If you’ve started to loosen your seatbelt, lulled by decreasing unemployment into thinking the worst of over and America is finally shrugging its way out of the recession, you’d better buckle up tight. There is still plenty of rough riding ahead.
In its most recent report, the non-partisan Congressional Budget Office predicts that GDP (Gross Domestic Product) will grow at an average of only 2.4% per year through 2022. Economists agree that annual growth of less than 3% severely limits long-term national wealth and well-being. But 3% economic growth only gets us back on track. To expand and build wealth, annual economic growth must reach at least 4%; and economists are warning that healthy growth rates still far in the future. The U.S. could be stuck at 2% growth for decades to come!
Part of the problem is that the U.S. economy is now driven by consumers rather than manufacturing. Fifty years ago, 62% of our economy was consumer-driver. Today, that figure has increased to 71%. What that means is that the economy doesn’t grow if consumers don’t buy things. While consumer spending this year is up slightly compared to last year, the majority of Americans are still putting their money into paying down debt rather than spending. Compounding the problem is that 93% of recovery dollars have gone to the nation’s top 1% of earners, not the middle class which typically fuels our consumer-driven economy.
It’s a vicious circle. When consumers don’t buy, company profits drop. When company profits drop, they don’t hire workers or increase salaries. When workers can’t get jobs or can’t earn more than enough to meet basic needs, they don’t buy. The cycle repeats and the economy stagnates.
So what does this all mean for the average American worker? The reality, economists say, is that, for the foreseeable future, America’s workers had better get used to working longer hours for less pay!