HINRICHS: Still more to be done years after collapse
Opinions Column: Unveiling the Truth
We simply saw the shadows of objects passing in front of the fire before us and believed them to be reality. Our Plato’s cave was warmed by the idea that they were too big to fail. We were naïve. We were numbed by our nihilism and marketized culture. A decade ago, Lehman Brothers filed bankruptcy, and by the next day, Sept. 16, 2008, the housing bubble burst and the Dow Jones plummets, “778 points, wiping $1.2 trillion off the value of American businesses.” The entire financial system unravels, and we were abruptly dragged out from our manufactured reality in the cave.
Ten years ago, the culmination of deregulation, undercapitalized banks, subprime lending and derivatives left the economy in a free-fall recession. Credit flows were paralyzed, business and consumer confidence plunged and investment and consumption nose-dived. And the accepted narrative goes that the rescue mission stabilized the nation, and a second global Great Depression was avoided.
In many respects such is true. Former President Barack Obama’s era of influence from 2009-2017 saw the “largest annual gain in the value of the dollar, the largest annual decline in household debt in relation to disposable income, the largest growth in car sales and the largest increase in hourly wages.” In January 2009, the U.S. economy was hemorrhaging 800,000 jobs per month. In February 2009, Obama’s American Recovery and Reinvestment Act passed and brought a $787 billion stimulus package that aimed to jumpstart the economy. The package was split into three allocations: tax cuts, unemployment benefits and federal employment contracts and grants. Obama oversaw the creation of 11.3 million new jobs in total with 75 consecutive months of job additions. When he left office, he managed to cut the unemployment rate by more than half from approximately 10 percent in 2009 to 4.7 percent.
That said, substantial critiques can be made about not addressing the causes of the collapse fully and failing to curb the ideological plagues and fundamentalist practices that led to the meltdown. While a bailout of banks prevented a complete crash, public trust in government and institutions leaving room for fringe populist movements to build fell. As Americans felt the back-breaking weight of financial collapse, the bailout, the golden parachutes for CEOs and the lack of prosecution of those responsible created a fertile illiberal rubble of democracy for the Tea Party and far-Right movements to grow and flourish.
President Donald J. Trump inherited a resuscitated, growing and recovering economy that had regained its lost jobs. While in office, unemployment continues to decline to remarkably low levels. But the facts that Trump touts as his own doing both conceal the deep wounds that have yet to heal and steal the progress of his predecessor. There is not a job problem in America. There is a good job problem.
Currently, there are throngs of college graduates overqualified for their jobs and in immense debt, a growing number of contract workers with no job security and an army of part-time workers desperate for full-time jobs. Anti-union movements have undermined the populace and exacerbated inequality. Approximately 80 percent of full-time working Americans say they live from paycheck to paycheck. Median household income, adjusted for inflation, has barely budged over the last decade while the incomes of the wealthiest 5 percent of Americans have increased 10 percent, according to the Los Angeles Times.
The Federal Reserve Bank of New York stated that total household debt in the United States had reached a new peak of approximately $12.7 trillion in the first three months of this year.
While debt can be an economic signal for consumption and faith, the current debt crisis has the potential to ultimately stifle growth significantly.
“In the abstract, more debt signals optimism. But in reality, families are using debt as a mechanism to pay for things their incomes don’t support,” said Heather Boushey, the executive director and chief economist at the Washington Center for Equitable Growth.
In the financial crisis, an opportunity for big ideas and grand reform was born. Our wounds may not be as visible, but they are just as open and just as cantankerous. Our financial system built on stilts of profit maximization and deregulation collapsed a decade ago. Similar structures to those of the past are in place to today. Now is the time to look back in our history in order to tame the corruption and greed of plutocratic elites and revitalize the static, uninspiring political body. We must find models in the democratic movements of populism, progessivism and trade unionism. Battles were once won against the dogma of free-market fundamentalism. Great progress fought not for either-or, but for both racial justice and economic justice can be won by marginalized minority groups and the working class moving together hand-in-hand. The upcoming mid-term elections provide the platform for the populace to demand more than a masking of our wounds through avoidant rhetoric and hate. Change is needed. And change is made on the electoral ticket and in the voting booth.
Luke Hinrichs is a School of Arts and Sciences second-year majoring in political science and economics. His column, “Unveiling the Truth,“ runs on alternate Wednesdays.
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