A Good Christmas, Thanks To China
Wednesday - January 05, 2011
Oh, the weather’s been cloudy and wet, and clouds will continue to gather during the new year.
The nightly news anchors report (every night, it seems) that, despite the deluge that descended on Hawaii and the blizzard that struck the East Coast, Americans have been driving to the malls and spending at an economic recovery clip.
Holiday sales, we’re told, grew 3.1 percent and equaled those of the 2007 holiday season: the last year of growth before the economy’s collapse in 2008.
I suppose we should all feel good about that: all those new iPhones and high definition televisions and stuff of every description under all those Christmas trees - proof positive that we Americans are back doing what we do best: consuming.
Indeed, consuming has become a primary measure of our national psychic health; economists tell us that growth in consumption demonstrates that the nation’s “consumer confidence” is up.
It better be, because our “productive capacity” has never been lower. Those TVs and telephones underneath the tree are all marked “Made in China.”
Proof of that is in our startling unemployment numbers. Nationally, 10 percent of us are out of work. That’s bad enough, but broken down by educational attainment, the numbers are far worse. Three percent of those with graduate degrees are unemployed, and 5 percent of those with a college degree don’t have a job. But among those with a high school education or less, 15 percent have no work.
In a nation that made things - steel and automobiles and airplanes - men and women with a high school education had good jobs in the nation’s factories. Or, if they lived in Hawaii, on the Islands’ plantations: jobs that provided housing (in Hawaii’s case), health care and a living wage.
Globalization ended all that. In their search for cheaper labor, America’s business leaders first moved from the unionized Northeast and Midwest to the non-union South. Then they abandoned the South for Central America and Asia, blaming the high price of unionized labor for their exodus.
So those of us who still have jobs or a pension are left to consume, while those who don’t ... well, tough. Maybe the nation’s so-called political leaders will offer a few more months of unemployment benefits in exchange for two more years of tax breaks for the wealthiest of Americans who don’t need them and whose demands for higher dividends resulted in the exportation of American jobs.
Another dark cloud looms. On a recent 60 Minutes, market analyst Meredith Whitney warned that 50 to 100 cities will default on their loan payments within the next few months. Those cities’ revenues, according to Whitney, simply won’t support the interest payments on the municipal bonds they’ve sold.
“We face a day of reckoning,” said Whitney. “I’m most concerned about the level of complacency regarding the municipal debt crisis. Next to housing, it is the largest threat to the U.S. economy.”
The problem begins with the states. They fund as much of 40 percent of municipal debt. Since the economic collapse of 2008, federal stimulus funds have made it possible for the states to continue to help cities in trouble with their debt. But the stimulus funds will run out this spring and then, according to Whitney, without the states’ help, cities will go into default.
The clouds aren’t as dark over Hawaii and Honolulu as they are over, say, Illinois. There the state spends twice as much as it takes in. California, Arizona, New Jersey and Florida are in desperate shape as well, largely because so many homeowners were overleveraged in the booming housing market of the past decade.
But our new governor’s current budget numbers for fiscal years 2012 and 2013 include a $771 million difference between revenue and expenditures.
Look for new taxes. Look for steep cuts. Look for cloudy weather.
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