The Real Economy: Getting Worse
The Politics
The 2008 election has come down to one overriding issue: our economy. In all recent major polls, the majority of Americans name “the economy and jobs” as the issue that is most important to them. [Polling Report] In overwhelming numbers, people are looking for change.
The winners of Tuesday’s election—from first-time state legislators to the president—will have one clear mandate: make the American economy work for working Americans.
The Facts
The U.S. economy shrank during the third quarter of 2008—its first economic contraction in 28 years. The Commerce Department reported yesterday (October 30) that America’s Gross Domestic Product has declined, pushed down by a 3.1 percent drop in consumer spending over the summer. The decline was driven primarily by a 14 percent decrease in purchases of “durable goods” such as cars, sales of which fell more than 25 percent. [U.S. Department of Commerce]
Without intervention, the U.S. will continue sliding into the worst recession in a generation. Key economic indicators suggest that the current recession is already as severe as the post-September 11th recession in 2001, and may even be worse than the recession of the early 1990s. GDP growth has slowed to 2001 levels, and inflation-adjusted personal spending has fallen for the first time since the 1991 recession. [Bureau of Economic Analysis, New York Times] Based on current trends, economists predict that consumer spending will decline as steeply as it did in 1990. [Economic Policy Institute]
American savings and investments have been tanking. Our nation’s personal savings rate is now at its lowest point since the Great Depression. [Bureau of Economic Analysis] The average debt for students graduating college now exceeds $19,000. [U.S. Department of Education] Last year, total household debt was at its highest level ever recorded. [Economic Policy Institute]
Home prices are free-falling. Home prices have fallen by 16.6 percent in the past 12 months, bringing the total decline in price since their June 2006 peak to 20.3 percent, according to a study released on October 27. [Market Watch]
Retirement accounts have been decimated. Americans’ retirement accounts and pension funds have lost an estimated $3.9 trillion over the last 12 months, or about 18 percent of their value. [U.S. News, Urban Institute] The more affluent have been hit by the stock market’s loss of nearly a third of its value during the past year. Since September 2007, the value of the stock market has plummeted by $7 trillion. [Urban Institute]
Consumer confidence has hit an all-time low. The Conference Board reported on October 28 that the Consumer Confidence Index, which had improved slightly in September, fell to an all-time low in October. The Index now stands at 38.0 (1985=100), down from 61.4 in September. [Conference Board] ABC News’ “Consumer Comfort Index” has fallen 37 points since October 2007, with consumers now rating their comfort with current economic conditions at -49 on a scale of -100 to +100. [ABC News]
State revenues have plummeted. Thirty-nine states are now facing budget shortfalls totaling more than $12 billion. As consumer spending and wages drop, state sales tax and personal income tax revenues are falling as well, forcing many states to consider cutting spending on schools and health care programs. [Center for Budget and Policy Priorities]
The Argument
Conservative economic policies got us into this mess, and they won’t get us out of it. From banking deregulation to irresponsible tax cuts for the rich, the conservative economic agenda has proven to be a recipe for recession. Even former Federal Reserve Chairman Alan Greenspan has admitted that he put too much faith in the “free market,” and that it’s time for a change, but conservatives such as John McCain are still promising to continue President Bush’s failed economic policies.
America needs a long-term strategy for economic growth. For too long, conservatives have written economic policies without planning for much more than the next quarter’s federal budget or this year’s tax bills. It’s time for America to develop a strategy for long-term economic investment that will secure our children’s economic future—not just to score points in the next election.
Progressive Solutions
This is an emergency, so we have to do whatever it takes to fight our way out of recession. Conservatives balk at the short-term costs of a national growth program. But the costs of a severe recession—both short- and long-term—would be far greater.
In the short term, progressives are fighting for a main street recovery program to put people to work and get the economy going-- --public investment in renewable energy and rebuilding projects for schools and infrastructure, expanded unemployment benefits, and aid to cities and states to avoid layoffs of teachers and cops. In the long term, we need a national strategy in the global economy that works for working people, while supporting workers with universal health care coverage, union-organizing rights, and fair wages.
