to pay. And then, they'll leverage up again like they always do. Credit availability will increase because money is cheap. With improving employment picture, consumers will suffer the usual amnesia about the debt crisis.

        The U.S. government can always monetize its debt, so this is an overblown concern.

  •  There Is No Institutional Memory of Running USA (26+ / 0-)

    for a non declining mainstream population. As you say, the last time we did this LBJ and Nixon were Presidents.

    Normality is decline. Policies of sustainability appear too looney for consideration. Both parties are conservative parties committed to the major economic policies of Reagan.

    We are called to speak for the weak, for the voiceless, for victims of our nation and for those it calls enemy.... --ML King "Beyond Vietnam"

    by Gooserock on Mon May 17, 2010 at 05:58:46 AM PDT

  •  Dumb question. (1+ / 0-)
    Recommended by:

    But if property and oil are cheaper, and health care costs are finally put under control, isn't it a net plus for workers anyway?

    (I don't know what's happening with food costs and I'm sure energy ccsts aside from oil are on the rise--I hope a real energy bill will start addressing that.)

    •  That assumes one IS a worker. (2+ / 0-)
      Recommended by:
      3goldens, CParis

      Millions of unemployed don't care if the price of property and oil go down. Maybe they will get a subsidy for health insurance.

      They can't afford any of that at any price except free.

      "The difference between the right word and the almost-right word is like the difference between lightning and the lightning bug." -- Mark Twain

      by Brooke In Seattle on Mon May 17, 2010 at 08:22:12 AM PDT

      [ Parent ]

  •  Outsourcing's downward pressure. (31+ / 0-)

    Last week I worked for the first time in 5 months. At a wage 70% of what I made before. Because the work, publishing, is all going to India. Friends in the same boat/industry took on some jobs at a per page rate which worked out to be 22% of what they had been paid the previous year. (This week my job is over, btw.)

    We're not the only business being outsourced. Short of huge "social costs to the US" penalties for outsourcing, I don't see how we keep work, and wages, from rapidly plummeting, forget about improving.

    And I've not heard a peep yet from DC about any massive programs to get new industries running. We've got the $2 billion a day or so to spend on national defense which is busy making us enemies thousands of miles away, but not to get America moving. Even the alternate-energy companies which started up in the US (clearly one area were employment can be generated), have started moving their operations to China. Make companies pay a twice-(or thrice)-the-foreign-wages tax and maybe that doesn't happen.

    It seems like there's really no political will to take care of our own beyond lip-service and some crumbs on occasion.

    Until we break the corporate virtual monopoly on what we hear and see, we keep losing, don't matter what we do.

    by Jim P on Mon May 17, 2010 at 06:06:26 AM PDT


      The comment above deserves its own highly recommended diary.

      We cannot have higher incomes (without inflation) unless we produce more with highly productive workers.  Moving money around and selling imported goods at retail does not improve the productivity that allows for higher wages.  When the U.S. nationally showed higher profits from moving money than from making things, wages stagnated.

      One huge component of stagnating take-home incomes is the increasing cost of health care and the workers' contributions to their employer-paid health care.  We must make every effort to find ways that work to lower health care costs while broadening health care coverage.  We must not do neither.  We cannot afford to do one and not the other.

    •  That's what all the filibustering is about. (0+ / 0-)

      Take 2 years, make us desperate and frustrated, and give power back to the Republicans who promise results and attack the failures of the Democrats.

      That's the whole point.

      Full Disclosure: I am not Ben Leming. But I think he's pretty cool.

      by Benintn on Mon May 17, 2010 at 08:01:32 AM PDT

      [ Parent ]

      •  I'm pretty sure the Repubs aren't filibustering (0+ / 0-)

        the very thoughts, speech, and announced plans of the Democrats. Did I miss the announcement of a massive, direct-hiring, non-Rube Goldberg jobs program?

        Until we break the corporate virtual monopoly on what we hear and see, we keep losing, don't matter what we do.

        by Jim P on Mon May 17, 2010 at 01:54:28 PM PDT

        [ Parent ]

    •  yup (3+ / 0-)
      Recommended by:
      Pescadero Bill, 3goldens, cameoanne

      It seems like there's really no political will to take care of our own beyond lip-service and some crumbs on occasion.

      If we only had a transformational president instead of just another status quo enabler...someone who realized that the middle and lower classes are the lifeblood of the country, not "pretty savvy guys" at the top.

      One can dream. Sometimes that's all that can be done.

      This is what chump Change looks like.

      by Wamsutta on Mon May 17, 2010 at 08:40:36 AM PDT

      [ Parent ]

  •  Two threats to the Dem Majority (5+ / 0-)

    And I cited them one year ago.

    (i) Median wage stagnation, as you've outlined above.

    (ii) Higher tax burden at the state and city level.  One decade ago, the Dems were still able to raise taxes on the non-union working and middle-class, in large part to pay the salaries and benefits of union city and state employees.  This is no longer true, as Corzine found out in NJ.  In IL, the Dem Governor is promising to raise the income tax on everyone by 33%, saying that without the income tax hike he will need to let go thousands of teachers.  He is 8% behind in the polls, against a rabid conservative, in President Obama's home state.

    What to do about both.....

    (i) Difficult to address wage stagnation without protectionist policies.  Perhaps we need to go there, as much as I loathe to do so.

    (ii) Dems must revisit some of the commitments the Party made to the service unions.  Dems must argue the following:  Either you agree to reasonable salary and pension adjustments with us, or you risk having your salary and pension decimated under a GOP administration that will be elected due to your high wages.

    Learn about Centrist Economics, learn about Robert Rubin's Hamilton Project.

    by PatriciaVa on Mon May 17, 2010 at 06:08:08 AM PDT

    •  Don't you see the contrast? (7+ / 0-)
      You point out two threats:
      One is wage stagnation, the other is high union salaries and benefits?
      And your proposals are "perhaps", though you are "loathe to do so" address the first, but definitely cut union salary and benefits.

      Won't that counter any progress we might make stopping wage stagnation? Shouldn't we be focusing on raising everyone else to the level the unions have managed to hold onto, rather than continue the union busting?

      The Empire never ended.

      by thejeff on Mon May 17, 2010 at 08:10:52 AM PDT

      [ Parent ]

    •  You want to address wage stagnation (5+ / 0-)

      by depressing wages?

      "George RR Martin is not your bitch" ~~ Neil Gaiman

      by tardis10 on Mon May 17, 2010 at 08:12:16 AM PDT

      [ Parent ]

    •  See PatriciaVa you've fallen into the trap (2+ / 0-)
      Recommended by:
      cameoanne, tardis10

      of the conservative anti-union lie.

      What the unions have is/should be the norm. And for the most part used to be.

      The unions are the last hold out to the successful transfer of money to the top.

