How to Get Washington’s Attention

Finally, it seems, the economic burdens of America’s vast middle class may be catching up with the Street. The Dow lost 2.22 percent today; the Standard & Poor’s 500-stock index was down 2.28 percent. Both marked their worst declines since August 11, 2010. The Nasdaq composite index fell 2.33 percent.

We’re coming full circle: The stock market is dropping because corporate earnings are slowing. Corporate earnings are slowing because consumers are pulling back. Consumers are pulling back because they don’t have enough jobs or adequate wages.

The immediate cause of the sell-off was an announcement by ADP Employer Services, a payroll processing firm that estimates employment, that private employers added only 38,000 jobs in May. The economy needs 125,000 new jobs a month just to tread water, given that at least 125,000 people join the potential labor force every month. Simply put, if new hires are in the range of five digits, American consumers will not have enough purchasing power to buy what the private sector can produce.

The leaders of the Street and big business may now have to wake up to a reality they’ve tried to avoid — that the central economic problem of our time isn’t the long-term budget deficit but the immediate deficit in aggregate demand.

They may not yet see the necessity of a renewed social contract linking pay to per capita productivity, but they will understand something must be done to fuel jobs and wages.

Never underestimate the power of Wall Street and big business to set the terms of the economic debate in our nation’s capital. After all, Wall Street and big business pay the tab of politicians on both sides of the aisle. Even if the middle class can’t get the attention our representatives in Washington, those who fund their campaigns can.

This post originally appeared at Robert Reich’s Blog and is reproduced here with permission.

One Response to "How to Get Washington’s Attention"

  1. JPBulkoMBA   June 3, 2011 at 5:59 am

    How can we "fuel jobs and wages"? Here's my idea: To solve the unemployment problem (and restore the American economy), I've written a proposal that describes a mechanism through which we can fund a massive number of new business ventures by tapping the financial power of Wall Street to create jobs on Main Street. This approach ramps up employment quickly and puts money directly into the hands of the people who need it now: the consumers (whose spending represents 70 percent of GDP). This enormous financial turbo-boost to the economy will reinvigorate economic activity and quickly return the eight million jobs lost during the Great Recession. The purpose of this mechanism is to take a private sector proactive approach to address the expected long-term high unemployment problem. You can read the proposal here: http://jpbulko.newsvine.com/_news/2011/04/20/6500

    Joseph Patrick Bulko, MBA