U.S. May Be Headed for Downward Spiral, Says Pulitzer Prize-Winning Journalist
Posted Nov 19, 2010 11:00am EST by Stacy Curtin in Newsmakers,
http://finance.yahoo.com/tech-ticker/us ... VoZWFkZQ--
From the fall of Lehman and rescue of Merrill Lynch, to a housing crash that threw millions from their homes and catapulted the country into a recession, it has been a long two years for the U.S. economy and the American people.
Recovery has been sluggish, but some would argue that things are starting to look up as we head into this holiday season (see Sonders: Building Blocks for Recovery). Pulitzer Prize-winning journalist David Cay Johnston, however, says we may not be out of the woods just yet.
Johnson thinks there is room for our economic situation to get much worse before it gets better. He reasons that this country is plagued by too many overvalued assets, chronic unemployment and lots of under-employment -- those who have given up looking for work or are working part-time but desire full-time employment.
Johnston supports his claims to Aaron and Dan with the following:
* Every 34th worker in America who had employment in 2008 went all of 2009 without earning a penny.
* Lots of people own houses worth five, six or seven times their salary, when the rule of thumb is to own property that is 2.5 or three times your salary.
So if "worse" should come to pass, what might that look like? Johnston says we can expect to see more people showing up at food banks, applying for food stamps, and being kicked out of their homes.
In order to course correct, Johnston says we need to focus on the future by encouraging entrepreneurs to innovate and to get “productive economic activity [back] here in the United States.”
Johnston, also the author of Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense, criticizes our free-trade practices as costly arrangements that are not really free, especially with China, but rather “labor arbitrage.”
He says our free-trade agreements have allowed American businesses to “get rid of workers who cost $40 an hour all-in cost and replace them with workers who cost $40 a week all-in costs, including shipping the goods back to America.”
Our huge budget deficit is also major problem. Johnston argues that, if we don’t do something about our budget shortfalls, we risk another major shock to our economy.
In 2010 the U.S. budget deficit is $1.3 trillion, and it will only continue to grow if Congress and President Obama do not take action. To his credit, earlier this year the President started down the road toward fiscal responsibility by appointing a bi-partisan fiscal deficit commission to report budget-reform recommendations by Dec. 1.
But, Johnston says, “the commission is a complete waste of time.” He goes on to say that our representatives in Congress are more interested in standing their ground than coming together in compromise. Partisanship will only hurt the American people, he says.
Unkil's trade deficit falls 50% in next few years.
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