Most Americans would love to begin the New Year with the chipper confidence born of a good job and bright economic prospects. In the struggling economy of our post-financial-crisis world, however, that will be harder done than said for the nearly 10 percent of workers still searching for a job.
It will be hard, too, for many of the nation’s state governments, including Tennessee, which will find their revenue coffers even barer when the Obama administration’s blindly maligned but extraordinarily useful stimulus funds expire this year, leaving states to deal with still-steep declines in post-recession tax revenues without Washington covering their backs. Tennessee, for example, will have to deal with a billion-dollar-plus shortfall when three years of stimulus funds finally dry up next summer.
The chicken-or-egg dilemma that continues to haunt the economy – which comes first: consumer demand, or the new jobs that provide the money and confidence to drive consumer demand – remains the sticking point. It exists not because businesses can’t afford to hire or need another tax cut, but because they are waiting for a strong uptick in consumer demand.
As the Wall Street Journal recently reported, “corporate American’s cash pile has hit its highest level in half a century.” Non-financial companies in the United States, it noted, were sitting on $1.93 trillion in cash and other liquid assets at the end of September, up from $1.8 trillion at the end of June. “Cash accounts for 7.4 percent of the companies’ total assets,” it gushed, “the largest share since 1959.”
In fact, corporate America is hiring – but mainly overseas in markets, like China and India, where economic growth rates are quadruple the rate at home. Wall Street also has done very well lately. The street’s banks, investment banks, hedge funds, money-management firms and securities exchanges went into the end of 2010 poised to earn nearly $450 billion, and to pay nearly a third of that in employee compensation.
Clearly the problem with the economy is not a lack of capital or the result of onerous taxes and regulatory mandates. Rather, it’s a sign of something else – a general malaise shaped by both slow job growth and declining wages in inflation-adjusted dollars. Both reflect an ongoing, general diminishment of the American middle class over the past two decades that is aggravated by soaring health care costs, outright loss of health insurance in many companies, and the downward pressure otherwise exerted on wages and jobs by an increasingly entrenched globalized economy.
American workers have simply lost their leverage for better pay and benefits because so many employers can ship their jobs abroad – not just in manufacturing, but also in back-office and white-collar jobs in all manner of service and financial industries.
That’s a huge part of the reason that the American economy’s job gains have been so anemic in the slow recovery from the 2008 financial meltdown. Though job growth occurred nearly every month in 2010 under the Obama administration’s crucial fiscal and monetary policies, the net gains were well below the 150,000-a-month level that is required to begin working down the number of 15 million unemployed or underemployed workers who want a job.
Most of those job-seekers were laid off or tuned out in the Great Recession that will forever haunt George W. Bush’s legacy. But many are also among the new workers who regularly enter the job market every month as the nation’s ever-growing population shuttles new graduates and immigrants into the workplace. It doesn’t help, of course, that retirement-aged baby boomers, their savings and wealth depleted by recession-racked retirement portfolios and the housing crash, find themselves forced to hang on to their jobs.
Regrettably, none of these trends are subject to easy change. They are almost certain to be worsened, however, if Republicans get their wish to further slash federal and state spending on already pared public services. The most vital of these are the big ticket items of education, health care and infrastructure. Cutting any of these any deeper will just further depress both the economy and the nation’s chances for growing our way out of the economic slump.
Given these trends, particularly the need for stronger schools to produce a more globally competitive work force, the times call for vigorous commitment to public education and worker training and strategic investments.
Facing the challenges ahead with optimism and confidence can produce a good new year if political leaders exercise some vision and keep their austerity packages tightly disciplined. But in a year in which tea-party-addled Republicans seem primed and eager to concoct disastrous economic policies, a good New Year is no sure bet.