Saturday, September 18, 2010


QUESTION: What do abysmal employment numbers, rising poverty levels, collapsing home prices, evaporating middle-class wealth, a forgotten Main Street, white pity rallies and, finally, the emergence of a whiny elite class have in common?

ANSWER: They all help us understand why the Democrats have a hill to climb this November, and why this nation's troubles may be just beginning.

Let's take a closer look ...

ON THE JOBS FRONT, former Labor Secretary Robert Reich reports:

The Labor Department reports [in June] that the private sector added a measly 41,000 net new jobs in May. (The vast bulk of new jobs in May were temporary government Census workers.) But at least 100,000 new jobs are needed every month just to keep up with population growth.

In other words, the labor market continues to deteriorate.

The average length of unemployment continues to rise – now up to 34.4 weeks (up from 33 weeks in April). That’s another record. More Americans are too discouraged to look for a job than last year at this time (1.1 million in May, an increase of 291,000 from a year earlier.) Of the small number of jobs created by the private sector in May, many came from temporary help services ...

... The only reason the economy isn’t in a double-dip recession already is because of three temporary boosts: the federal stimulus (of which 75 percent has been spent), near-zero interest rates (which can’t continue much longer without igniting speculative bubbles), and replacements (consumers have had to replace worn-out cars and appliances, and businesses had to replace worn-down inventories) ...

ON THE POVERTY FRONT, via the NY Times, the Census Bureau reports:

Forty-four million people in the United States, or one in seven residents, lived in poverty in 2009, an increase of 4 million from the year before, the Census Bureau reported on Thursday.

The poverty rate climbed to 14.3 percent — the highest level since 1994 — from 13.2 percent in 2008. The rise was steepest for children, with one in five residents under 18 living below the official poverty line, the bureau said ...

... For a single adult in 2009, the poverty line was $10,830 in pretax cash income; for a family of four, $22,050.

Things could be worse, except for ...

Given the depth of the recession, some economists had expected an even larger jump in the poor. Expanded unemployment insurance and a rise in the number of families doubling up helped temper the trend, said Timothy M. Smeeding, director of the Institute for Research on Poverty at the University of Wisconsin.

“A lot of people would have been worse off if they didn’t have someone to move in with,” said Mr. Smeeding, noting that in a typical case, a struggling family, like a mother with a child, stays with more prosperous parents or other relatives. The Census study found an 11.6 percent increase in the number of such multifamily households last year.

ON THE HOUSING FRONT, Michael David White is reporting:

Data from predicts a nine percent fall in property prices nationwide in 2010. is making this prediction "despite positive signals of higher prices including a gain of seven percent nationwide by Case-Shiller 10-City index from its post-crash bottom in April 2009."

So, why all the doom and gloom for the housing market? Part of the story is explained because of the lagging jobs and poverty picture painted above. But the real key is tied to historical projections that were broken by the bubble market starting in 2000. By using pre-bubble trends that predate 2000 it follows that housing prices will continue to fall.

This is especially since government sponsored home ownership programs are either ending, or not going so well (the Making Home Affordable Program, is especially a disaster because the details were left in the hands of the banks).

ON THE COLLAPSING NET WORTH FRONT, via Huffington Post we see that the Federal Reserve is reporting:

Americans' net worth plunged in the second quarter of this year, new data from the Federal Reserve show, erasing the gains of the previous two quarters and adding evidence to the argument that the economy has entered a double-dip recession.

The net worth of households and non-profit organizations dropped $1.52 trillion during the period from April 1 to June 30 of this year, according to the report released Friday. The new figure, $53.50 trillion, represents a 2.8 percent decline from the previous quarter.

The net quarterly loss, the data suggests, came from Americans' losses in the sagging stock market. Equity shares owned by households and non-profits tanked in the second quarter, dropping $1.88 trillion or 11.2 percent to $14.87 trillion from the previous quarter. The second quarter figure went down past the territory of 2009's third quarter ($15.32 trillion), almost to the range of the 2009 second quarter ($13.06 trillion), when equity was just starting to rise from its low of $10.94 trillion in the first quarter of that year.

