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Amid the news that retail sales have fallen for the fourth straight month, that housing prices continue to slump, and that another 600,000 workers were laid off in the month of January—the largest number in one month since 1974—comes word from some experts in the business community that things are not going to be getting better soon, and that when they do, they will not get back to the way things were in 2006 or early 2007, before the recession began.
In an interview I did for the trade publication Investment Management Weekly on Thursday, Putnam Investments’ global asset allocation head Jeffrey Knight said that while the stimulus could “help to prevent a Great Depression sequel,” at the same time “Those who measure prosperity against the Faustian opulence of the last 10 years may find that stability, equilibrium and even recovery will still feel like a deep depression.”
Another fund manager, Ron D’Vari, co-founder and CEO of a new fund management firm that specializes in so-called distressed assets—the very things that have the nation’s banks reeling on the edge of failure—says the economy has fallen into “an L-shaped recession where it’s hard to say how long it will be down at the bottom.” D’Vari also told me, “We think we will have a sort of subsistence economy—not like North Africa, but it could look like just getting by for some time before you see the start of a real recovery.”
Now these guys were all talking about how things look to them assuming passage of the stimulus package. In other words, the stimulus package is not going to turn things around. In fact, D’Vari pointedly referred to the close to $1-trillion package as ‘just a pain-killer, not a final cure.”
President Obama would do well to heed these kinds of hard-nosed views. He’s not likely to be hearing them right now. To date, he has chosen for his economic team mainly retreads from the Bush and Clinton administration—people like Larry Summers and Tim Geithner who helped set the nation on its current disastrous economic course by promoting globalization and the flight of jobs overseas as well as the deregulation of Wall Street, by advocating a shift of the tax burden from the wealthy to the working classes, by urging the gutting the safety net for those who lose jobs or can’t find them, and by advocating measures to artificially pump up asset values, whether real estate or the stock market.
These are clearly not people who are going to want to call attention to the economic and social train wreck that their own policies have produced.
Nor does Obama’s latest announcement of his new Council of Economic Advisers look much better. Headed up by Paul Volcker, the Carter and Reagan choice for Federal Reserve Chairman, and a close associate of the Rockefeller family and the Chase banking empire who helped bring us the heretofore worst recession since the ‘30s during the early 1980s, that panel includes Jeffrey Imelt, chairmen of mega-defense contractor General Electric, Jim Owens, chair of Caterpillar (a firm that just sacked 20,000 employees and during it’s recent contract disputes with the UAW hired scabs and locked out employees, racking up a huge number of labor law violations), William Donaldson, President George W. Bush’s SEC chair, who had to resign that position in disgrace in 2005 after his agency missed the Enron and Worldcom meltdowns and collapses as well as some early hedge fund disasters, Martin Feldstein, the head of Ronald Reagan’s Council of Economic Advisers and an adviser to Obama’s opponent, John McCain, and Austan Goolsbee, a senior economist with the Democratic Leadership Council, a strong proponent bank deregulation and of the job-killing NAFTA and the World Trade Organization treaties. True, the panel does include some token labor representatives like former Mineworkers Union president Richard Trumpka of the AFL-CIO and Anna Burger of the SEIU, but wholly absent are more progressive economists in line with the likes of Nobel laureates Paul Krugman and Joseph Steiglitz, or former Clinton labor secretary Robert Reich, much less left-leaning economists like James Galbraith or Dean Baker.
Before Obama was inaugurated, there was much blather in the mainstream press about his selection of conservative Democrats and Republicans for his cabinet, as a strategy of having a “team of rivals.” But clearly, where economic policy is concerned, those “rivals” are pretty much all on the same side of the fence. (The same can be said, by the way, of his defense department and state department teams.)
What the country really needs at this point is straight talk and creative new ideas—not returns to policies of the ‘90s, ‘80s, ‘70s or perhaps even the ‘30s.
Obama needs to hear from experts who know that the economy of the United States is not going to rebound to anything like where it was in the last few years, and that drastic new programs and approaches are needed if the US is not to continue a slow slide into third world status. And the American public needs to hear the same honest news.
An economic “team of rivals” is a great idea, but to get that, Obama would have to be willing to reach over to the left side of the spectrum, not just the right.
DAVE LINDORFF is a Philadelphia-based journalist and columnist. His latest book is “The Case for Impeachment” (St. Martin’s Press, 2006). His work is available at www.thiscantbehappening.net