A Nation Of Worriers

The Weekly Standard: American Economic Discontent Is Well-Founded

(Weekly Standard)  This column was written by Irwin M. Stelzer.

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THIS IS THE SUMMER of our discontent. Only 14 percent of us are satisfied with the way things are going in the United States, the lowest figure recorded by Gallup's pollsters since they began asking that question almost fifteen years ago. Consumer confidence is at its lowest level in 28 years, according to the respected Reuters/University of Michigan survey. And not many Americans are expecting things to improve soon. "Consumers' economic outlook is so bleak that the Expectations Index has reached a new all-time low," reports the Conference Board.

In part this pervasive gloom is due to gasoline prices that have passed the $4 per gallon level. In part it is due to the squeeze soaring food prices are putting on consumers' pocketbooks. In part it is due to falling house prices, and to a deteriorating job market, with long-term unemployment up 37 percent from last year.

And there is no escape from the gloom. Try to get away from it all, hop in your car, and soon you are pumping $4-plus gasoline into the tank of a vehicle designed more for safety and comfort than for fuel efficiency. Try to get on a plane, and you find that most flights are full, fares are up, and your air miles are virtually useless as the number of seats allocated to freebies shrinks. Which might explain why sales of flat-screen television sets at Wal-Mart increased by double digits in June: Staying home is an increasingly attractive alternative.

But only if you live in a neighborhood where for-sale signs aren't festooning the lawns. Not only are home sales and house prices down and still declining in most parts of the country, and inventories of unsold houses and mortgage foreclosures up, but the few families willing to buy houses are finding that their once-friendly lender is not delighted to see them. I am told that even pricey Manhattan properties are languishing on the market as Wall Street layoffs mount--driving some from the buyers' queue to the unemployment benefits queue. Indeed, even those bankers still at work find that mortgage lenders are so nervous about the career and bonus prospects of Wall Streeters that financing is not available.

The proud new owners of those flat-screen TVs will have to stay away from the 24-hour financial news channels if they are to find solace in their new acquisition. Share prices are falling, earnings expectations are being lowered, financial-sector firms continue to scramble for new capital to offset write-downs of loans gone sour, and it took government intervention over the weekend to restore calm after shares in Freddie Mac and Fannie Mae plunged something like 90 percent.

The softer jobs market affects more than those who have lost their jobs. Even though the unemployment rate (5.5 percent) is nowhere near the levels characteristic of serious recessions, many people who have jobs quite reasonably feel there is reason to worry about their futures. That's why it was unhelpful to the McCain campaign for his top economic advisor, Phil Gramm, to label these folks "whiners". "Worriers" might have been a better choice of words.

In this atmosphere it is difficult for the shreds of good news to penetrate the gloom. The International Council of Shopping Centers reported that sales at stores open at least a year ("same-store sales" in the jargon of the trade) rose by 4.3 percent last month, with Wal-Mart recording a 5.8 percent jump, its largest in four years. Since June is the second most important month for retailers--summer stock is cleared to make room for back-to-school items--this should be unalloyed good news.

It isn't. Pessimists argue that the sales increase results from a combination of the $86 billion tax-rebate checks from a program due to end this week, higher prices of food and gasoline, discounts on clothing and electronic goods, and that old favorite of retail analysts, the weather--warmer than usual and therefore good for getting summer clothes off the racks and into consumers' closets. Besides, much of the stuff that consumers buy in the flourishing discount stores comes from overseas, and so directly provides no jobs for American workers. The two most powerful forces underlying almost all of the economy's problems are the price of oil, and the condition of the financial sector. Bring oil prices down, and share prices will rise; revive the financial sector so that credit is again available to businesses and homebuyers, and the economy will revive. Unfortunately, it is not easy to forecast either of those important drivers of the economy.

The best we can say about the outlook for the price of oil is that in the short run it will continue to be affected by geopolitical events. An Israeli decision not to live under the threat of a nuclear attack by Iran, or Mahmoud Ahmadinejad's test-firing of a few missiles by the Iranians, can cause a temporary spurt in prices. In the longer run we are reduced to guessing about the balance of supply and demand. In a free market higher prices would cause an increase in exploration and, eventually, available supply, and "demand destruction" as high prices induce Americans and others to drive less, heat less and cool less will ease demand. But the OPEC cartel is capable of curtailing the amount of crude it allows on the market, which might offset the beneficent effect of increased non-OPEC supplies and an easing of demand in developed countries.