ON THE "FORGETTING" MAIN STREET FRONT, as I pointed out after the Democrats lost the U.S. Senate seat in Massachusetts, Main Street is rightfully pissed off because:

1. President Obama rewarded Wall Street for their incompetence, while doing little to nothing for Main Street.

2. President Obama didn't push Congress when it came to allowing cheaper medicines in from countries like Canada (there goes the elderly independent vote).

3. President Obama made it look like he didn't really want a single payer system, or a public option, both of which he pushed for on the campaign trail. The base is uninspired.

4. Unemployment is hovering around 10% after the Obama administration said it wouldn't hit 10%. 

5. After the House passed foreclosure legislation, which would have helped stem record foreclosures by allowing bankruptcy judges to rewrite mortgages, it died in the Senate. After going to bat for Wall Street, President Obama did nothing to help push it through the Senate ... The message is clear, "You're on your own Main Street."

6. President Obama's Making Home Affordable plan is being undermined by banks, who have Federal trillion-dollar guarantees and aren't in any hurry to negotiate with distressed homeowners. Sitting by as homeowners get kicked out of their homes by the very banks that created our mess is no strategy for winning votes.

ON THE WHITE PITY / "WHINY" BILLIONAIRE FRONT, David Frum and Les Leopold report:

Former Bush speechwriter David Frum called attention to the comments of Chris Hitchens, who referred to  Glenn Beck's recent rally in Washington DC as the Waterworld of White Pity.

At the last “Tea Party” rally I attended, earlier this year at the Washington Monument, some in the crowd made at least an attempt to look fierce and minatory. I stood behind signs that read: “We left our guns at home—this time” and “We invoke the First Amendment today—the Second Amendment tomorrow.”

But Beck’s event was tepid by comparison: a call to sink to the knees rather than rise from them. It was clever of him not to overbill it as a “Million”-type march (though Rep. Michele Bachmann was tempted to claim that magic figure). The numbers were impressive enough on their own, but the overall effect was large, vague, moist, and undirected: the Waterworld of white self-pity.

Then we have Les Leopold pointing out how our bailed out billionaires think they deserve more tax breaks (or a medal) for their greed and stupidity. They are now whining about being asked to pitch-in some of their government escorted (or taxpayer subsidized?) profits so that the larger American economy can recover.

While 43.6 million Americans live in poverty, the richest men of finance sure are getting pissy. First Steve Schwartzman, head of the Blackrock private equity company, compares the Obama administration's effort to close billionaires' tax loopholes to "the Nazi invasion of Poland."

Then hedge fund mogul David Loeb announces that he's abandoning the Democrats because they're violating "this country's core founding principles" -- including "non-punitive taxation, Constitutionally-guaranteed protections against persecution of the minority, and an inexorable right of self-determination." Instead of showing their outrage about the spread of poverty in the richest nation on Earth, the super-rich want us to pity them?

Why are Wall Street's billionaires so whiny? Is it really possible to make $900,000 an hour (not a typo -- that's what the top ten hedge fund managers take in), and still feel aggrieved about the way government is treating you? After you've been bailed out by the federal government to the tune of $10 trillion (also not a typo) in loans, asset swaps, liquidity and other guarantees, can you really still feel like an oppressed minority?

Soaring unemployment, rising poverty levels, collapsing home prices, evaporating middle-class wealth, broken promises, pathetic white pity rallies, and a whiny elite class that think they've suffered enough ... All of these developments help to explain why the Democrats find themselves facing a pissed off electorate in November.

To be sure, this is exactly how the Republican Party wanted this electoral season to play out. Why else would they have become the Party of No? The GOP clearly understands that it's hard to reward a party when their policies helped bail out Wall Street, but had the effect of pretty much leaving Main Street to fend for itself.

At the end of the day, President Obama deserves much of the blame for trying to negotiate with a political party that told the country at the beginning that 60 vote filibusters would be the norm in the Senate, and then acted in a way that confirmed Rush Limbaugh's wish for him - and, by definition, for the country - to fail (whatever happened to Country First?).

With George W. Bush and his failed policies still a recent memory, this is the only strategy the GOP had. They knew it. People like me knew it. Unfortunately for the country, President Obama is still figuring this out ... and it appears this may cost him big in November.

- Mark

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