Economic Recovery for Whom?

Michael Blim

Heard enough about those “little green shoots” of economic recovery? Not finding them in your backyard garden? Not popping up in between the cement slabs on your stoop?

Perhaps this is because the only place the green is sprouting is on Wall Street and on the balance sheets of several mega-banks. The Dow Jones has hit 9,000 again. Goldman Sachs and JP Morgan reported hefty profits. Seems like old times.

But these are new and perhaps even better times for the masters of the money universe. They now operate with a full and explicit federal guarantee against failure, and many have made back their government loans at little or no expense. Even though the banks and big financial firms working through them laid us low, the Obama Administration seems to have passed out “get out of jail cards” to their operators. Unless Andrew Cuomo decides to play spoiler, the miscreants who triggered the world financial crisis will be back living large in no time. This is also because the proposed Obama financial regulation regime is so weak that it is even described as toothless by that paragon of 18th Century classical liberalism, the Economist.

Walk off Wall Street and you hit upon another world. Never mine no green shoots. There is instead massive die-off, as if the economic eco-zone had been ripped up by a financial Katrina and been left to molder.

The rot and decay of a near-dead economy lie all around us. There is universal acknowledgement that we will reach 10% unemployment in the fall. Every occupational category has been hit thus far, with rates of unemployment doubling since 2008 in computing, architecture, engineering, community and social services, health care technical services, construction, maintenance, repair, manufacturing, mining and transport. Already in double digits are food services, buildings and grounds maintenance, construction, farming, fishing, forestry, construction, mining, manufacturing and transport. In addition, state and local governments are laying off workers at unprecedented rates.

The unemployed are running out of benefits – an estimated 600,000 have run out of benefits since the recession began, and the rate at which workers will lose their benefits is growing exponentially as the stimulus package extension of benefits runs out.

I also counted 9 states and Puerto Rico as having forced furloughs of varying lengths on their workers thus far.

Perhaps the most baffling as well as infuriating fact is that home foreclosures continue to rise. Here after all was where it all started – where the financial grifters did their dirty work and triggered the worst recession since the Great Depression. The Center for Responsible Lending estimates that there will be 2.4 million home foreclosures in 2009. They estimate further that 9 million foreclosures will occur between 2009 and 2012. Having found their estimates reliable over the past two years, I take these to be serious numbers.

The Center for Responsible Lending has performed a study that suggests that an estimated 92 million homeowners will lose $1.86 trillion in home equity between 2009 and 2012. Millions will lose through foreclosure, but 10 times more homeowners will lose equity as houses are foreclosed around them.

Nothing the Obama Administration has done on housing has worked. Some experts argue that the recession has so clobbered homeowners that federal efforts were quickly made inadequate to the task. Even if true, I am not aware of what the Administration intends to do about its failure to turn back the foreclosure tide.

In my Boston neighborhood, the head of housing litigation for the Harvard Law School clinic there told Jenifer McKim of the Boston Globe (July 23, 2009) that “lenders are not modifying or engaging in any meaningful efforts to save folks’ homes.” Several of these lenders are those the federal government in effect now owns or controls.

This leaves one in a quandary. The recovery is a success if you are a banker. It is fast becoming an abysmal failure if you are out of work, out of luck, or poor. President Obama’s initial diagnosis of the economic crisis is becoming a tired excuse. Yes, the Administration was handed a failing economy that had been running on fumes for years. Yes, Bush’s many wars weakened government’s capacity to fight the recession.

But Obama’s politics, it seems more and more to be the case, are now part of the problem. To fix health care, better wire our infrastructure, improve fuel inefficiency, and curb environmental crisis – to pick out a few items from his standard speech litany of things we can do to create a new economy out of the current chaos – doesn’t put people, surely not enough people, back to work, nor does it help them save their houses. His insistent, visionary call for creating good times out of bad is not only turning out to be myopic, but it is beginning to cover his Administration’s failure thus far to transform the federal government from a kind of hand brake on economic decline into a driving force for good, the American motor of fundamental economic and political justice.

Who would have thought a year ago that Obama suffered from the sclerosis of Daddy Bush’s “vision thing?”

In the real world, President Obama has until the mid-term elections to seek out justice that helps people in the here and now, and that puts a majority of America behind him in his work for a truly better world. If President Obama doesn’t, he will lose a Democratic majority in the house, and with it governability. His administration, even if he were re-elected, would become the third in a row to open the doors of power to the forces of reaction.

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