180 foot monster

The Distribution of Wealth in America

--- July 22, 2011 ---

If we could magically transfer just 5% of the nation's total assets ($2.7 trillion) from the wealthiest 10% of households (who own over $37.8 trillion) to the lowest 40% of households --- this would reduce the share of the top 10% of households from 70% to 65% of all assets --- then the lowest 40% of households (47 million households or 125 million Americans) would increase their average net worth from $2,200 to $60,000 per household. Is that dreaming irrationally? Is that being un-American? Why do the least wealthy 40% own only 0.3% of the nation's total wealth? Would that improve the quality of life? What prevents such a wealth distribution?

You may read the following as a facetious story, but no, not on this blog. It's only too true. True Detective True. I draw my facts from the report "State of Working America's Wealth" by Sylvia Allegretto, published March 2011 by the Economic Policy Institute. (more on her research below)

I'm dreaming. In the middle of the night I dream a friend invites me to his house; I agree. He says, "Let me introduce you to my housemates." I agree. I walk in the door of his house, and the first thing he says is, "The median height of everyone living here, all 20 people in this house, is 6 feet tall." That's a little odd. "The median height? What is he talking about?" I remember, the scale from shortest to tallest, the guy in the middle is the median, and he is 6 feet tall, half shorter and half taller. Why does he bring this up. I nod, OK. It's a tall group. I don't ask a lot of questions because I'm dreaming. That's my height, too.

Then he says, "But the average height is a lot taller, something like 21 feet tall." I wonder, "What the hell is he talking about?" (The median is 6, the average 21 feet???) "Let me introduce you to the other 19 men and women who live here," he says, and I agree. He takes me to a room and opens the door and I see 8 little mice-like human beings running around on the floor, shouting and yelling. He closes the door abruptly. He says, "The average height in there is 1.4 inches high. Those 8 roommates are really short. We don't know exactly what to do about it." I nod and gulp. I noticed how fast he shut the door. How odd, what were those things? They could all stand on the handle-bars of my bicycle.

Then we go to the living room where he introduces me to 10 other residents, and they range from 5 foot four to 6 foot 6, normal looking adults, all pleasant and well adjusted -- except one is really tall, about 10 feet I guess. He shares the name of each one. I start to forget about the other room with the excited little 8 shrimp-anoids running around and shouting. I am happy to meet these ten people, they are all friendly. I say, "Larry told me he really enjoys living here and the company of his housemates, it's an interesting place to live. It' nice to meet you all." Or something like that. And I add, "Now I've met you and 17 of your housemates, where are the two other housemates?" He points outside. I gaze out the open door where I see two huge buildings that resemble airplane hangers or maybe where the blimps sleep at night. There are two giants in the two buildings. He says, "That's Oscar over there, the short giant, only 50 feet tall, and Horace, can you see him? He's enormous, 300 feet tall! He rests in that house pretty much all day long. Oscar is 50 feet tall, Horace is 300 feet tall."

"My God! How could that be? But I thought you said the median height here was 6 feet tall," I say somewhat stupefied. My friend replies, "Yes, that's true, the median height is 6 feet, but I did say the average height is 21 feet tall. The average went way up because of those two giants, Oscar and Horace, who you see out there resting in the shade of the dirigible hangers. Because one of them is 50 feet tall and another 300 feet tall, it brings the average to 21 feet tall." My head is swimming, I can't do all this math in a dream.

There are 20 people in this house. Total height of everyone: add up, 8 times 1.4 inches is about 1 foot; 9 times 6 feet = 54 feet, plus one whose is 10feet tall; plus one 50 feet, plus the 300 footer = 415 total feet. Divide by 20 equals almost 21 feet, the average. The median height (the middle guy in a scale from shortest to tallest) of all the 20 people is 6 feet tall. Eight of the people are midgets, 1.4 inches in height. Ten are normal looking, and the other two, 50 feet and 300 feet tall. Then I start thinking, maybe I should try to wake up from this dream. Time to awaken old sport, this is getting too weird.

But, this dream image accords with the distribution of wealth in America.

But if I convert these 20 dream images from height into weight, then we will see 8 tiny people weighing about 4 pounds, 10 people weighing about 200 pounds (some are obese to be sure), one huge guy at 1,560 pounds and another weighing 9,360 pounds. Still we preserve the essential ratio of wealth distribution. Imagine what a nightmare. But let's not be unpatriotic. "God bless America" and all that. The greatest place on earth. It has its virtues.

We would be a far better nation if we distributed income and wealth in a more equitable fashion. As far as income distribution, see the United Nations Human Development Index, the U.S. is the most unequal among developed nations, and ranks about 72nd among all nations on Earth, behind Egypt, Russian, Bulgaria and others. The link above is more interesting, placing the U.S. 24th in a list of the top 30 most developed countries, showing the quality of life for the lowest is still much higher than many nations. Inequality studies are very complicated.

See Sylvia Allegretto's report if you think I invented this dream. She reports that the "average" net worth is just below $500,000, the white household median $97,000, the fortieth percentile stands at $65,200, the African American median $2,200. The top 5% owns 60% of all assets, and about 72% of all financial assets (stocks and bonds). And the next top-most 5% owns 10% of all assets (from Edward Wolff's report at Levy Economics Institute). The average net worth of the bottom 40% is $2,200, and they own 0.3% of all assets. With those details one can determine the ratios as I did.

Page 2 is an eye-opener, a summation of fallout from 2007 to 2009. The nation lost 16% of its net worth, the bottom 90% lost 25% of their worth, the bottom 80% lost 40% of their worth. The bottom 80% own 12.8% of all net worth. The ratio of median household net worth (the 50th percentile) to the top 1% is 1 to 225, a new record. Almost 1 in 4 households have no net worth, 3 out of 8 have less than $12,000. House prices dropped 32% since 2006. Home equity as a percent of home value dropped from almost 60% to 36.2%, "meaning that banks now own more of the nation's housing stock than people do," for the first time on record.

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Our U.S. society has problems. Our incarceration rate is about 12 times the rate of Japan, and the homicide rate is 6 times the rate of Japan, Germany and much of Europe, to name two important metrics. Thoughtful and caring people ask themselves "why?'" Do our rules of organization (economics) and the opportunities available to some but not to all contribute? Why such alarming disparities between other advanced countries? Certainly avoiding human suffering is common sense. Personally, I worked at an elementary school in a poor and violent neighborhood, and I got sick of the conditions there. Poverty neighborhoods and criminal behavior are inseparable and ineradicable. But other advanced countries do not have it as bad. Why? Unfortunately we do not recognize our blatant problems, and a "What me worry?" ("or care?") attitude is normal. Or "America is the best, beyond question (ing)." Let's not be bothered with murder and mayhem, unless it's on the TV happening to some unfortunate poor soul. And when misfortune is reported, it serves more as an alarmist message that increases general fear and paranoia, not compassion or constructive thinking.

