American Workers’ Earnings Fall 1.2% in Past Year

February 20, 2008

http://www.usatoday.com/money/economy/2008-02-20-real-earnings_N.htm

This merely continues the three-decade trend in falling earnings that I detailed in the first chapter of Five Short Blasts.  This trend will persist as long as our enormous trade deficit lasts.  When I update the book for the 2nd edition, those graphs of income and especially net worth (following the collapse of the housing bubble) are going to look like they fell off a cliff!

The downward spiral continues.  Wages can’t even keep pace with the price of cheap imported junk.  Isn’t globalization wonderful?

Pete


Middle Class Can’t Afford Homes

January 31, 2008

http://money.cnn.com/2008/01/29/real_estate/Housing_unaffordability_persists/index.htm?section=money_mostpopular

This article is proof of what I’ve been saying about our current recession.  You have to look past the most obvious symptoms – like the burst of the housing bubble – to find what’s really going on if we want to take meaningful action. 

Even in spite of the decline in housing prices, the middle class still isn’t even close to being able to afford an average home.  Why?  Because incomes haven’t kept pace with inflation?  Why?  Because we’ve carved out much of the entire manufacturing sector of our economy and given it away to foreign countries for nothing in return. 

Labor obeys the law of supply and demand as much as any other commodity.  Take away a big piece of the labor demand and the price will drop.  Wages will go down.  Balance our trade equation with a tariff structure (one indexed to population density), and that demand for labor will come back home and restore wage growth. 

We can cut interest rates and pass stimulus packages until the cows come home; in the long run it won’t make a bit of difference in stemming our economic decline.  We have to take meaningful action to address real problems instead of treating only the symptoms.  You can’t cure the flu by wiping your runny nose.  Neither can we fix our economy with actions that don’t address the real problem.

Pete