After presiding over the decimation of nearly three million jobs, the first net job loss since the Great Depression in the 1930’s, Bush finally received some good economic news in November. The economy seems to be growing more rapidly, with some job creation; according to the Labor Department, official unemployment fell from 6.1% to 6%. That, plus the pickup in corporate profits, provided some optimism on Wall Street about the economy, which made further gains in November.
On Main Street, anxiety about the economy is still high, with a majority saying that the country is “headed in the wrong direction.” So what is happening in the U.S. economy? What can working people expect to happen over the next year?
The recent upbeat economic news is the result of increased consumer spending, driven by the lowest interest rates since 1958, the massive tax cuts, and a substantial short-term stimulus provided by the enormous increase in military spending for the occupation of Iraq and Afghanistan. Federal Reserve Chairman Alan Greenspan said in a recent speech that employers had been able to increase production since the end of the recession in 2001 without hiring new workers because of an “exceptionally high level of growth of productivity” (i.e. the output of goods and services per hour worked) (Washington Post, 11/7/03).
For Bush, though, the economic situation will continue to be quite difficult. The economy is extremely unlikely to reabsorb the 2.7 million jobs lost since 2001, mostly in manufacturing. While forecasters predict that there will likely be some job creation, the economy would need to grow by 4% per year in order to absorb those newly entering the workforce. The more optimistic forecasts anticipate 3% economic growth for 2004, which does not take into account possible shocks or reverses because of the world economy, the difficult situation emerging in Iraq and Afghanistan, the collapse of world trade talks, fluctuations of the dollar, the ballooning U.S. trade deficit and national debt, etc.
In a report about the health of the international economy, the U.N. Conference on Trade and Development warned: “The world economy is now facing a widening deflationary gap created by deficient global demand. There is a global glut in both labor and product markets, with too many goods chasing too few buyers and too many workers chasing too few jobs. The result is intense price and exchange rate competition among major exporters which add instability and deflationary pressures.”
Deflation is defined as a general drop in prices over a sustained period, and it can have a profoundly negative effect on the economy as corporations go through rounds of layoffs, lowered production, falling prices, huge debt defaults and bankruptcies, etc. The deflationary pressures that exist today are a reflection of the crisis of overproduction and overcapacity that exists in many sectors of the world capitalist economy.
At the same time, under Bush, military spending has increased by 22% (adjusted for inflation) to $396 billion in 2003, and the deficit is expected to top $500 billion next year. Seen alongside the $1.7 trillion tax cuts mainly for the rich and big business, these numbers warn of “a fiscal crisis unlike any we’ve ever seen,” according to a senior Democrat on the Senate Budget Committee.
While the official numbers paint a rosy picture, millions of workers know that the economy is crummy. The official 9 million unemployment figure does not include over 5 million workers who work part-time but say that they would like full-time jobs if they could find them, or millions more who have given up looking for work.
Corporations are typically shedding jobs that pay $34,000 per year and creating jobs that pay $19,000, and significantly the manufacturing sector continued to lose jobs despite an increase in payrolls for the economy as a whole in October (MSN News, 10/27/03). The issue of the destruction of good paying and manufacturing jobs will continue to haunt Bush, especially in the Midwest where job losses have been the heaviest. As Greenspan points out, the economic gains were made mainly by an enormous acceleration of exploitation of workers.
While we may see some uneven and erratic economic growth for the next few quarters (based on the artificial boom of low interest rates, mortgage refinancing, and increasing profits), this will not spell relief for workers and their families. The economy is far from overcoming its serious problems of massive debts and deficits, and in many ways these problems are getting worse. The Washington Post (10/20/03) warned that “a sluggish economy and three successive tax cuts have … reduced tax revenue for three successive years, something that has not happened since the Great Depression.” Tax receipts have fallen by 12% since their peak in 2000.
Big business attacks will intensify as the capitalist system seeks to overcome its crisis in the U.S. and internationally at the expense of workers, the poor, and the environment. The only answer is for the profit-addicted economy of capitalism to be replaced by democratic socialism.
Justice fights for: no cuts in jobs and services, taxing the rich and big business, a 30-hour workweek without loss of pay and a $12.50/hour minimum wage, a massive public works program to create jobs rebuilding the energy and transportation infrastructure and cleaning up the environment, a universal health care system, and free education. This program is the only effective way to mobilize and defend the interests of working people.