Recently a survey report originating from the National Bureau of Economic Research, the organization that announces the official beginning and end of recessions in the U.S., noted that half the population in the U.S. would not be able to come up with $2,000 within 30 days without selling something or borrowing from a relative or friend. Half. See CNN Money, May 14, 2011, "Half of Americans Don't Have $2,000 for a Rainy Day". Only one in four were certain they could handle the emergency.

The Credit Suisse Bank released "Global Wealth Report" in October, 2010. By my rough calculation, if the U.S. had the same wealth distribution as Japan almost all families would have over $100,000 in savings. Perhaps that is why people are not killing each other in Japan, at least not a the rate people kill one another in the U.S.. (See page 16 and 28) You might be surprised to learn that even poor communist China does better than the U.S. Though they have billionaires, by and large their distribution is more equal than most countries.

If we could magically transfer just 5% of the nation's assets from the wealthiest 10% of households to the lowest 40% --- reduce the share of the top 10% from 70% to 65% ---, then the lowest 40% of households (47 million households or 125 million Americans) would hold on average $60,000 instead of $2,200. Is that dreaming irrationally? Is that being un-American?

Scholars at Washington University in Saint Louis, at the Center for Social Development, Mark Schreiner and Michael Sherraden have proposed methods of asset accumulation for low-earning households. The "Individual Development Account" is the primary focus of their proposal and research. Their book "Can the Poor Save?" describes their research. A social program in San Francisco, SF Earns, see www.earn.org, provides incentives to low-earning families to save for education, housing, or business creation. I recommend that readers review the successful and encouraging personal stories on their web page. These programs are marvelous, but grossly under-funded.

In Germany, 40% of the banking system is publicly owned. See German Public Banks, a Wikipedia article. Assets do not have to be held privately, and accumulation beyond the sky's limit does not have to be the social norm. Such a norm contributes to mis-allocation of human and natural and especially financial resources.

This is just a beginning of a look at a very large and neglected problem, the 300 foot giant -- or is he a monster?

Ben Leet

Deficits, from Clinton and Bush

THIS BLOG: My February 2011 essay, the Six Point Program, is a comprehensive proposal to restore prosperity. I recommend it. Go the the column at the right, click-on February, 2011. Look for the Contents page also, December of 2010. We can do two major things in this nation: we can make sure all jobs pay a decent wage -- they don't, believe me --- and democratically we can create jobs for everyone.

The Federal Budget
Comparing the Clinton years with the Bush years

Data from the Congressional Budget Office, Office of Management and Budget, Historical Budget Data, January 2011.

Basic Facts

Year National Debt

1980 ----- 26.1% of GDP --- before Reagan

1992 ----- 48.1% of GDP --- after Reagan and G.H.W. Bush years, up 22.0%

2000 ----- 34.7% of GDP --- after Clinton, down 13.4%

2009 ----- 53.5% of GDP --- after G. W. Bush, up 18.8%

The publicly held national debt (debt not held by intragovernmental agencies such as Social Security Trust Fund) as a percentage of annual GDP has oscillated up and down and up. For 10 years, 1970 to 1980 the debt had held steady around 26% of GDP.

This graph originates from here, Data 360 web page. 

See the graph at Wikipedia of the national debt levels:

http://en.wikipedia.org/wiki/File:USDebt.png

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There are fewer private sector jobs today than 11 years ago in 2000. And taxes were higher in 2000 by 6% of GDP, and that would be by $900 billion in today's money. Let me refer you to Hughes and Seneca of Rutgers University (America's Post-Recession Employment Arithmetic) for the first fact. Not since 1930s have there been fewer jobs after 10 years of stagnation. And Robert Borosage at Truthout.com two days ago for the second. In 2000 the portion of GDP converted into federal revenues was 20.4% and today it's 14.2%. And the private sector employed 110 million in 2000, 107 million today, in spite of a larger labor pool. The labor participation rate in 2000 was much higher than today, and if added onto the unemployment rate, today's U3 unemployment would be at 13%. Taxes --- raise them on the top one percent whose pre-tax income is approximately equal to the bottom 60% of households (!! Yes, see UC Berkeley professor Emmanuel Saez, Striking It Richer), and create public jobs with them. Thanks Joshua H. (I left this comment at Alternet, July 16, 2011)

John Miller, November 2009, Dollars and Sense Magazine,

How I Learned to Stop Worrying and Love the Deficit

http://www.dollarsandsense.org/archives/2009/1109miller.html

Robert Borosage, July 15, 2011, Truthout.com

http://www.truth-out.org/gop-dogma-taxes-spending-andrevenue-vs-facts/1310649524

Robert Reich, July 15, Truthout.com

http://www.truth-out.org/presidents-jobs-plan-not/1310666366

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The economy expanded by 76% over the six years between 1939 and 1944, the years of World War II. In 1939 it stood at 100, at the end of 1945 it stood at 176. This is a growth rate of 10% a year compounded. The workforce expanded by 42% (including the expansion of the military and the civilian workforce, "19.2 million additional people were either working or in the Armed Forces"), and even with additional workers, the unemployment rate dropped to 1.2% and below 2% during 1943 and 1944, proving that full employment is possible, not just a dream. This comes from American Economic Development Since 1945 by Samuel Rosenberg, page 20, 21. One can ask, How much of that growth was due to private sector investment and hiring? "Federal government purchases of goods and services, mainly military related, grew from $22.8 billion in 1939 to $269.7 billion in 1944. This increase is virtually identical to the overall increase in real GDP"

Today, 2011, there's a strong case to re-allocate federal resources. Congresswoman Jan Schakowsky has presented an alternative budget that reduces spending by $400 billion and provides for a $200 billion jobs program. The People's Budget also has a similar program. The war period, 1939 to 1945, demonstrates conclusively that government can influence the economy in a positive way. No one in 2011 would advise such huge stimulus spending, but the point is --- stimulus works. Military Keynesianism is the term for the Reagan stimulus of the 1980s. As shown above, he increased the public debt from 26% to 48% of GDP.

