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Thursday, 7 February 2013

The Obama Depression Is like the Great Depression

Mortimer Zuckerman on How We Can End Our Modern-Day Depression in US News: "We must increase investment in education and infrastructure, and enact tax reform":
If you went out this morning and saw hundreds of people lining up at soup kitchens, you'd think you were in a time machine, transported back to the Great Depression of the '30s, or the victim of a hallucination incubated by powerful images of those times. In fact, it is the absence of such images that is the illusion. We believe we live in more normal times—and we do not. Millions of people today are experiencing exactly the same struggle as the millions did in the Great Depression. They can't find work. They depend on government and philanthropy. They live on hope denied.

The big difference: Today millions are assisted by checks from Social Security and by food stamps. Food-stamp enrollment has been rising at the rate of 400,000 per month. More than 47 million Americans now depend on that program, an almost incredible record, for it is 15 percent of the population compared with the 7.9 percent who received food stamps from 1970 to 2000. Meanwhile, nearly 11 million Americans are now collecting federal disability checks from Social Security, and half have signed on since President Obama came to office. In 1992, there was one person on disability for every 35 workers. Today it is one for every 16. Such an increase simply cannot have been caused by direct disability experienced during employment. This is in effect another unemployment program, one without end. Many of the people on disability would normally be considered unemployed.

The reality is, we are experiencing a modern-day Depression. It is harder to find work than it has been in any previous economic recovery period. Typically, it takes 25 months to close the employment gap from the employment peak near the start of a downturn. But this time around, five years after employment peaked in January 2008, non-farm employment is still roughly 4 million below where it started. Never before has the job level not been at a record high during the fourth year into a business cycle.

In fact, 4.5 million fewer Americans are working today than when the recession started, and fewer are working today than in the year 2000, despite the fact that our population has grown by 31 million and our labor force by 11.4 million. Though the White House forecast four years ago that, with its stimulus policies, the jobless rate would be down to 5.2 percent by now, the real unemployment rate is 14.4 percent.

The Pew Research Center reports that for the first time in the post-World War II era, middle-class families finished the decade significantly poorer in terms of household net worth—which is down almost 40 percent since 2007—and with lower incomes than a decade earlier. This has hit the middle class harder than any other group. According to Pew, one third of Americans now identify themselves as lower class or lower middle class, a deterioration since 2008 when one quarter identified themselves that way.

The outlook is no better. Job seekers are only one third as likely to find a job now as they were in 2006. A record number of households have at least one member looking for a job. Some 40 percent of the people who are unemployed have been out of work for 27 weeks or more, which means we've got 4.8 million who are described as "long-term" unemployed. Employers are shortening the work week or asking employees to take unpaid leave in unprecedented numbers. Those taking unpaid leave are not included in the unemployment count.

Indeed, the recession has shown employers that they can make do with fewer workers. Now over 20 percent of companies say that employment in their firms will not return to pre-recession levels.

Older Americans, whose net worth has taken a huge hit (75 percent of it due to a decline in their home equity), can't afford to quit. Since the recession began, employment in that age group of 55 and older is up by over 3 million, in contrast to total employment, which is down by 5 million. The baby boomers are quite simply postponing their exit from the workforce. This has created a huge bottleneck for the nation's youth, who now face double-digit unemployment.

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