Paul Craig Roberts: Is the Recovery Real?
by Tom Pauken on March 6, 2010 at 4:38 PM
Recent upward revisions to the U.S. Gross Domestic Product in the fourth quarter of 2009 have drawn skepticism from many who still point to dragging unemployment rates, reduced consumer demand, and still-declining home values. Paul Craig Roberts, a former congressional staffer and key economic policy advisor to President Reagan, is one of those skeptics:
Happy news! The government has come up with a 5.9 percent GDP growth rate in the fourth quarter of 2009. The recession is over.
Or is it? Statistician John Williams has informed us that 69 percent of this growth, or 4.1 percentage points, is the result of inventory accumulation. That leaves a 1.8 percent growth rate, and the 1.8 percent is likely due to the underestimate of inflation and other statistical problems.
The Federal Reserve’s own monetary evidence contradicts the recovery assurances from Fed chairman Ben Bernanke. The Federal Reserve continues to pour massive reserves into the banks. The monetary base, which consists of currency in circulation and bank reserves (the basis for new loans), has surged from $850 billion last year to $2.2 trillion on Feb. 24.
I have expressed some similar concerns about the lasting impact of this so-called national economic recovery. Like Roberts, I am worried about the loss of good manufacturing jobs over the past decade and the rising debt levels. Here is what Roberts has to say on those subjects:
As I have emphasized for years, an economy that moves its high productivity, high value-added jobs offshore is going nowhere but down. Except for the super-rich, there has been no growth in people’s incomes for a decade. To substitute for the missing income growth, consumers took on more debt. The growth in consumer debt kept the economy going. However, most consumers have now reached their maximum debt load, and millions went beyond their limit, resulting in foreclosures and lost homes.
There are no jobs to which people can be called back to work. The jobs have been given to the Chinese and Indians.
The economy is set for a “double-dip,” that is, renewed decline. This, of course, means larger federal, state, and local budget deficits. The U.S. federal deficit is now so large that it can no longer be financed by the trade surpluses of China, Japan, and OPEC.
I believe a restructured tax system that would reward savings and capital investment here in the U.S. is what would encourage responsible business practices and reduce the number of jobs we continue to lose to our foreign competitors.