Since July, 2009, the depth of the recession, corporate profits have accounted for 92% of the economic rebound in the GDP gross amount, while in contrast aggregate wage income is still what it was in July 2009, and job growth has yet to happen. The private sector is sitting on almost $2 trillion and not hiring. The tax/GDP rate stood at 20.4% in 2000, Clinton's last years, while today -- as the graph shows in the Borosage article --- it stands at 14.2%, a drop of 6% of GDP less, which in today's economy is $900 billion. The entire debt this year is about 9% of GDP. Raising taxes to the 2000 level would almost eliminate the deficit. Creating public jobs would compensate for the private sector's inability to hire during a depression. About 30% of all workers, 45 million, are either unemployed, not fully employed, or working full-time and year-round for below poverty level wages. Two of eight Americans are connected to a family with absolutely no savings, and another one in eight is in a family with less than $12,000 in savings. That is a depression. The upshot would be a self-expanding economy, and corporations would begin to sell to paying customers again and could begin to hire and invest again. That's the case against freezing taxation.

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Increase in military spending
Clinton era --- 1994 --- $282 billion or 4.0% of GDP
2001 --- $306 billion or 3.0% of GDP

Bush era: -----2002 --- $349 billion or 3.3% of GDP
2009 --- $657 billion or 4.7% of GDP Clinton decreases military spending by 25%, Bush increases it by 42%.

I used inclusive dates for my calculations. The years 1994 to 2001 inclusive are 8 full years, as are 2002 to 2009 inclusive. The president’s budget begins October of the year he is sworn in, for Clinton October 1993, for Bush October 2001. Therefore the 1994 budget begins the Clinton years, 2002 begins the Bush years.

________________________________________________________________Growth in National Debt as a % of GDP
Clinton era: down by 16.7% ---- from 49.2% to 32.5%
Bush era: up by 19.9%% ---- from 33.6% to 53.5%
In 1994 the federal debt stood at $3.433 trillion, or 49.2% of the size of the GDP.
By 2001 it had shrunk from 49.2% to 32.5% of the GDP, a reduction of 16.7%.
Bush’s debt began in 2002 at 33.6% of GDP and ended in 2009 at 53.5% of GDP, which was over $9 trillion.Clinton knocked the debt down, Bush ran it up. The differential between the two presidents is 36.6% of GDP, that is $5.307 trillion, a very big number. If we had continued the Clinton momentum for another 8 years, instead of $9 trillion in publicly held debt we would have less than $3 trillion, or approximately 20% of GDP as a debt level, instead of 2010’s 60% level. Obama did not run up the debt, he inherited from his predecessor the greatest recession in almost 80 years. The forward momentum of the recession ratcheted up the debt from 53.5% of GDP to 60% in Obama’s first year.

_______________________________________________________________Tax Revenue as a percentage of GDP
Clinton era: 19.2%
Bush era: 17.0%

Bush inherited a short 6 month recession, March 2001 to September 2001. But the tax cuts lasted more than ten years. He used the 2001 recession as a justification for decreasing taxes, a Keynesian rationale that federal government should borrow money in a recession and run up the debt. Thereby the saved tax dollars are spent as investment or consumer demand, making up for the lost demand due to the economic downturn. But Bush’s taxes were generous to the highest earners and did little to stimulate widespread demand, and job creation was very weak taking four years to return to their former level, and the median household never recovered it’s lost income to pre-recession levels.
________________________________________________________________Income Tax as a percentage of GDP
Clinton era: 9.05%
Bush era: 7.56%
The Economic Policy Institute claims that the Bush tax cuts cost $2.5 trillion in lost tax revenue over ten years. But these data show it to be $2.08 trillion less than the income tax level of the Clinton’s tax level spread over ten years.
_______________________________________________________________Average Budget Deficit as % of GDP
Clinton era: -2.0% per year
Bush era: -4.76% per year
In today’s dollars, 4.76% of GDP comes to $690 billion of federal expenditures. Coincidentally, this is almost identical to our present military budget. For eight years, this was the Bush II level of deficit spending. The military budget for 2010, which was $689.1 billion, which is also 20% of all federal expenditures. But the true cost of the military is nearly double that amount yearly, $1.2 trillion.

Clinton inherited the legacy of Ronald Reagan and G.H.W. Bush of excessive budget deficits. In 1980 when Ronald Reagan assumed the presidency, the publicly held debt as a % of GDP was 26.1%. Twelve years later after G.H.W. Bush (Bush I) it stood at 48.1%, an 84% jump in the size of the debt. At the last year of Clinton’s term the debt was down to 34.7% of GDP, a decrease of 28%. In 2009 the debt was back up to 53.5%, and increase of 54% relative to the size since 2001. It was more than double the size of 1980. “Deficits don’t matter,” is the advice of former vice-president Dick Cheney. “Reagan proved it.” Politically they don’t matter if your party is in power, when out of power deficits are the only thing that matters.

Franklin Roosevelt ran up huge debts, fortunately, or else we would still be in the Great Depression. See the Marshall Auerback essay that demonstrates the effect of the WPA spending that lowered the unemployment rate from 25% to 9.6% in four years, 1933 to 1937. It depends on how you spend or invest the borrowed money. (See this other excellent report by Auerback, February 2009.)
Roosevelt put workers back to work. Reagan and Bush I and Bush II spent it on the military while cutting taxes. Some call this “military Keynesianism”. The principle that Keynes advocated, increasing purchasing demand through government spending on jobs, was observed. Enlarging the military is not a great investment; better is to create things that do not explode, that improve the quality of life for decades to come. Sidewalks on the streets in my town of San Leandro still bear the inscription, “WPA 1940”.

The Historical Budget Data is non-controversial. The Congressional Budget Office presents basic numbers. It’s without argument that the budget is in deficit. I hope readers will consider the numbers, and draw their own conclusions.
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I love being brief, but there is always more in my writing.

***!!!! --- Back to 1976 ---- !!!!***

I'm going to restore the national income distribution of 1976 by transferring 15% of the nation's income to the lower 90% of households. It's an exercise in re-distribution of income.
You can reference two sources that show the percentage of all personal income going to the top ten percent, U.C. Berkeley professor Emmanuel Saez' report "Striking It Richer" page 7, or the Tax Foundation, Table 5 in their report. The share of personal income going to the top ten percent remained below 35% between the years 1940 to 1980, and today it approaches 50%. I've reported this over and over on this blog. That's my central goal for reform: to restore an appropriate income distribution. This morning I calculated that restoring the previous distribution ratios, 1940 to 1980, transferring 15% of all income that the top ten percent now receives, up from 35% between 1942 to 1982 to almost 50% in 2007, would entail a transfer of $1.319.7 trillion from the top ten percent to the lower 90%. In summary, if the distribution ratio of of 1980 remained the same in 2007, then $1.319.7 trillion would go to the lower 90% of households.

