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There has been no economic recovery, says economist

By
From page A1 | January 22, 2014 |

Roberts Paul_Craig

DR. PAUL CRAIG ROBERTS

Americans are facing some difficult economic and political problems says Dr. Paul Craig Roberts, an American economist who was recently interviewed regarding the economy, the impact of Obamacare and the state of the country.

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Roberts was previously the Assistant Secretary of the Treasury in the Reagan Administration and a co-founder of Reaganomics. He is a former editor and columnist for the Wall Street Journal, Business Week and Scripps Howard News Service and is the author of 11 books. He has a Website at paulcraigroberts.org.

Summarizing his take on the economy and the problems facing the average American, Roberts said there has been no recovery since the economic downturn at the end of 2007.

“There’s been no growth in family median income or real per capita income,” he said. “Both have declined and are actually lower than decades ago, except for the 1 percent. Back when (Alan) Greenspan was Federal Reserve chairman, he realized there was no growth in consumer income to push economic growth, so he substituted an increase in consumer debt for the missing growth and income. He lowered interest rates and created a real estate bubble in which low mortgage rates drove up home prices so people would then refinance homes and take out equity and spend it. By loading people up with more debt, he kept the economy growing until the bubble burst and we had a financial collapse at the end of 2007. There’s been no recovery from that.”

Another reason for the weak economy, and with it the gradual erosion of the American middle class, is the result of job offshoring, which has been going on since the early 1990s. Roberts said the opening of China and India to western capital started the outflow of western jobs to those two countries. At the time, Chinese workers were paid 25 cents an hour while it cost $25 an hour to hire an American. Offshoring resulted in a huge increase in corporate profits for corporate managers and stockholders.

“Wall Street also pushed corporations to go offshore because they wanted the profits to help drive the market and so did the large retailers like Walmart. Wall Street told the corporations, move your operations offshore or we’re going to finance takeovers. So they didn’t have any choice,” he said. “I don’t think it was initiated by corporate executives. They were pushed into it in most cases. These were the well-paid manufacturing jobs that moved blue-collar people into the middle class and provided the ladders of upward mobility for them and their children.”

Roberts said following the offshoring of manufacturing was the offshoring of tradeable professional service jobs that university graduates looked forward to, such as software engineering, information technology, research and design.

“A lot of these moved to India. The Internet made this possible. These two developments facilitated significant offshoring of jobs and destroyed the ladders of upward mobility. The economy hasn’t been able to create middle class jobs since the offshoring took hold. I have examined the monthly payroll reports for the last 10 years and the kinds of jobs created in the U.S. now are non-tradeable, lowly paid domestic service jobs such as waitress, bartender, retail clerk, and hospital orderly. These are the future of the workforce. This is the type of workforce India had 30 to 40 years ago. Basically the United States is un-developing. It’s in the process of moving from a developed country to a lesser or undeveloped country and that’s the main reason for the curtailment of growth of per capita income.”

Roberts said only recently is he seeing discussions of the connection between offshoring and the decline of the middle class.

“It’s very late in the game to turn it around once it happens,” he said. “The skills are gone. The supply chains are gone. The relationships are gone that held everything in place. It’s not going to be brought back easily, particularly now that corporations are offshore and are benefitting from it along with shareholders.”

Noting that rarely is the real state of the economy reported in the media, Roberts attributed it to journalists who, “don’t know any better or who just print the press releases sent out. Nobody wants to get on the wrong side of government and get cut off from sources and no one wants to get on the wrong side of the corporations because they won’t advertise. So they go along because to fight it can be career destroying.” Aggravating the situation is data put out by the government that covers up the true amount of inflation and the lack of GDP (gross national product) growth, he said. “Most of the GDP increase is actually inflation increases.”

Obamacare is another hit to the middle class, said Roberts, with some employers cutting employee hours to avoid paying their medical costs. The result is lost income and lost benefits. Most Americans with private health care policies are also seeing their premiums double because they are being forced to carry certain coverage.

“Now elderly women and men are required to be covered for pregnancy, female contraception and abortion. It’s nonsensical,” said Roberts. “It’s a way of driving up the profits for the insurance companies. Now they can charge people for all this coverage they can’t possibly use.”

Roberts said the poor will end up paying the most because if they can’t afford an insurance policy, they are automatically dumped into Medicaid, which has an estate recovery program. So when they die, the government can recover everything they spent by having first claim on the person’s estate including any home they might have along with their bank account and any assets.

“When you sign up for Obamacare, it doesn’t warn you about estate recovery,” he said. “Deductible and co-pays are also so high you can’t afford to use the insurance. So the whole thing is a racket, a scam. And the amount of consumer demand will decline even further because the money people would have spent on food, clothing or gasoline will be siphoned off into these policy premiums.”

Roberts ended his comments by discussing where the United States is as a country.

“In the 21st century, the Bush administration and now the Obama administration have used the so-called terrorist threat, which is essentially a hoax, to make the executive branch unaccountable to law or the Constitution. This is why the president of the U.S. is the only leader of any country on earth, even the most brutal regimes, who claims the legal right to murder citizens without due process of law. No evidence, no trial, no conviction. The only country where the president has the legal right to imprison citizens indefinitely with no presentation of charges to a court, no conviction. Just on his own authority. So this means the president is no longer accountable to the Constitution and the Bill of Rights, habeas corpus, due process, right to life, all these things. So the question is, is the U.S. a democracy or a tyranny?

“A tyranny is unaccountable government and that’s what Obama and Bush have established. The Justice (sic) Department has created legal memos adding support to these claims. It’s all nonsense. The courts have not rejected them. The law schools and bar associations are largely silent. And the public seems to be unconcerned because they think it will never happen to them. They trust the government will use this unaccountable power correctly and only apply it to terrorists who are a threat to the public. But of course anybody who knows anything knows that’s not the way things work. The founding fathers knew good and well things didn’t work that way and that’s why they wrote the Constitution and Bill of Rights. So when people say, ‘I’m not doing anything wrong, I don’t care if they spy, or they pick people up,’ they need to wonder why the founding fathers prohibited these activities. What does it mean if the Constitution is no longer effective? That’s what the U.S. is. Then it means we’re something else. Without it, the executive branch is unaccountable and an unaccountable government is by definition a tyranny. That’s where we are at today.”

Contact Dawn Hodson at 530-344-5071 or dhodson@mtdemocrat.net. Follow @DHodsonMtDemo on Twitter.

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