stated that the financial system had stabilized, and economic growth
had begun. It was the same "we've turned the corner" cheerleading that
begun on day two of the recession; and the same corner has been
proclaimed "turned" and returned dozens of times since by the media,
politicians, and Wall Street CEO's.
In the real world, the economy remains lifeless -- over 10 million jobs
remain lost. Those lucky enough to have jobs are working harder with
longer hours, while wages and benefits are being downsized.
Obama too, gave quick acknowledgment to this in his speech, and his
thundering proposal for jobs received a thundering applause from
Congress. Obama's "solution" received an even bigger ovation, not for
its audacity, but for its meagerness.
His plan would be laughable were not the stakes so high and were not
millions of people suffering. That night Obama essentially told
millions of U.S. workers to "eat cake." Most of the Republicans refused
to applaud for anything Obama said; but they must have been smiling
brightly inside given that he had plagiarized their ideas.
job. Rather, it encourages corporations to hire workers by giving
them a variety of tax credits or tax breaks -- the same solution
proposed by the previous two Bush's and Reagan; a building block of Conservative Ideology.
The reason that Obama's plan is bound to fail is that businesses need
more than merely encouragement to hire workers, they demand profits.
A recession is defined by an absence of profits, without which
corporations lay off workers or hibernate until a more profitable
environment reappears. This is capitalism 101.
This recession will last longer than previous ones because the
environment of profitability that existed pre-crash, no longer exists.
The main driving force of the economy was consumer spending, which
accounts for 70 percent of the U.S. economy! Anybody can plainly see
that the consumers -- working class Americans -- are going broke. They
cannot continue to prop up the economy.
For years the U.S. working class took on enormous debt as they tried to
compensate for their shrinking wages, or exploding healthcare costs.
They took on second mortgages, credit cards, student loans, etc. This
debt was single-handedly fueling the economy. It could not all be paid
back, especially since wages continued to decline; better times refused
to come. The banks realized that many of the loans they made were not
getting paid back; they stopped giving loans, and the house of cards
collapsed.
The Federal Reserve has tried to re-inflate the debt bubble by making
money cheap for banks, but they still refuse to lend. And why should
they? Why make loans if consumers are broke and can't pay them back?
Why make loans to small businesses if consumers cannot buy their
products? Under capitalism, banks are run for profit, not social
service.
This economic reality, obvious to anyone who looks around, was
unmentioned by the President in his speech. If Obama were serious about
returning the economy to a "sound foundation," he would need to create
living wage jobs by the millions, which now exist in dwindling numbers
and face extinction. If workers have living wages, they can afford
houses, cars, food, loans, and other products that corporations need to
sell in order to make profits, and thus hire workers.
But corporations aren't hiring. The supply of corporate goods is still
much higher than demand on the market, i.e. what workers can afford. A
recession equals a failure of the market economy. When something fails,
it is helpful to try something new. Obama, however, is using
Republican-inspired "free market solutions" to tackle the crisis, akin
to using a flamethrower to put out a fire.
The U.S. economy cannot correct itself; much more than "encouragement" is needed. Workers demand intervention. The highly-touted 5.7 percent growth in fourth quarter U.S. GDP was revealed as a fraud by Wall Street, which saw stock prices fall that day. Instead of expanding, and hiring, companies were only re-stocking empty inventories, causing a temporary surge in spending. Don't forget that this 5.7 percent "surge" was accompanied by the loss of hundreds of thousands of jobs.
Why does Obama refuse to intervene? Why will he not create a real
stimulus plan, i.e., a massive, federally-run jobs program? There are
two answers.
First, Obama has promised the rich investors who fund America's debt
that they are the priority. These investors demand that America's debt
be managed -- by trimming the budget. Instead of cutting back on war
spending or bank bailouts, or taxing the rich and corporations, Obama
is freezing social spending, while refusing to spend money to create
jobs.
The second reason that Obama will not create millions of new, living
wage jobs is more ominous. To the President, low wages do not present a
problem, but an opportunity. Although low wages destroy domestic demand
for consumer goods, they create the potential for a new kind of demand
internationally.
Since corporations can no longer sell their products to American
workers, they are trying to switch gears, and sell more of their
products abroad. This is the grand solution that Obama speaks of
whenever he talks about "increasing exports," which he mentions often
now.
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