Taking a Dive.

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December 9, 2012 by Thomas Hauber

HooverIn the 80’s movie classic “Lost in America” Albert Brooks and wife Julie Hagerty are walking near the edge of Hoover Dam. Hagerty has just gambled their “nest-egg” away the night before. Brooks, peering over the edge, says to her sarcastically, “Do you wanna go first, or should I?”

In the current debate over the “fiscal cliff” not everybody’s worried about going over it.  Americans have been de-leveraging and adjusting to the “new normal” for about three years now watching unemployment rise, pensions, savings and home values plummet and their real wages decline for twenty years. There’s not much left to lose. It’s telling to see who’s really worried and why. To Corporate CEOs, wall-streeters, bankers and the cheer-leading financial news press it’s the end of the world. They collectively hound Congress and the White House to “rise above” political budget shenanigans and save them from lower corporate profits, stock market riots, and lower CEO compensation (maybe). Companies are already hoarding record amounts of cash and still doing what they do best, down-sizing, cost-cutting, union-busting, out-sourcing, laying-off and capital-striking over cry-baby canards like excessive government regulations and taxes. Back at the ranch, wages keep going down and unemployment increases.

They’ve never understood we’re in a demand recession in the first place. When demand slows, they cut and the downward spiral continues. They’re unable to fight there way out of the wet paper sack of their own making. It’s not that business is inherently bad, corporate capitalism is amazingly efficient at cranking out products and services at the lowest possible cost. There is just no social contract to it, only a fiduciary deal cut with shareholders to make a profit. The big loser is an economy 70% based on consumption. George Bush knew this when he simplistically told us to all go shopping, but things have changed. Globalization is real and unemployment has structural elements, its not just a Union smackdown. Technology continues to advance and produtivity to increase. Robots make cars now. The headcount continues downward. Modern capitalism just doesn’t want to employ enough people or pay them enough to keep buying the products it produces. Henry Ford once thought all his employees could afford to buy his cars.

Americans have a lot less money left to spend and the Mayan calendar says there’s even fewer shopping days left at Walmart and the Dollar Store. When the cliff shakes what’s left of the loose change out of their pockets, they’ll probably be OK, they’re getting used to it.  After all, there’s the NFL and NASCAR and that holiday weight to be lost.

The Republicans will be held to blame for waffling on tax rates and closing ranks around the top 1%. The 47% (more like 52% who voted for Obama) will take another hit on basics, while the wealthy will have to wait until next year to put a new roof on the boat house. The Pentagon will scream bloody murder but maybe the sequester is the only way to get at Defense Spending. Meanwhile Democrats will crow and blame the Republicans for everything while refusing to expect the people to pay for the government they get.

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