The Recovery that Wasn't

When running for President in 2016, Donald Trump repeatedly ridiculed the claims of Hillary Clinton that President Obama's economic program was responsible for a robust economic recovery from the Crash of 2008.  She cited the dramatic rebound of stock values, and reduction of the unemployment rate, as proofs of this claim.  Trump charged that neither of these indicators was valid proof of a recovery, as stock valuations did not reflect the real economy, as a majority of Americans devastated by that crash had not recovered, with more than eight million families losing their homes; and that the unemployment figures did not reflect the real status of the workforce, as nearly a third of potentially employable people were not counted, as they were no longer looking for work, and therefore, did not show up as "unemployed" in official figures.

In 2016, Trump was absolutely right on both counts, and he won the election by gaining votes from many formerly middle class people and blue collar workers who agreed with him, especially from Democratic voters in such once-industrial states as Pennsylvania, Michigan and Ohio, which had been carried by Obama in 2012.  Trump correctly stated that Obama and Clinton ignored the plight of such citizens, whose standard of living had been destroyed by the combined effects of banking deregulation, which favored speculators over producers, providing liquidity for speculative investments in mortgages while keeping credit from reaching producers; and so-called free trade agreements, which rewarded multinational corporations, which outsourced production and jobs, while devastating the once-powerful U.S. manufacturing sector.  By the end of his campaign, he was calling for a restoration of Glass Steagall banking regulation to address the former, and rejection of agreements such as the Trans-Pacific Partnership (TPP), which would have further eroded U.S. manufacturing, and repeal of the job-destroying North American Free Trade Agreement, NAFTA.

Since his election, President Trump has moved against neo-liberal orthodoxy on trade policy, beginning with his cancellation of U.S. participation in the TPP and renegotiation of NAFTA.  Further, he has continued to speak out against the Green, anti-growth lunacy of carbon taxes and the fake-ecologist push against nuclear energy and fossil fuels, and has initiated a crash effort for a return to the Moon which, if not blocked by Congress, would provide an economic boost along the lines of the 1960s NASA effort of President Kennedy, which spurred significant economic growth, and fostered optimism, through scientific and technological advances.

However, under the influence of neoliberal economic advisers from Goldman Sachs and other City of London/Wall Street insiders, he has yet to act to restore Glass Steagall bank separation, and opposition from austerity mongers in the Republican Party, in collaboration with anti-Trump Democrats, backed by so-called free market economists, think tankers and media hacks, has prevented a serious effort at the promised investment in infrastructure.  

The net effect of the continued influence of neoliberal policy makers has been that the only growth in the U.S. economy, besides a marginal initial increase in manufacturing, has been in the bubble of stock valuations, fueled by a continued flow of relatively cheap credit to speculators.  Unfortunately, President Trump has been hailing the stock bubble, along with historic lows in official unemployment figures—figures which continue to leave out the third of the workforce no longer seeking work—as proof that his economic policies are working.  Equating the stock bubble with economic "growth" ignores the most devastating aspect of the post-2008 "recovery", that the bubble has been inflated by a voluminous increase in debt, which has now reached unsustainable levels, while leaving no credit available for investment in the small and medium enterprises which engage in physical economic production.  In fact, the leverage which has produced this debt has reached proportions beyond that of 2008, and overall corporate debt is 60% larger than in 2008, leading to warnings that a new crash is likely. 

Helga Zepp LaRouche from the Schiller Institute has referred to the claims from the President and his advisers that this is a new, unprecedented recovery is an Achilles' heel for him, as a new crash between now and the 2020 election would likely doom his chance for reelection.

THE REAL STATE OF THE U.S. ECONOMY

It is this problem of a speculative balloon sitting on top of a declining, deindustrialized economy, which was addressed by a special report in the July 12 issue of the authoritative LaRouche publication, Executive Intelligence Review (EIR).  Titled "The Bitter Truth About the U.S. 'Economic Recovery'", the authors lay bare the results of the forty-plus years of physical economic breakdown, which has been accelerated by the failed policies of the Bush, Jr., and Obama presidencies.  The report focuses on several key economic parameters, such as the collapse of manufacturing and agriculture, the effects of speculation on housing, which has produced shortages and skyrocketing prices, leading to growing numbers of homeless families, and the broader implications of these policies on cities.

