Reich: Inequality Causes Bad Economy

As he so often does, Robert Reich explains the disastrous economy in straightforward terms:

THE 5 percent of Americans with the highest incomes now account for 37 percent of all consumer purchases, according to the latest research from Moody’s Analytics. That should come as no surprise. Our society has become more and more unequal.

When so much income goes to the top, the middle class doesn’t have enough purchasing power to keep the economy going without sinking ever more deeply into debt — which, as we’ve seen, ends badly. An economy so dependent on the spending of a few is also prone to great booms and busts. The rich splurge and speculate when their savings are doing well. But when the values of their assets tumble, they pull back. That can lead to wild gyrations. Sound familiar?

The economy won’t really bounce back until America’s surge toward inequality is reversed. Even if by some miracle President Obama gets support for a second big stimulus while Ben S. Bernanke’s Fed keeps interest rates near zero, neither will do the trick without a middle class capable of spending. Pump-priming works only when a well contains enough water.

The rest of his article, which appeared on his site (linked above) and as an op-ed in the New York Times, is worth your time as well.

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  • NTodd Pritsky  On Monday September 5, 2011 at 9:27 am

    It’s a wonder the WH doesn’t listen to Reich, Krugman, and Stiglitz…

    • Steve  On Monday September 5, 2011 at 9:32 am

      NTodd, two Nobel prizes and an international reputation are no match for the money Obama can receive from right-wing foundations when his term is over. He isn’t looking for a restoration of America’s economic health; he is looking for a comfy retirement, either next year or in 2016. Listening to those three would not necessarily provide him that.

  • MandT  On Monday September 5, 2011 at 1:15 pm

    It seems more clear by the moment that Obama’s only goal was to become an ‘historic’ president and payback those who purchased it for him. Like Clinton, he’s a warmongering neo-liberal on steroids.

  • NTodd Pritsky  On Tuesday September 6, 2011 at 2:31 pm

    Like Clinton, he’s a warmongering neo-liberal on steroids.

    You say that like it’s a bad thing…

  • MandT  On Tuesday September 6, 2011 at 4:03 pm

    Oh, did I not say Hilary?

    • Steve  On Tuesday September 6, 2011 at 8:20 pm

      Now children, play nice… 🙂

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