Reich: The economy in 2016 — on the edge of recession

“Economic forecasters exist to make astrologers look good, but I’ll hazard a guess. I expect the U.S. economy to sputter in 2016. That’s because the economy faces a deep structural problem: not enough demand for all the goods and services it’s capable of producing,” writes political economist Robert Reich.

“American consumers account for almost 70 percent of economic activity, but they won’t have enough purchasing power in 2016 to keep the economy going on more than two cylinders. Blame widening inequality.

“Consider: The median wage is 4 percent below what it was in 2000, adjusted for inflation. The median wage of young people, even those with college degrees, is also dropping, adjusted for inflation. That means a continued slowdown in the rate of family formation—more young people living at home and deferring marriage and children – and less demand for goods and services.

“At the same time, the labor participation rate—the percentage of Americans of working age who have jobs—remains near a 40-year low.

“The giant boomer generation won’t and can’t take up the slack. Boomers haven’t saved nearly enough for retirement, so they’re being forced to cut back expenditures.

“Exports won’t make up for this deficiency in demand. To the contrary, Europe remains in or close to recession, China’s growth is slowing dramatically, Japan is still on its back, and most developing countries are in the doldrums.

“Business investment won’t save the day, either. Without enough customers, businesses won’t step up investment. Add in uncertainties about the future—including who will become president, the makeup of the next Congress, the Middle East, and even the possibilities of domestic terrorism—and I wouldn’t be surprised if business investment declined in 2016.”

The rest of the article is here.

About jeffpelline

Jeff Pelline is a veteran editor and award-winning journalist - in print and online. He is publisher of Sierra FoodWineArt magazine and its website SierraCulture.com. Jeff covered business and technology for The San Francisco Chronicle for years, was a founding editor and Editor of CNET News, and was Editor of The Union, a 145-year-old newspaper in Grass Valley. Jeff has a bachelor's degree from UC Berkeley and a master's from Northwestern University. His hobbies include sailing and trout fishing.
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3 Responses to Reich: The economy in 2016 — on the edge of recession

  1. Ben Emery says:

    Reich, Batra, Stiglitz, Piketty, and Wolff are some of the economists where I get my macro economic views. Populist and progressive macro economic policies has shown to be the best system for the most people time and time again. Most people who oppose these ideas confuse or at least conflate economic and political systems. There is overlap but there is also a great distinction between government role/ services and economic role/ services. Our government needs to make the rules to structure our economic system to benefit the most people within that economy/ society.

    Unless working class Americans can afford to live debt free within the society that is set up that economy will either struggle or become hostage to those who control the distribution of that economies currency. The last 40 years easy debt for average working Americans has replaced wages that track production. The result more and more people go into debt to keep afloat in the society we have created. Health Care, Transportation, Higher Education, Food, and Shelter have all increased tremendously in that 40 years. Wages have not but the ability to get credit opened up to those who previously didn’t need it as much and to exploit people necessities of the American lifestyle.

    We focus on Public Debt way too much and rarely hear about Private Debt. If we are to ever see reduction in social service spending in the US it is either going to have to be through brutal austerity or recreating an economy where working class people can afford to live if they work 40 hours a week.

    Ravi Batra Best-selling author Ravi Batra on economic prosperity. February 2007 –
    See more at: http://www.texasmonthly.com/politics/ravi-batra/#sthash.qF0BBy7d.dpuf

  2. Don Pelton says:

    Get ready for a disturbance in the force:

    “a href=”http://www.telegraph.co.uk/finance/economics/12093807/RBS-cries-sell-everything-as-deflationary-crisis-nears.html”>RBS cries ‘sell everything’ as deflationary crisis nears“

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