Hope Amidst Pessimism

Here is an excellent post by Robert Reich that sums up the cusp of fate on which we find ourselves. The future lies in two directions. The tragedy of the present moment can perhaps wake up the political leaders, the financial elite, and the intelligentsia to the need to rebuild the social contract, or they can lose the moment and let everything slide into an abysmal recession/depression. I've bolded key bits:

How to Get Washington's Attention

Finally, it seems, the economic burdens of America’s vast middle class may be catching up with the Street. The Dow lost 2.22 percent today; the Standard & Poor’s 500-stock index was down 2.28 percent. Both marked their worst declines since August 11, 2010. The Nasdaq composite index fell 2.33 percent.

We’re coming full circle: The stock market is dropping because corporate earnings are slowing. Corporate earnings are slowing because consumers are pulling back. Consumers are pulling back because they don’t have enough jobs or adequate wages.

The immediate cause of the sell-off was an announcement by ADP Employer Services, a payroll processing firm that estimates employment, that private employers added only 38,000 jobs in May. The economy needs 125,000 new jobs a month just to tread water, given that at least 125,000 people join the potential labor force every month. Simply put, if new hires are in the range of five digits, American consumers will not have enough purchasing power to buy what the private sector can produce.

The leaders of the Street and big business may now have to wake up to a reality they’ve tried to avoid — that the central economic problem of our time isn’t the long-term budget deficit but the immediate deficit in aggregate demand.

They may not yet see the necessity of a renewed social contract linking pay to per capita productivity, but they will understand something must be done to fuel jobs and wages.

Never underestimate the power of Wall Street and big business to set the terms of the economic debate in our nation’s capital. After all, Wall Street and big business pay the tab of politicians on both sides of the aisle. Even if the middle class can’t get the attention of our representatives in Washington, those who fund their campaigns can.

I'm an optimistic pessimist, so I believe the elite will stumble around and make every mistake possible in their attempt to keep the current "system" in place that feathers their nest. But I'm optimistic in that I believe that this moment, or one like it that will come as this crisis continues to bump along the bottom, the elites will finally realize that the game's up and fundamental change is required. At that point, the social contract will be renewed and the bottom 90% will be cut in for a bigger slice of the pie. Not a big slice, but one substantially bigger than they have now, enough to get them back into the harness and slaving away to enrich the billionaires and millionaires who really own America.

In another post Robert Reich sums up the economic mess:

The U.S. economy was supposed to be in bloom by late spring but it’s hardly growing at all. Expectations for second quarter growth aren’t much better than the measly 1.8 percent annualized rate of the first quarter.

That’s not nearly fast enough to reduce our ferociously-high level of unemployment. The Labor Department will tell us Friday whether the jobs situation improved in May, but there’s been no sign of a surge in hiring. Nor in wages. Average hourly earnings of production and non-supervisory employees – who make up 80 percent of non-government workers – are lower than they were in the depths of the recession, adjusted for inflation.

Meanwhile, housing prices continue to fall. They’re now 33 percent below their 2006 peak. That’s a bigger drop than recorded in the Great Depression. Homes are the largest single asset of the American middle class, so as housing prices drop many Americans feel poorer. All of this is contributing to a general gloominess. Not surprisingly, consumer confidence is also down.

The recovery has stalled. It’s unlikely America will find itself back in recession but the possibility of a double dip can’t be dismissed.

...

Democrats, meanwhile, are behaving as if they’re powerless to affect the economy even though a Democrat occupies the White House and his appointees run the federal government. They’d rather not dwell on the slowdown because they don’t want to spook the bond market or add to the prevailing gloom (Jimmy Carter’s ill-fated comment about the nation’s “malaise” during the stagflation of the late 1970s has served as a permanent admonition for presidents to stay upbeat).

Democrats are staking their electoral hopes on continuing disarray among Republican presidential aspirants, as well as the Republicans’ suicidal plan to turn Medicare, the popular health insurance system for seniors, into vouchers that would funnel money to private, for-profit insurance companies.

The result is as if Washington were on another planet from the rest of the country (many Americans would argue this is hardly a new phenomenon).

Obama didn't keep his eye on the ball, the economy. He's been told my his advisors that the 2009 stimulus was "enough" and that things were coming back steadily. It wasn't and it hasn't. He trusted advisors who in fact created the financial crisis. They lied to create the 2008 collapse and they've lied to keep Obama in the dark about how badly the "fix" he did was working. Obama needs to wake up and fire all this economic advisors and get some in that will work for the American people and not Wall Street or the rentier class.