Big Money On Rise, Average Worker Losing

Big Money On Rise, Average Worker Losing

By ROBERT REICH

November 13, 2010

http://www.courant.com/news/opinion/hc-op-reich-1113-20101113,0,1262257.story


Next time you hear an economist or denizen of Wall Street talk about how the "American economy" is doing these days, watch your wallet.
There are two American economies. One is on the mend. The other is still coming apart.

The one that's mending is America's Big Money economy. It's comprised of Wall Street traders, big investors, and top professionals and corporate executives.
The Big Money economy is doing well these days. That's partly thanks to Ben Bernanke, whose Fed is keeping interest rates near zero by printing money as fast as it dare. It's essentially free money to America's Big Money economy.
Free money can almost always be put to uses that create more of it. Big corporations are buying back their shares of stock, thereby boosting corporate earnings. They're merging with and acquiring other companies.

Thanks to fast-growing China, India and Brazil, giant American corporations are racking up sales. They're selling Asian and Latin American consumers everything from cars and cell phones to fancy Internet software and iPads. Forty percent of the S&P 500's biggest corporations are now doing more than 60 percent of their business abroad. And America's biggest investors are also going abroad to get a nice return on their money.

So don't worry about America's Big Money economy. According to a Wall Street Journal survey released last week, overall compensation in financial services will rise 5 percent this year, and employees in some businesses like asset management will get increases of 15 percent.
But there's another American economy, and it's not on the mend. Call it the Average Worker economy.

Last Friday's jobs report showed 159,000 new private-sector jobs in October. That's better than in previous months. But 125,000 net new jobs are needed just to keep up with the growth of the American labor force. So another way of expressing what happened to jobs in October is to say 24,000 were added over what we need just to stay even.

Yet the American economy has lost 15 million jobs since the start of the Great Recession. And if you add in the growth of the labor force — including everyone too discouraged to look for a job — we're down about 22 million.
One out of eight breadwinners is still out of work. Most families in the Average Worker economy rely on two breadwinners. So if one out of eight isn't working, chances are high that family incomes are down compared with what they were three years ago.

According to a recent Washington Post poll, more than half of all Americans — 53 percent — are worried about making their mortgage payments. This is many more than were worried two years ago, when the Great Recession hit bottom. Then, 37 percent expressed worry.

Most people in the Average Worker economy own few shares of stock, if any. Their equity is in their homes. But with all the delinquencies and distressed sales, the housing market has a glut of homes for sale. As a result, home prices are still dropping. So the net worth of most Americans is still dropping. Even though interest rates are falling, most people in the Average Worker economy can't refinance their homes. They can't get home equity loans.

Inhabitants of the Big Money economy are celebrating Republican wins last week. They figure financial regulations will be rolled back, environmental regulations will be canned, the Bush tax cut will be extended to the top 1 percent, and it will be harder for workers to form unions.

Inhabitants of the Average Worker economy aren't so sure. The economy has been so bad, they're angry at politicians. They showed their anger at the ballot box. They took it out on incumbents.

But if nothing changes in the Average Worker economy, there will be hell to pay.

Robert Reich, former U.S. Secretary of Labor, is professor of public policy at the University of California at Berkeley. This was distributed by Tribune Media Services

Always has. He's an inveterate free trader and sets up strawman arguments against any and all attempts to address the issue, let alone change policy.