Robert Reich: The Economy in 2016: On the Edge of Recession

[eridani]

http://www.commondreams.org/views/2016/01/04/economy-2016-edge-recession

Economic forecasters exist to make astrologers look good, but I’ll hazard a guess. I expect the U.S. economy to sputter in 2016. That’s because the economy faces a deep structural problem: not enough demand for all the goods and services it’s capable of producing.

American consumers account for almost 70 percent of economic activity, but they won’t have enough purchasing power in 2016 to keep the economy going on more than two cylinders. Blame widening inequality.

Consider: The median wage is 4 percent below what it was in 2000, adjusted for inflation. The median wage of young people, even those with college degrees, is also dropping, adjusted for inflation. That means a continued slowdown in the rate of family formation—more young people living at home and deferring marriage and children – and less demand for goods and services.

At the same time, the labor participation rate—the percentage of Americans of working age who have jobs—remains near a 40-year low.

The giant boomer generation won’t and can’t take up the slack. Boomers haven’t saved nearly enough for retirement, so they’re being forced to cut back expenditures.

Exports won’t make up for this deficiency in demand. To the contrary, Europe remains in or close to recession, China’s growth is slowing dramatically, Japan is still on its back, and most developing countries are in the doldrums.

[Proserpina]

1. That's it, in a nutshell

[Warpy]

2. On the edge?

Wall Street is getting a little panicky around the edges now that China's markets are back in free fall. The rest of us have been in deep recession for many years and for the same reason: the unwillingness of conservatives in both parties to acknowledge the role of the demand side in the economic equation and get the minimum wage out from under the poverty line.

We've had 40 years of depressed wages that the 1% were absolutely sure would end inflation forever. Now we have killed the goose that laid all their golden eggs, the middle class, and we've got as much inflation as ever, despite economic flimflamming in the government trying to lie about it.

Face it, conservatives are completely out of ideas, out of gas, out of relevance to anything but trying to hang grimly onto power.

[Punx]

4. Yep

I'm not so sure that their ideas haven't succeeded, are succeeding. If the destruction of the middle class was the goal all along. Strong middle classes have a way, and the power to enforce economic policies that limit the power of the very wealthy.

Conservative leaders know this. Look at the writings of Russell Kirk and Buckley from the 1950's. It was always about power, and since the 70's and the Powell Memo they have been going after the middle class. If you are struggling just to survive it's hard to be politically active. That the DLC wing of the Democratic party thinks they can embrace these policies and get a better outcome is a "Fool's Errand".

[Depaysement]

3. Been saying this for years

Supply side economics was predicated on debt stimulating demand. Those days are over. Time for higher wages to do that job.

[Punx]

5. And higher taxes at the top

As long as those taxes are spent on productive endeavors, like infrastructure, and I would add things like health care.