EconomicCrisis.US

Nothing better shows corporate control over the government than Washington’s basic response to the current economic crisis. First, we had “the rescue”, then “the recovery”. Trillions in public money flowed to the biggest US banks, insurance companies, etc. That “bailed” them out (is it just me or is there a suggestion of criminality in that phrase?), while we waited for benefits to “trickle down” to the rest of us.

As usual, the “trickle-down” part has not happened. Large corporations and their investors kept the government’s money for themselves; their profits and stock market “recovered” nicely. We get unemployment, home-foreclosures, job benefit cuts and growing job insecurity. As the crisis hits states and cities, politicians avoid raising corporate taxes in favour of cutting government services and jobs – witness Wisconsin, etc.
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The recent financial collapse actually started back in the mid-1970s, when “redlining,” banks denying loans for homes in poorer neighborhoods, was identified as a problem. It took another two decades for Congress to devise a way to increase lending in depressed areas.

If Wall Street investment monies could be made available to Main Street banks, so the theory went, banks could make more mortgage loans. So, Congress effectively removed the separation between investment and depository banks when it repealed the Glass-Steagall Act of 1932 by passing the Gramm-Leach-Bliley Act of 1999.
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As the United States debates its economic future in light of large government budget deficits, it is important that the public has a clear understanding of how the economy works. A good starting point for understanding how the economy works is to understand how it is measured.

Economies are measured in terms of their Gross Domestic Product or GDP. GDP is made up of personal consumption expenditure, private investment, net trade (i.e. exports minus imports) and government spending at both the federal level and the state and local level. If the size of each of these components is known, it is only necessary to add them together to find the size of the whole economy. In 2009, the United States GDP was $14.1 trillion, according to the Bureau of Economic Analysis (BEA). Of that amount, spending on personal consumption accounted for 71% or $10 trillion; private investment 11% or $1.6 trillion; and government spending 21% or $2.9 trillion, with federal government spending of $1.1 trillion and state and local government spending of $1.8 trillion. Net trade deducted 3% or $390 billion from GDP because exports from the US were $390 billion less than imports into the US.
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What will happen to the economy and the stock market and interest rates in 2011? This is the season for forecasts and prognostications. But that’s not what most people are thinking about when they wonder what’s in their economic future for the year ahead.

The one economic question on most people’s minds is whether the United States will grow again, and whether their lives will ever be materially better, and most of all — whether their children will have a better life than they do.

A Facebook poll taken a few months ago revealed that many had worked hard all their lives, lost significant ground in the recession — and were not at all optimistic that their children or grandchildren would have a higher standard of living.
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