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‘Two Americas’ Hasn’t Changed

Feb 07, 2011 | By: Mr_Blue | Tags: unemployment, john edwards, two americas, two economies, robert reich

Back in 2004, former senator and presidential candidate John Edwards started referring to “Two Americas”. He was referring to gapping income inequality and level of poverty in the U.S. Then last Friday, Prof. Robert Reich referred to ‘two economies’ in the U.S. These two divergent paths has been happening for quite some time and nothing is being done to change it.

Robert Reich was absolutely correct to point out the different economies that are occurring today in the U.S.:

We have two economies. The first is in recovery. The second remains in a continuous depression.

The first is a professional, college-educated, high-wage economy centered in New York and Washington, that’s living well off of global corporate profits. Corporations continue to make money by selling abroad from their foreign operations while cutting costs (especially labor) here at home. Wall Street is making money by taking the Fed’s free money and speculating with it. The richest 10 percent of Americans, holding 90 percent of all financial assets, are riding the wave. And their upscale spending has given high-end retailers and producers a bounce.

The second is most of the rest of America, and it’s still struggling with a mountain of debt, declining home prices, and job losses. In coming months most Americans will also be contending with sharply rising prices of food and fuel.

Professor Reich was writing in response to the completely lack luster jobs numbers for January 2011 that were released last Friday. Here is the Employment Situation Summary. In January, there were 35,000 jobs created and (official) unemployment rate was 9.0% down from December 2010 (9.4%). Of course these numbers were spun as a big positive but many, particularly those in traditional business media, forgot to mention that one reason why unemployment rate went down was because 4.9 million workers were not counted or had dropped out of the labor force - 4.9 million people not counted is a big deal.

Let’s be real. These “Two Americas” or “Two economies” has been building for quite some time:

Source: Center on Budget and Policy Priorities

Any semblance of progress or perceptions of improvements were masked by more and more debt on part of working class Americans:

Debt became a substitute for wage growth as working class families struggled to maintain a certain living standard. These higher debt levels (absent wage growth) were the source of the financial crisis but you won’t hear that in the traditional media. Both Mr. Edwards and Prof. Reich were very correct in pointing out these two different realities in the U.S. The tragic thing is that nothing is being done to change these differences.

We can no longer expect or rely on politicians from either party to make changes to address this dual economic reality. Both political parties are captive to big money interests which are not concerned about working class Americans and are only concerned about preserving their economic reality of prosperity. Reality for the rest of us is that we must work together outside the political system to “become the change we we want to see” (Mahatma Gandhi) in the U.S.

Good luck.