Divided evenly between all households in the lower 90%, each household would have an average increase of annual income of $12,569. The median would rise from around $50,000 to $62,000, and since the average income for the bottom 20% of households is $13,000 according to a Citizens for Tax Justice report, the lower income families would in some instances double their incomes. It's just a fantasy towards which the nation could aspire. I'm not an economist, I'm a dreamer. Dream along with me.

Certain analysts claim that the top income earners pay too much of the federal income tax, which is just 45% of all federal revenue. They never complain about how much more of the nation's income the top income group now receives. To find the overall effective tax rates for all income groups, go to the Citizens for Tax Justice report here, and discover that most households pay taxes in a close range of their total incomes, contrary to the alarmists for the wealthy group.

(Using the Tax Foundation report, Table 3, we see that the Adjusted Gross Income amount for the bottom 50% of taxpayers came to $1,078 billion in 2007, and the top 50% received $7,720 billion, roughly a 1 to 8 ratio, arriving at a total AGI for the nation of $8,798 billion. To $8,798 billion I take out 15%, or $1,319.7 billion, and divide that amount among 105 million households or 90% of the nation's households. This yields an income increase of $12,569 for each household.)

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Let’s cut to the chase: the federal government needs to raise taxes by about 30%. But before it destroys the economy by raising taxes it should create public jobs and get everyone working as we did in the 1930s and 1940s. Then we, the shapers of government policy, should aim to restore the income distribution to the ratios of 1976 when the top ten percent of households received less than 35% of all income, not the 49% it presently receives. “Back to 1976” is my radical cry. Then we can raise the taxes by 30% and have a balanced budget.Imagine three large pizza pie plates, because I cannot graphically create them. Or imagine three clock faces. The first contains all the GDP with one slice representing the federal government’s expenses. That one slice is about 14 minutes on the clock face. Most advanced nations have a larger slice. The federal government was 19% during the Clinton years, and then it expanded to 24%.

Now, imagine the second clock face. This represents all federal spending, and the slice portion, 12 minutes (or 20% of spending) of the clock face, represents the portion not paid for, the deficit during the Bush II years. Clinton eliminated this slice.

Now, the third clock face, it is 17 minutes (or 28% of spending) as a slice size। When you take out all the federal expenses that are paid for by payroll taxes, the Social Security and Medicare parts, you have a smaller pie. Instead of $3.5 trillion, the pie is now $2.4 trillion, and the unpaid part, 17 minutes ---which amounts to 28%---is the part that the Bush II government neglected to collect, its real deficit. To balance the budget G.W. Bush would have had to raise income and corporate taxes by 28% for all the eight years of his presidency.

Three clock faces: 14 minutes, 12 minutes, and 17 minutes.
24% ------20% ------------28%

The People’s Budget and the budget proposed by Representative Jan Schakowsky are responsible alternatives to what either the Republican Representative Paul Ryan presents or to what the Obama administration proposes. Both do damage to our nation, in my opinion. We should look for a responsible plan. Opinions of course vary, and intelligent people often disagree. Let’s be intelligent and disagree intelligently.

The Tax Policy Center, part of the Urban Institute, has a Briefing Book that explains much of the pie chart business. The President’s Budget and the Congressional Budget Office also explain the various expenses, for those who wish to explore at the source.

June 27, 2011

Jobs and Recovery

THIS BLOG: My February 2011 essay, the Six Point Program, is a comprehensive proposal to restore prosperity. I recommend it. Go the the column at the right, click-on February, 2011. Look for the Contents page also, around November or December of 2010. We can do two major things in this nation: we can make sure all jobs pay a decent wage -- they don't, believe me --- and democratically we can create jobs for everyone. Today there are not enough jobs, as you should know, and we can create them. About 16% of all jobs are government jobs today, we can create more, we are rich enough to do so. And the lower 80% of workers earn only 28.2% of the national income through their jobs. One dollar in income at the bottom 80% is matched with $6 in income at the top 20%. That is an insane income distribution; no other advanced country is as bad. We can change the wage ratios with taxes, incentives and income credits. The economy generates $47,000 per person, per human being, per infant, child, adult, elder, everyone, $47,000 a year. That's about $141,000 for every family of three, on average. We are rich enough. We have a broken system. We need more jobs, and higher wages. It's your future, your family's future, and your and their happiness.


Jobs and the Recovery

Officially the economy has recovered. How do we know? Economic production, the GDP, has recovered to its pre-recession level, but 7 million jobs were lost in the process. So is it a real recovery? The Great Recession lasted from December 2007 to June 2009 when the GDP declined by 4.2%, it reached its nadir or trough. The economy then began to grow, an 18 month rebound which recaptured its pre-recession level. The drop and recovery had a symmetry to it, 18 months for each. Since the trough, corporate profits have increased by nearly 40%, or $465 billion, accounting for 92% of the growth in national income. The casualty of the rebound was the American worker who saw the elimination of over 7 million jobs. The economy shed 8.750 million jobs according to the Bureau of Labor Statistics (Monthly Labor Review, April 2011). The economy has since recovered 1.3 million jobs, far below the bare minimum rate needed to absorb new workers entering the work force, leaving a 7.45 million job deficit. At the Economic Policy Institute one researcher places the net job deficit at 11 million when one adds on the influx of unemployed new workers to the workforce. Economists estimate that the economy is performing at 10% below of its capacity.

A staggering 45% of the unemployed have been unemployed for over half a year as of May, 2011. Heather Boushey reporting at the Center for American Progress, June 2011, states, "The share of workers who are long-term unemployed — that is, out of work and searching for a job for at least six months — ticked back above 45 percent in May. This share has hovered above 40 percent for 18 months. Those are highs not seen since the Bureau of Labor Statistics began tracking these data in 1948."

Since the recession's trough the aggregate wages and salaries of workers have actually gone downward even further, so the “recovery” has yet to affect wages in the least. The median wage earner has earnings 0.6% below the June 2009 level.
Is the word “recovery” truly apropos in this condition? Recovery for whom? For people who create the economy, or for the economy as a concept? Was there prosperity for most before the Great Recession? The GDP per capita, the amount of economic production per citizen, is over $47,000 a year, therefore would not poverty and income inadequacy be difficult to explain?

