I’m Mad As Hell (Part 3)

Morris Segall      2009 trends, anger, bailouts, economics, finance, future of economy, government, taxpayers

In a recent article published March 23 for SPGTrend.com subscribers, we examined the social and political toll of the current recession and their longer term impacts on the U.S and overseas economies.  Over the course of several blog posts, we will take you through the content of this piece and put what we’re going through into context.

In part one, we outlined an introduction for this series.  Part two discussed the first four trends and developments.  In part three, we will outline the next trend – public anger

5.  Public anger is also being aroused by the scandals related to the “bailouts” of many of this nation’s large, international conglomerates, particularly financial firms, and the recently disclosed large bonuses paid by both financial and non-financial firms that have received billions in taxpayer assistance. The “bailouts” and the executive bonuses have stoked the fires of smoldering public resentment at the widening gap between the increasingly rich executive class and the struggling middle class in this country.  See the slide below showing the disparity in real per capital income growth in the economic expansion of the 2002-2007 period and that of the economic expansion of the 1982-87 periods under President Reagan.

6.  Now also look at the slide below showing the trend in retail inflation over the 2005-2008 periods and the most recent six-month reporting period of February 2009.

While the collapse in commodity prices in the last six months has been a primary cause in inflation turning negative in the last six months, note the annual inflation increases in 2007 and 2008 and the continued increases in many non discretionary consumer expense categories such as utility charges, education and tuition and healthcare costs. Add to this data the fact that American workers have now experienced the second major declining stock market cycle of this decade with major market indices declining by 50% from peak to trough in 2001-02 and 2007-2009. Importantly, excesses and mismanagement of risk have caused the current stock market debacle by many of the nation’s financial institutions that have needed taxpayer assistance to stay afloat. It is little wonder, the American middle class is angry and they are reflecting their anger politically.

It began with the Congressional elections of 2006 when an angry American electorate gave a sitting Republican President and his party the worst political drubbing since the elections of 1964. This at a time when the American economy was humming and creating approximately 2 million new jobs annually in 2005 and 2006. It continued with the recent Presidential election of 2008 where the unlikely candidacy of a first term Senator from Illinois first surprisingly won the Democratic nomination, upsetting the presumed party favorite, and then led the Democratic Party to its most overwhelming victory since Lyndon Johnson defeated Barry Goldwater and the Republican Party in 1964. The 2006 and 2008 election results were a loud dissatisfaction on the part of the American electorate with the economic, social and political status quo. Their statement was clear, “They were mad as hell and not going to take it anymore”.  We have long noted this building anger among American voters and counseled candidates running for office in 2006 and 2008 that the American electorate was angry and wanted dramatic change.

We also felt that change was being translated in two very distinct demands. First, the inequities of the economic system that allowed excess and corruption by corporate CEO’s and politicians were unacceptable and needed to be reformed. Second, the middle class wanted the Federal government to do more to help them with the draining expenses of energy, healthcare, education and retirement necessities.  To their credit, the Democratic Party and Barack Obama, grasped voter dissatisfaction and embraced a populist agenda of job protection, increased government spending and tax reform to answer that dissatisfaction. American voters responded with a landslide victory for President Obama and the Democrats that now control both houses of Congress as well as the White House. But the intensifying recession since the end of the third quarter of last year has created more pain and suffering among American workers and consumers. President Obama’s stimulus programs highlighted by huge taxpayer financed “bailouts” of major financial institutions are wearing thin on the American public. Already angry American voters are now livid with the revelations of continued bonuses to failed executives and the failure of newly elected Democratic congressmen and senators and newly appointed officials within the Obama Administration to stop “politics as usual”. The embarrassing revelations and resulting voter backlash is forcing the President to adopt a defensive posture of trying to convince voters and congressional opponents of his program both within and outside of his party to support him. This is not the position the President wanted to be in within the first 100 days of his administration. The current recession belongs to the Democrats now and voters want to see tangible improvement from the Congress and this Administration.  Continued corporate excesses at the expense of taxpayers and middle class workers are only adding to the anger of the American public.

This anger is resulting in growing frustration and doubt about the current state of American capitalism. An angry electorate is an unpredictable one. Previously accepted beliefs regarding American social, political and economic behavior, attitudes and most importantly, demands, are being re-evaluated and adjusted by a citizenry whose ideals and aspirations are not being met.

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