What emerges is not a picture of a robust economy, but of the day-to-day struggles of an increasing percent of the American population to cope with a collapse of the physical economy.  For example, in a chapter on the deindustrialization of the nation, the report demonstrates that "parts of the former Great Lakes powerhouse of manufacturing belt are now industrial wastelands...."  The number of manufacturing jobs has fallen from 19.5 million to 12.5 million today.   As factories left cities, "the physical conditions of life fell apart, from homes to institutions: hospitals, churches, museums, school districts and local governments" have all experienced a drastic "downshift."  This is reflected in population decline, with five of the most prominent cities in the Great Lakes region—Pittsburgh, Detroit, St. Louis, Buffalo and Cleveland—having lost half their population since 1950.  Many cities in the Midwest region face bankruptcy, the most prominent being Detroit, which declared the largest Chapter 9 bankruptcy in history in 2013.  Pittsburgh's finances were put under a receivership by Pennsylvania, while its capital, Harrisburg, declared bankruptcy in 2011.

The failure to invest in infrastructure, which has made travel within and between cities a wasteful, time consuming effort, has had catastrophic effects in rural America.  The flooding of this year in the Upper Missouri-Mississippi River Basin, has affected fifteen farm states.  It has resulted not from "man-made climate change", but from the failure to invest in water management (dams, levees, diversion lakes and channels) and upgrading the river navigation system.  This has not only led to a lack of planting and farm bankruptcies, but now threatens a significant portion of world food production.

The report includes a snapshot of three major cities, New York, Los Angeles and Seattle, which are often portrayed as economic success stories.  While these cities are centers of enormous paper wealth, from Wall Street, Hollywood and the tech sector, respectively, the declining conditions of life for the majority living in these urban centers have been ignored.  All three face severe housing shortages, as speculators moved in to buy up foreclosed homes after the 2008 crash, and drove rental prices to unaffordable levels for most families.  Add to this the extraordinary growth of personal debt, from credit cards, student loans and medical costs, and homelessness has become an existential crisis, a profound "social crisis", as recently declared by the police chief of Los Angeles.

The deeper, cultural implications of this are explored under the title "Drugged-Up America", which covers the drug epidemic destroying whole sectors of the population.  "An environment has been deliberately created," the author Robert Ingraham writes, "in which everyday drug usage is seen as acceptable, if not normal or even desirable."  When prescription drugs such as opioids, anti-depressants, anti-anxiety drugs and attention-deficit disorder drugs are included, more than 25% of the population is under the influence of mind-altering drugs.  Drug-related deaths topped 70,000 in 2018.  During the Obama presidency, when drug laws were inexcusably loosened, due to lobbying of drug-pushing organizations such as those funded by George Soros, marijuana use rose by 100%; methamphetamine use by 62%; and heroin use by 200%!  Overlooked in these statistics is the role of drug trafficking and drug-money laundering in providing a source of liquidity to the major banks, which continue to profit from such practices, despite the occasional slap-on-the-wrist fines from weakened government enforcement agencies.

A REAL RECOVERY PROGRAM

Given that President Trump has had little maneuvering room since his election, as his opponents have been committed to a regime change coup against him under "Russiagate", and he is surrounded by neocons and neo-liberals in both parties who are profiting enormously under the speculator-friendly policies implemented after swindlers crashed the economy in 2008, it is not surprising that he has been reduced to cheerleading the stock market as proof of his success.  It is clear, however, from his determined battle to defeat the coup plotters, and his recent efforts to establish collaborative relationships with Asian and Eurasian nations—which are rising, as the West collapses—that if he continues to pursue a full break with the failed neoliberal policies of the past, he will create a precondition to igniting a real spark of economic development in the U.S.

The path ahead involves achieving a cooperative breakthrough with China, which would open U.S. participation in the global Belt-and-Road Initiative, along with the prospect of a New Bretton Woods economic system, and adoption of LaRouche's Four Laws: Glass Steagall bank separation; a Hamiltonian credit policy oriented toward investment in manufacturing and an upgrade in agriculture; major investment in development of new platforms of infrastructure; and crash programs in scientific frontiers, especially in space exploration, and development of nuclear fusion.  With his Democratic opponents stuck in mud-slinging on behalf of anti-growth, anti-human Green policies, such an orientation by the President would not only reaffirm the commitment of his voters in 2016, but would recruit a growing section of the population to an optimistic future, of scientific and technological advance.  

For this to occur, it would be most beneficial for readers of this article to read the full report in the July 12 issue of the EIR, to not only learn the "bitter truth" about the actual state of the U.S. economy, but to become insightful advocates for the American System approach embodied in LaRouche's Four Laws.  With a cadre force of committed and knowledgeable citizens, a bright future, freed from the ideological stranglehold of today's establishment elites, is not only possible, but likely.

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