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U.S. economic stagnation continues three years after financial crisis of 2008

Working people need to fight back against austerity
Editorial by Fight Back! Editors |
September 11, 2011
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The U.S. economy continues to stagnate with almost no economic growth or job creation more than three years after the great financial crisis of 2008 and more than two years after the recession officially ended in 2009. The official unemployment rate is still over 9% nationally, and millions of workers who have stopped looking for work are not included in this count. Even worse, the Obama administration projects unemployment to stay above 8% for all of 2012, which would be four years of near double-digit unemployment.

The U.S. is not the first to face economic stagnation. In the 1980s, European unemployment rates were also near double-digit levels. U.S. economists blamed this on the European social-welfare state, with universal health insurance and unemployment insurance, early retirement and long paid maternity leaves. But here in the United States more than 50 million people have no health insurance at all, millions of unemployed have no benefits, the retirement age is rising and there is no mandatory paid maternity leave. Still, the U.S. economy stagnates.

In the 1990s, the Japanese economy entered what is now 20 years of stagnation, marked by deflation or falling prices. Deflation can poison an economy as prices and incomes fall, making it harder to pay off mortgages and other debts. As more and more loans go bad, the economy is dragged down even more. Again, U.S. economists blamed the Japanese Central Bank for not printing enough money to prevent deflation and stagnation. Here in the United States, the U.S. central bank, the Federal Reserve, has printed more than a trillion and a half dollars over the last three years, yet was able to stop the deflation in 2009. But still the U.S. economy stagnates.

The problem here in the United States (as well as Europe and Japan, which also have economies that are going from bad to worse) is not the limited social safety net or central bank policy. The problem is that our monopoly capitalist economy, dominated by a smaller and smaller number of gigantic corporation and Wall Street financial institutions, is dedicated to increasing profits at all costs. Over the last two years corporate profits have soared to record levels, while at the same time there are 7 million fewer people working than when the recession began in late 2007. These gigantic profits are not reinvested to create more jobs, but rather are flowing to the financial casino known as Wall Street for massive speculation.

Republicans are trying to use the continuing economic stagnation to try to eliminate what is left of the U.S. safety net. In Congress, Republicans have proposed to end Medicare and replace it with more expensive private health insurance. The leading Republican presidential candidate, Texas Governor Rick Perry, is attacking Social Security and wants retirees to depend on Wall Street. In states such as Wisconsin, Republicans have led the charge to chop pay, retirement, and collective bargaining rights of teachers and other government workers. They are also leading efforts in Arizona, Georgia and other states to scapegoat immigrants and pass racist laws targeting Chicanos and Latinos. These efforts are backed by the Koch oil billionaires and others who want corporations to be able to run amuck over working people and the environment.

The Democrats also have close ties with Wall Street, and spearheaded the bailout of big banks and corporations during the financial crisis. But to bring along their supporters among working people, African Americans, and other oppressed nationality communities, the Democrats have promoted programs that have been at best too little and too late and at worst crumbs compared to the hundreds of billions spent on corporate bailouts. While millions of home owners have been foreclosed and millions more have gone underwater - with their prices falling below their mortgages - the Obama Home Ownership Modification Program (HAMP) has only helped 63,000 severely underwater homeowners.

The latest Obama proposal for payroll tax cuts and extending unemployment insurance could add 2 million jobs if all of it is passed (there is almost zero chance of this happening with the Republican controlled Congress). With the labor force down by 7 million jobs since the recession started, this is still not enough to restore the economy to full employment.

Both the Republicans and the Democrats support continuing costly wars abroad. The wars in Iraq and Afghanistan have cost over a trillion dollars and counting, while the U.S. military is attacking Pakistan, Libya, and Yemen with bombs and drones. Trillions more have been spent on military bases, naval fleets and nuclear weapons so the United States is spending more than the rest of the world combined on the military. In the meantime college tuition is up, K-12 teachers are being laid off, roads and bridges are crumbling and even disaster relief is being questioned in Congress.

Both the Republicans and Democrats have committed themselves to cutting the federal budget deficit. But this is not going to help the economy; just look at what is happening in Europe where efforts by countries to cut spending and budget deficits are just leading to more and more unemployment and suffering by working people.

Neither the Republicans nor the Democrats will restore the economy to health. The Republican austerity proposals will only make the economy worse and deepen the suffering of working people. The Democratic practice of big bailouts for banks and corporate America combined with big announcements of programs to help working people that turn out to be little more than the status quo only serve to make the rich richer while trying to keep the poor and working people quiet.

Only a grassroots movement to fight back against austerity and for real relief for working people can protect our livelihoods and communities. We need a real government jobs programs that can put millions of unemployed to work like the WPA in the 1930s. We need to allow homeowners to reduce their mortgages and keep their homes through bankruptcy courts. We need to defend and expand Medicare, to provide universal health insurance for all and eliminate costly private health insurance. We need to defend Social Security and pensions so that working people can retire with peace of mind. Neither the Republicans nor Democrats will do the job if left in the clutches of Wall Street and billionaires. Only a massive fight back can force Congress and the administration to provide the jobs, education and services that working people need.