Trickle Down Fail

The sequester decreased federal investments in national infrastructure resulting in lay-offs and more unemployment. Only 88k jobs were created in march — the least jobs created per month in the past 9 months. The Labor Dept report showed that the U.S. Postal Service, for example, lost 12k positions. The pace of job growth this year is slower than its pace last year. Effects of the sequester are expected to continue mounting well into spring. The economic recovery was gaining momentum before the arbitrary and unnecessary cuts to government services took place. Congress legislated the sequester as a means of motivating itself to compromise on partisan national budget differences. It failed to compromise. The nonpartisan Congressional Budget Office has estimated the sequester will cost the economy 750,000 jobs, ultimately.Although thousands were laid of off, unemployment has not increased, offset by the exodus of personnel from the workforce. Unemployment is paradoxically down to 7.9%, because the number of people in the workforce has declined. Nearly half a million people have stopped searching for jobs recently. If you’re not looking for work, you can’t be counted as unemployed. The low unemployment figure belies the weakness of the labor market. The labor market’s weakness is evident in the small percentage of Americans currently active in the labor force. The percentage of working-age Americans with a job or looking for one has dropped to 63.3 %, the lowest it has been since 1979.Most of the 88k jobs created in March were from the construction and health care sectors. The construction sector, which is usually propelled by housing market growth, only generated 18k jobs in March. This is half the number reported in the previous month. Health care created less jobs than last month as well, at only 23k. Typically 36k retail jobs were created per month for the past 6 months. However, even the retail sector lost jobs in March for the first time in 6 months.

Trickle down economics is failing — statistically speaking. Evidence shows that cutting government spending and reducing taxes on the wealthy did not create jobs for the middle class. Statistics from March in the wake of the sequester show that companies won’t hire if consumers aren’t buying enough goods to justify the new hires. And consumers don’t have enough money to buy when they are unemployed. A growing economy depends upon an employed middle class. Employment leads to consumption which drives the need for job creation. Not vice versa.

The hike in the payroll tax (January), the government budget cuts due to the sequester (February), and gas price increases to maximize Big Oil profits (March), are all robbing the middle class of its income. People therefore, are not able to consume. Explicit evidence for this can be seen in that Retail Department Stores have cut their staff by 24k jobs this March.

The booming stock market should not be touted as evidence that the entire economy is recovering. A small segment of society is affected by the stock market. The top 1% of wealthy Americans own 35% of all stock shares. The wealthiest 10% of Americans own 90% of all stock shares. So the rest of the 90%, own less than 10% of stock shares. There is no generalizability in looking to the market as a gauge of middle class economic growth and stability. Even this is evidence trickle down economics is a cultural hoax, which has been foisted on the American people to abet the swindling of wealth by the elite from the national labor market.

Furthermore, the recent recovery in the housing market is not due to employed families mortgaging new homes. The recovery is from wealthy investors buying up real estate and renting it out to middle class families who can no longer request mortgages from banks. Again, middle class wealth and consumer confidence are undercut, and as demand shrinks so goes production and supply. The effect is bottom up.

The American recession mirrors the structural reform in Europe, known as austerity measures, which has exacerbated wealth inequality there. The middle class is asked to live more austerely, while wealth is concentrated increasingly in the hands of a shrinking few. Fewer people are working and generating wealth, thus there is a smaller pie to go around. The wealthy abide this situation, nay even enable it via lobbying congress to legislate trickle down economic tax codes, because their market share of the wealth increases. As long as the market share of the wealthy increases faster than the rate at which the pie is shrinking, they will not be moved to lobby against this state of affairs. Austerity economics is squeezing the average American and European.

A labor-based economy, that rewards work and empowers the central government to tax and create middle class jobs is the best hope for a sustained economic recovery. Economies, like organic bodies, grow bottom up.

Rain Dance