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The Ugly Truth: America's Economy is Not Coming Back
By Dave Lindorff
President Barack Obama and his economic team are being careful to couch all their talk about economic stimulus programs and bank bailout programs in warnings that the economic downturn is serious and that it will take considerable time to bounce back.
I’m reminded of an experience I had with Chinese medicine when I was living in Shanghai back in 1992. I had come down with a nasty case of the flu while teaching journalism at Fudan University on a Fulbright Scholar program. A Chinese colleague suggested I go to the university clinic. When I told him there wasn’t much point since doctors couldn’t do much for the flu besides recommend fluids and bed rest, he said, “That’s Western doctors. You could go to the Chinese medicine doctors at the clinic. They can help you.” I figured, what the hell, and we went. The doctor inquired into the lurid details of my illness—how my bowel movements looked, the color of the mucus in my nose, etc. He didn’t really examine me physically. Then he prescribed an incredible number of pills and teas and sent me home with a huge bag of stuff, and instructions on the regimen for taking them through the course of each day. I followed the directions dutifully, and my colleague came by each day to check on my progress. By the fifth day, when I was still running a fever and feeling terrible, I told him I didn’t think the Chinese medicine was working. He replied confidently, “Chinese medicine takes a long time to work.”
I laughed at this. “Sure,” I said. “But the flu only lasts a week or so, and now, when I get better, you’ll say it was the Chinese medicine, right?”
He smiled and agreed. “Yes. You are right.”
Obviously the Obama administration recognizes that it needs to keep the finger of blame for the current economic collapse squarely pointed at the Bush administration, which is certainly fair in large part (though the Clinton deregulation of the banking industry played a major part in the financial crisis and its enthusiastic promotion of globalization began the massive shift of jobs overseas that has left the nation’s productive capacity hollowed out). But it also seems to recognize that it cannot tell the bitter truth, which is that our national economy will never “bounce back” to where it was in 2007.
America, and individual Americans, have been living profligately for years in an unreal economy, propped up by easy credit which inflated the value of real estate to incredible levels, and which led people to spend way beyond their means. Ordinary middle-class working people have been encouraged to buy obscenely oversized homes at 5% down, or even no down payment. They have been lured into buying cars the size of trucks, one for each driving-aged member of the family (in our town, so many high school kids drive to school that the school ran out of parking spaces and the yellow school buses, largely empty on their runs, are referred to by the students as the “shame train,” an embarrassment to be seen riding). They’ve installed individual back-yard swimming pools, unwilling to share the water with their neighbors in community pools. Boring faux ethnic restaurant franchises of all kinds have befouled the landscape, filling up with families too stressed out to cook, and willing to endure over-salted, over-priced and tasteless cuisine and tacky plastic décor night after night.
Now this is all crashing down. Property values are in free-fall. Car sales have fallen off a cliff. Joblessness is soaring (At present, it’s approaching an official rate of 8%, but if the methodology used in 1980, before the Reagan administration changed it to hide the depth of that era’s deep recession, were applied, it would be 17% today, or one in seven workers).
Eventually, the economic slide will hit bottom and begin its slow climb back, as all recessions do, but there will be no return to the days of $500,000 McMansion developments, three-car garages and a new car every two or three years for both parents plus a car for each highschooler. Not only will banks no longer be able to offer such credit to clients. People, having been burned, will not be willing to borrow so much. Company health care benefits, pension programs or 401(k) matching programs that were slashed during this downturn will not be restored when the economy picks up again.
Over the last 20 years, America has degenerated into a nation of consumers, with 72 percent of Gross Domestic Product (sic) now being accounted for by consumer spending—most of it going for things that are produced overseas and shipped here.
That is not an economic model that is sustainable, and it is a model that has just suffered what is certainly a mortal blow.
What we are now seeing is the beginning of an inevitable downward adjustment in American living standards to conform with our actual place in the world. As a nation of consumers, and not producers, with little to offer to the rest of the world except raw materials, food crops, military hardware and bad films (none of which industries employ many people), we are headed to a recovery that will not feel like a recovery at all. Eventually, productive capacity will be restored, as lowered US wages make it again profitable for some things to be made here at home again, but like people in the 1930s looking back at the Roaring 20s of yore, we are going to look back at the last two decades as some kind of dream.
It would be better if the new administration would be honest about this, because with honesty, we could have a recovery program that would actually address the real critical issues facing the country—the decline of our educational system, the irrationality of official promotion of home ownership that has led to the proliferation not just of suburbs but of exurbs, the over-reliance on the automobile for transportation, the unprecedented waste of resources, the pillaging of the environment, not to mention the decimation of the retirement system and the creation of a vast medical-industrial complex that is sucking the life-blood out of families and businesses alike.
With honesty, we could also confront the other big obstacle to national recovery—the nation’s obsession with militarism and foreign wars. The honest truth is that the US is technically bankrupt and in a state of chronic decline, and yet the nation persists in spending a trillion dollars a year on war and preparations for war, as though America were in mortal danger from foreign enemies.
The truth is that we are not threatened by Communism, by drug lords, or by Muslim Jihadists in any serious way. Rather, we have become our own worst enemy.
The administration could start by telling us all this straight up, but the problem is, most of us probably don’t want to hear it, which explains why we’re not hearing it. It also explains why we’re about to blow another trillion or so dollars on propping up failing banks, funding pointless highway and bridge construction, and blowing up illiterate peasants in remote places like Afghanistan and Pakistan.
DAVE LINDORFF is a Philadelphia-based journalist. His latest book is “The Case for Impeachment” (St. Martin’s Press, 2006 and now available in paperback edition). Lindorff spent five years reporting on China and Hong Kong for Business Week magazine. His current work is available at www.thiscantbehappening.net