While everyone is worried about who is more TEH SUCK, Obama or Clinton, there's a stimulus package working its way through Capitol Hill. One of the arguments revolves around what is the best way to stimulate the economy. But that's the wrong way to pose the problem.
There isn't a single economy; rather, different people experience different economies. For example, this editorial from The Back Bay Sun describes the economy of the Back Bay, Boston (a very wealthy neighborhood):
The nation is feeling an economic pinch and Goldman Sachs chief economists are all predicting a recession but so far the Back Bay has dodged the bullet, and to look around the Back Bay, you'd never know that the economy is changing.
The real estate marketplace is retrograde throughout the nation. In Back Bay, the real estate market has changed only slightly. Prices have remained unusually high, and in many instances, have gone higher in the down market.
Back Bay's higher end rents, as nearly all of us have come to know, have soared. In some cases at the residences at the Ritz and the Four Seasons, some rentors are paying as much as $30,000 a month for the their living units. And there does not seem to be an end in sight for rising rents in Back Bay.
Retailers across the land reported Christmas sales that did not inspire while most Back Bay retailers enjoyed a prosperous Christmas season. The dozens of restaurants in Back Bay enjoyed a solid Christmas. Business is flatter right now - but it's flat this time of year every year. The high priced steak houses like Mortons and Abe and Louies do not appear short of diners only too happy to fork out $40 for a top sirloin a la carte.
At some of Back Bay's specialty businesses, such as Vose Art Gallery, the Vose brothers appear to be reaching a larger and more prosperous customer base as time goes by. The same can be said of Barney's in the Copley Square Mall, of at Louie's, where a sweater costs $800 and a modest sports jacket $1500 - $2000. Again, there does not seem to be a shortage of customers at the high end clothiers.
Restoration Hardware and Pottery Barn continue to attract throngs to their gorgeously appointed stores.
Housing starts across the nation are down dramatically. Even business at Lowe's and Home Depot has dropped off as a reaction to the real estate downturn. However in the Back Bay, higher end building projects like the Mandarin and a bevy of smaller, extremely expensive rehabilitation projects in private condominiums costing millions are now underway. It is common for some Back Bay condominium owners to spend as much as $500,000 on a new kitchen with all the proper appliances or $100,000 on a bathroom with expensive tiling, fine fixtures and skilled tradesmen working with precision and for big money.
In other words, there seems to be no end in sight for the good economic times Back Bay has been experiencing.
But can this last? Will the Back Bay remain an oasis of prosperity as the rest of Massachusetts struggles with a downturn?
Can the Back Bay swim against the current? Can everything about the economy be moving in one direction with Back Bay moving in another?
On other side of the coin, Barbara Ehrenreich describes another economy (italics mine):
But we've had nearly full employment, or at least an official unemployment rate of under 5 percent, for years now, without the predicted gains. What the old liberals weren't counting on was a depressed minimum wage, weak unions and a witch's brew of management strategies to hold wages and salaries down.
So thoroughly is the economy decoupled from ordinary experience that according to a CNN poll, 57 percent of Americans thought we were already in a recession a month ago. Economists may complain that this is only because the public is ignorant of the technical definition of a recession, which specifies at least two consecutive quarters of negative growth. But most of the public employs the more colloquial definition of a recession, which is hard times. And -- far removed from whatever happens on Wall Street, the Nikkei, Dax, or the curiously named FTSE -- most Americans have been living in their own personal recession for years.
....overall, subprime loans were designed for, and snapped up by, the poor. According to a recent study from United for a Fair Economy, 55 percent of subprime loans went to African Americans and 17 percent to whites. Among whites, they went far more frequently to low-income people than to the wealthy -- 39 percent compared with 24 percent. Hence the subprime industry's noble boasts about providing the opportunity for home ownership to people who might otherwise have been excluded from it.
And why were so many Americans poor enough to turn to subprime mortgages and other dodgy credit schemes? The chief reasons are low wages and job insecurity. Chronically low wages afflict about 25 to 30 percent of the population -- more than twice the 12 percent the federal government counts as "poor." And even earnings in the six-figure range can be canceled overnight when an employer downsizes or outsources, leaving a family without income or health insurance.
For years now, we've had a solution, or at least a substitute, for low wages and unreliable jobs: easy credit.
A short term stimulus is necessary, but a lot of people have needed a stimulus for a very long time. And the argument that it would 'take too long' just doesn't wash. They were hard up before, so don't worry, they'll still be hard up a year from now. They need the help. Ehrenreich again (italics mine):
Government intervention, whether short-term or long-term, needs to get to the heart of this problem by offering a hand to the poor and the unemployed. Until the House capitulated to Bush two weeks ago, Democrats seemed to be standing solidly behind a stimulus package that would include an increase in food-stamp allotments and an extension of unemployment benefits, both of which are screamingly obvious measures. Current unemployment benefits last just 26 weeks in most states and end up covering only a third of people who are laid off. Food stamps are in even shabbier shape, with an allotment amounting to about $1 per meal. Nothing could be more stimulating than putting money in the hands of those who will spend it quickly.
But you can't jump-start a car that lacks a working battery. We need less titillating talk about "stimulus" and more commitment to some fundamental repairs -- higher wages, a real safety net and a return to progressive taxation among them. The challenge isn't just to prop up stock prices but to rebuild an economy in which everyone shares the good times -- and no one is consigned to a permanent recession.
Amen to that. As I noted in yesterday's post, many of our problems revolve around a wage crisis, even if, at first glance, that's not obvious. We not only need to raise pre-tax wages, but also increase post-tax real wages, both through reducing income disparity and providing more services, such as healthcare*. As my Uncle Harry used to say, "Rich or poor, it's always good to have money."
A very wise man, he was.
*As opposed to invading the wrong fucking country.
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