Arguably, the largest casualty of the Great Recession was the wealth of the bottom 80% of households. U.C. Berkeley professor Sylvia Allegretto reports, “Average wealth of the bottom 80% was just $62,900 in 2009 --- a dropoff of $40,900 from 2007 and slightly less, in inflation-adjusted terms, than it was more than a quarter-century ago in 1983.” This 39% drop in wealth, from $103,800 to $62,900, resulted from the 32% decline in housing prices; the median family holds 95% of its wealth in home equity. Homeowner equity or “home equity as a percent of home value fell from 59.5% in the first quarter of 2006 to 36.2% in the fourth quarter of 2009. For the first time on record, the percent of home value that homeowners own outright dropped below 50% --- meaning that banks now own more of the nation’s housing stock than people do.” As most people know, the banks are doing much better, they have recovered. Housing prices have not recovered, in fact after a year of stability they have recently been falling. The foreclosure epidemic continues apace, as well --- no recovery there.

Allegretto reports that in 2009, “nearly one in four households had zero or negative net worth, while 37.1% had net worth of less than $12,000. In other words, more than a third of U.S. households have wealth holdings that are so low they are extremely vulnerable to financial distress and insecurity.” My own “other words” are: three out of eight Americans are hanging by a thread in the wealthiest nation on earth where the per capita economic production is over $47,000 a year.
This is the greatest or one of the greatest problems our nation faces.

Corporate profits on the other hand have increased since June 2009 by almost 40%. The Center for Labor Market Studies, May 2011, reports, “Annualized corporate profits in constant 2010 dollars rose very strongly . . . Over the first seven quarters of recovery, this would represent a gain of $465 billion in corporate profits or just under 40%.” From a profit level of $1.203 trillion in the second quarter of 2009 to $1.668 trillion in the first quarter of 2011, profits increased by just under 40%. The S & P 500 Stock Index rose by 44% in this same 21 month period.

The May 2011 report adds that in the 21 months of recovery from the recession’s trough, “corporate profits accounted for 92% of the growth in real national income while aggregate wages and salaries declined by $22 billion and contributed nothing to growth.” “To date,” the report concludes, “through the first quarter of 2011, the nation’s recovery from the 2007-2009 recession is both a jobless and a wageless recovery. Aggregate employment still has not increased above the trough quarter of 2009, and real hourly and weekly wages have been flat to modestly negative. The only major beneficiaries of the recovery have been corporate profits and the stock market and its shareholders.” Allegretto’s wealth report shows that 80% of stock market wealth is owned by 10% of U.S. households.

If the economy had the same labor participation rate as 2007 the unemployment rate would rise from 9.1% to 11.5%. And if the participation rate were equal to 2000, the present U3 unemployment rate would be 13%. An amazing 29.0% of Americans workers --- 45 million adults in all --- fall into the unfortunate categories of either being out of work (11.5%), involuntarily without enough work (5.5%), discouraged from looking for work (1.4%), or working year-round and full-time for less than poverty level wages (10.6%). The purchasing power, which drives the economy, is severely limited by low wages, under-utilization of labor, and very sluggish private-sector job creation. Recovery does not apply to the labor market.

The National Jobs for All Coalition reports, "In April, 2011, the latest month available, the number of job openings was 3.0 million." Thus with an 18.4% unemployment rate, as I have calculated it, or 28 million full-time job seekers, there are more than 9 workers seeking every one job opening. Using only the usual U3 unemployment rate, 9.1% in May 2011, the Economic Policy Institute reports that the ratio has exceeded more than four workers for every job opening for the entire past 28 months. New job hiring has not recovered.

There were more private sector jobs in December of 1999, eleven and a half years ago, than today (110 million versus 107 million); and the economy is barely adding on jobs at the rate of growth of the labor force, according to researchers at Rutgers University. (See September 2009 and July 2010 reports) Not since the 1930s has the nation had a decade of net job loss.

The nation is in a strange policy vacuum. Most people recognize that employment is the central problem, yet the major political parties limit their discussion to the size of cuts in government services and expenditures, indicating they are at a total loss to discuss job creation proposals. The Bush tax cuts of the 2000s cost the government $2.5 trillion over ten years in lost revenue, and the Republican Party insists on extending these cuts for the wealthiest minority whose fortunes have recovered, and who arguably needed recovery less than the poorer majority who lost a greater portion of their savings. The low tax policy after ten years has proved to be a total wash-out; job creation in the 2000s matched the housing bubble.

Running in contrast to this paralysis, on April 14, 2011, 40% of the Democrats in the House voted for a public job creation proposal costing $145 billion a year. This was the “People’s Budget” from the Congressional Progressive Caucus. Other Congress members have proposed direct public job creation: Representative Conyers is sponsoring again the Humphrey-Hawkins full-employment bill; Representative Jan Schakowsky has presented a budget that would devote $200 billion to public jobs. Demos in January 2011 published professor Philip Harvey's plan "Back to Work" that for less than $200 billion a year would create a net of over 8 million jobs; and the Economic Policy Institute, the Chicago Economic Political Group, the National jobs for All Coalition, Jobs for Justice, and many others are putting forward proposals for public job creation.

At the New Deal 2.0 web site, Marshall Auerback wrote (8.30.09) that between 1933 and 1937 Roosevelt’s job creation program reduced the unemployment rate from 25% to 9.6%, indicating the power of the federal government to ameliorate the economic doldrums when the private-sector refuses to hire.

Political power is as unevenly distributed as income and wealth: the top ten percent of households earns nearly 50% of the pre-tax yearly income and owns over 70% of all wealth. The disparity in political power is just insurmountable, and the poor remain powerless and unemployed -- wageless and jobless. The nation seems locked into a depression with lower wages and record rates of long-term unemployment. Simultaneously, the Recovery continues with high corporate profits. Housing prices are again falling, and one wonders how long corporate profits can stay high with a diminishing purchasing base.

But not to worry. The wealthiest 1% has an average wealth holdings 225 times the median household, which ratio has increased from 125 times in 1962, and 131 times in 1983. If you converted the wealth holdings of the nation’s households into piles of $100 bills, you would have a wide circle with half the piles less than one inch high, and an inner circle of piles representing 40% of the households each pile reaching 14 inches, a still inner circle (9%) with piles reaching six feet high, a center of the circle representing 1% rising to over 50 feet high, and in the very center a few piles reaching over 20 miles high. This is our America today.


Comment section:
“Apres moi le deluge” was said by a) Louis XV, or b) George II --- ?

