Thursday, August 25, 2011

The President’s Bold Jobs Bill (Maybe) / Stock Tip: Be Worried. Workers are Consumers – Robert Reich


The President is sounding like a fighter these days. He even says he’ll be proposing a jobs bill in September – and if Republicans don’t go along he’ll fight for it through Election Day (or beyond). That’s a start. But read the small print and all he’s talked about so far is extending the payroll tax cut and unemployment benefits (good, but small potatoes), ratifying the Colombia and South Korea free trade agreements (not necessarily a job-creating move), and creating an infrastructure bank. An infrastructure bank might be helpful, depending on its size. Which is the real question hovering over the entire putative jobs bill – its size?

Repeat after me: Workers are consumers. Consumers are workers. We’re slouching toward a double dip, and the stock market is imploding, because consumers – whose spending is 70 percent of the economy – have reached their limit. It’s not just the jobless who can’t spend. It’s mainly people with jobs. Median wages continue to fall. Weekly wages in July for Americans with jobs were 1.3 percent lower than eight months before. America’s median earners are now earning less (adjusted for inflation) than they earned ten years ago.

Get it? It was only a matter of time before the boom on Wall Street turned into a bust. Economic booms cannot continue without American workers participating in them. Foreign consumers have helped sustain earnings, but that won’t continue, either. The European economy is sinking and China is pulling in the reins on growth. What will happen to the Dow Jones Industrial Average when corporate earnings revert to their historic average relative to American wages? I’ve seen various estimates. They’re not pretty.

1 comment:

  1. isn't infrastructure bank private lenders, groups, corps., banks. and depending on amount loaned vs valuations lenders can assume income from fee's/tolls and such? new construction if private loans, repairs if price is...? for some reason infrastructure bank sounds like a page out of imf playbook. karma or something


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