Former Secretary of Labor Robert Reich foresees the loss of another 3 million jobs and the Dow Jones “languishing” around 7,500 during the next year.
Reich cautioned members at The Commononwealth Club of California’s Bank of America-Walter E. Hoadley Annual Economic Forecast today in San Francisco that without “effective government action” the current recession will likely continue until 2010, with unemployment rising over 10 percent.
He reiterated his belief that the much-debated stimulus bill on Capitol Hill should carry a price tag of $900 billion over the next two years, which is larger than the plan put forth by President-elect Barack Obama. Reich believes the lower figures put forth by Obama may be an attempt to lure Republican support for the plan.
Reich praised Federal Reserve Chairman Ben Bernanke for taking on more responsibility during the financial decline, while deriding Treasury Secretary Hank Paulson’s Troubled Assets Recovery Program as “a miserable failure.”
Despite the ecomonic gloom, Reich attempted to cajole some hope in the current situation by noting out-of-work Amrericans and a neglected infrastructure could spark a type of national renewal.
“We have now the opportunity to make these investments or, at least, make a down payment on these investments,” said Reich, “We have the opportunity because of the gap between economic capacity and demand in the private sector from consumers and business.”
Reich also said that, because of the popularity and relative safety of Treasury bills, borrowing is cheaper than ever before. In addition, there's a mood among Americans of striving for a common political cause. “We have an opportunity to begin doing what we could not before.”
The bursting of the housing bubble, according to Reich, was not the impetus for the current state of the nation’s coffers, but ultimately revealed the underlining problems with our economy.
Reich has always laid claim to defending working class Americans and finds their plight to be indicative of the current financial situation, where consumers turned to refinancing their homes and procuring home equity loans as a way to finance their lifestyles despite stagnating wages in inflation-adjusted terms.
“Some Congressmen said Americans are living way beyond their means, but another way of looking at that was: Americans' means have not grown, and therefore the only way of continuing their spending and maintaining their living standards is to go deeper and deeper in debt,” said Reich, “When the housing bubble burst, so did that last coping mechanism.”
The ways Americans coped with maintaining their financial standing, Reich said, goes back to the 1970s when more women were forced into the labor market not because of opportunity but for maintaining their family income. Americans also worked more hours disportionate to others in the world. Reich, at one point, offered the acronym, “DINS” to describe the situation as “Double Income, No Sex.”
At various point during the program, Reich comically played on the audience’s dour deameanor by urging them to keep in mind that “now is an opportunity that we have not had in decades.”
--By Steven Tavares
Is Reich correct in his diagnosis of the economy and what needs to be done? What do you think will happen to the economy in 2009? Post a comment and share your opinion.
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