My friend read this essay and replied:
I don't think it's a policy vacuum. I think the analysis works better if you assume that the government is totally controlled by multi-nationals who's purpose is to rob all world-wide populations of any wealth. Eisenhower warned us 60+ years ago. Then don't worry. I could send you more articles that I notice, but not really any point in it. Your own numbers say only 40% of democrats voted for public jobs. That is not contrast - it's a sign of who controls democrats.

Foreign Derivative Swaps

This is my first reform effort for the financial industry. I think it's thought provoking. The Americans for Financial Reform (dot org)posted a letter to the same committee stating a similar argument. I'll try to remember to link to it soon. The final concept here is that
finance has not contributed to prosperity, it has diverted our attention. It should be much smaller. The book The Great Financial Crisis is a good source of info that I should review (and I'm writing to myself, as usual). Written around May 12, 2011

To the U.S. Treasury,

Re: Regulations on international “swaps” and the exemptions rule.

This is my suggestion.

You are about to exempt international “swaps” from regulations in the Dodd-Frank Commodity Exchange Act. I object.

I surmise from my reading that the financial system is much too large, and the U.S. Treasury should do its utmost to reduce its size. I gathered the following facts from the book Epic Recession by Jack Rasmus, a professor at St. Mary’s College in northern California. He was commenting on the growth of debt in the U.S. since 1978, and he drew from Federal Reserve’s Flow of Funds Report, Q1 2009.
Total U.S. Debt, 1978 to 2008:
Government debt up 8.0 times (all are ‘78 to ‘08),
Total Consumer Debt (including mortgages) up 10.3 times,
Non-Financial Corp. debt up 9.4 times,
Financial Corp debt up 47.0 times. Financial corporate debt jumped from $412 billion in 1978 to $19.5 Trillion in 2008 — Federal Reserve Flow of Funds.
As Marshall Auerback wrote at New Deal 2.0 in May 14, 2011, “The whole boom of the last 25 years was predicated on financial deregulation, massive fraud, and a huge build up of private debt as a consequence of inadequate fiscal policy to generate full employment and rising incomes.”

I commented, “The huge increase in financial corporate debt had no matching component in real world investment. There were relatively few projects to fund, as the figures prove. But there were corporate mergers and buyouts, and CDO securitization and credit default swaps and financial engineering. Real financial intermediation which is the true function of finance and credit was replaced by financial engineering, and often that resembled gambling more than investing. How else can you explain the numbers that increased financial corporation debt by a factor of 47? Financial corporations’ profit as a portion of all corporate profit also grew, Our financial system has yet to resolve the “frozen negative assets” (a phrase ‘coined’ by H. Paulsen and B. Bernanke) that they hold, and housing prices are expected to decline another 15%. The losses must be faced and absorbed privately, not transferred to the public. Then we need an economy modeled on growth that serves the majority of citizens. “Mark to fantasy” has replaced Mark to Market. “Extend and pretend” is the new banking norm. Banks own over 60% of U.S. home equity since the recession stripped value from mortgage holders. But the book value which the banks show does not reflect the true, reduced value of these housing assets. As Auerback claims, the banks are still bankrupt.”

Another book that makes a similar argument is The Great Financial Crisis by Foster and Magdoff, two socialists. On page 20 they display a graph that shows from 1959 to 2007 two measures, “Debt as percentage of GDP” and “Total goods production as percentage of GDP”. From an index of where both items begin at 100 in 1959 the Debt figure rises to 250, the Total Goods figure falls to 65. “The search by capital for profitable outlets for its surplus despite the stagnation of investment opportunities within production, coupled with the belief that asset prices as a whole went only one way -- up --, generated a secular financial explosion.” But, they conclude with Karl Marx, “The real barrier of capitalist production is capital itself.”

Using the findings of another report we see much the same trend.
Thomas Palley (Financialization: What It Is, Why It Matters, PERI, U.Mass/Amherst, 2007) shows that financial corporation profits as a percentage of all corporate profits grew from 20% to 43% between 1973 to 2005 (Palley, page 37). Financial corporation debt as a percentage of GDP grew, 1973 to 2007, from 9.7% to 31.5%, increasing by a factor of 2.4 times (Palley, page 38) . Non-financial corporate debt decreased from 90.3% of GDP to 68.5% (Palley). Mortgage debt, 1973 to 2005 increased from 48.7% of GDP to 97.5% (Palley).

Palley's findings show a rapid growth of financial corporation debt (by a factor of 2.4), but not as rapid as the findings reported by Rasmus or by Magdoff and Yates (showing an increase by a factor of 6) in The ABCs of the Economic Crisis, page 77. The Magdoff and Yates figures align with the Rasmus figures. Perhaps Palley's definition of a financial corporation was more restricted, not including the 'shadow' banking corporations. (See also Palley's 2009 paper, America's Exhausted Growth Paradigm: Macroeconomic Causes of the Great Recession, for more analysis along this line.)

So, why ?, I ask myself, is the Treasury exempting “swaps” from regulation?

My suggestion comes from another book, The Keynes Solution by Paul Davidson. He proposes an International Monetary Clearing Union (IMCU). “All international payments, whether for imports or financial funds crossing national borders, would go through this clearing union.” (page 136) You can read the rest of the chapter for yourself. But I’ll shortly quote his three objectives:
1. Prevent a lack of global effective market demand for the products of industry from occurring due to liquidity problems whenever any nation holds excessive idle reserves by saving too much of its internationally earned income. . . .
2. Provide an automatic mechanism for placing a major burden of correcting international trade imbalances on the nation running persistent export surpluses.
3. Provide each nation with the ability to monitor and, if desired, to control movements out of the nation of:
a. Financial funds ... moved .. to avoid paying taxes on such funds.
b. Earnings from illegal activities leaving the nation.
c. Funds that cross borders to finance terrorist operations.

I want to remind you of a few uncomfortable facts: since Nov. 2009 one in four children in the U.S. get their food by way of food stamps, and now it is about 29% of all children, one in seven of all citizens, over 44 million. 24.1% of all households have “zero or negative” wealth or savings, probably almost one in three have less than $5,000. Our nation produces a GDP/capita of over $47,000. We have tremendous inequality. The top one percent now own 225 times more than the median household, an all time high. The median household has just lost over $40,000 (or 40%) in savings. (These figures come from Sylvia Allegretto’s report State of Working America, Wealth, published by Economic Policy Institute, March 2011.)

Inequality is widening, opportunities are shrinking, precarious security is infecting more and more. Various forces could tip the balance in catastrophic ways, which would really be tragic (food prices, gas prices, housing prices, more unemployment, disruptions). The people at the Treasury should have a bigger outlook than what I presently see. They seem to be protecting the private holders of financial assets, the status quo, the wealthiest people on the face of the earth who themselves created a monumental mess. The arrogance of the mighty creates suffering for those who did least to create the problem.

