“The economy grew at a 4 percent annual rate in the final three months of 2003 – a slowdown from the red-hot performance of the prior quarter but still compelling evidence of a recovery in full motion at year’s end.”
The lead paragraph by Associated Press writer Jeannine Aversa on Jan. 20 was typical of the way the media has treated current economic news. The White House, without much challenge from the press, goes even further in a press release titled, “Strong economic growth shows president’s policies are working.”
Is there a recovery? And if so, for whom?
Not for millions of working-class Americans.
• There are about 10 million unemployed (counting those who have given up looking for work). The quarter-million new jobs Bush boasts about aren’t enough to keep up with new people entering the labor force.
• Wage increases have slowed to a crawl, with most workers falling behind inflation. Sectors that are gaining jobs (like health care) have lower wages than sectors losing jobs (like manufacturing). The administration has frozen the minimum wage and is on the verge of eliminating overtime pay for many workers.
• Health care costs are soaring, 43 million are without insurance, employers are dropping coverage for workers and retirees, and medical emergencies are a leading cause of personal bankruptcies.
• State and local taxes are increasing, while services are declining in quality and increasing in cost (like college tuition).
• Personal debt and bankruptcies are at record heights. Predatory mortgage lenders are victimizing growing numbers of homeowners.
For many – probably a majority – of workers, there is no recovery. Nonetheless, profits and productivity are up, the GDP is rising, and people with money are celebrating a stock market above 10,000. So let’s take a look at their recovery.
The recession that began in March 2000 was a result of great overcapacity worldwide and in the U.S. Since then, some capacity has been destroyed through war (Iraq and elsewhere), and through bankruptcy (Enron, WorldCom, etc.). Some new investment is necessary to replace computers and other rapidly obsolete electronic equipment. There is investment by stronger monopolies (e.g. Wal-Mart) in an effort to gain market share at the expense of weaker rivals.
The tail end of the housing bubble has been maintaining the construction industry, and a burst of mortgage refinancing maintained consumer spending in the summer and fall. Increased military spending and continued high level of luxury consumption provide some stimulus. Add to this the likelihood that the administration will release a trickle of funds to selected states and programs with the elections in mind. All these have contributed to economic growth for the past six months, and it is possible that a weak recovery will continue, even including modest job growth (though far below Bush’s original promises).
Against this is the underlying weakness that has not been resolved – continued stagnation or decline in working class incomes, and in social spending. You can give rich people and big corporations all the tax breaks in the world, but they are not going to invest if they don’t think anyone will buy their increased production.
Add to this the overhanging debt burden, the federal deficit, the ongoing state and local fiscal crises, and the trade deficit – any or all of these could trip the economy back into a more severe recession. A full-blown run on the dollar would trigger a very deep economic crisis in the U.S.
As Greg Godwin pointed out in last week’s “People before Profits” column, the administration will do everything in its power to preserve the appearance of recovery at least through the elections. They may succeed, and there are too many variables to predict exactly when the growing contradictions will erupt in a new economic crisis. These contradictions – and the crises that inevitably follow – are part of the capitalist system.
But the impact on working people is affected by policies like improved unemployment insurance, universal health care, jobs programs, worker protection and union rights. We cannot even begin to fight for these things while George Bush occupies the White House and right-wing Republican fanatics control Congress.
The author can be reached at economics@cpusa.org.
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