If you think that most of the protesters occupying Wall Street and venues in many other cities are clueless about what it really takes to keep the U.S. or any other economy running efficiently, you are right. But that leaves us with a dilemma. How do we account for the remarkable resonance the movement has garnered in mainstream America? Various polls place support for the OWS crowd at between 37 and 67 percent. Depending on the poll, this is close to the levels of support for the Tea Party. In truth, both groups are tapping into the same wellspring of discontent, as the vast majority of Americans believe that the nation has run off the rails — the difference being that one side blames the rich and corporations, while the other blames an out-of-control government.
The ultimate source of both types of discontent is, of course, the nation’s sputtering economy, or, more pointedly, the widespread feeling that the land of opportunity will have much fewer opportunities in the future. I believe that if this feeling was wiped away by another period of rapid economic growth, both OWS and the Tea Party would vanish from the political scene.
The statistics are indeed sobering. As Barry Ritholtz reported last week on his economic blog, The Big Picture, the Social Security Administration states that today there are fewer jobs than there were one year ago, and the jobs there are pay less. Moreover, the median annual income fell by 1.2 percent, to $26,364, the lowest level in over a decade. And that is not the worst of it. Although the Labor Department reported that the economy gained 117,000 jobs last month, it was able to do so only by ignoring the 137,000 persons who, that same month, became discouraged and stopped looking for work. If one puts these discouraged workers, along with part-time workers who would prefer full-time employment, back into the unemployed pool — as they should be — the nation’s real unemployment rate is close to 17 percent, and by some measures over 20 percent. This is Great Depression territory.
Recovering from a recession brought on by a financial crisis was always going to be a long hard slog. It would have helped, of course, if the government had been more inclined to initiate policy measures aimed at growing the economy, rather than adding massive new amounts of debt in pursuit of Keynesian growth fantasies. But that is now all water under the bridge. The $15 trillion of debt is on the books, and that is a huge enough number to make any sane politician pause before offering to spend another gargantuan sum in hopes of stimulating growth. Moreover, after printing trillions of dollars, the Federal Reserve is finally running short on ammo. Despite recent hints that it may have one more round of quantitative easing chambered up and ready to fire, even the Fed knows such action has only a forlorn hope of jumpstarting the economy. If we are lucky, though, it may help to ward off the European contagion; so don’t rule it out..
There is some good news, however. Despite Washington’s best efforts to cause further economic wreckage, the economy is displaying some signs of recovery, or at least stabilization. This is probably the result of the political stalemate brought on by the election of a Republican House. Washington has not been able to do much to help the economy since the last election. But, more important, it is finding it much harder to do further damage. Left alone by politicians, America’s huge economy has remarkable recuperative powers.
The problem is that past government actions have so hamstrung business that future prospects are not as bright as they might otherwise be. Moreover, there still remains great uncertainty over the damage that laws already on the books, but not yet part of the regulatory structure, are going to do. Because of this, there is a strong likelihood that we can bounce along on the bottom for years. A decade of lost economic growth, as our competitors gallop forward, would be dire for the United States as a whole, but catastrophic for the bottom rungs of our economic ladder.