What Main Street Economic Recovery?

Robert Reich is professor of public policy at the Richard and Rhoda Goldman School of Public Policy at the University of California, Berkeley. He was secretary of labor in the Clinton administration. He has this to say about the shape of a US economic recovery.

“My prediction, then? Not a V, not a U. But an X. This economy can’t get back on track because the track we were on for years — featuring flat or declining median wages, mounting consumer debt, and widening insecurity, not to mention increasing carbon in the atmosphere — simply cannot be sustained.

The X marks a brand new track — a new economy. What will it look like? Nobody knows. All we know is the current economy can’t “recover” because it can’t go back to where it was before the crash. So instead of asking when the recovery will start, we should be asking when and how the new economy will begin. More on this to come.”

The Obama Team would do well to give Mr. Reich’s views some careful consideration. Thus far the entire economic recovery effort has been designed to restore the US economy to what it was before the crash, to the golden age of excess and capital misallocation that took place up to the Fall of 2008. There has been no acknowledgement as to how an economy built upon the marketing of fraudulent financial products and rampant consumerism rather than upon savings and capital investment is not substainable.

Even worse, the Obama team’s efforts in creating huge additional amounts of debt and piling on one unfunded program after program is sure to make matters worse within a very short time frame. Think of the 2010 elections to signal that Obama and his team are in trouble and that unless his policies face up to reality and change Obama faces a defeat in the 2012 presidential election.

With present policies left unchecked, and if anything probably greatly expanded by 2012, many disenfranchised Americans will no longer be living on the edge, they will be over the cliff and mad as hell about their disappointment with the Obama promises and misplaced confidence that the old economy could be restored. Obama will be charged with making only skillful misleading speeches rather than effective policies.

I’m confident that President Obama is under the influence of the “Goldman Sachs crowd” and other financial advisers whose knownledge got us into this mess and most certainly have no idea as to how to get us out. After receiving billions of dollars in taxpayer funds these guys are right back to their old schemes and tricks. The risky trading and risk appetite is as strong as ever. If Obama continues to rely on these questionable Clinton era retreaded advisers many millions of Americans will be asking well before 2012 “what economic recovery for main street?”.

The longer that President Obama fails to level with the American people about the need to build a new downsized substainable economy based upon for one thing the end of cheap energy the more certain it is that Obama will be a one term failed president. And that the once proud America becomes a third world nation.