The eventual outlook for the financial services sector is somewhat easier to predict. Despite the weekend announcement that in essence confirmed that two of the biggest players in that sector, mortgage lenders Fannie Mae and Freddie Mac, are too big to fail, investors continue to worry that shares of these government-chartered, shareholder-owned entities will be hit harder by defaults, and that Fannie and Freddie will be forced to raise new capital on unfavorable terms. Both have ample reserves according to both Treasury Secretary Hank Paulson and their regulator, but when fear stalks the markets, reassurances from government carry little weight.

Meanwhile, banks need to deleverage--raise more equity capital relative to their debt--to make up for write-offs of bad debts. Paulson told Congress, "Much has been accomplished. Our financial institutions are repricing risk, deleveraging, recognizing losses, raising capital and improving their financial position." But he won't attempt to guess when the recovery will be completed, and the credit spigots turned on. Market analysts are guessing that share prices of banks will fall further, before an eventual recovery at the end of 2009.

That means that the credit squeeze will persist at least until then, making it unlikely that at this time next year we will be experiencing the "glorious summer" celebrated by Richard III, with all the gloom-producing clouds by then "in the deep bosom of the ocean buried." But we might just have a merry Christmas. Or at least a less gloomy one.

Irwin M. Stelzer is a contributing editor to THE WEEKLY STANDARD, director of economic policy studies at the Hudson Institute, and a columnist for the Sunday Times (London).

[noloyalisti]

Time for massive consumer boycotts and then general strikes. While we still have anything left. Before the war criminal corporatists take the rest. While we can still resist.

[walt1944-2009]

Most of us have very SHORT memories. We want to remember the good times but not the bad.

There should be many of us who remember the "non-recession" of 1991-1993 when the Great Emperor Bush I firmly ignored a 8% unemployment rate, out of control prices, fed-up citizens, and decided to go on numerous trips around the world, "up-chucking" on world leaders.

People were mad at the fledgling neocon Fascist Nazi Republicans, they were made at BIG BUSINESS for farming every possible job to Mexico (China would come later under "Wild Bill" Clinton), mad at paying $1.75/gallon for gas, and mad at each other. It was the period when "road rage" was born, religious "cults" were our home-grown "terrrrorists", and Osama Bin Laden (remember him?) was a crazy Arab running around in Afhganistan!

Back then, we all thought nobody could be worse than George HW Bush!

Man, where we wrong!!!!!!!!!

SIG HEIL, BUSH!!!!
sig heil, TOTALLY MORE OF THE SAME, McCain!!!!!

[joyous88]

the republicons are the new Nazi''s ,

they has destroyed america with their greed driven policies,

and we can thank the mindless christians who voted these criminals into office

end the faith based bribes

[joyous88]

mcbushsame is another bush

[noloyalisti]

This is a perfect story for the Weakly to publish. Their kind have made huge amounts of money by supporting the Greasy Old Pervert party and their invasion fiascos. Like Alfred E. Neuman and Bushoccio and many other morons they can say "What Me Worry". These guys are the reason we need to support higher education in this country.

[sharncedar]

"Bring oil prices down, and share prices will rise; revive the financial sector so that credit is again available to businesses and homebuyers, and the economy will revive."


this is a misunderstanding about economics that has led to our current problems. Extensive credit is nto a good thing, it is a bad thing if the interest rate is higher than the current growth rate. In a young America, with zillions of unoccupied acreage and the room to take in zillions of immigrants and grow expansively, credit was OK as the investments of today''s credit grew faster than tomorrow''s extra payments. In a saturated, filled-up America with little room for more growth, credit is a drag on the economy. The key is whether the overall growth of the economy (the real economy not the fake measures of "GDP" that fails to account for inflation) is faster than the interest rates. If not, credit extended today slows the growth of the future.

We need to rethink how capital is provided to the economy, and move away from a model based on 1960.

[bluestardad]

THE WEEKLY STANDARD PRO ISRAELI RAG

WHO HAS ADVOCATED KEEPING AMERICA IN THE MIDDLE EAST FOR YEARS

RUN BY AIPAC MEMBERS WHO ARE DUEL PASSPORT HOLDING AMERICAN ISRAELI

WHO HAVE NEVER SERVED IN THE MILITARY BUT PUSH AMERICAN KIDS TO GO FIGHT FOR THEM IN THE MIDDLE EAST!

THEY ENJOY OUR FREEDOMS YET DONT SERVE THEMSELVES

THEY SHOULD BE DRIVEN FROM AMERICAN SHORES

AMERICA STAND UP OR SHUT UP!