    •  Very few left with middle class "perks" (5+ / 0-)

      Yes, this seems to be the new meme arising out of the jealous (former) middle class who once enjoyed things like defined benefit programs, guaranteed health care benefits after retirement, 30 and out retirements, etc.

      The only ones left with such things these days are public employees whose pay used to be lower than most private worker's pay, in exchange for decent benefits and job security.  In our new American economy both their wages and benefits, thanks to good Union contracts, are far superior to most private sector employees.

      The solution (to some) is obvious: We need to make them suffer, just as the rest of us are suffering.  That way, we're all miserable.  Truth be told, if government pension obligations were to be held to the same standards the few private plans still remaining are held to (or, for an even better comparison, multi-employer plan funding rules) we would all see just how deep a hole such benefits have driven the average taxpayer.

      From where I sit, as a trade association labor negotiator, the downward pressure on wages faced by MY members is astonishing in its breadth and scope.  It seems that every time there is another recession, I have to go back to the bargaining table and ask for yet another round of wage or benefit cuts.  Cuts which are never really restored.

      Competition today is such that anyone who subcontracts functions out does so for one reason--to save money, whereas it used to be about finding the expertise.  Finding people to do things cheaply (here or overseas) is easy these days.  The trick is not having to hire them in-house, which necessitates paying employment taxes.  No taxes = 25%+ savings!

  •  Reaganism (16+ / 0-)

    This financial crisis has been framed by corporatists to look like a glitch instead of treating it as a systemic failure.  Reaganism didn't work--less taxes resulted in less income, less regulation resulted in more abuse.   Let's return to the tax structure of the 1970s--top personal rates high enough to make fraud less appealing.  Let's bring back local and federal regulation of utilities.  The big picture is what a croc of shit Reaganism was/is--everything flowed from those flawed thoughts.  And they have managed to starve the beast along with the rape of the working man.  Reagan was a devil--definitely not a saint.

  •  Great diary NDd!! (13+ / 0-)

    That the middle class has lost such important ground (and purchasing power) for 30+ years can not be finessed anymore.  Without gainful wages, the consumer will never recover adequately enough to support our consumption driven economy.  And what worries me the most is that so many who lost jobs, lost jobs that will never return.  The paradigm has shifted and it will require enormous imagination and, most of all, political will to rescue the country from permanently high unemployment.

    Instead, they're looking to cut "entitlements?"


    "History is a tragedy, not a melodrama." - I.F.Stone

    by bigchin on Mon May 17, 2010 at 06:09:12 AM PDT

  •  Our "golden" economy was based on hegemony (5+ / 0-)

    and once other countries either a) recovered from the destruction of WWII (Japan/Europe) or b) began to industrialize for the first time (India/China), we began to lose the edge that allowed for that economic golden age of the 1950-1970 period.  Following that, our "leaders' never really got it and kept relying on the same economic solutions/policies that were not designed with a globally competitive world in mind.  No amount of protectionism or focus on "green tech" is going to get the global economy back in the bottle and we still haven't even begun to design policies that would allow the "middle-class" to live a more stable and enjoyable lifestyle.  Essentially, the decline in wage growth has nothing to do with the decline in unions or the increase in free trade, but with the competitive nature of the entire global economy and the technological revolution that has made the manufacturing worker obsolete.

    •  I beg to differ (5+ / 0-)
      Recommended by:
      ssgbryan, CParis, ilex, papicek, congenitalefty

      If we had better trade agreements than NAFTA and more enforcement, things would be different.

      •  At best (2+ / 0-)
        Recommended by:
        CParis, papicek

        the pace of the decline may (and I repeat may) have been slower (but only slightly so).  The fact is that automation has very quickly replaced labor in manufacturing and the industrialization of China/India has limited our ability to export most goods/services.  If we banned all imports tomorrow, the inflation impact on the middle-class would be far greater than the number of new jobs created in the onshored production.

        •  I disagree (2+ / 0-)
          Recommended by:
          CParis, papicek

          For lower middle class people like myself, the inflation I worry about is in healthcare, rent, food, insurance, utilities, gas.  I buy very few items, mostly toiletries, and I'm quickly getting rid of even those and doing make-your-own things like washing my hair with Castile soap and using a mooncup.  Food I try to buy local and organic.

          Really the only export item I buy is clothes, and I'd be willing to pay more and buy less clothes if it meant more American jobs.

          Durable goods I have bought in the past year--a pressure cooker and a toaster oven.  Both I would have been willing to pay more.  My pressure cooker was made in Spain.  Not sure where my toaster oven was manufactured.

          Imports from overseas are mostly crap items I can live without.  The ones I do need I'm willing to pay more for American, because the extra is nothing compared to my sky-high rent and food costs.

    •  Then Explain (10+ / 0-)

      Why Germany, with a highly unionized work force, is the largest (or close second) exporter in the world with a a much better paid and stable "middle-class."

      Yea, the decline of unions in the U.S. has something to do with the facts of this diary.

      •  Germany and Japan (3+ / 0-)
        Recommended by:
        Pescadero Bill, papicek, cameoanne

        got a free ride to recovery under the umbrella of American military protection for 60+ years. Same goes for South Korea.

        We need to close our overseas bases, bring the troops home, and erect trade barriers to keep out goods and services from places like China and India that can't or won't meet our standards for protecting workers, consumers, and the environment. Trade deals such as NAFTA and the like should be scrapped, and re-written to provide real protection for labor, consumers, and the environment.

        Al Qeada is a faith-based initiative.

        by drewfromct on Mon May 17, 2010 at 06:42:35 AM PDT

        [ Parent ]

        •  Doesn't Answer My Question (8+ / 0-)

          And is frankly just a stale bit of ugly Americanism. World War II ended over 50 years ago. Time to move onto the current epoch.

          Germany has a highly unionized workforce. They have a far more robust manufacturing sector. They have a far more stable middle-class and a far lower poverty rate than the U.S.

          The original poster posited that the decline of unionism in the U.S. is not a cause of wage decline in the U.S. I disagreed. I posit that Germany's high rate of unionism is in fact a large part of why they have not had the same kind of wage stagnation that the U.S. has experienced (while also maintaining a thriving manufacturing sector).

          •  Except you are wrong (1+ / 0-)
            Recommended by:

            AS I linked below, Germany has many of the same problems we have even after taking unification into account.  They have lost 28% of manufacturing jobs.  Their median income has declined.  Their number of poor has increased.  


            German Income Issues.

            •  And Their (3+ / 0-)
              Recommended by:
              arbiter, cameoanne, sethtriggs

              Poverty rate is still far below ours.

              And their unemployment benefits are much better than ours.

              And their infant mortality rate is far below ours.

              And their wealth gap is far below ours.

              And their manufacturing industry is still far healthier than ours.

              And Germans don't go bankrupt when they get cancer.

              Or take out second and third mortgages to send kids to college.

              And ... I think it is their unions that in large part help make life better for their middle-class.

