Half-Full or Half-Empty?

Which America Do You Live In:  Newsweek’s SuperCountry or Robert Reich’s Stalled “Tinder-Box”?

by Arlen Grossman

Newsweek’s May 7 cover reveals a man’s shirt ripped off to reveal Superman–with a big “$” on his chest instead of an “S”–and the headline: “America is Winning-And Why.” Financial journalist Daniel Gross describes a quickly recovering nation “bigger, stronger, and faster than anywhere else in the world.”

That same week, in two blogs, economist and former Labor Secretary Robert Reich describes a “Tinder-Box Society” with an economy “Heading For a  Big Stall.”

Same country. Far different perceptions. Who is right? You decide.

Newsweek’s America: “Like the world’s first bionic man, the U.S. economy has come back—better, stronger, and faster than most analysts expected, and than most of its peers. In fact, the lows of March 2009 marked the beginning of an unexpected recovery—not the beginning of an era of irreversible stagnation…The stock market has doubled since March 2009, while corporate profits and exports have surged to records. The U.S. economy has regained its 2007 peak, and is now growing at a 3 percent annual clip—a more rapid pace than any other developed economy.”

Reich’s America: The Dow Jones Industrial Average hit 13,338 Tuesday, its highest since December, 2007. The S&P 500 added 16 points. Wall Street will remember May 1 as a great day. But most of these gains are going to the richest 10 percent of Americans who own 90 percent of the shares traded on Wall Street. And the lion’s share of the gains are going to the wealthiest 1 percent.”

Newsweek’s America: “It took the U.S. just 18 months to conduct the aggressive fiscal and monetary actions that Japan waited 12 years to carry out after its credit bubble burst. But America’s recovery since then has been fueled by a resilient and nimble private sector. Rather than sit around and wait for salvation, U.S. companies quickly moved to restructure operations and debt.”

Reich’s America:  “Shares are up because corporate profits are up, and profits are up largely because companies have figured out how to do more with less.”

Newsweek’s America:  “Rather than sink deeper into a financial morass, the American private sector emerged better: better equipped to meet obligations, to save, to invest, to spend, and, ultimately, to grow …And rather than throw in the towel and surrender to Chinese competitors, U.S. companies figured out how to get more out of existing resources….From the fourth quarter of 2008 to the fourth quarter of 2009, productivity rose 5.4 percent. And it rose an impressive 4.1 percent in 2010.”

Reich’s America: One of the most striking legacies of the Great Recession has been the decline of full-time employment – as companies have substituted software or outsourced jobs abroad (courtesy of the Internet, making outsourcing more efficient than ever), or shifted them to contract workers also linked via Internet and software. That’s why most of the gains from the productivity revolution are going to the owners of capital, while typical workers are either unemployed or underemployed, or else getting wages and benefits whose real value continues to drop.”

Newsweek’s America:  “For U.S. companies, focusing on efficiency and productivity has been the equivalent of a runner strengthening her core. But companies now run farther and faster because of their ability to engage external forces. Declinists believe that the structural forces transforming the global economy are arrayed against us. But in fact, many of them work in America’s favor. The U.S. remains the largest, richest, most secure market in the world, full of valuable resources.”

Reich’s America:  “{Owners of capital are} now advocating austerity economics, on the false basis that cuts in public spending – including education, infrastructure, and safety nets – will generate more “confidence” and “certainty” among lenders and investors, and also lead to more jobs and better wages. None of this is sustainable, economically or socially.”

Newsweek’s America “The U.S. is losing primacy in geopolitics, but it remains the indispensable economic nation. The systems that American companies have invented are being put to vital use.”

Reich’s America:    “{Austerity measures are} not sustainable economically because it has resulted in chronically inadequate demand for goods and services. That’s meant anemic growth punctuated by recessions. Without a larger share of the economic gains, the vast middle class doesn’t have the purchasing power to buy the goods and services an ever-more productive economy can generate.”

Newsweek’s America:  “It’s easy to look at the record of the past few years and despair. The U.S. has a very long way to go to make up for lost ground in housing and, especially, in jobs. The resurgence of the corporate sector, which provides ample reason for optimism, hasn’t translated into new positions for the legions of unemployed. But here, too, there’s positive news. Since February 2010, the private sector… has added nearly 4.1 million jobs, or about 160,000 per month. That’s not sufficient, but it’s a sign that the jobs machine is clearly working again.” 

Reich’s America:   “The Commerce Department reports that the economy as a whole has slowed from the last quarter of 2011 when it was expanding at an annual rate of 3 percent, to 2.2 percent for the first quarter of this year. And last month’s unemployment report showing only 120,000 new jobs in March was downright alarming… In Europe and America, 30 to 50 percent of recent college graduates are unemployed or underemployed.”

Newsweek’s America:  “In the months since the Lehman debacle, the U.S. has no more lost its ability to grow and innovate than reality-TV producers have lost their ability to coax skanky behavior out of New Jersey’s youth. And despite all the headwinds, there’s no reason the expansion that started in July 2009 can’t go on as long as the previous three, which lasted 73 months, 120 months, and 92 months, respectively. When the definitive history of this period is written, it is possible—no, likely—that this post-bust era will go down not as a time of economic decline, but as one of regeneration.”

Reich’s America:   “Absent real wage gains, that spending pace can’t possibly continue. Consumer savings are down and their debt is up. Consumer confidence dropped last week to a two-month low. The only people left spending are in the top 5 percent, whose stock portfolios have been doing so well they feel even richer. But the top 5 percent can’t pull the entire economy out of the doldrums. Besides, if demand continues to slide the stock market will follow.”


This entry was posted in Economics, economy, employment, finance, government, inequality, labor, politics, poverty, Wall Street and tagged , , , , , , , , . Bookmark the permalink.

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