How Much the US Economy Has Recovered for Most Workers

Basically, not at all.

So, around 1980, wages go off a cliff. Americans respond by increasing the number of two earner households, because from 1980 onwards, the Federal Reserve deliberately limits wage increases for most workers so they always come in under the inflation rate.

Then the 2008 financial crisis happened, and those jobs went away. Wages haven’t improved, for most people they are even or down.

In 2009, I predicted a collapse in incomes. I got it partially wrong. I held the labor force participation rate steady and expected reductions to come out of wages. Instead, the reduction came mostly from jobs just going away. (In retrospect this was a clumsy mistake.)

So, lately you’ve been hearing about how wonderful the economy is. It isn’t. It’s still shitty for most people and has been shitty since 2008.

Obama’s didn’t fix the economy. He froze it at approximately where it was after the financial collapse, minus a dead cat bounce, which is to be expected since he and the Federal Reserve and Treasury did everything they could to not allow price discovery to happen and to not allow capitalism to do one of the things it does well, when left alone: make bankrupt companies go bankrupt and wipe out bad loans.

Instead they made sure that companies and people who had caused the financial collapse, in most cases deliberately, were made whole and prevented from losing everything, while pushing the losses down onto homeowners who were minor participants compared to Wall Street and large banks.

This has played out as stagnation. It is exacerbated by a host of other issues, like monopolization, corruption and the declining era of oil, but at heart it is a simple refusal to let large, politically powerful actors take their losses and lose the economic power they misused.

Having done everything wrong from 2000 to 2008 except buy Congress, financial interests afterwards kept doing everything wrong except buying politicians, because they won big-time, and the most important rule of capitalism is: “If you’re making lots of money, keep doing what you’re doing.”

When making money is, in effect, guaranteed, capitalism stops working in anything close to a beneficial fashion.

This was, again, Obama’s decision. When TARP was first proposed it failed to pass and only did so because Obama bent arms, viciously, to make it happen. He was 100 percent on side with everything Bernanke did, and not only did nothing to stop him, but aided and abetted him in what were crimes by any reasonable definition of the word.

The economy is bad. It is has never recovered from the financial collapse, and it will not do so until both austerity and crony capitalism are dealt with.

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