In addition to Foster and Magdoff, and Paul Davidson, and Sylvia Allegretto, I recommend you read the facts at inequality.org, see the side-bar links to income and wealth inequality. I also have a blog, http://benL8.blogspot.com, in Feb. 2011 I posted a 6 point program. Raise wages, increase minimum wage, increase EITC, create public jobs, impose tariffs and quotas, emplace a values added tax on multi-national corporation’s imports. I just collected ideas from scholars and writers, it’s not my own creation. I will add a 7th proposal, drawing from Rep. Jan Schakowsky’s deficit reduction plan, eliminate the interest payment deduction enjoyed by financial corporations, a savings of $77 billion a year. Raise capital gains tax to normal marginal tax levels, and if sold before 12 months raise that rate to 70%.

Lawrence Mitchell wrote The Speculation Economy, a financial history centered around the 1900s when the stock market began to overshadow productive industry. Perhaps it is time to reel-in speculation. The world lost between 2007-2009 about $35 trillion (17% of all value) because incentives were poisonous, incentives that U.S. government officials nurtured. It’s time to think deeply.

I hope this gives you a glimpse of a new world of prosperity, justice, endeavor, and growing enjoyment of life. We should all be working less, doing art, visiting friends, but not worrying that the foundation is about to crack and sink into the Ocean of Chaos. The German worker works 9 weeks less per year, the Gini level in Germany is 25, not the 41 in the U.S. Time to humanize the system.

Yours, Ben Leet, I live in San Leandro, CA, May 12, 2011
I am a retired public school teacher, not an economist.

Why the Economy Must Have Public Jobs
or Suffer a Lengthy Slump

--------The Problem-----
One in four American children get their food by way of food stamps, and among the total population one in seven or over 44 million Americans. In fact, the use of food stamps has increased by over 30% since the official end of the recession in July 2009. The rate of children getting food from charity coupons is approaching one in three. Yet, on the other hand, our economy creates over $47,000 of value each year per person. We are a very wealthy nation. These two snapshots provide a concise picture of an economy with extreme inequality. This inequality threatens our core values of personal opportunity, and it threatens the overall prosperity of our country. We are all victims of this inequality, and the economy performs far below its potential.

As the economy shrunk since January 2008, so did government revenues from taxes. Some say the government services must shrink. “We have a spending problem, not a revenue problem,” is heard. “We don’t need new taxes, we need to cut our spending.” I disagree. The problem lies in the greater economy that is shrinking because of inequality. If we attack unemployment and inequality we can have an economy that self-expands and a government that expands in tandem. To simplify my position, “Create public jobs and raise wages.” We need a spending solution.

Today if the nation embraced public job creation and made the political choice to add between 8 to 18 million more public workers, the economy would create a self-sustaining expansion, which is one way of saying “Recovery.” The purchasing power of those additional workers would inspire private employers to add more non-supervisory workers, also known as employees. This is Robin Hood economics, we “steal” from the rich to create jobs for the poor, and the economy recovers its ability to self-sustain employment and expand. Those who insist that we have a spending problem, not a revenue problem, are wrong. We have a problem with the greater economy to self-sustain.

The perfect illustration is that ten years ago, in December, 2000, there were more private sector jobs than there are today. Between 1980 and 2000 38 million private sector jobs were added to the economy; between 2000 and 2010 7 million jobs were lost. The economy has shrunk in terms of private jobs since 2000 when there were 110 million private sector jobs; today we have less than 105 million private sector jobs. So we have a ditch out of which to dig. Maybe in five, ten, or twenty years the economy by its own power will self-motivate and resume hiring and restore former employment levels --- or we could jump start it with public jobs.

There is total confusion about government spending in Congress. The Speaker of the House, John Boehner, gives speeches about cutting trillions, not billions, from the budget. He erroneously states that the “wealthy” do not have enough money to balance the budget, so thoughts of raising their taxes are futile. Wrong. The top one percent of households, as he probably knows, own 35.6% of all private property, are worth about $20 trillion, much more than $1.4 trillion needed to close the budget shortfall. The wealth of the top 10% exceeds $38 trillion, 75% of the total. (The bottom 4/5ths of U.S. households own only 12% of the nation’s wealth.) Boehner and his allies threaten to close down the government by refusing to raise taxes or the debt ceiling. These are rhetorical flourishes that just add hysteria and confusion to the atmosphere.

In 1933 Franklin Roosevelt faced a nationwide “bank holiday” -- which is a euphemism for total financial system collapse -- in the first days of his administration, the economy was on the brink of freezing up. John Maynard Keynes published an open letter in the New York Times in which he advised the President to seek recovery before he sought reform. And the method to achieve recovery was by massive government spending to re-employ the unemployed. Keynes advised, “Broadly speaking, therefore, an increase of output cannot occur unless by the operation of one or other of three factors. Individuals must be induced to spend more out of their existing incomes; or the business world must be induced, either by increased confidence in the prospects or by a lower rate of interest, to create additional current incomes in the hands of their employees...; or public authority must be called in aid to create additional current incomes through the expenditure of borrowed or printed money... It is, therefore, only from the third factor that we can expect the initial major impulse.”

Roosevelt took this advice, he created the Civil Works Administration that lasted only five months but, creating 4 million jobs, is to date the largest government public employment project in our nation’s history. And then he created the Works Progress Administration (WPA) and the Public Works Administration (PWA).

This is how the nation recovered from the Great Depression. Marshall Auerback, writing in New Deal 2.0, claims (and he is seconded by Paul Davidson, prolific Keynesian scholar and author of The Keynes Solution, and by Jeff Madrick, editor of Challenge Magazine, writing in his deficit reduction report for Campaign for America’s Future, January 2011) that between 1933 and 1937 the unemployment rate decreased from 25% to 9.6%. Prematurely in 1938 Roosevelt drastically reduced government spending on jobs creation, and unemployment shot up to 13%, so he reapplied his previous policy. Again between 1939 to 1946 the federal government spent like a nation at war, creating public jobs, and unemployment dropped from 13% in 1938 to below 2% for three consecutive years during the war, 1943, 1944, and 1945. Afterwards the result was an economic expansion unheard of before. It worked. This is not socialist history, it is the history of the most productive period of economic growth in American history, bar none.
It’s a case study in a “spending solution” not a “cut spending solution.”