              Come on: Is the West really in such decline? Yes, we can sit here on our island continent and gloom about the rise of China, as our elite now like to do. Or we can go out into the world and start competing like the Europeans. For here’s a strange fact: since 2003, it’s not China but Germany, that colossus of European socialism, that has either led the world in export sales or at least been tied for first. Even as we in the United States fall more deeply into the clutches of our foreign creditors—China foremost among them—Germany has somehow managed to create a high-wage, unionized economy without shipping all its jobs abroad or creating a massive trade deficit, or any trade deficit at all. Sure, China just pulled slightly ahead of Germany, but that’s mostly because the euro has soared, making German goods even more expensive, and world trade has slumped. Meanwhile, the dollar is dropping, and we still  can’t compete with either nation. And even as the Germans outsell the United States, they manage to take six weeks of vacation every year. They’re beating us with one hand tied behind their back.

              So, I think your opinions about what destroying the union movement in the U.S. has wrought are, well, naive at best.

              •  Better Link (1+ / 0-)
                Recommended by:


                Why is Germany beating us? It’s tempting to say it’s because we beat them. After all, we helped put a major component of the German model in place, which is the role that German workers have in running their firms. After World War II, we had a problem: Who would keep watch over all the German businessmen who had supported Hitler? We couldn’t put them all in jail. Back in that New Deal era, we and our allies were quite willing to put workers on the boards to keep an eye on businessmen. Still, the idea of works councils was not invented by Americans. In fact, it had its origins in Weimar Germany. And now Germany is the country, out of all countries, including Communist China, in which workers have the greatest amount of control over (dare I say it) the means of production.

                Okay, it’s not that much control. But it’s enough to make the German system a rival form of capitalism. And because German workers are at the table when the big decisions are made, and elect people who still watch and sometimes check the businessmen, they have been able to hang on to their manufacturing sector. They have kept a tool-making, engineering culture, which our own entrepreneurs, dreamily buried in their Ayn Rand novels, have gutted. And now, thanks in large part to these smart structural decisions, Germany is not only competitive, it’s rich. Although it’s unlikely that even the most liberal of American politicians would ever use a phrase like "worker control"—much less describe people who work as "workers"—it might still be worth at least considering what would be involved in emulating the German model.

      •  A few reasons (0+ / 0-)

        First, German unemployment has always been high (averaging almost 10% during the previous decade).
        Which does not imply a great middle-class (to challenge your assumptions).  And according to Wiki:

        After 1991, the country has lost about 28% its manufacturing jobs. The number of industrial employees in Germany is now lower than it was in West Germany alone before the unification. Labour costs in Germany are one of the highest in Europe.  The disappearance of industrial jobs has created a lower class of unemployed, uneducated people who have little chance of re-entering the job market.

        Their export dominance is related to the automation of manufacturing, as Germany happens to make many of the machines that have replaced workers across the world (a nice niche to be in).  

    •  I think you miss one very important factor: (1+ / 0-)
      Recommended by:

      Exploding world population that made it possible to have populations of desperately poor people that could be exploited.

      Most of the imports into this country aren't done with automation, they're still being done by hands. Hands left exposed to toxic chemicals, lungs breathing unfiltered toxic vapors.

      If anything, I'd bet exploitation of the vast number of poor workers has led to a decline in the automation of some if not many industries.

      And if I were to guess, I'd say we're ripe for imports of cheaply made, and cheap Chinese cars. And they won't put the final nail in the coffin of Detroit because of automation, it will be because they can produce cars for a few thousand dollars on the backs of their labor force.

  •  We have unrealistic expectations with ROI (4+ / 0-)

    I've seen it with business cases inside of corporations, down to individual investors:  we all want terrific returns on our investments without realizing the significant trade-offs required to achieving those target returns.

    We can't charge and are unwilling to pay higher prices -- we are all being forced to cut costs and increase productivity -- given our global economy .  Yet, we all want higher wages, growth in wages and higher-paying jobs.  And yet, wages are costs, they eat into profits.  And yet yet, higher wages also drive higher consumption which drives growth.

    But the markets demands growth in ROI, which means bigger profits, which means lower costs, which means controlling wages.

    I don't see how we can't have it both ways.

    Whenever you find yourself on the side of the majority, it is time to pause and reflect -- Mark Twain.

    by dcrolg on Mon May 17, 2010 at 06:13:45 AM PDT

  •  If productivity has increased (4+ / 0-)

    and real wages haven't, then some other factor of production must have captured the surplus.  Seems obvious that it should be capital, but the value of capital assets has stagnated too.  Where'd it all go?  Land?

    •  They upper incomes kept it (12+ / 0-)

      That's how their incomes went up.

      They took their money - and the tax cuts - and invested it on Wall Street, not Main Street.

      That created little to no new demand for other goods and services. Without new demand, there is no pressure to increase wages or employees.

      •  Why invest in jobs when you've got free money (3+ / 0-)
        Recommended by:
        Liberal Protestant, CParis, freesia

        coming out of the Fed and the investment market?  Just hold all your cash and capital, and buy up foreclosed homes.

        It's the Henry F. Potter approach to business.

        Full Disclosure: I am not Ben Leming. But I think he's pretty cool.

        by Benintn on Mon May 17, 2010 at 08:00:21 AM PDT

        [ Parent ]

      •  And that's what made the boom of the (0+ / 0-)

        80's and 90's so interesting. It was literally created when wealthy people started taking their savings and investing in economic prospects that actually created jobs. It proved the potential of the capital being held by the well-to-do. The capital they have sequestered and are holding out of circulation. And the potential of what could happen when that capital is tapped.

        That's why a progressive tax policy is so important. And why limiting the types of Wall Street trading that can take place. Wall Street must be about investing in business, not investing in financial merry-go-rounds.

        Time to start forcing the wealthy to either use that money in real ventures that create jobs, or have it taxed back into circulation via the IRS.

    •  The DJIA is up 4000 points from the bottom... (1+ / 0-)
      Recommended by:
      Liberal Protestant

      Stocks just had the best year in about the last 50...

      Profits are phenomenal. The stock market reflects the productivity gains....

  •  I find it hard to take this seriously (2+ / 0-)
    Recommended by:
    Joe Bob, papicek

    The price of gasoline will control whether the consumer has enough money to spend?  Seriously?  If that's all that we're hanging by, we are in serious trouble indeed.

    If this is in fact the case, the federal government should put a much larger and stronger Cash for Clunkers program in place, specifically for hybrids and electric cars.

    •  There is also a giant (2+ / 0-)
      Recommended by:
      3goldens, Paul Goodman

      financial clusterfuck still in progress.

      But as far as consumers go jobs/extended unemployment may keep us afloat as long as expenses don't rise too much.

      Energy and food (which is strongly affected by oil prices) are the biggest inflation factors for households.  That's why they aren't included in the CPI - because they are too volatile dontcha know.

