A Week of Ugly Economic News

[Omaha Steve]

http://blog.aflcio.org/2007/03/02/a-week-of-ugly-economic-news/

A Week of Ugly Economic News

by Tula Connell, Mar 2, 2007

What to make of the nation’s economy after a week of mostly unpleasant indicators? The Dow plummeting more than 400 points on Tuesday may be a “correction” or may be something bigger.

Of greater portent for the near future—and of more significance to most working families—are several other stats that came out this week Let’s take a look.

* New home sales drop 16 percent in January. At the same time, home owners with subprime mortgages are getting hit with new monthly mortgages they can’t afford. Some 20 percent of subprime loans at the biggest U.S. mortgage lender, Countrywide Financial, are more than 60 days late and late payments are increasing in the non-subprime mortgage markets.

* Working people’s personal savings are nearly nonexistent. Two-thirds of workers have less than $50,000 saved—with 39 percent having less than $10,000 set aside for retirement, according to new numbers released from the Employee Benefit Research Institute (EBRI). Yet, recent EBRI research shows individuals age 55 who live to age 90 would need to have accumulated $210,000 (by age 65) to pay for insurance to supplement Medicare and out-of-pocket medical expenses in retirement—far more than all but about 10 percent of workers currently have saved for all retirement expenses.

* Worse, consumers spend more than they earn. American workers spent more than they earned last year as the economy steamed ahead, pushing the personal savings rate to negative 1.0 percent, the deepest hole since the 1930s Depression, according to the U.S. Commerce Department. Meaning not only did Americans spend all their income, they dug into savings and used credit to buy more.

* More and more info tech jobs are being exported overseas. We noted earlier this week that a new report from the Brookings Institution finds 2.4 million jobs in some 250 U.S. cities will be sent overseas between 2004 and 2015.

* U.S. trade deficit is in the tank. The United States ran a record trade deficit in 2006 for the fifth consecutive year, according to the U.S. Census Bureau . The bureau said that the trade deficit, or gap between what the United States sells abroad and what it imports, reached $763.3 billion last year, a 6.5 percent increase over the year before. To deflect focus on this massive deficit, the Bush administration has been touting a recent increase in U.S. exports. But while the nation’s exports have boosted profits for U.S. companies, “they have not meant more jobs for American factory workers,” according to a recent New York Times article.

* Central banks are diversifying away from the dollar. A record trade deficit, increased foreign holdings of U.S. debt, an out-of-control federal budget and a negative savings rate make the dollar an unattractive currency. Here’s how Bonddad puts it on The Agonist:

The short version is simple: The U.S. is borrowing today hoping the growth rate will be fast enough to help us pay down the debt. However, there is nothing extraordinary about the current U.S. growth rate compared to other expansions. Our current growth rate is on par with the growth rate of the last 25 years. In short, we are borrowing to achieve the same growth rate we have always had during an expansion.

So the Bush administration is taking the nation deep into debt just to achieve the modest growth we’ve made in the past without hocking our children’s future.

Given these recent reports, it’s no surprise that today, a Reuters/University of Michigan report shows U.S. consumer confidence fell last month from a two-year high, declining to 91.3 in February, a five-month low, from 96.9 in January.

While the Wall Street crowd fixates on the stock market, the economic indicators that make or break the financial threads working people sew together every day also need addressing—and fast. Because here’s what’s not working: Bush’s failed trade deals, lack of attention to creating fiscal policies that encourage U.S. corporations to keep jobs in this country and vitriolic opposition to strengthening America’s middle class by such measures as leveling the playing field for workers to form unions.

[DemReadingDU]

1. 60 mintues - U.S. Heading For Financial Trouble?

When the stock market plunges like it did this week, everyone pays attention. The man you're about to meet says hardly anyone is paying attention to what really threatens our financial future. Like an Old Testament prophet, David Walker has been traveling the country, urging people to "wake up before it's too late."

But David Walker is no wild-eyed zealot. As Steve Kroft reports, David Walker is an accountant, the nation’s top accountant to be exact, the comptroller general of the United States. He has totaled up our government's income, liabilities, and future obligations and concluded the numbers simply don’t add up. And he’s not alone. Its been called the "dirty little secret everyone in Washington knows" – a set of financial truths so inconvenient that most elected officials don’t even want to talk about them, which is exactly why David Walker does.


http://www.cbsnews.com/stories/2007/03/01/60minutes/main2528226.shtml

[pretzel4gore]

3. bush the carrion necktie....

we're gonna learn, like a bad farmdog with unruly taste for chicken whose neck the farmer ties a dead chicke to, leaving it there to rot, that there are things no healthy society does (and installing a privileged fratboy in its highest elected office as result of nakedly longterm rightwing scheming is most certainly that!) especially when it requires painting pretty such ugliness as the 2k election, the clinton impeachment, the oj simpson media frenzy (which made america racist) and 'wars' on communism/drugs/terror etc, not to mention all the financial nonsense that's gone on while bush pigmedia repeatedly yelled 'fire' in the crowded theatre about fictional threats....

