The wounds are still deep. Five years ago this fall, a financial system warped by misbegotten government policies and reckless risk-taking by bankers nearly imploded.
The economy dived into the Great Recession. That ended in June 2009. A recovery began.
We’re still recovering.
That’s not news to the millions still out of work, to those who have taken part-time jobs, or those coping with tepid wage gains, furloughs and the still-potent fear of job cuts.
In many ways, however, this long slog of a recovery is especially galling. The stock market is at record highs, driven by profits supercharged by corporate cost-cutting.
Despite the damage the financial sector wreaked in 2008, not one of the top Wall Street or commercial bank chieftains involved has been convicted of criminal charges. Civil fines levied have mainly been paid from corporate coffers. In other words, investors.
The country’s mega-banks are still playing dangerously with derivatives and securitized debt instruments, and they control an even greater share of the country’s financial assets than before the recession.
Despite Dodd-Frank, they’re still too big to fail.
Don’t get me started on how really galling it is to face the headwinds to the economy blowing from Washington. The budget shenanigans and a poor implementation of the Affordable Care Act are just the latest gusts.
All right, get me started.
Our disconnected politicians seem to have no idea that never-ending deadlock just adds strain to an economy being buffeted by ever-speedier technological advancements, the globalization of trade and labor, and aging demographics.
Changes that could help remain stymied. Among them: immigration reform, patent reform, infrastructure spending reform, tax system reform and long-term entitlement reform.
Instead, we’ve left it to the Fed to try to strengthen the recovery with an unprecedented easing of the money supply, something that’s mainly helped the banks and stock investors while chopping to virtually nothing the return that consumers make on savings.
More importantly, being unprecedented,no one knows
how the easing will turn out.
For years now, I’ve optimistically looked for signs within signs that a stronger recovery is building. So have many others — consider the downward recalibration of the Kansas City economy made Monday by MARC economist Frank Lenk on today’s Page A1 of The Star.
Americans are indeed digging out of the hole. Housing and auto sales are picking up. Consumers are working down debt and regaining wealth. The job market is logging steady gains. A better stock market does help.
But all those indicators are still below prerecession peaks.
Five years on, you can’t escape some big-picture numbers that make it clear just how bad the wounds still are.
• The economy is still growing at a much slower rate than after previous recessions. According to USA Today, growth in the fourth year of the recovery was 1.6 percent. In five previous recessions, growth in the fourth year averaged about 4.7 percent.
• In January 2008, U.S. workers held 138.1 million jobs. By February 2010, the number of jobs declined from that peak to 129.3 million. In August, we had 136.1 million. So we’ve gained back 6.8 million of the 8.8 million lost.
But that doesn’t take into account the jobs the economy would have created absent a recession and growing at a more-normal rate during a recovery. Instead of August’s 136 million jobs, we should have at least 140 million to 145 million.
• The number that would make anybody choke on their optimism is median household income. Adjusted for inflation, it’s still $4,500 below its 2007 level.
Gains from the recovery are going to those on the top rungs. While the real income of the bottom 40 percent fell 6 percent adjusted for inflation from 2009 to 2012, the real income of the top 1 percent soared 31 percent.
The Economist magazine figures that 95 percent of the gains from the recovery have gone to the richest 1 percent, and that their share of the country’s overall income is once again close to its highest in a century.
Through the recovery, the United States has become even more unequal. This could be the most damaging wound. As The Economist says, “You do not have to be an egalitarian to worry about this trend.”
Of course, inequality is an animating force in a capitalist, free-enterprise country. To get rich, you work your tail off and take risks.
But turn that formulation on its head. There can be too much inequality, especially if it’s caused by crony capitalism, the connected wealthy influencing regulations or arranging tax subsidies, or corporate executives reaping huge gains while holding down wages.
That sort of inequality destroys incentives for those lower down the economic ladder. If they can’t attain a good middle-class life by also working hard and taking risks, in the long term that will be bad for us all. The wealthy included.
Good business men and women know that they do well when their employees, customers and neighbors also do well.
Yes, that’s trickle-down economics. But what if trickle-down economics isn’t trickling?