Former Secretary of Labor Robert Reich says the “recovery” is a sham.
“Part of the perceived growth in GDP is due to rising government expenditures,”he says. “But this is smoke and mirrors.”
“The stimulus is reaching its peak and will be smaller in months to come.” Reich recently wrote in The Huffington Post. “And a bigger federal debt eventually has to be repaid.”
And even though the U.S. economy grew at a 5.9 percent annual rate in the fourth quarter of 2009, those GDP figures are badly distorted by structural changes in the economy.
For example, part of the increase is due to rising healthcare costs. When WellPoint ratchets up premiums, that enlarges the GDP. But you can’t consider this evidence of a recovery.
Big global companies, Wall Street, and high-income Americans who hold their savings in financial instruments are clearly doing better, Reich notes.
“As to the rest of us — small businesses along Main Streets, and middle and lower-income Americans — forget it,” he says.
Business cheerleaders naturally want to emphasize the positive, Reich points out, because they assume the economy runs on optimism and that if average consumers think the economy is getting better, they'll empty their wallets more readily and the economy will expand faster.
“The cheerleaders fail to understand that regardless of how people feel, they won't spend if they don't have the money,” Reich says.
Analysts at Wells Fargo expect that the economy's growth rate will likely slow from above 3 percent in the current quarter to less than 2 percent by the middle of the year.
"Going forward, growth is going to be much more dependent on the private sector," senior analyst Mark Vitner told the Associated Press. "And consumer demand hasn't picked up that much yet."
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