The Ugly Truth: America's Economy is Not Coming Back

By Dave Lindorff

President Barack Obama and his economic team are being careful to
couch all their talk about economic stimulus programs and bank bailout
programs in warnings that the economic downturn is serious and that it
will take considerable time to bounce back.

I’m reminded of an experience I had with Chinese medicine when I
was living in Shanghai back in 1992. I had come down with a nasty case
of the flu while teaching journalism at Fudan University on a Fulbright
Scholar program. <!--break>A Chinese colleague suggested I go to the university
clinic. When I told him there wasn’t much point since doctors couldn’t
do much for the flu besides recommend fluids and bed rest, he said,
“That’s Western doctors. You could go to the Chinese medicine doctors
at the clinic. They can help you.” I figured, what the hell, and we
went. The doctor inquired into the lurid details of my illness—how my
bowel movements looked, the color of the mucus in my nose, etc. He
didn’t really examine me physically. Then he prescribed an incredible
number of pills and teas and sent me home with a huge bag of stuff, and
instructions on the regimen for taking them through the course of each
day. I followed the directions dutifully, and my colleague came by each
day to check on my progress. By the fifth day, when I was still running
a fever and feeling terrible, I told him I didn’t think the Chinese
medicine was working. He replied confidently, “Chinese medicine takes a
long time to work.”

I laughed at this. “Sure,” I said. “But the flu only lasts a week
or so, and now, when I get better, you’ll say it was the Chinese
medicine, right?”

He smiled and agreed. “Yes. You are right.”

Obviously the Obama administration recognizes that it needs to keep
the finger of blame for the current economic collapse squarely pointed
at the Bush administration, which is certainly fair in large part
(though the Clinton deregulation of the banking industry played a major
part in the financial crisis and its enthusiastic promotion of
globalization began the massive shift of jobs overseas that has left
the nation’s productive capacity hollowed out). But it also seems to
recognize that it cannot tell the bitter truth, which is that our
national economy will never “bounce back” to where it was in 2007.

America, and individual Americans, have been living profligately
for years in an unreal economy, propped up by easy credit which
inflated the value of real estate to incredible levels, and which led
people to spend way beyond their means. Ordinary middle-class working
people have been encouraged to buy obscenely oversized homes at 5%
down, or even no down payment. They have been lured into buying cars
the size of trucks, one for each driving-aged member of the family (in
our town, so many high school kids drive to school that the school ran
out of parking spaces and the yellow school buses, largely empty on
their runs, are referred to by the students as the “shame train,” an
embarrassment to be seen riding). They’ve installed individual
back-yard swimming pools, unwilling to share the water with their
neighbors in community pools. Boring faux ethnic restaurant franchises
of all kinds have befouled the landscape, filling up with families too
stressed out to cook, and willing to endure over-salted, over-priced
and tasteless cuisine and tacky plastic décor night after night.

Now this is all crashing down. Property values are in free-fall.
Car sales have fallen off a cliff. Joblessness is soaring (At present,
it’s approaching an official rate of 8%, but if the methodology used in
1980, before the Reagan administration changed it to hide the depth of
that era’s deep recession, were applied, it would be 17% today, or one
in seven workers).

Eventually, the economic slide will hit bottom and begin its slow
climb back, as all recessions do, but there will be no return to the
days of $500,000 McMansion developments, three-car garages and a new
car every two or three years for both parents plus a car for each
highschooler. Not only will banks no longer be able to offer such
credit to clients. People, having been burned, will not be willing to
borrow so much. Company health care benefits, pension programs or
401(k) matching programs that were slashed during this downturn will
not be restored when the economy picks up again.

Over the last 20 years, America has degenerated into a nation of
consumers, with 72 percent of Gross Domestic Product (sic) now being
accounted for by consumer spending—most of it going for things that are
produced overseas and shipped here.

That is not an economic model that is sustainable, and it is a model that has just suffered what is certainly a mortal blow.

What we are now seeing is the beginning of an inevitable downward
adjustment in American living standards to conform with our actual
place in the world. As a nation of consumers, and not producers, with
little to offer to the rest of the world except raw materials, food
crops, military hardware and bad films (none of which industries employ
many people), we are headed to a recovery that will not feel like a
recovery at all. Eventually, productive capacity will be restored, as
lowered US wages make it again profitable for some things to be made
here at home again, but like people in the 1930s looking back at the
Roaring 20s of yore, we are going to look back at the last two decades
as some kind of dream.

It would be better if the new administration would be honest about
this, because with honesty, we could have a recovery program that would
actually address the real critical issues facing the country—the
decline of our educational system, the irrationality of official
promotion of home ownership that has led to the proliferation not just
of suburbs but of exurbs, the over-reliance on the automobile for
transportation, the unprecedented waste of resources, the pillaging of
the environment, not to mention the decimation of the retirement system
and the creation of a vast medical-industrial complex that is sucking
the life-blood out of families and businesses alike.

With honesty, we could also confront the other big obstacle to
national recovery—the nation’s obsession with militarism and foreign
wars. The honest truth is that the US is technically bankrupt and in a
state of chronic decline, and yet the nation persists in spending a
trillion dollars a year on war and preparations for war, as though
America were in mortal danger from foreign enemies.

The truth is that we are not threatened by Communism, by drug
lords, or by Muslim Jihadists in any serious way. Rather, we have
become our own worst enemy.

The administration could start by telling us all this straight up,
but the problem is, most of us probably don’t want to hear it, which
explains why we’re not hearing it. It also explains why we’re about to
blow another trillion or so dollars on propping up failing banks,
funding pointless highway and bridge construction, and blowing up
illiterate peasants in remote places like Afghanistan and Pakistan.
_____________________

DAVE LINDORFF is a Philadelphia-based journalist. His latest
book is “The Case for Impeachment” (St. Martin’s Press, 2006 and now
available in paperback edition). Lindorff spent five years reporting on China and Hong Kong for Business Week magazine. His current work is available at www.thiscantbehappening.net

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