Saturday, 7 January 2012


It is an undeniable fact that the unemployment rate is at historical high and the income distribution at historical lows. From 1948 to the present, has there been an election year when unemployment - currently at 8.5% officially, as my chart below indicates:
1948- January - 3.4% unemployment
1952 - "" - 3.2% 
1956 - "" - 4.0%
1960 - "" - 5.2%
1964 - "" - 5.6%
1968 - "" - 3.7%
1972 - "" - 5.8%
1976 - "" - 7.9%
1980 - "" - 6.3%
1984 - "" - 8.0%
1988 - "" - 5.7%
1992 - "" - 7.3%
1996 - "" - 5.6%
2000 - "" - 4.5
2004 - "" - 6.3%
2008 - "" - 5.4%
2012 - "" - 8.5%

Only Ronald Reagan's administration came close to the current unemployment rates, which is interesting for those who either remember of have studied that era and will know that Reagan put foreign policy front and center to distract the American people from the economic issues confronting them. But even in the Reagan era that was responsible for slashing social welfare programs and strengthening the corporate welfare state, especially defense, income distribution was not as uneven as it is today.

In the past few years and months, I have provided numerous postings on the issue of US income distribution, but any person interested in doing comparisons between income distribution in the mid-1980s and today will find that today the middle class is experiencing a sharp downward socioeconomic mobilization. This is primarily because Reagan borrowed heavily to finance tax cuts that trickled down to the rest of the population. Some may recall the trickle-down economics and John Kenneth Galbraith criticizing the theory and practice as analogous to the horse (eating massive quantities from the trough) while the sparrow was picking up what fell on the ground from the horse's mouth! The current administration must pay down debt, so it cannot engage in heavy borrowing or any more liberal monetary policy as a stimulus.

Therefore, it must take the income to pay down debt from the middle class, especially given the resistance of the corporations to make any sacrifice for a stronger fiscal structure. This does not mean that by mid-summer the rate unemployment will not be at around 7-7.5%, giving Obama a boost for November. This is his race to lose, given that the Republicans have nothing to offer that would strengthen the American middle class. In closing, if Obama were to ask the American people "Are you better off now than you were four years ago" what would the majority answer? Statistically speaking, the majority of the American people, middle class and workers are worst off today than four years ago, although that is not necessarily the fault of Obama alone.

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