    •  Preferably not funded like the last one :P (1+ / 0-)
      Recommended by:

      The last Cash For Clunkers had pathetic MPG requirements, and the funding for it was robbed from the DOE's AFVL program, which was the program that loans money to makers of electric and fuel efficient cars to scale up their operations.

    •  I am not in a position... (0+ / 0-)

      to evaluate the truth of the effect of oil prices on the "recovery," however, this is not the first time I've heard it. On business news and some TV talk shows, I've heard the same claim. Talking heads, as far as I'm concerned.

      I'm skeptical about it as well, but as I say, I'm in no position to argue the matter. Perhaps it was synedoche, using "oil" to mean the underlying price levels of all commodities, in which case, I'd have to give it some serious thought before coming to any conclusions.

      In this economy, a hike in oil prices might lessen demand, and cause price hikes throughout a bunch of other industries, (as they did as a result of the oil shock of 1973) and thus lessening demand (as businesses closed or changed their practices to use less transport) throughout the economy. I doubt there's any actual data to back this up this notion though and it still seems farfetched that either oil prices would spike enough to bring this about.

      Plus ça change we can believe in.
      Bye Obama. You and I are done.

      by papicek on Mon May 17, 2010 at 05:12:52 PM PDT

      [ Parent ]

  •  Yep. NDD and Bonddad nailed it a year (5+ / 0-)

    before the meltdown.  Your work is appreciated.

  •  But, but, but.... (13+ / 0-)

    if we lower taxes for the very rich, that will spur investment, which spurs growth, and then the wealth will trickle down to the rest of us....won't it?

    If there were any truth to "Trickle Down" economics, why hasn't it worked as advertised? Why do some people still believe in and espouse it?

    It's very simple: A CEO or hedge fund manager who "earns" 1,000 times the yearly pay of a middle-class worker might buy up to a dozen mansions, but he won't buy 1,000 middle-class homes. The purchase of a few dozen Porsches and Ferraris will not provide the employment needed to manufacture and market a few thousand Fords and Chevys. "Trickle Down" is and always was a total sham, and it's so sad that so many suckers fell for it, and are still falling  for it today.

    When more people are doing better, more people are doing better.

    Al Qeada is a faith-based initiative.

    by drewfromct on Mon May 17, 2010 at 06:29:35 AM PDT

    •  Exactly (4+ / 0-)

      But the Republicans got away with it. And then in the moment when the Dems got the White House and both houses of Congress, did they reverse trickle down and replace it with demand-side rise up economics? Did they create a millionaire's surtax and close that loophole that allows hedge fund fuckers to get taxed less than their secretaries? Did they introduce new tax credits to provide a bailout for working people? Nope.

      "Imagine all the people, sharing all the world." --John Lennon

      by RiseUpEconomics on Mon May 17, 2010 at 08:08:21 AM PDT

      [ Parent ]

      •  Nor did they (4+ / 0-)

        do anything to reverse the tide of merger-mania or outsourcing and offshoring of American jobs to the third world. Nor did they do anything about the consolidation of the Corporate media into a few giant conglomerates that exercise corporate censorship over the airwaves.

        The Dems have done very much as far as entrenching and empowering the Reagan agenda, and little if anything to counter it.

        Al Qeada is a faith-based initiative.

        by drewfromct on Mon May 17, 2010 at 08:42:29 AM PDT

        [ Parent ]

    •  But, But.... (2+ / 0-)
      Recommended by:
      CParis, RiseUpEconomics

      Trickle down WOULD work....if the CEO had to pay each of the guys who come build the mansion a wage 1/10 of his own.  Imagine all the plumbers and electricians doing work on his mansion getting $300 an hour plus benefits, such as a $8,000 per year contribution into a defined benefit plan just like his.  Then the CEO would gladly build his India.

      The problem with "trickle down" is that not enough was forced to trickle.  Instead, the upper class took those increased checks, killed the Unions so that their money would go even further, then set about unwittingly destroying the rest of the middle class because who wants to pay an American to build your blue jeans when an Asian worker can do it so much more "efficiently".

      Now, as someone pointed out above, we've weakened ourselves to the point that no America  middle class wage earners can pay American workers American wages anymore.  Look inside Walmart if you don't believe me.  The only people still making "American wages" are the executive classes, for the most part.  

      •  the only jobs they created (1+ / 0-)
        Recommended by:

        were for maids, lawn-care workers, nannies - many of whom were exploited undocumented laborers "earning" less than minimum wage...

        If you haven't got anything nice to say about anybody, come sit next to me. ~ Alice Roosevelt Longworth

        by CParis on Mon May 17, 2010 at 04:04:57 PM PDT

        [ Parent ]

    •  trickle down actually works... (1+ / 0-)
      Recommended by:

      but not in the way they sold it to us. It trickled down to poor Chinese looking for work.

      Plus ça change we can believe in.
      Bye Obama. You and I are done.

      by papicek on Mon May 17, 2010 at 05:14:24 PM PDT

      [ Parent ]

  •  A meme I'm Sick Of....... (7+ / 0-)

    Meet the Press 16 May 2010

    MR. GREGORY:  Before you go, Senator McConnell, if the economy continues to produce jobs--573,000 between January at April--it's a projected 1.72 million jobs created over a full year.  If that happens, do you think President Obama deserves credit?

    SEN. McCONNELL:  What we know right now is there have been 3,000 private sector jobs lost when the president--since the president came to office.  We know they've added 260,000 government jobs.  We know the only boomtown in America is Washington because they're exploding government employment, hiring new government workers by borrowing money from our grandchildren.  That isn't likely to change by November.  I hope the economy is beginning to come back, but it'd have to come back a long way for anybody to believe the stimulus plan, which was sold to us to keep unemployment at 8 percent, has worked. Unemployment is at 10 percent.  We're not making a whole lot of headway so far.

    I can't understand Why no body hits not only McConnell but anyone using same or similar speak, reason the Government is needed for stimulus is to Stabilize the Private Sector of which their constant speak is Taxcuts to the wealthy and businesses create jobs and growth, Not! There's nothing being injected in the economy from the Private Side as to those Taxcut spin points and Especially 'reaganomics', 'supply side' or 'trickle down'

    There could be a reason for the no private funds, they, as we're seeing with the street and the banks, want to Keep Things As They've Been These Last Decades and helping not only the economy, the work force or anyone in government trying to gain back reality of Capitalism just plain doesn't matter to them as long as they get theirs, which isn't to begin with!

    "What is the difference between an al Qaida terrorist and a misguided American terrorist?" "The planes they fly!"

    by jimstaro on Mon May 17, 2010 at 06:30:00 AM PDT

  •  IMHO, the immediate threat to GDP (4+ / 0-)

    is a market crash from Europe and/or the Gulf spill.  But you're pretty much right that even with insanely good luck on everything else that's going to tank us in a few years.

