Ten Years of Deepening Economic Crisis

Aug 5, 2019

Over the last month, several U.S. government agencies have issued reports indicating that storm clouds are gathering over the U.S. economy. At the end of July, the U.S. Commerce Department said that Gross Domestic Product (GDP), the broadest measure of the economy, had slowed markedly, with both business investment and residential construction dropping. The U.S. Federal Reserve also reported that U.S. manufacturing production is now in an official “recession,” that is, industrial production has dropped steadily for more than six months.

Given these worsening conditions, on July 31, the U.S. Federal Reserve announced that it was cutting its short term interest rate for the first time in ten years. Thus, the bankers who run the Federal Reserve admitted they were speeding up the printing of money, in order to encourage more lending and speculation in an effort to safeguard the profits of the big banks and financial companies.

The Supposed Economic Recovery

About a month ago, the news media had boasted that the current recovery had become the longest recovery in history, it had lasted more than a decade–a record! Of course, what they didn’t say is that even according to their own statistics, it was also the weakest and worst expansion on record–with the economy growing at half the rate than it did during previous expansions, which themselves were not strong at all.

No, over the last 10 years, the only real recovery has been in corporate profits and the wealth of the capitalist class. And they gained that wealth at the expense of the working class and society as a whole, leaving the rest of society in ashes.

After 10 years, the job situation has not improved, despite what their lying unemployment statistics say. Sure, there has been some hiring. But the level of hiring has been so weak, millions of workers dropped out of the labor force and therefore are no longer counted in government statistics as unemployed. In a truer picture of the economy, the government admits that the labor force participation rate has been stuck at its worst level in more than four decades, that is, before the mass of women workers began to enter the labor force in big numbers.

For those workers with jobs, wages and benefits have not improved at all. For the last 10 years, government officials, the news media and economists kept on telling workers to be patient, promising that they would eventually get that raise. But it never happened and the capitalists laughed all the way to the bank.

We are told that during periods of economic growth, governments take advantage of swelling tax revenues to improve infrastructure, invest in education and fund research. At the same time, companies plow profits into new products and expand markets. But none of that happened over the past decade. Companies didn’t invest. And neither did the public sector. The government just handed out tax cuts and subsidies while companies handed out dividends, and repurchased shares from big owners.

Record Amounts of Debt

So, along with corporate profits, the only thing that really grew through this entire decade was debt.

To pay for necessities, such as cars, childcare, education, housing and health care, working people, who were already tapped out because their household income was so low, went into record amounts of household debt. Today, overall household debt stands at close to 14 trillion dollars, more than half the size of the entire economy. It is about one trillion dollars higher than it was in 2008, the last peak, which was hit just when the entire financial system collapsed. Today, some of that debt is going bad. About 71 million households, or close to one-third of all those holding debt, are behind in their payments and face collection.

Over the last decade, the debt held by the federal government more than doubled, from 10 trillion to 22 trillion dollars. Today, the federal debt totals more than the entire GDP, that is, the entire U.S. economy, and it is now growing at a rate of more than a trillion dollars per year. Along with the trillions of dollars in debt bought up by the Federal Reserve, much of that debt was taken to bail out the banks and finance companies from the crisis that they themselves brought about in their mad rush to increase their profits.

Added to that, there is corporate debt, which has grown to about nine trillion dollars, or about half of GDP, as companies often take on more debt in order to increase their payouts to their biggest stockholders, or in order to carry out financial speculation, that is, to bet on financial markets.

Taken together, all that debt represents a bubble–a very unstable bubble–that is much bigger than the debt bubble that collapsed 10 years ago and is many times larger than the entire U.S. economy. All it would take is a shock somewhere that could puncture that bubble and cause a worse collapse than a decade ago, to further deepen an economic depression that the capitalist system cannot get out of.