Wednesday, July 24, 2013

America's Great Divide

On July 22nd, I followed up my CNBC Street Signs (7/5/13) segment on the June Jobs Report
( ) with an appearance on Power Lunch with 
Peter Henry, Dean of the Stern Business School at NYU.

Our segment ( discussed the "Great Divide" between Wall Street and Main Street.

Here are my extended thoughts on the issue.


Q. Will the "Great Divide" widen?

Unfortunately, there is a good chance that we could see a third surge in income inequality. We saw increases in income inequality during the 1980s and from 2001 to 2007. Why a new surge?

-We are in the midst of an anemic recovery, especially for youth, minorities and the less educated.

Tepid growth in Gross Domestic Product. Not strong enough to create consistent job creation in excess of 150,000.
-We are over 30 months into the recovery. Almost 40% of the jobless are classified as long-term.
-Including those that are part-time, but want full-time work, raises the jobless rate to over 14%.
-Over the past 12 months, jobless rates have fallen, but largely due to labor force departure.
-A large portion of private sector jobs have been created in industries with below average earnings. 
-Women and minorities have borne the brunt of the over 600,000 job cuts in the public sector.

 Q. What role is policy playing in helping to generate a new surge in inequality?

We are making policy decisions that are slowing investments in what the UN calls "Human Priorities." These are the building blocks of life: education, training, community resources, and social safety nets. Specifically:

State and local governments continue to cut back services and employment.
Diminished Congressional political will to invest in job creation.
Sequestration will place a drag on economic growth.
$1.2 trillion across the board spending cuts over 10-year period
$85 billion in auto cuts started March 1, 2013

–Our conscious decision to weaken the social safety net is adding more economic “systemic risk” to low to moderate income families. Job loss, natural disasters, and other economic shocks are having greater immediate, short and long-term impacts.

I have said this in early post and opinion pieces and I will say it again. As the sage auto tech said, "You can pay me now, or pay me later."


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