  •  One dumb question: can government change the (0+ / 0-)

    ...calculation private industry makes when it decides whether to hire? This is very tricky --- you don't want to give away tax revenue (on corporate profits) to assist companies to hire people that would have been hired anyway...

    I don't know how to do it, but it is worth considering....

    •  We *might* increase overall employment (1+ / 0-)
      Recommended by:

      by raising minimum wages while also taking away tax incentives for offshoring jobs AND knocking the crap out of companies that use illegals.

      No, I'm not hating on illegals.  Give people a path to citizenship.  

      What I'm saying is end the employment practice which IS do-able.  If we can have licenses for other things then I'm sure we can have a license to work in the U.S.  Show your papers...birth certificate/immigration paper, one main agency like Social Security and get a license to work in the U.S.  Companies can contact the licensing agency to verify eligibility to work legally.

      Presently illegals are second class workers that are abused by employers because employers know that these workers have no recourse if they are mistreated, or aren't paid what they should be paid.

      De-incentivising off shoring is kind of a no brainer.  

      And raising minimum wage sounds nuts unless you consider that in most industries companies are already operating with minimal employees.

      Look at retail.  Even when I was in it in the early 90's it was pathetic.  4-6 employees working the entire floor of a huge Target store.  The one place you could find help was the front end.  Now they have cut cashiers too by putting in self checkouts (which I refuse to use, BTW).

      IMO the canard that raising the minimum wage will decrease employment is a dead cat.  Jobs have been cut to the bone.  All it will do now is help out the lucky ones that are employed.  

      •  We tried to do this already (2+ / 0-)
        Recommended by:
        CParis, ilex

        The government proposed to get all employers to go through a new Social Security based database to verify the legality of workers being hired (Here).  Now it is a voluntary thing.  Guess why?  Go on, guess.  Its really not a hard question....

        Such a system, coupled with strong sanctions for cheating, would stop 90% of all illegals from working in the U.S.  Then they would become "illegal tourists" and no one would care.

  •  It's systems issue of power distorting the labor (4+ / 0-)

    market. We have an economic system that has been allowed to run wild with the amplifying feedback loop of more financial accumulation in fewer hands leading to even more financial accumulation in even fewer hands. This dynamic gives ever more power to those at the top of the income distribution.

    The labor market, like all markets, is a complex  social structure where many factors in addition to supply and demand play a role. Power imbalances between the participants plays a big role in how the system functions. Comparing CEO salaries to the median wage illustrates the problem quantitatively but doesn't describe the power dynamics. When boards of directors are composed of CEO's and other top earners from other companies and they sit on the compensation committees they approve outrageously high salaries for CEO's. That isn't really much of a market. If it were the process would look to those below the CEO to see who could do the job as well but would do it at a reduced rate. For many other jobs in the middle there is no power counterbalance to the power of the corporations so they gradually move down. Here is a good article on places to intervene when trying to change a system.

    I don't know what the best leverage point for moving this toward a more power balanced state but a more progressive taxation system has had a leveling effect in the past, so have strong labor unions.

    Love = Awareness of mutually beneficial exchange across semi-permeable boundaries. Political and economic systems either amplify or inhibit Love.

    by Bob Guyer on Mon May 17, 2010 at 06:56:27 AM PDT

    •  taking a systems approach to economics... (1+ / 0-)
      Recommended by:
      Bob Guyer

      is something I've read about before. Yves Smith touches on this somewhat in her book. Have you any more info and links about this?

      Plus ça change we can believe in.
      Bye Obama. You and I are done.

      by papicek on Mon May 17, 2010 at 07:32:53 AM PDT

      [ Parent ]

      •  General systems theory emerged from biological (1+ / 0-)
        Recommended by:

        science needing a way to understand complex organisms and living systems. The linear causal model of the physical sciences didn't help explain the development of complex biological systems so the biological sciences developed their own model, General Systems theory and it has proven useful in understanding how many complex social systems develop and function. The article I linked above is a great description, particularly from an activists (someone who wants to change things) point of view, of how systems thinking can be applied to systems in an attempt to intervene purposefully and try to change how a system functions.

        Herman Daly, while not explicitly a systems economist, makes a systems point aimed at one of the most powerful leverage points (changing the mindset out of which the system arises) identified in the Leverage Points article by Donnella Meadows, when he argues for a steady state (not growth) economy by starting at the foundation assumption of the system. Daly says traditional economics assumes the environment as a throughput of the economy, in other words the natural world is a subset of the larger system the economy. Daly says things look very differently economically if you see the economy as arising in, being a subset of, a finite living world.

        Sorry I don't have an explicitly systems oriented economist to point you toward but the first place I really got interested in systems approaches was in the organizational development work of Peter Senge. His book "The Fifth Discipline" was a book about identifying factors in organizations that succeed over the long haul. It turns out that organizations with a strong ability to learn were much more likely going to survive and thrive for long periods of time. Several key skills are apparent in these organizations, one is that they are less event thinkers than system thinkers. Event thinkers see an event and try to intervene with the event, systems thinkers see an event and try to intervene with the system out of which it emerges.

        Love = Awareness of mutually beneficial exchange across semi-permeable boundaries. Political and economic systems either amplify or inhibit Love.

        by Bob Guyer on Mon May 17, 2010 at 08:02:45 AM PDT

        [ Parent ]

        •  thanks for the reply and the link... (1+ / 0-)
          Recommended by:
          Bob Guyer

          I read Meadow's paper, and then because the paper was good (and accessible to a layman) and because it was there (I looked for it), I bought her book, Thinking In Systems today.

          Her Limits To Growth, I read back in the 70's, and I think it's still kicking around here somewhere.

          Again, thanks for the heads-up.

          Plus ça change we can believe in.
          Bye Obama. You and I are done.

          by papicek on Mon May 17, 2010 at 05:20:48 PM PDT

          [ Parent ]

          •  Great find, I haven't read either book, just the (1+ / 0-)
            Recommended by:

            paper. I liked the paper because it was so clear and easy to understand.

            Love = Awareness of mutually beneficial exchange across semi-permeable boundaries. Political and economic systems either amplify or inhibit Love.

            by Bob Guyer on Tue May 18, 2010 at 08:17:15 PM PDT

            [ Parent ]

  •  Excellent post, NDD. (9+ / 0-)

    It's the Two Americas.  Class stratification is the core problem.  

    Without real and sustained wage growth -- without addressing the structural issues faciing the American middle/working classes -- recessions will be more frequent and deeper, and recoveries including this one will have problems being sustainable for too long a period of time.

    Pooties and Woozles unite; you have nothing to lose but your leashes!

    by TomP on Mon May 17, 2010 at 07:03:10 AM PDT

  •  the other half of the wage equation... (1+ / 0-)
    Recommended by:
    New Deal democrat

    is inflation. When wages go up, costs are passed to consumers. This isn't necessarily a bad thing, all else being equal, a little inflation (I'm told) is regarded as a good thing, indicative of growth.

