It seems a mystery as to why the economy is so sluggish (other than the Republicans like it that way) but there are actual numbers available now to show how they are doing it. First the history: we were really destined to drop into a really serious depression after Reagan's massive tax cuts and the huge downward pressure on wages that he created. The stock market crash and the collapse of commercial real estate after the S&L looting nearly did us in, but Reagan held it all at bay by spending trillions of borrowed dollars. Money borrowed from the very same rich people who were no longer paying taxes, it’s what conservatives like to call “wealth transfer” except when it’s going from the poor and middle class to the already wealthy, then it’s called “fiscal conservatism“.
The reason we didn't have the Republican Great Depression in the 90s was that Allan Greenspan set about creating a series of bubbles: dot com and such crap as that, Clinton raising taxes helped but that wasn’t really enough. Then Greenspan and GW Bush created the housing bubble, Greenspan made the cash available and Bush killed all regulations on lending.
This scheme also took advantage of so-called investment “deregulation and modernization” done by the Republicans under Bill Clinton’s signature. This allowed them to securitize the debt that was created so that they could bilk investors on the debt itself, and sell derivatives that allowed the banks to bet against their own securities. This wasn't the only thing they were doing but is relevant to this point.
We really need about $18 trillion/year in GDP just to maintain our middle class based economy. Under Bush this was achieved with 14 trillion in actual GDP plus another 4 trillion a year in new consumer debt for an effective $18 trillion GDP. Currently this debt is being de-leveraged (either paid down or defaulted on) at about 2 trillion a year. So instead of an $18 trillion economy we now have a 14 trillion minus 2 trillion or a $12 trillion economy. This is what has created 14 million permanently unemployed people.
This economic strategy works just fine for everybody, except the 99.9% who are screwed. To get the debt down a point where the economy stabilizes at this rate will take about 10 years. This doesn’t take into account anything else the Republicans might do. The austerity they have been pushing at the state and local levels is just making it all worse of course. If they are able to do that at the Federal level things will go down hill fast.
Speaking of things going downhill, the number of students receiving subsidized lunches rose to 21 million last school year from 18 million in 2006-7, a 17 percent increase in the USDA meals program. Eleven states, including Florida, Nevada, New Jersey and Tennessee, had four-year increases of 25 percent or more. Over the previous 30 years as we saw the gradual decline of the middle class, the program had only incremental growth from year to year. These new numbers are only for the last school year ending in June, and don’t reflect the worsening situation this fall.
So even as some Americans go back to work their wages are being cut drastically, and this also cuts into the GDP as 70% of the economy is consumer spending. Traditionally when consumer spending lags, the government steps in to make up the difference. Even in ancient times if there were an excess of beggars outside the castle the king would launch some sort of building project to put coin of the realm into circulation, or just start a war if he was a conservative king.
We are currently in the midst of a war with a slight twist, I mean besides the ones overseas. The rich are making war on the rest of us to loot and pillage the wealth of 99.9%. We were supposed to be distracted by the endless war on Terror but people are starting to notice. The Republicans think it might work for them to start a war with Iran to keep us busy, “we’ve always been at war with South Asia”. www.prairie2.com