Bailout package won’t help much
Doug Henwood: The economic outlook for the average American gets bleaker
ZAA NKWETA, PRESENTER: The bailout package offered by the Bush administration—do you see this as a sound one? And is it going to help the average person?
DOUG HENWOOD, EDITOR, LEFT BUSINESS OBSERVER: Well, it’s better than nothing, but it looks like it’s skewed towards upper-income individuals and to tax breaks for businesses. Now, there are two things wrong with this. One is that it’s not going to get money into the pockets of lower- and middle-income people. It would be much more likely to get money into the pockets of upper-income people, who are much less likely to spend it and need it much less dramatically. Lower- and middle-income people are already suffering, and if the economy heads south, then they’ll suffer even more. They’re the ones that need whatever dollar they can get their hands on, and they’re more likely to spend whatever they get. So that will serve a much more stimulative effect for the broader economy. The other thing that is wrong with it: the business side. Businesses do not invest on tax considerations; they invest if they think they’re going to make money, and if it looks like the economy is going sour, they’re not going to invest, even if they get a tax credit. So these kinds of tax credits are utterly ineffectual; they have no positive effect at all. They are gravy for businesses that are already investing, but it’s not going to change behavior one bit.
NKWETA: And in a layman’s perspective, how does this crisis affect the average person who, let’s say, has a credit card, has a mortgage, and is expecting their pension at the end of their job?
HENWOOD: For most people, the pension is many years in the future. So the stock market does go up and down, and if you retire at the wrong time, you’d have a small pension, if you retire at the right time, you have a better pension. But that is not the most immediate worry for most people. Interest rates on mortgages now are very low, but that may be just an academic point for a lot of people if they can’t get a mortgage at all. So that’s how it’s really affecting consumers most directly. But the pathway in which it could really throw things into a tailspin is if businesses suddenly can’t get loans, then the economy would go into a very severe recession, which means falling incomes, rising unemployment, and evaporating jobs. The weakness of the American labor movement is a problem on so many levels. The way it engages in politics is very depressing, and the fact that there’s no organized labor to speak of in the private sector to represent the interests of the average worker has really done tremendous damage to people’s security, to their incomes, to their benefits. And for people at the middle and lower ends of the income distribution, it’s just been a hellish economy for many, many years now. There was a brief exception in the late ’90s, but average wages, average real wages, have been flat or declining for 25 years in this country—35 years in this country, sorry. And the erosion of the labor movement has been a very important part of that. If there’s no organized labor to defend the interests of average working people and to press for more generous social welfare spending, then they’re just thrown to the tender mercies of the market, which is a very, very unsympathetic thing. We’re now five years—more than five—six years into an economic expansion. It’s never really felt like one for the average American: the job market has been very poor; job growth has been the weakest of any post-World War II expansion; wage growth has been very weak. The real beneficiaries of the economy since 2001 have been the very rich, the top one percent or even less of the American population. So for a lot of people this so-called period of prosperity hasn’t felt like that. I think, now, we are entering–regardless of whether this is a formal recession or not–I think, we’re entering a period of a really troubled economy. We’re going to see really slow growth, perhaps for an extended period of time, years of very weak growth. So I think we do need to talk about policies that will address that over the longer term, but the economic outlook for the average American, which has not recently been very happy, is going to get bleaker in the coming months and years.
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