    Plus ça change we can believe in.
    Bye Obama. You and I are done.

    by papicek on Mon May 17, 2010 at 07:05:38 AM PDT

  •  that first graph doesn't really... (4+ / 0-)

    illustrate just how flat most everyone's income has really been, so let's contrast the top 1% against the middle 60% and bottom 20%:

    The change of scale really illustrates this well.

    Plus ça change we can believe in.
    Bye Obama. You and I are done.

    by papicek on Mon May 17, 2010 at 07:29:35 AM PDT

  •  It Just Strikes Me That The House of Cards.... (3+ / 0-)
    Recommended by:
    pletzs, barbwires, OnlyZuul

    ....that has artificially propelled the economy for much of the last 30 years has already tumbled and something fundamental has to change for us to restore the pre-Reagan era of upward mobility based on real-world economic vitality.  You can trace the dawn of our problems to globalization and subsequent deindustrialization.  From that point forward, effectively all economic growth has been the result of financial industry three card monte and a death spiral of easy credit and cheap imports feeding an unsustainable consumer binge that helps people forget their incomes have gone nowhere since "The Incredible Hulk" was a hit TV show.

    I think it also has to be mentioned that the advent of the 401K has contributed greatly to the boom-and-bust bubble economy.  We now have a massive amateur investor class--an "ownership society"--looking for the path of least resistance to be able to retire at age 45.  They make for easy prey for financial barons taking advantage of their ignorance and overhyping every bubble that begins to get blown.  We're seeing the same effect now with a stock market restoring all that it's lost since November 2008 for no obvious reason relating to sustainable economic recovery beyond the fact that millions of people with 401Ks are in a big hurry to get their portfolios back to what they were worth in 1999.

    •  What choice do we 401k "owners" have? (0+ / 0-)

      We can work 60 years and have no pensions. So why attribute the 401k syndrome to ignorance.

      Democrats give you the Bill of Rights; Republicans sell you a bill of goods!

      by barbwires on Mon May 17, 2010 at 08:42:43 AM PDT

      [ Parent ]

      •  Obviously Not Every 401K Holder Is The Same.... (1+ / 0-)
        Recommended by:

        ....but the anecdotal evidence suggests the nature of the 401K allows for the barons of Wall Street to game the system by promoting every "next big thing" into an unsustainable bubble and convincing amateur investors to get on board for the wild ride.  Once the barons realize the bubble's gonna burst, they get out and leave the working person with a 401K to take the fall.  Then it's onto the next bubble and the exact same scenario.  Rinse and repeat.

        In short, I'm not blaming individual 401K holders as much as an economic system that has moved away from more defined-benefit pensions that are at least a little more stable.

        •  The other problem (0+ / 0-)

          is that there are few investment options for many 401k holders.

          I agree the real problem is the move away from defined-benefit pensions, but mny of us have worked 40 years or more and have none.

          Democrats give you the Bill of Rights; Republicans sell you a bill of goods!

          by barbwires on Tue May 18, 2010 at 10:04:04 AM PDT

          [ Parent ]

    •  big problem with 401k is lack of employer (0+ / 0-)

      vesting.  With fewer people staying at the same company for years - often the employer match portion of the 401k never becomes vested. Most plans require 3 years before company contributions are vested.

      If you haven't got anything nice to say about anybody, come sit next to me. ~ Alice Roosevelt Longworth

      by CParis on Mon May 17, 2010 at 04:08:16 PM PDT

      [ Parent ]

  •  That's what recessions are for (5+ / 0-)

    To keep our wages down. When a recession happens, all wages end up being reset to a lower level. Currently, in my field, the drop on this one is over 30%. I have been trying to get a new job, but I can't afford to change now. All the businesses are taking advantage of the recession to decrease wages for new employees (and current ones, in some locations).

    She who hesitates, waits.

    by KatGirl on Mon May 17, 2010 at 07:48:00 AM PDT

    •  what field? eom (1+ / 0-)
      Recommended by:

      Full Disclosure: I am not Ben Leming. But I think he's pretty cool.

      by Benintn on Mon May 17, 2010 at 07:58:51 AM PDT

      [ Parent ]

      •  I'm in (1+ / 0-)
        Recommended by:

        computers. I'm a senior systems administrator with over 20 years of experience.

        I've been doing this far too long. But, it pays pretty well so what's a girl supposed to do?

        She who hesitates, waits.

        by KatGirl on Mon May 17, 2010 at 08:06:01 AM PDT

        [ Parent ]

        •  yup, i'm familiar, know the drill (1+ / 0-)
          Recommended by:

          IT is a really tough field, because it's so easy to justify outsourcing your IT solutions to overseas contractors who get paid pennies on the dollar.

          It's especially hard when you've got experience, because IT is a field that is always "cutting edge" and doesn't tend to reward those experienced hands who know how processes and systems work best.

          We're in a "first break all the rules" cycle right now in IT.  I wish there were solutions to this ... I wonder what you might suggest?

          Full Disclosure: I am not Ben Leming. But I think he's pretty cool.

          by Benintn on Mon May 17, 2010 at 10:41:12 AM PDT

          [ Parent ]

          •  I'm trying (0+ / 0-)

            to change up to management. I've been there before, but the tech side payed more, so I switched back. Now the management side is paying more, so I'm back trying to move into it again.

            She who hesitates, waits.

            by KatGirl on Mon May 17, 2010 at 02:03:54 PM PDT

            [ Parent ]

  •  Excellent post... (2+ / 0-)
    Recommended by:
    xxdr zombiexx, New Deal democrat

    now if only the brain dead media would follow.  

    Now whoa whoa whoa right there spinach chin!

    by Borg Warner on Mon May 17, 2010 at 07:54:26 AM PDT

  •  Productivity has gone up (4+ / 0-)
    Recommended by:
    xxdr zombiexx, CParis, ilex, tardis10

    And been Hoovered into the fat cats grubby hands.  Money ultimately is a unit of work.  We work harder, produce more wealth and get fucked.  General strike.  I want my money.  I earned it.  Now fork it over.  And don't make me come get it because I will.

    ObamaCare because Obama Cares. Next time you're hospitalized you can thank him. Just remember he delivered it for you.

    by Atilla the Honey Bunny on Mon May 17, 2010 at 07:55:41 AM PDT

  •  Yup. We need to raise taxes. (5+ / 0-)

    Because that's the only way to stop the stagnation.  The Fed can't fix it.

    Full Disclosure: I am not Ben Leming. But I think he's pretty cool.

    by Benintn on Mon May 17, 2010 at 07:58:14 AM PDT

  •  What I am experiencing is NOT BEING PAID! (7+ / 0-)

    I have worked ofr a slew of private mental health organizations in the past 2 years and with 2 exceptions, they are not able or willing to pay people correctly or on time.

    Right now I have an agency I work for and they were supposed to pay me SOMETHING on April 30th. It's May 17th and STILL NO PAY, nor even a word about where it's at.

