The American Decline I: The Richest Rich People Money Can Buy
The January new-jobs-added figures have arrived, as well as the revisions for December. January shows 146,000 jobs, December has been revised downward to 133,000 jobs, down from an initial estimate of 157,000. And January’s revised figures are equally likely to be revised downward.
It takes 150,000 new jobs per month to simply absorb the “never before employed” new entrants to the job market. We are three years into a “recovery” that will probably last 5-6 years at the maximum (the Clinton Recovery was the longest in history at 8 years). It is already showing the first signs of the inflationary pressure that will force the rise in interest rates that lead to recession. Halfway through the recovery we still can’t generate enough jobs to reliably absorb fresh job market entrants, let alone employ all the people who lost jobs since 2000!
Think about it for a minute.
With the January figures the Bush Administration finally showed a net job gain: between January 2001 to January 2005, the economy generated a net gain of 119,000 jobs. So we have now replaced all the jobs lost since 2000, and a few more for good measure. Finally, we’re back exactly where we stood then.
That sounds real good, doesn’t it? But if you multiply 150,000 new entrants per month by four years, that’s 7,200,000 totally new jobseekers since 2000 piled on top of all the people who have lost jobs in the interval, and whose jobs have now finally been replaced. Seven million two hundred thousand new jobseekers, with a net gain of only 119,000 new jobs for them.
Something is seriously wrong with the American economy.
It is not an “anomaly”, a “blip”, or a “concern”. It is a deep and pervasive structural failure, a day of reckoning that has been coming upon us now for 25 years. You can see most of the relevant data in the factbook “How Unequal Are We Anyway?” at Inequality.Org. You will also need this data on recession and poverty.
Take a moment and bring up a new window in your browser to have these at your fingertips so we can all be on the same page. Look at each chart in the new window so you can flip through them with the back button. Then minimize this window. For the browser challenged, I will re-link as well throughout the essay.
The starting point is how wealth, or “net worth” is distributed in this country (chart 3 in the factbook). Twenty percent of Americans own 83% of the wealth, 40% of Americans own 16% of the wealth, and 40% of Americans own less than 1% of the wealth. We are two nations, rich and poor. Almost half of us have no significant share of this country’s real assets. Why is this important? Assets are what exist beyond wages transformed into mere consumption of necessities or luxuries—they are the only things you can invest to make yourself significantly wealthier. Almost half of America has little or no chance to do this.
We are no longer the world’s richest nation, as we once were. We are now the nation of the world’s richest rich people.
We started becoming that way from the start, not coincidentally, of the Republican administration of Ronald Reagan. Between 1947 and 1979, largely under Democratic government, incomes of all Americans rose steadily, and to about the same degree. From approximately 1980 forward to today, largely under Republican government, the richer you are, the more your income has risen. (Factbook Chart 2) Risen by how much? Income for the bottom 40% of Americans (who, remember, have little to no “net worth”) has risen by just slightly over 10% in dollars adjusted for inflation. The top 20%, (who, remember, own 83% of the “net worth”) have risen in income by 68%. And the top 1% have risen in income by 201%! (Factbook Chart 1) The nation of the world’s richest rich people. Period.
Fully sixteen industrialized nations are “richer” than we are in the only functional way to view the matter, (unless you happen to be personally rich) the ratio of rich to poor and the equality of distribution of wealth and income. (Factbook Chart 4)
Why have the richest of us gotten so much richer so quickly? Speculative market investment of their “net worth” is why. The top 20% have overwhelmingly more “net worth” so they can make overwhelmingly more money with it. Why have the poorest of us lagged behind? (Factbook Chart 6) Because since about 1980 most of the basis for the real growth of wealth for the rest of us, competitively making things for sale, has simply disappeared here. It has gone to China, in case you hadn’t noticed. If you follow such things, China is now, self-evidently, the “land of opportunity” and upward mobility. America has become the “land of customer service” and McJobs.
But matters are even worse than this. When the McJobs aren’t there, the poor go nowhere or go down the tubes. They haven’t been there for four years now, despite “rising economic indicators”, and there is no real evidence they will ever be there again in any serious quantity. The best we have done so far, four years into a recovery, is tread water.
The rich, however, can always make money through intelligent investment, whatever the state of the economy, by essentially betting against American growth rather than for it, what the Stock Market calls “selling short”. They may make a little less money, but they continue to make it, if they have their heads screwed on straight. This is why brokers are now touting on television the buying of Euros, or betting against the rise of the American dollar rather than for it.
Keep this firmly in mind as we look at recessions, the times when the poor must go to the wall and the richest can sell short. What do we see? Of the seven recessions since 1959, only one has both started and ended under a Democratic President. It is the most important one, as we will see next week, but for now lets look at the other six. Of these six, five of them have started under a Republican Administration.
What we notice next is that, under a Republican executive branch, both the number of people in poverty and the absolute poverty rate, steadily and reliably rises or plateaus. Under Democratic Presidents, both these measures steadily and reliably--and usually quite sharply--declines.
In an economy that, by any measure but jobs and poverty, is growing quite nicely, we cannot generate enough jobs to even absorb first time workers, and at the moment both the number of people in poverty, as well as the absolute rate of poverty, is steadily growing.
Speaking in Omaha, Neb., on Friday, February 4th, President Bush said he was pleased with the new January job report, "That's a good sign. More people are going to work around our country. But we shouldn't be content. I'm looking forward to working with the members of Congress to create the conditions for continued economic expansion."
The American decline is real. It has been created and maintained largely by the policies of Republican Presidents. In the next essay I will examine the policy decisions that manufactured it.