After hiring millions and reducing the rate of unemployment to below 2%, the national distribution of personal income held steady for about 40 years. Distribution for the years 1940 to 1980 restrained the amount received by the top 10% of households to under 35% of all personal income. Marginal tax rates in the highest brackets, that is taxes on income over and above a very high level, exceeded 90%. That lasted until 1980, when high bracket marginal tax rates dropped dramatically, and when the share of the top earning households grew and grew, and recently, 2007, the top 10% received 49.7% of all pre-tax income, in 2007 the top one percent received 23.5%, nearly 1 or every 4 dollars of income.

As a nation we can now sadly boast of having the worst, most unequal distribution of income among advanced nations. And to match that achievement, we do the worst job of transferring income to those who are in need. Chuck Marr at the Center for Budget and Policy Priorities recently reported that an OECD report “shows that the disparity in income [inequality] in the United States is more pronounced than any other country (squeaking past Poland). At the same time, U.S. tax and spending policy [social transfers] (i.e., the whole budget) does less to diminish this inequality than the policies in any other country in the OECD except South Korea.” We have the most inequality, we do the least to reduce it. Quite a record! Robin Hood had a good idea. In France, before social transfers, their childhood poverty is approximately the same as the U.S. rate, 27%. After transfers they reduce childhood poverty to 7%, we reduce it to 20%, which is about double the average in Europe.

The value of our economy, the GDP, divided equally among children, adults, and retired elders, is over $47,000 a year per person. A family of four could have an income of $186,000. Divided equally among all workers it comes to $100,000 a year. Yet more than half of U.S. workers earn less than $29,775 a year, according to the U.S.Census. The bottom 40% of households own a mere 0.03% of all private savings.

The Republicans argue that the wealthy need more money (tax cuts) to create more jobs. It didn’t work out that way 2000 to 2007, despite the enormous tax cuts to the wealthy afforded by the Bush administration and the Republican dominated Congress. Those years were called the “jobless recovery.” The top one percent, according to U.C. Berkeley economics professor Emmanuel Saez, took in two-thirds of the economic gain of that period.

Marriner Eccles, the Chairman of the Federal Reserve during the Great Depression described in 1951 the causes of the Depression in these words:

"As mass production has to be accompanied by mass consumption, mass consumption, in turn, implies a distribution of wealth -- not of existing wealth, but of wealth as it is currently produced -- to provide men with buying power equal to the amount of goods and services offered by the nation's economic machinery. [Emphasis in original.]

Instead of achieving that kind of distribution, a giant suction pump had by 1929-30 drawn into a few hands an increasing portion of currently produced wealth. This served them as capital accumulations. But by taking purchasing power out of the hands of mass consumers, the savers denied to themselves the kind of effective demand for their products that would justify a reinvestment of their capital accumulations in new plants. In consequence, as in a poker game where the chips were concentrated in fewer and fewer hands, the other fellows could stay in the game only by borrowing. When their credit ran out, the game stopped. . . . Had there been a better distribution of the current income from the national product -- in other words, had there been less savings by business and the higher-income groups and more income in the lower groups -- we should have had far greater stability in our economy.”

President Kennedy described the economy in nautical terms, “A rising tide lifts all boats.” That was when we had a balanced income distribution. This apt description was to be replaced in the 1980s with “When there is more for me, there is less for you.” The top one percent of households now earns more pre-tax income than the combined income of the bottom sixty percent. Soon it will be the case that Scrooge McDuck, or Daddy Warbucks, or whoever, will own everything once and for all, and we’ll be living in feudal times again, the Dark Ages will have returned. (I have my own hysterical flourishes too, if you don’t mind.)

_________________________________________________________________

-----The Solution-----
Unfortunately, we as a society do not believe in public job creation for the purpose of balancing income distribution and repairing the economy.

Demos, a left-leaning political advocacy group, published recently a proposal “Back to Work, A Pubic Jobs Proposal for Economic Recovery” by Rutgers University professor Philip Harvey. For a net cost of $162 billion a year this plan would create 8 million new jobs, at a cost of $20,226 per new job.

Compare that cost with the cost of the Great Recession. After the financial system collapsed $11 trillion, or 17% of the nation’s private wealth evaporated, the typical or median household savings dropped from $109,000 to $65,000, a 40% drop to levels below the 1983 level.

Compare the cost of Harvey’s program with other big ticket costs to tax payers.
Economists Mark Zandi and Alan Blinder state the entire cost to the public of just the financial system bailout will be approximately $1.6 trillion, ten times the yearly cost of the Harvey proposal. Other government expenses:
--$2.5 trillion over ten years for the Bush tax cuts benefiting the wealthy
--$700 billion to bailout the too-big-to-fail banks
--$152 billion for the Bush stimulus of 2008
--$787 billion for the Obama stimulus in 2009
--$800 billion for the tax compromise of December 2010
--$150 billion to bailout AGI insurance company
---$70 billion, the replacement cost of the trident missile submarine fleet
--$664 billion, the yearly military budget costs
-- $1.2 trillion, the actual but unofficial cost of the military

Additional social costs are not included in the cost of the debacle: the cost of 10 million (or 22% of all) home mortgage foreclosures over a six year period, resulting in family and community disruption, the cost in terms of severe unemployment in the private sector, the costs to local and state government resulting in government employee (police, fire, education) unemployment --- none are included in the $1.6 trillion estimate of just bailing out the banks and other financial corporations who after self-destructing still managed to make enormous profits.

We should ask, where’s the money for workers? The bailout left 17% of the workforce in the lurch --- unemployed. If we spent $162 billion on public jobs each year, a minute fraction of the cost and damage caused by the financial system collapse, 8 million new workers would contribute to the economy, pay taxes, enjoy a steady income with security and predictability. And most importantly the private sector could regain its usual hiring practices and achieve a self-sustaining expansion. Then the misery would begin to end.

There are other proposals fully developed and painstakingly thought out to create public jobs. These jobs could be targeted to create a solar/wind renewable-energy based system for the nation’s electricity grid and transportation system -- both enormous projects; and this would reduce our foreign oil dependency, improve our trade deficit and improve our national security resulting in lower military expenses. Public workers could insulate the nation’s homes and government buildings, renew our decrepit infrastructure, and improve and enhance our childcare services, and enlarge the number of home health-care providers for the elderly.

We suffer from a failure to analyze and execute. It’s time to lift a page from our historical past. “Happy Days” would be here again if we could break through the barrier that prohibits direct government created jobs as an economic remedy when the private sector is not up to the task.