    They have offered me a program manager position which I would love to do, but without any rock-solid guarantee that my paychecks won't be late it's worthless to me. I have another job that has paid me twice, has already implemented direct deposit, and is going to pay me again this Friday.

    So my wages have stagnated SEVERELY in the past 2 years. I am about a year behind on income, have a hundred dollars in the bank at the moment and another root canal that needs to be done: $1200 I don't have.


    Torture good, Healthcare bad, Marijuana evil.
    Doc in the Twitterverse

    by xxdr zombiexx on Mon May 17, 2010 at 07:59:34 AM PDT

  •  good descrpition of the problem. (4+ / 0-)

    but you leave out the fun part: who gets their asset hoard wacked to redress the imbalance?

    At the end of all the fancy talk, the solution is found in here: too few people control too much wealth and they ain't gonna give it up voluntarily.

    The bear and the rabbit will never agree on how dangerous a dog is.

    by fromer on Mon May 17, 2010 at 08:00:48 AM PDT

  •  good post (1+ / 0-)
    Recommended by:
    Paul Goodman

    the one thing i believe is missing is that we need to change the way we think as americans. We can't continue a "permagrowth" more is better approach. There aren't enough resources. So when we talk about recovery requiring the "American Consumer" returning to bubble level consumption we are just kicking the can down the road.

    As far as making the kick the can and consume approach work, where are the jobs going to come from that will employ people so they can overconsume?

  •  Yes.. good post.. but those "structural issues" (1+ / 0-)
    Recommended by:

    are not easily addressed.

    There's a Catch-22 built into a recession as bad as the one we've just gone through.

    Companies learn how to do more with less.  They become more efficient.  So even as productivity goes up, hiring doesn't, nor do wages.

    The other problem that no one wants to address, of course, is the millions of undocumented workers in this country that force down wages for citizens.  Simple supply and demand..

    "Those are my principles, and if you don't like them... well, I have others." - G. Marx

    by Skeptical Bastard on Mon May 17, 2010 at 08:06:43 AM PDT

  •  And if you think it's bad for homeowners, (3+ / 0-)
    Recommended by:
    wu ming, New Deal democrat, tardis10

    try living over the last 30 years without the ability to refinance a mortgage or tap a HELOC because you were renting.

    There was nothing for us.

    Add bad or no credit on to that, and we've been worthless for years.

    Maybe that's why so many renters fell off the economic radar so long ago. We didn't have any equity to tap, so when our wages didn't go up and we had no line of credit, we were just screwed. Nobody was looking out for us.

    And here we are. All together in the same boat full of holes.

    And renters are STILL being ignored as somehow not part of the real economy. You really have to have a house to get credits and deductions that amount to any tax help.

    "The difference between the right word and the almost-right word is like the difference between lightning and the lightning bug." -- Mark Twain

    by Brooke In Seattle on Mon May 17, 2010 at 08:12:16 AM PDT

  •  What is way above 2% inflation (3+ / 0-)

    Anything medical from health care to health "insurance."  With the whopping increases in co-pays and deductibles even people with employer-linked insurance have taken effective pay cuts if they have any medical conditions at all.  More and more co-pays are now percentages of amount owed, also, rather than fixed dollar amounts.  In many cases this means they are not only much higher beut that they are unpredictable.  One also finds out that out of pocket "maximums" really aren't-they dont cover anything "above UCR" or apply to things "out of network"--even if you need surgery and no anaesthesiologist is "in network."

    So its not just big oil putting a huge dent in the ability of a middle income worker to survive.  This is also hitting really hard on the 50-65 year olds--many of whome have chronic conditions.  And more and more health conditions are being factored into whether you can get a job, and I bet under the table they are factoring into whether one can get a mortgage, and increased credit card limit or a loan.

    Democrats give you the Bill of Rights; Republicans sell you a bill of goods!

    by barbwires on Mon May 17, 2010 at 08:26:37 AM PDT

  •  We are screwed (6+ / 0-)

    Simply put, from here on, we're not going to see any sustained recovery, nor long term growth in the American economy until average Americans see a real and sustained increase in their compensation for labor

    In other words, no sustained recovery is forthcoming.

    What magical forces are going to stop the forces of globalization and make this so?

    Barring a revolutionary upheaval of the sickly relationship that exists between our "government" and their corporate masters, I don't see much hope for change. The die has been cast.

    This is what chump Change looks like.

    by Wamsutta on Mon May 17, 2010 at 08:27:31 AM PDT

    •  Wage Suppression Is Intentional (0+ / 0-)

      It's the policy of both parties of government.  You are correct.  We're doomed.

      "Simon Wiesenthal told me that any political party in a democracy that uses the word 'freedom' in its name is either Nazi or Communist."

      by bink on Mon May 17, 2010 at 09:36:09 AM PDT

      [ Parent ]

    •  We need to change "Work" as we know it (0+ / 0-)

      How do you adjust to a global economy where capital flows across boundaries to find the lowest labor costs? We can't continue to rely on "jobs" and "work" as our only source of income. We need to establish a basic income, enough to get by on, as a human right. Tax the rich and give to everyone else. Then work becomes something you do to earn extra money to raise your standard of living.

      It's clear that they don't need us as workers any more. Why do we have an economy where we need jobs so much?

      "Imagine all the people, sharing all the world." --John Lennon

      by RiseUpEconomics on Mon May 17, 2010 at 03:03:14 PM PDT

      [ Parent ]

  •  very much like the first 30 years of 20th century (2+ / 0-)

    History is repeating itself.  The last time wages were stagnant for a long period of time, the Great Depression resulted.

    I'm trying to free your mind, Neo. But I can only show you the door. You're the one that has to walk through it.

    by noofsh on Mon May 17, 2010 at 08:36:12 AM PDT

  •  Dovetails with Zuckerman attack on unions. (3+ / 0-)
    Recommended by:
    3goldens, tardis10, livingthedream

    The Crippling Price of Public Employee Unions

    In which Zuckerman, leading main stream media publisher, argues that good wages, fair labor practices, health care and pensions are just terrible for rich people who have to pay taxes on their Wall Street ponzi schemes to cover cost of government services Wall Street depends upon.

    Somehow business smart guy Zuckerman does't get the connection between bankrupt governments and GOP policies of lowest taxes in 60 years and GOP deficits and debt....and that fixing GOP economic disasters should be paid for by municipal workers vs. Wall Street.

    •  Disgusting that right wing still blames unions (5+ / 0-)

      It's a fact though.  Right wingers across the board, whether Mort Zuckerman or Chris Christy in NJ, blame unions for everything.  Nothing could be further from the truth.  The right wing won't be satisfied until they destroy the middle class completely.

