The economy is out of recession since it is actually growing and not contracting. Yet job growth compared to the baseline of 100,000 new jobs a month just to accomodate the growth in the labor force is actually negative. There were 83,000 private sector jobs created in June. That means that actually there were 17,000 fewer jobs created than were needed just to stay even and so a net job loss. However, the economy is still expanding so what's the problem? The rich it seems have been presuaded to do their patriotic duty and consume more thus making up for the poor suckers who can't keep up their pace of consumption because their jobs went down the tubes. As long as the rich consume more to make up the difference, the economy will continue to expand and GDP will continue to grow since it is based 70% on consumption. It's the least the rich can do since they don't want to have their taxes raised, something that might make the government more solvent and provide funds for job creation.
The fact of the matter is that private sector employment will continue its downward trend simply because it's government policy to export jobs. So waiting patiently for the economy to "turn around" is like waiting for Godot. It's not going to happen unless radical changes take place in the relationship between government and the market place. Ross Perot was right. Ever since NAFTA, CAFTA, the WTO and various and sundry other free trade agreements, there has been a "giant sucking sound" of jobs leaving the American economy for places in the world where labor and raw materials are cheaper. It only stands to reason that most Americans cannot continue to consume at the same pace they did when they were actually employed. That is why the rich must step up to the plate and consume more. The gap between rich and poor has never been larger, taxes have never been lower and its their patriotic duty to make up the difference in consumption if they don't want to pay more taxes and now that the lower middle class can no longer be counted upon to consume.
It used to be that the US imported cheap natural resources from Latin America and then made manufactured products here and then exported those products abroad. The poor peasants that extracted the raw materials in Latin America were paid a pittance and American workers were paid decent salaries. Now the manufacturing is done elsewhere, the workers are paid less and profits for the corporations are commensurably greater. Profits created abroad tend to stay abroad in offshore secret bank accounts where they can escape taxation which is leading to the collapse of municipal and state governments. Eventually, it will lead to the collapse of the Federal government as well as it will no longer have any money or willingness to prop up the economy as it has done for a year now with automobile and housing credits. But it will always have money for war as long as the rest of the world remains willing to loan us the money.
What needs to be done obviously is to restructure the whole economy getting rid of the vast expenditures on the military machine and reducing it to the basics of actually defending the US Homeland instead of pursuing military adventurism abroad. The "free trade" aspects of government policy need to be revisited with an eye to actually creating and protecting domestic jobs and making imports from abroad more expensive. Tariffs were the largest source of federal revenue from the 1790s to the eve of World War I, until it was surpassed by income taxes. So for most of US history the Federal government was actually funded by foreigners wishing to import into the US economy. This actually fostered job creation in the US by 1) keeping taxes low and 2) making domestically produced manufactured goods salable at attractive prices. Today the US is subsidizing foreign competitors and US corporations who wish to use cheap foreign labor and import the finished goods back into the US. They locate their factories wherever labor is cheapest. They also have better access to cheaper raw materials. Cheap transportation by container ship makes it more profitable to import into the US market than to build factories here and to employ American workers. Labor for the products that can't be manufactured abroad is supplied by illegal immigrants who will work for sub-minimum wages and not complain for fear of being deported.
The Chinese model, where government is deeply involved in the private sector, is gaining ground over the US model of hands off by government and laissez faire economic practices. There is the obvious contradiction that laissez faire has done nothing to create jobs although it has added to the corporations' bottom lines. Deregulation not only led to the financial collapse of 2008 but also to the oil gusher in the Gulf which is destroying the environment. The capital not collected by the government in the form of taxes has not been put to productive use by the capitalists who have retained it. Instead, higher returns have been sought in the financial sector. The financialization of the economy has replaced the productive deployment of capital which might be involved in job creation with higher returns expected from the deployment of capital in the casino economy. Hedge fund managers and private equity leveraged buyout specialists have made money not by investing in productive pursuits but by gambling and ripping apart already profitable companies that had been actually producing manufactured goods until they were taken into bankruptcy by the private equity firms.
The rapaciousness of the bond markets and other financial experts and quants has diverted intelligent young college graduates into the financial economy in pursuit of making money from money rather than from the manufacture of finished products. The best and the brightest are going into finance not creating or being employed in businesses that manufacture products. In many cases the financial sector is duping their clients instead of serving them. In collusion with the hapless rating agencies such as Moody's and Standard and Poor's, the big banks like Goldman Sachs had worthless garbage rated as triple A investment grade bonds and fooled pension funds all over the world into buying them. Then they turned around and shorted their own products thus reaping billions when the bonds and the underlying subprime mortgages defaulted. You can read all about it in an excellent book, The Big Short, by Michael Lewis.
So what to do about restructuring the economy? 1) Cut the Pentagon budget by 50%. Eliminate most foreign military bases. 2) Come up with creative new ways to tax the rich. As Al Capone said, "I rob banks because that's where the money is." Similarly, government has to go after funding sources where the money is, and right now it's in the financial sector and among wealthy investors. 3) Institute a financial transaction tax. 4) Establish an industrial policy which establishes, shelters, husbands and grows companies which employ American workers and don't export jobs. 5) Build a domestic industrial base based on replacing the oil economy with a green economy. 6) Establish a fair trade policy replacing free trade. 7) Make sure a social safety net is in place to ease the transition of workers in the military-industrial complex to jobs in the green economy. 8) Emasculate lobbyist control of Congress. 9) Establish publicly funded elections with free air time. 10) Invest in the American people rebuilding the nation at home instead of spending fortunes trying to build nations abroad.
The probability of any of the above happening is near zero. Instead, the US will probably come to tolerate a 10% nominal unemployment rate with a real unemployment rate hovering around 25%. Just as free trade created a poverty class in Latin America, a new neo-feudal poverty class is already being created in the US. The rich will have to shoulder the patriotic duty of taking on the burden of increased consumption previously shouldered by the middle class, who will just be able to eke out a living, in order for the economy to expand. The homeless will take to the streets and public parks until the public parks are fenced off due to a lack of budget to maintain them. The rich who don't frequent public parks will say good riddance to them. Increasingly, public institutions will be privatized and the former middle class will be marginalized, quaking in their boots, grateful for a few crumbs from the tables of the rich. There will be just three classes: the rich, the poor and the desperately poor, just like in the rest of the underdeveloped world.
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