Posted on Monday, February 7, 2011
Step back from the ledge, America. Scotch the gloomy talk of a Japan-style Lost Decade in which we sink into decline and marinate morosely there for years. We're back, baby! So says a cheery depiction of these times from the wizards at Goldman Sachs (a firm that, come to think of it, played a starring role in trashing our economic security).
The report from Goldman's Investment Strategy Group, and served up here as evidence of happy times by the credulous folks at Politico's Morning Money, dismisses suggestions that the American economy might yet confront substantial problems. "The U.S. Will Not Face a 'Lost Decade,'" declares a subheading in the report, which later calls the odds of that prospect "very remote indeed." Instead, "America's structural resilience, fortitude and ingenuity will carry the economy and financial markets in 2011 -- and beyond."
Lest this hyperventilating prose fail to provoke the intended response, that last clause sits beneath a picture of George Washington crossing the Delaware. (Hats off to the creative geniuses inside Goldman's public relations machine, who apparently aim to redefine doubts about the economy -- and Goldman's lucrative cheerleading -- as downright un-American.)
But one problem with all this soothing talk: As millions of ordinary people can readily attest, we are already deep into a Lost Decade and then some. Rescuing ourselves from this era of diminished expectations is going to require far more than disseminating rosy projections about this year's stock market while touting the innate power of American business. It demands a serious-minded plan to get people back to work so we can wean ourselves off the investment fantasies propagated by Goldman and its Wall Street cohorts.
A brief consideration of reality comes in handy here. The U.S. economy slipped officially into recession in December 2007 and remained there until June of 2009, not for nothing earning the moniker "the Great Recession." During those 19 brutal months, the economy lost a net 7.3 million jobs, according to the Bureau of Labor Statistics. In the year and a half since, the economy has gained back a grand total of 72,000 jobs -- not even half what most economists say we need in a single month just to absorb new entrants to the labor force.
And that concentrated period of pain landed on top of a so-called economic expansion that was as weak as any on record. In 2000, at the tail end of the last so-called boom, the median American family claimed annual earnings of about $61,000, according to federal data. By late 2007, as the Great Recession began, that same median family had seen its earnings dip to $60,500.
Never before in the half-century during which the government has tracked such figures had the data offered up such clear evidence of declining fortunes: An expansion had run its course with the typical American family rolling backward.
Add this up: Seven years of times so lean that lowered incomes became the American norm, followed by a year and a half of terrifying decline -- with millions of foreclosures and trillions of dollars in lost wealth -- followed by a similar interim of tepid economic growth leaving the unemployment rate above 9 percent. That's a Lost Decade right there.
Set aside the fluctuations that have made the economy manic in recent time -- a technology bubble propelled by Wall Street financiers and Silicon Valley venture capitalists; the real estate bubble, pumped up by banks that turned mortgages into casino chips -- and focus instead on what matters most to ordinary people: What do we bring home from work? In that context, "Lost Decade" seems like a mild description of the American experience. The data offers up the Lost Three Decades.
At the end of 2010, the average weekly earnings for American rank-and-file workers sat at roughly the same level as at the end of 1979 in inflation-adjusted terms. (Have a look at the raw Labor Department data here.) A lot of caveats go into absorbing that number. Large numbers of women and immigrants entered the labor force in those years, which has tended to pull down average wages. But a central truth cannot be dismissed: More than a quarter-century has gone past -- a sweep of history that has seen the personal computing revolution, two wars in the Persian Gulf, the fall of the Berlin Wall and the end of the Cold War, the integration of China into the global economy -- and yet the average American worker has gotten nowhere. This while the costs of health care, education and housing have skyrocketed.
You won't encounter any of this sort of analysis in Goldman's delightful report, which is aimed not at people who work for a living, but people who are inclined to conflate the stock market and the real economy. And the stock market, according to Goldman, is poised for a boffo 2011.
Who can argue with that? Savvy U.S. corporations are making enormous sums of money by boosting their sales abroad and keeping a lid on their costs -- which is to say, by not hiring people. Companies like General Electric, whose chief executive Jeffrey Immelt was just named to head a task force that is supposed to encourage job growth, have netted record profits by selling product overseas and laying off workers at home.
This formula pretty much describes how the economy has grown robustly for most of the last three decades, while opportunities for working people have withered. Its perpetuation fairly ensures no need to worry about a Lost Decade if you are an executive at a multinational corporation, a shareholder seeking hefty dividends, or a Wall Street chieftain counting on a bonus.
But the words at the top of Goldman's report -- "Stay the Course" -- amount to a threat for the rest of the nation. The course is untenable. For most people, it leads to credit card debt, ulcer medication and, perhaps, bankruptcy.
Japan imploded and then stagnated at the messy end of the real-estate speculation that filled out the 1980s by dithering about the needed fix. Tokyo tried modest stimulus spending packages, then austerity, then public works spending and then export-led growth -- always too late, always inadequately and usually amid political discord over how to proceed.
Here in the United States, the most striking similarity with Japan's years of decline is the way in which political dysfunction continues to be a powerful barrier to needed action, rendering impossible the muscular investments required to pull us out of the ditch -- investments in renewable energy, education and infrastructure.
Goldman's dismissal of Lost Decade fears is brazenly self-serving. When people are afraid, they tend not to hand their money to Wall Street gamblers to manage. Worse, its words heap fresh disinformation and a false dose of reassurance into a conversation that ought to be centered on an honest reckoning about where we are and how to claw our way back.
We are very much lost, and have been for decades. And we will remain so for as long as influential people pay attention to the cynical assurances of Goldman, which has mastered the art of digging us deeper into a hole, all the while selling us the shovels.
Peter Goodman, THE HUFFINGTON POST