We’re Spent (After the consumer bubble has fizzeled)

[Derechos]

THERE is no shortage of explanations for the economy’s maddening inability to leave behind the Great Recession and start adding large numbers of jobs: The deficit is too big. The stimulus was flawed. China is overtaking us. Businesses are overregulated. Wall Street is underregulated.

But the real culprit — or at least the main one — has been hiding in plain sight. We are living through a tremendous bust. It isn’t simply a housing bust. It’s a fizzling of the great consumer bubble that was decades in the making.

The auto industry is on pace to sell 28 percent fewer new vehicles this year than it did 10 years ago — and 10 years ago was 2001, when the country was in recession. Sales of ovens and stoves are on pace to be at their lowest level since 1992. Home sales over the past year have fallen back to their lowest point since the crisis began. And big-ticket items are hardly the only problem.

The Federal Reserve Bank of New York recently published a jarring report on what it calls discretionary service spending, a category that excludes housing, food and health care and includes restaurant meals, entertainment, education and even insurance. Going back decades, such spending had never fallen more than 3 percent per capita in a recession. In this slump, it is down almost 7 percent, and still has not really begun to recover.

http://www.nytimes.com/2011/07/17/sunday-review/17economic.html?ref=opinion

[BOHICA12]

1. Is there a fix?

Or are we at the new normal?

[Hydra]

3. Sure, there's always a fix

The question is, does anyone want it? We need an entirely new system where people come first, and not just the people at the top.

[BOHICA12]

4. I know the fix is private sector employment ....

... without it there is no public sector employment or consumption increase/growth. How do we get shoes, stoves, TV, computers, kitchen ware, sporting goods, automobile tires, cell phones, tools, small engines, flooring, and even wind turbines built here by folks here so they can earn money here to do two things: buy these and other goods and services & pay taxes?

[FreakinDJ]

5. Restructuring Corp Taxes is starting to make sense

Get rid of all the special interest tax loopholes, give aways to Huge Multinationals and allow Small Cottage Industry to be on the same level playing field.

Standing idelly by while Huge Corporations gobble up successful start ups only to down size the work force and ship production off shore is not working

[PSPS]

7. No need for the "private" qualifier ...

... unless you're spouting right wing "gubmint bad" talking points. Employment is employment. It doesn't matter who does the hiring, it can be private or public. Anything that gets money into people's pockets will accomplish everything you describe.

To say there is no public sector employment without private sector employment is just silly. The NRA, CCC and WPA were "public sector," and they accomplished the task quite well. In fact, if we had employed such a strategy this time, we wouldn't be in the mess we are.

[BOHICA12]

10. And the money will come from where???

Taxes, fees, levies create the universe of money that government needs to fund its employment & programs. The only original source of this is the private sector. Government is not self-funding. The programs you mentioned kept folk employed and active and fed, but were not generators of a middle-class lifestyle. They were training grounds for many, but the craft-folk generated by them moved on to employment (mostly in the private sector) that did create a better life.

[girl gone mad]

12. Seems you've got the monetary relationship completely screwed up.

Where is it that you believe the money to pay those "taxes, fees, and levies" comes from in the first place?

[quaker bill]

14. Wrong

the government is a soveriegn issuer of currency. It never needs to borrow even a nickel.

[quaker bill]

15. Wrap your head around this one...

The TARP program bought fake assets of little value, at "face value" through 4 people in cubicles with desktop machines literally keystroking and mouse clicking "money" into bank accounts. The "money" did not exist before the "execute" button was pressed, it was borrowed from no one, and no piles of actual currency went anywhere. Once the "execute" button was pressed this "money" became just as real as any you or I might have in our pockets.

Now, understand that 3% of Federal revenue last year came from interest and profits on this now very real money, which prior to 2009 did not exist...

Rethink your premise, because it is wrong. Taxes, fees, and levies are the brakes in the governor we put on the economy to prevent it from overheating. There is no such risk at this time.

[girl gone mad]

8. The public sector has to spend more.

The economics of it is fairly straightforward. When the private sector runs a net surplus (savings), the federal government must run a deficit or the economy shrinks.

[starroute]

6. The previous situation was artificial

People talk a lot about how World War II finally got us out of the Depression because it forced us to spend wildly. But what isn't mentioned as often is that in the late 40s, the economy sagged and there seemed to be a very real risk of slipping back into the Depression.

This was averted in two ways. The first was the establishment of a permanent wartime economy, with the Cold War as an excuse for military Keynesianism. The second was the invention of the consumer economy, powered by advertising, planned obsolescence, and the general notion that spending on consumer goods was the essence of the American dream.

The consumer economy was never viable in the long run, because the planet can't sustain it. But it began failing sooner rather than later because the rich folk got greedy and forgot the lessons they'd learned back around 1950.

So there may be a fix for our present state of extreme inequality. And properly managed, the planet ought to be able to provide everyone with the essentials of food, shelter, medical care, education, and opportunities for creativity. But the kind of spending binge we enjoyed for 50 years, thanks to cheap oil and Western domination, is unlikely to recur.

[Hardrada]

9. Convair B-36's. Expensive planes. Never used in a war.

Part of the peacetime war economy.

[BOHICA12]

11. Sort of like the F-22s & F-35s .... nt

[Old Codger]

2. Sadly Enough

It has to hit bottom before a recovery can start... not there yet I'm afraid.

[no_hypocrisy]

13. Makes sense.

This economy is based mostly on consumers buying stuff, not manufacturing or agriculture. The consumers were running out of money, so between the Fed and the banks and the government, they were given extended credit between low interest rates, government borrowing money, inflated home prices, and home equity loans. When most of that was taken away, coupled with job loss or insecurity, consumers were left with debt and barely any liquid assets to continue purchasing.