[SpiralHawk]

10. "Don't worry. Me and my republicon cronies are doing great." - Commander AWOL

"Smirk, smirk, smirk." - Commander AWOL

[Skink]

2. The economy has been on steriods for so long this was bound to occur.

[FatDave]

4. Good God!

I read most of these individually last week, but to see them all together in one convenient lump like this... People, this is going to get very ugly.

[blondie58]

8. thanks for the laugh, Fat Dave!

I really had a good laugh while reading your Republican Talking Points Bingo.

I needed it after reading this depressing article.:)

[FatDave]

15. Glad to do it

And glad you liked my web silliness. I really need to update it though. Some of those talking points don't really apply anymore, having been replaced by new ones.

[frankenforpres]

5. Dont worry

it is going to get far worse

[corkhead]

6. our house of mirrors is a house of cards

I am amazed that the shit hasn't it the fan yet.

[blondie58]

7. this is so sad

I really fear that our status as a superpower is over. Soon, we be replaced by China or another India.

[sendero]

9. This has been well in sight...

.. since no later than 2003. We are heading for a long, intractable, devastating economic downturn. Exactly what form it will take is not possible to predict, but it will be ugly.

This (the recent stock market swoon) may be the beginning of it in earnest, or it might get forestalled for a few more years by central bank intervention of the type we've already been seeing for a full 6 years now, flooding money into the system trying to keep it afloat.

They will keep trying, and the things they are doing to try are damaging enough, but eventually the old "you can't push on a string" fact will doom their efforts.

The only thing more scary than the inevitability of this crash is the fact that our own government and central bank has been an active participant in making it all so much worse.

[Porcupine]

11. Well don't go over into Environment/Energy because it gets worse...

The US and much of DU thinks that we can continue to trash our environment and still make out ok. Well that games just about over. What isnt' getting through is that a mass conversion to a zero-carbon economy has to happen ASAP.

Climate Change is breathing down our necks and promises to render all our previous efforts to waste. We really aren't crying wolf on this one.

[Alcibiades]

12. Entitlements are not the problem

Comptroller Walker does make a correct diagnosis of the problem in health care--spending too much, getting too little--his solution, to limit entitlements, just isn't the answer.

snip "He does believe the current health care system is way too expensive, and overrated.

"On cost we're number one in the world. We spend 50 percent more of our economy on health care than any nation on earth," he says.

"We have the largest uninsured population of any major industrialized nation. We have above average infant mortality, below average life expectancy, and much higher than average medical error rates for an industrialized nation," Walker points out. snip

Most of these problems are actually the result of the lack of a national health system. Our current system is geared to maximize one thing: profits. The prescription drug benefit he does not want to get rid of was designed by the drug companies themselves--of course it's gold-plated! Of course it fails to deliver medicine to those who need it--it does, however, a fine job of maximizing profits, particularly with its prohibition against negotiating prices.

What's the real problem with government spending? Hm, let's see: in 2004, the US spent 466 billion dollars on "defense" (i.e. what we used to more honestly call "war"). The rest of the world spent 500 billion combined. China, the #2 spender, spent only $65 billion. In economic terms, all of this is dead weight, as it doesn't increase our productive capacity. Can we remain (if that's the right word) economically competitive if we spend $1,553 per capita on the military while the Chinese spend only $50 per capita?

Marx had it right. Capitalism is about capital and the process of capital accumulation. Right now, "Communist" China understands this better than we do, but communists have always claimed to have a better understanding of capital than capitalists.

The trade deficit, the destruction of the growth of the earning power of the American middle class, the export of manufacturing jobs, the takeover of the FIRE sector by increasingly risky boondoggles and Ponzi schemes, the household deficit, the federal deficit, the state deficits, the lack of a Social Security "lockbox," the tax breaks for billionaires: our economy is so fouled up by so many problems that it can only be propped up by force or fraud (or genuine reform, but we know that won't happen). It is a wonder that the whole house of cards didn't come crashing down ten years ago.

[blondeatlast]

13. Imagine if the value of the working man or woman's biggest investment,

their home, were reported every day. If this were truly a nation of opportunity--it would be the stuff of daily news.

Nasdaq and Dow Jones have little to offer even me, and I'm pretty well-off, in my own humble opinion.

Even DU tends to overlook economic news in favor of more exciting stuff, but this is the stuff that makes us or breaks us.

I never thought I'd say it, but I wish there were truly an economic conservative in the WH--and I'm as fiscally liberal as it gets. * is just insane when it comes to fiscal policy.

[blondeatlast]

14. ...

:kick::kick::kick: