09/01/09 Pittsburgh, Pennsylvania
Just reading the newspapers gives me a daily diet of economic gloom. For example, my pessimism for today (Aug. 26) started with the headline of my local newspaper this morning. The Pittsburgh Tribune Review delivered a banner message, “Record Red Forecast at $1.58 Trillion.” (I think they printed the newspaper before the word came out that Sen. Ted Kennedy died.)
Then for a national perspective, I looked at The Wall Street Journal, which published a slightly different alliteration, “Decade of Debt: $9 Trillion.” And finally, for an international view, The Financial Times summed it all up in characteristic British understatement, with, “US Says Debt Outlook Worsening.” Oh, you don’t say.
The big problem – obviously, the headline issue – with the US economy is too much debt. (That’s the BIG problem. There’s a long list of other problems after that.) And the debt problem is getting worse, not better.
Debt is ubiquitous across US society. Debt permeates the culture. Practically the whole nation has bitten off more than it can chew. Within the past two generations, the US economy has transformed from what Harvard historian Charles Maier calls an “empire of production” (which is what won the Second World War, for example) to an “empire of consumption.”
The lunch bucket-toting factory worker, or the beam-walking riveter constructing a skyscraper, symbolized the former empire of production. Those iconic workers are no more. They’ve been replaced by the image of vast tracts of McHouses blanketing the landscape. Or of parking lots filled with new cars outside coast-to-coast malls, with their owners inside maxing out their credit cards.
It’s the difference between an economy that creates surplus capital and an economy that consumes capital to gross deficit. Professor Andrew Bacevich of Boston University summed it up this way in his recent book, The Limits of Power. “The evil genius of the empire of production was Henry Ford. In the empire of consumption, Ford’s counterpart was Walt Disney.”
Come to think of it, we should be so fortunate as to be indebted just because we collectively took too many trips to Disneyland. As a nation, the US has borrowed and spent far beyond its means. You know what I mean. I don’t have to get into the details on that point. In particular, the political class just can’t seem to say no.
The other side of that debt coin is a widespread inability to repay. Households are so deep in debt that they’ve stopped buying, and I don’t care what the so-called consumer confidence surveys say. Less buying means that business profits are down. Where businesses are showing profits, a lot of it is because they are goosing the bottom lines through layoffs and spending cuts.
Layoffs? That’s putting it mildly. Many of the recent job losses are permanent. They’re structural. It’s not just the good old days, when the company said, “Go home and we’ll call you back in a few months.” No, in many cases, the jobs are gone forever.
It’s not just factory jobs, either. Those jobs were the first to go. The US economy lost millions of its old-line factory jobs over the past 25 years or so. It brought us into the age of the Rust Belt. Some economists and deep thinkers bragged about how this was somehow “good” for America. (Call me old-fashioned, but I could never quite figure that out.)
Now people with white collars are getting hit with permanent job losses in sectors like banking and law. Many parts of the nation’s financial districts are the new Rust Belts of America.
There are former lawyers waiting on tables, stealing jobs from the traditional class of table servers, starving artists. At many silk-stocking firms, even the formerly sacrosanct legal “billable hour” is under attack. And I know doctors and architects who’ve been laid off.
So joblessness is up, and it’s not about to come down anytime soon. With joblessness up, tax collections are down across the board. Unemployment compensation accounts are running out of money. Public assistance accounts are running down. Some states want to give early release to prisoners to save the costs of incarceration.
In Michigan, for example, some counties are no longer repaving the roads. They just grind the asphalt to gravel and save the cost of paving. It’s a foretaste of things to come, I believe.
I don’t see where the problems of indebtedness have been cured. We’re not even close. Maybe it’s my inner bankruptcy attorney at work. Where’s the wipeout? Where’s the discharge? How has all that bad paper out there been voided? It hasn’t.
Regards,
Byron W. King
for The Daily Reckoning
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you are 100% correct about lawyers. Read my blog:
bigdebtsmalllaw.wordpress.com
michael hudson is a first rate economist to consult regarding indebtedness and its pathologies…he speaks of debt peonage as our new way of life – literal serfdom…
one of the causes for so much unemployment is due to the loss of low cost production environment due not to high wages but to high infrastructures costs caused by the fire economy….i.e. we have become a rentier economy where the economy of producing goods and services is vanishing quickly because of tax and regulatory policy…
although that may not be a news flash for most folks, his analysis of why it is bad and how it is perpetuated is news….
part of the problem is that labor and production have been taxed far more heavily than economic rents / capital gains….he also cites the privatization of infrastructure which vastly increases costs….
if we are ever to recover and take political power from the plutocrats whose top 1% owns 57% of the wealth, then capital gains, economic renting, and labor taxes must be brought into equilibrium….
i am not a high tax advocate by any means but the key point is that special preference has been granted to non-earned income….the plutocrats will not let go which is why they are squealing like pigs over hr 1207….
if the people do not see that the fire economy and their bought and paid for whore representatives have sold them down the river, this country is doomed to serfdom….
good column
a bit downbeat, but good nonetheless
of course, it begs a follow up
They say that ‘a war is lost when “the Authority” believes ist own propaganda’.
For 35 of my 51 years I have believed strongly in industry protection, tariffs, quatas etc.
I understand the short comings of protection and there may have been an improved version of this concept available if it hadn’t been turned into the dirtiest of political words (concepts).
At the very bottom of the dung pile we currently find ourselves in is ‘trade imbalances’, I believe that had the right wing cruisaders not silenced villified and derided alternative views and those who bespoke them, Protection may have morphed into something very useful and perhaps could have saved capitalism from itself.
We will se it again soon but … woops its too late….. bring the mop.
It seems as if our elected officials are sure the sun will come out one day, and the good old days will return!!! It ain’t going to happen!! Until they realize this, they will continue their spending ways. The consumer driven economy is past life support, and God help us!!!
You forgot to mention Peak Oil.