I was listening to the evening news the other night and couldn't believe what I was hearing. According to all of the commentators, the state of the US economy was very good. No dissenter was heard. Unemployment was at 5%. No mention was made of our staggering $700 billion trade deficit. The telejournalists echoed the press releases from President Bush that the economy was humming along.
In reality, the state of the US economy is not good. Our record balance of trade deficit means that we are buying $700 billion worth of goods and services that we cannot afford. As a nation we are living on credit card debt, car loans, second mortgages and refinance loans.
We are living beyond our means. We are living on borrowed money. And we are borrowing this money from overseas, from China, Japan and Europe.
The Wall Street Journal reported in late 2004 that the saving rate in the United States was the lowest rate recorded since the US government's monthly savings data began in 1959, with the exception of October 2001, when statistical quirks related to the prior month's terrorist attacks produced a small negative savings rate.
Federal Reserve Chairman Alan Greenspan stated that the sizable gains in consumer spending of recent years have been accompanied by a drop in the personal saving rate to an average of only 1% over 2004 -- a very low figure relative to the nearly 7% rate averaged over the previous three decades.
The Bureau of Economic Analysis in September 2004 reported that the 2003 personal savings rate of 1.4% was the lowest since 1938. It is getting worse. The savings rate turned negative in 2005.
In addition, we are becoming a nation more divided between rich and poor, with a shrinking middle class. According to the Worldwatch Institute, of all high-income nations, the US has the most unequal distribution of income, with over 30% of income in the hands of the richest 10% and only 1.8% going to the poorest 10%.
This explains in part the lack of savings. The rich are doing most of the saving and the rest of us are doing most of the borrowing.
Most of the mainline economists and editorial writers are either ignoring the real story or claiming that negative or low savings and massive trade deficits are irrelevant. They are wrong. The US is living paycheck to paycheck. Most families are one major illness or layoff away from bankruptcy. US bankruptcies hit a record in 2005 with nearly two million Americans filing for relief from their debts.
Millions of Americans have lost a substantial part of their pension benefits in the last few years through corporate bankruptcy filings. The US Pension Benefit Guarantee Corporation's deficit more than doubled in 2004, rising to $23.3 billion from $11.2 billion the previous year. 2005's results will be worse.
The US Pension Benefit Guarantee Corporation (PBGC) is a US government agency that insures pension benefits for 44 million workers. Often this insurance only covers about one-half or less of the pension promised workers who worked 20 or 30 years for the same company. The agency's deficit is widening due to expected costs that would be incurred when taking over pension obligations that include United Airlines and other recent corporate bankruptcies. United Airlines will be the biggest obligation the PBGC has ever dealt with; the company's pension plans were underfunded by about $8.3 billion.
And you know who picks up the tab of the PBGC: the US taxpayers.
The US economy has been hemorrhaging jobs, especially factory jobs, during the past seven years. The economy has lost three million manufacturing jobs since 1998. That is 40,000 jobs a month and the pace is increasing at an alarming rate. During the past year we have lost an average of more than 50,000 factory jobs every month. Each one of those job losses directly affects the lives of three or four people, including spouses and children. Indirectly, nearly everyone in the US has been affected because of lower tax revenues, lower sales at stores frequented by these laid-off workers and higher unemployment costs.
Do you still agree that the state of the US economy is good? The US economy is being run into the ground by overpaid, prima-donna CEOs who don't give a damn about their workers, and by Congress members and other politicians who get their campaign contributions from wealthy businessmen and from a bureaucracy and court system that favor the corporations to the detriment of average working citizens.
And the watchdogs are asleep at the switch. These journalists and other self-appointed "experts" think that everything is just fine because they live in a fantasy world in Washington or New York and have no idea what is going on in the real world.
The state of journalism, like the state of the economy, is not good.
Joel D. Joseph is chairman of the Made in the USA Foundation. Phone 301-941-1989. Email madeusfdn@comcast.net.