The Economic Mess We're In
Tuesday, August 9, 2011 at 3:34AM How'd we get HERE? Here meaning the first time ever that the S & P downgraded the US credit rating? As a Certified Money Coach paying attention to what's happening with money is important to myself and my clients so I'll share some of my research.
We're in a recession that's lasted much longer than the typical 18 months. The HOW is a long story and I'm going to give a short summary. Once upon a time the United States was in a time of "great prosperity." This lasted from 1947 - 1975
(source Robert Reich, President Clinton's Sec. of Labor, from his book Aftershock: The Next Economy & America's Future). During this time the average family income rose from about $25,000 to $55,000 a year. Then things changed. They always do. Automation replaced factory workers and globalization or outsourcing jobs to other countries brought wages down. Though there were still abundant jobs in the 90s they didn't pay as well as the previous ones. (They didn't have to - companies could go to Mexico or China).
Americans coped, according to Reich (pronounced Reish) in three ways: 1) In the 70s women went to (paid) work in large numbers and so there were two earners. 2) Everyone worked MORE and longer hours. Men on average were working 50 hours a week and women 40 by the mid 2000s. Many started working 2 or 3 jobs. 3) Draw from savings and borrow, borrow, borrow. You see where this is going, right? This last "coping mechanism" empties the coping accounts, so to 
speak. We've borrowed as much as we can from our homes, our savings, our 401ks. What happens after that? I talk to people every week who are barely hanging on, trying SO hard to do the RIGHT THING and not file bankruptcy. This is a choice they shouldn't have to be making.
What can we do? Well the past is gone. We're making this up as we go along now. We're going to have to work together and creatively and collectively think about what's good for the whole, not just the few.
Tomorrow: Three suggestions Reich makes to get the American economy back on track. You may not like what he has to say.
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