The American Economic Recovery

Robert Reich in a post on his blog identifies the key problem with getting the US back on its feet. It requires spending but:

Moody’s Analytics estimates that the shopping of America’s richest 5 percent now accounts for 35.5 percent of all U.S. consumer spending. Just think how much more spending would be going on — and jobs thereby created — if more Americans shared in Wall Street’s gains.

The remaining 95 percent of Americans are still holding back from the malls because they’re worried about their jobs, their falling wages, their higher health-care deductibles, and their dropping home values. And as long as they continue to hold back, this recovery will be painfully slow.

As for the rest of America waiting for the rich to spend them out of this Great Recession, Robert Reich says the chance of that is slim to none:

The Street’s bull market over the last two years has seriously enriched only the wealthiest 5 percent of Americans who hold the lion’s share of stock. While their earned income starts at $210,000, their unearned income – dividends and capital gains — now puts them considerably above that.

Shouldn’t the shopping of the top 5 percent spur lots of new jobs? Not really. While the top 5 percent are spending more, they’re not spending all that much as a proportion of their earnings. The rich sock away a bigger share of their income than everyone else. After all, being rich means you already have most of what you want.

Sadly Obama still has not admitted he made a mistake in January 2009 in going for too small a stimulus and allowing the Republicans to lard it with tax cuts and other "spending" that did little to put people to work or put money in the hands of the bottom half of the population who would have quickly spent it and not saved it.