[jcr103]

After more than 7 years of the Bush Administration can you blame Americans for being worried?

[gunfighter51]

The left are the perfect examples of whiners and wimps, maybe we should bring back the misery index we had during the Carter years, too bad most of the leftists here were not even born yet, and don''t even have a clue what''s bad.

Wal-Mart will thrive, while Starbucks will crash.

I see our favorite lib Pelosi wants to hand out another check for the poor and downtrodden. Just another liberal handout to keep the masses voting for them.

Maybe we should get George Soros to supply the cash!

[cfin5]

You know, with all of these worriers around, there has got to be some that are better at it than others. Being serious about it for years surely has its rewards to being a professional instead of a lowly apprentice. If I was going to hire someone to do my worrying for me I''d want to know how long they''ve been at it as well as a list of all the issues that have been worried about where their efforts changed the situation. They can use the back of the application for listing extra worrying experience. Please include dates and times of all colitis attacks, nail biting fits, stomach ulcers, headaches, et al... How else am I going to be able establish some kind of pay scale to give an apprentice or journeyman? With that regard, the final test to determine this question of monetary compensation in whether or not they are qualified to do my worrying for me per hour,......will be their first job to worry about.

[joyous88]

what a laugh!

After eight years of the first FASCIST government in US history,

worried , you bet I am worried

the mindless conservative agenda has ruined our country

[gunfighter51]

The lefty''s have been so depressed the last 7 1/2 years, half of them have sought treatment, the other half want to succeed from the union.

For the libs there''s a crisis around every corner. Climate crisis, mortgage crisis, Darfur crisis, banking crisis, oil crisis, energy crisis, and last but not least, planet in crisis.

All this worrying is going to give you libs an ulcer, in which case you can whine about that!

[Razzl]

Cheerio, Stelzer, people will put on their happy faces again in November when the GOP is wiped from Congress and the White House and they can look forward to government that doesn''t consider them expendable any more. The Dems have proven themselves much better in the last 20 years at reading smoke signals from Wall Street than the drooling ideologues at establishments like yours whose uniform response to all public problems is "let them eat cake"...

[joyous88]

gunfighter51 is a conservative fool

[dillypickles]

Yes, I''m one of the worried folks since I live on an extremely small FIXED income & everything is being priced out of my reach. Pretty soon, though, I won''t have to worry anymore as I won''t be able to pay my bills & they''ll come after me for non-payment & put me in jail & then I will finally get free housing, meals, & the medical care that I cannot afford now.

Woooweeee - hmm - so guess that I''m a whiner - hmmm - properity is just around the jail - err - corner.

[dillypickles]

Dang - - meant to say - prosperity - dang typos 0 and oh by the way, in case anyone thinks I don''t hav it that bad because I''m on an OLD computer that I got when I was still able to work, is sadly mistaken.

[noloyalisti]

Don''t worry joyous 88 and other proud liberals. Every time a conservative or republican speaks, they expose themselves for the ignorant fools they are. They have run out of material and their entire ideology has been demonstrated to be a complete failure. Don''t let up on reminding them, every chance you can.

[shippg-2009]

Just for giggles: CNN (Anderson Cooper) refers to a certain celebutante as "She Who Shall Not Be Named." If you don''t know her, she''s the blond who is famous for NOTHING other than being famous, and being the daughter of a hotel tycoon.

Anyway, from now on Jesse Jackson should be known as "He Who Shall Not Be Named." He has blown his career and authority, if he ever had any. What ever DID he accomplish, anyway?

And as for worrying, get into a field that will always be needed. Two years ago, Money advisors (who knew what was coming) were saying to learn a trade (like plumbing) instead of going to college. Then plan on budgeting like crazy and paying for your own healthcare. It is not fun, but it''s the way of the future.

[joyous88]

These evangelical conservatives have ruined our country, in every respect, thime to boot them out of office,

and the next time a politician says that some old white guy with a long beard that lives in outer space
gives him advice, lets take him at his word

[hasher47]

Phil Gramm
You''''ve heard of mental depression; this is a mental recession,"

This is the same Phil Gramm that created the "Enron loop hole" which is allowing Commodities traders drive up the price of fuel.

This is also the same Phil Gramm, whose wife Wendy Lee, just happens to be a Commodities broker.

Don''t ya just love those Republicans.

[chatmandu002]

Would you all like some more cheese with your WHINE.