Robert

 Reich  
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Robert Reich is Chancellor’s Professor of Public Policy at

the University of California at Berkeley. He has served in
three national administrations, most recently as secretary
of labor under President Bill Clinton.

He has written thirteen books, including The Work of

Nations, Locked in the Cabinet, Supercapitalism, and his
most recent book, Aftershock. His “Marketplace”
commentaries can be found on publicradio.com and
iTunes. You can find his blog on www.robertreich.org.
 
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The  Truth  About  the  Economy  that  
Nobody  In  Washington  Or  On  Wall  
Street  Will  Admit:  We’re  Heading  Back  
Toward  a  Double  Dip
WEDNESDAY, MARCH 30, 2011

Why  aren’t  Americans  being  told  the  truth  about  the  economy?  
We’re  heading  in  the  direction  of  a  double  dip  –  but  you’d  
never  know  it  if  you  listened  to  the  upbeat  messages  coming  
out  of  Wall  Street  and  Washington.  
 
Consumers  are  70  percent  of  the  American  economy,  and  
consumer  confidence  is  plummeting.  It’s  weaker  today  on  
average  than  at  the  lowest  point  of  the  Great  Recession.  
The  Reuters/University  of  Michigan  survey  shows  a  10  point  
decline  in  March  –  the  tenth  largest  drop  on  record.  Part  of  that  
drop  is  attributable  to  rising  fuel  and  food  prices.  A  separate  
Conference  Board’s  index  of  consumer  confidence,  just  
released,  shows  consumer  confidence  at  a  five-­‐month  low  —  
and  a  large  part  is  due  to  expectations  of  fewer  jobs  and  lower  
wages  in  the  months  ahead.  
 
Pessimistic  consumers  buy  less.  And  fewer  sales  spells  
economic  trouble  ahead.  
 
What  about  the  192,000  jobs  added  in  February?  (We’ll  know  
more  Friday  about  how  many  jobs  were  added  in  March.)  It’s  
peanuts  compared  to  what’s  needed.  Remember,  125,000  new  
jobs  are  necessary  just  to  keep  up  with  a  growing  number  of  
Americans  eligible  for  employment.  And  the  nation  has  lost  so  
many  jobs  over  the  last  three  years  that  even  at  a  rate  of  
200,000  a  month  we  wouldn’t  get  back  to  6  percent  
unemployment  until  2016.  
 
But  isn’t  the  economy  growing  again  –  by  an  estimated  2.5  to  
2.9  percent  this  year?  Yes,  but  that’s  even  less  than  peanuts.  
The  deeper  the  economic  hole,  the  faster  the  growth  needed  to  
get  back  on  track.  By  this  point  in  the  so-­‐called  recovery  we’d  
expect  growth  of  4  to  6  percent.  
 
Consider  that  back  in  1934,  when  it  was  emerging  from  the  
deepest  hole  of  the  Great  Depression,  the  economy  grew  7.7  
percent.  The  next  year  it  grew  over  8  percent.  In  1936  it  grew  a  
whopping  14.1  percent.  
 
Add  two  other  ominous  signs:  Real  hourly  wages  continue  to  
fall,  and  housing  prices  continue  to  drop.  Hourly  wages  are  
falling  because  with  unemployment  so  high,  most  people  have  
no  bargaining  power  and  will  take  whatever  they  can  get.  
Housing  is  dropping  because  of  the  ever-­‐larger  number  of  
homes  people  have  walked  away  from  because  they  can’t  pay  
their  mortgages.  But  because  homes  the  biggest  asset  most  
Americans  own,  as  home  prices  drop  most  Americans  feel  even  
poorer.  
 
There’s  no  possibility  government  will  make  up  for  the  coming  
shortfall  in  consumer  spending.  To  the  contrary,  government  is  
worsening  the  situation.  State  and  local  governments  are  
slashing  their  budgets  by  roughly  $110  billion  this  year.  The  
federal  stimulus  is  ending,  and  the  federal  government  will  end  
up  cutting  some  $30  billion  from  this  year’s  budget.  
 
In  other  words:  Watch  out.  We  may  avoid  a  double  dip  but  the  
economy  is  slowing  ominously,  and  the  booster  rockets  are  
disappearing.  
 
So  why  aren’t  we  getting  the  truth  about  the  economy?  For  one  
thing,  Wall  Street  is  buoyant  –  and  most  financial  news  you  
hear  comes  from  the  Street.  Wall  Street  profits  soared  to  
$426.5  billion  last  quarter,  according  to  the  Commerce  
Department.  (That  gain  more  than  offset  a  drop  in  the  profits  of  
non-­‐financial  domestic  companies.)  Anyone  who  believes  the  
Dodd-­‐Frank  financial  reform  bill  put  a  stop  to  the  Street’s  
creativity  hasn’t  been  watching.  
 
To  the  extent  non-­‐financial  companies  are  doing  well,  they’re  
making  most  of  their  money  abroad.  Since  1992,  for  example,  
G.E.’s  offshore  profits  have  risen  $92  billion,  from  $15  billion  
(which  is  one  reason  it  pays  no  U.S.  taxes).  In  fact,  the  only  
group  that’s  optimistic  about  the  future  are  CEOs  of  big  
American  companies.  The  Business  Roundtable’s  economic  
outlook  index,  which  surveys  142  CEOs,  is  now  at  its  highest  
point  since  it  began  in  2002.  
 
Washington,  meanwhile,  doesn’t  want  to  sound  the  economic  
alarm.  The  White  House  and  most  Democrats  want  Americans  
to  believe  the  economy  is  on  an  upswing.  
 
Republicans,  for  their  part,  worry  that  if  they  tell  it  like  it  is  
Americans  will  want  government  to  do  more  rather  than  less.  
They’d  rather  not  talk  about  jobs  and  wages,  and  put  the  focus  
instead  on  deficit  reduction  (or  spread  the  lie  that  by  reducing  
the  deficit  we’ll  get  more  jobs  and  higher  wages).  
 
I’m  sorry  to  have  to  deliver  the  bad  news,  but  it’s  better  you  
know.