      I'm trying to free your mind, Neo. But I can only show you the door. You're the one that has to walk through it.

      by noofsh on Mon May 17, 2010 at 08:44:44 AM PDT

      [ Parent ]

  •  Higher interest rates (0+ / 0-)

    always a bad thing? You seem to focus exclusively on how lower interest rates allow consumers to refinance mortgage debt. What about people whose savings and investments are directly tied to higher interest rates? Not everyone is in the stock market. Some of us have money in Treasury securities and savings accounts. Higher interest rates mean we get a better return on our savings and investments, even if our wages don't increase. I would like to see higher interest rates. If I could get 15.21% on a 30-year Treasury bond, I would be very happy indeed.

  •  This is a paper recovery (2+ / 0-)
    Recommended by:
    CitizenOfEarth, 3goldens

    based on the premise that after all it really was just a "mental recession".

    Tell that to the bottom 50%.

    In this age of falseness, only howls of agony ring true.

    by Paul Goodman on Mon May 17, 2010 at 09:21:45 AM PDT

    •  The Great Recovery (1+ / 0-)
      Recommended by:

      amounted to the taxpayers (middleclass) being looted to the tune of $2+ Trillion by the rich.

      The recession is over for the rich. The rest of us are still in free fall. The Greece catastrophe is on its way here.

      Toxic Assets collapsed the world financial system. Toxic Asses have poisoned the U.S. Government.

      by CitizenOfEarth on Mon May 17, 2010 at 09:32:02 AM PDT

      [ Parent ]

  •  It Is a Paradox (1+ / 0-)
    Recommended by:
    New Deal democrat

    I think that the White House wants wages to descend in order to make American labor more competitive globally.

    But how can they do these without triggering a GDP recession?

    Very difficult thing to do -- but they are trying.  I don't know how it will work out.

    "Simon Wiesenthal told me that any political party in a democracy that uses the word 'freedom' in its name is either Nazi or Communist."

    by bink on Mon May 17, 2010 at 09:32:46 AM PDT

  •  The difference between now and 10 years ago (3+ / 0-)
    Recommended by:
    Copp, New Deal democrat, tardis10

    is that the American consumer's credit is all tapped out. Many folks have been faking it, pretending to be better of than they really are if you will, for decades.

    I've just been fakin' it,
    I'm not really makin' it.
    This feeling of fakin' it--
    I still haven't shaken it.
    -Simon and Garfunkel

    New improved bipartisanship! Now comes in a convenient suppository!!! -unbozo

    by Unbozo on Mon May 17, 2010 at 09:35:23 AM PDT

  •  I have a completely different point of view (3+ / 0-)

    In the 1950's the top 1% income earners accounted for between 6% to 7% of all American income available. Today the top 1%ers get 27%. Since more and more American capital is in the hands off fewer and fewer which means less capital flowing in the economy with more capital being held stagant. Offshore tax-shelters have been doing a huge amount of business in the last few years. Since 1996 an adverage of $800 billion in American capital has moved into these off-shore accounts each year. That means that $800 billion/year is completely removed from our economy which was not funding capital improvements, new startups, or creating jobs and tax revenues. The health and well being of the entire world economy relies upon the dynamic flow of capital the more held static means less overall economic activity everywhere. The federal tax laws must be reformed to shift the real tax burden way back upward to increase the amount of capital circulating in the economy. This would create higher wages, more profits, and more tax revenues.

    Really don't mind if you sit this one out. My words but a whisper -- your deafness a SHOUT. I may make you feel but I can't make you think..Jethro Tull

    by RMForbes on Mon May 17, 2010 at 11:58:42 AM PDT

    •  Crackdown on the offshore tax shelters (1+ / 0-)
      Recommended by:

      and tax that $$$ and redistribute it to working people who will spend it and stimulate the economy.

      "Imagine all the people, sharing all the world." --John Lennon

      by RiseUpEconomics on Mon May 17, 2010 at 02:57:17 PM PDT

      [ Parent ]

      •  Exactly or even make it impossible to do (0+ / 0-)

        in the first place. Reform the current ridiculous federal tax code to raise the minimum income level to something more realistic. Currently, if you make $401 in a year you are required to file a return and pay federal income taxes. That means an adverage teenager mowing lawns for pocket money is required by law to file a federal income return and claim their taxable income. I think it would make more sense to raise the minimum income level to a much higher level and get rid of all the deductions and loopholes. Change the code so that you don't have to file a return until your personal income exceeds $75,000 and begin the progressive income tax rates from there on all income from any source. No payroll withholding, no deductions, no loopholes, and no real way to hide income. It would be much easier for the IRS to keep track of a much smaller group to taxpayers and maintain compliance.

        After all the income tax was not originally setup to tax everyone. Only those that already reaped the benefits of our economy should be required to pay for the government services that maintain that economy. The working class was specifically excluded from the earliest Income Tax laws. It wasn't until after WWII that wages/salaries were added to taxable income and even then it was to be temporary (until the war debt was retired). But, you can guess what happened next.

        Really don't mind if you sit this one out. My words but a whisper -- your deafness a SHOUT. I may make you feel but I can't make you think..Jethro Tull

        by RMForbes on Mon May 17, 2010 at 04:01:17 PM PDT

        [ Parent ]

  •  Joblessness Hits the Pulpit (Article Link Below). (2+ / 0-)

    While the economy appears to be recovering from the worst downturn in generations, more clergy are facing unemployment as churches continue to struggle with drops in donations. In 2009, the government counted about 5,000 clergy looking for jobs, up from 3,000 in 2007 and 2,000 in 2005.

    Church staff are feeling the pinch, too. In an October survey, about one in five members of the interdenominational 3,000-member National Association of Church Business Administration said they had laid off staff amid the recession.

    The official unemployment rate among clergy sits at 1.2%, far below the national average jobless rate, but layoffs can be particularly painful for ministers. Churches aren't subject to unemployment taxes, so laid-off employees can't collect the benefits available to other workers.


    Stiff competition isn't the only hurdle clergymen face. Each job comes with a laundry list of required qualifications that are sometimes more specific than is common in corporate hiring. Courts have consistently declined to interfere in the hiring of clergy members on First Amendment grounds, meaning the usual prohibitions on discrimination based on disabilities, age, sex, and gender generally don't apply said Dianna Johnston an attorney with the Equal Employment Opportunity Commission.

    A job listing for a pastor opening in Florida on the Southern Baptist Convention website, for example, requires that applicants be married and between the ages of 30 and 49. Another ad for a part-time position in Kansas warns that the committee won't consider someone who has been divorced.


    There's the Conservative World of "Work".  That's what awaits us all if we keep giving them power.

  •  Reaganism must be revoked (1+ / 0-)
    Recommended by:
    New Deal democrat

    New Deal policies must be restored.

    Otherwise American and planetary decline will be unstoppable.

    We must take a sustainable path...or die.

    look for my DK Greenroots diary series Thursday evening. "It's the planet, stupid."

    by FishOutofWater on Mon May 17, 2010 at 07:26:22 PM PDT

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