"Barack Obama's plan to unveil tonight a non-defense discretionary spending freeze for the next three years will essentially forfeit America's growth future to China.
"China has been massively investing in its high speed rail, its science labs, its educational system, its roads, its energy grid an its information super-duper highway. It has been obsessed with job retention and job creation. It has been building a mind-boggling number of every kind of power plant imaginable -- natural gas, high end coal, low end coal. It's investing in next gen renewable energy projects on a scale larger than the United States. It has been subsidizing all of this with a neo-mercantilist currency policy, pumping exports which it finances to consumers not only in the US but all over the world. China flaunts a robust "Buy China" requirement in its government and semi-private industrial procurements and contracting.
"And the President of the United States, one year into his job, and still dealing with the tail winds of the worst economic disaster in global markets and the US economy since the Great Depression, is saying that he is going to freeze spending on virtually everything but the wars we have on hand.
"America needs to invest in itself."
Seven things about the economy that everyone should be more worried about than they are
"No. 1: The middle class may never be the same again
"The full effects of the crash of 2007-2008 on the lives of regular Americans has yet to be fully appreciated. For most members of the middle class, their sense of financial well-being was largely based on the size of their 401(k)s and their equity as homeowners. After the collapse of stock prices and with the steep drop in home prices, many may never feel the same way again, or spend their money as confidently.
"While 401(k)s have somewhat bounced back, about one in four homeowners now actually have negative equity -- are "underwater". A recent study by Barry P. Bosworth and Rosanna Smart for Brookings finds that American households lost $13 trillion in wealth between mid-2007 and March 2009, or about 15 percent in all. That decline badly hit baby boomers just as they’re headed into retirement. And middle-income families whose head is age 50 or younger actually have smaller net incomes today than in 1983.
"Meanwhile, many American families spent much of the last decade (or two) living beyond their means, piling up debt on their credit cards, or "bubble borrowing." Two University of Chicago researchers have found that the housing bubble hugely increased household consumption as homeowners borrowed on average $0.25 to $0.30 for every $1 increase on their home equity. Now that housing prices have crashed and credit is tight, the inevitable result, Atif Mian and Amir Sufi write somewhat euphemistically, is a "painful process of household de-leveraging."
"Harvard Professor Elizabeth Warren, an emerging hero among progressives in her role as chair of the congressional bailout oversight panel, sees the latest series of blows as the unfortunate culmination of a crisis that started taking form a generation ago. For long stretches of time, the growth in the nation's GDP has gone almost entirely to the top 1% or less of the population. That has resulted in a dramatic shift in wealth away from the middle class, made the economy more vulnerable to disaster and made the toll of such a disaster more catastrophic to all but the wealthiest Americans. Warren writes:
"America today has plenty of rich and super-rich. But it has far more families who did all the right things, but who still have no real security. Going to college and finding a good job no longer guarantee economic safety. Paying for a child's education and setting aside enough for a decent retirement have become distant dreams. Tens of millions of once-secure middle class families now live paycheck to paycheck, watching as their debts pile up and worrying about whether a pink slip or a bad diagnosis will send them hurtling over an economic cliff.
"She concludes: "America without a strong middle class? Unthinkable, but the once-solid foundation is shaking." "
This is a part of a remarkable series on the economy:
Read them all!
"Imagine a city of 50,000 people. A city whose entire population in the course of one evening had to abandon their homes. Forever. Welcome to the City of Ghosts – Prypiat and Chernobyl.
"First a few words about Chernobyl and the catastrophe itself. On April 26th, 1986, the greatest catastrophe in the history of nuclear power took place. Overheating, partial rusting of the reactor and a hydrogen explosion occurred as a result of a failure of the cooling system. This caused radioactive materials from inside the reactor to be discharged directly into the atmosphere and area surrounding the plant. As a direct consequence of the catastrophe, 30 people died, over 200 became ill with post-radiation diseases and in a 30 km radius around the power plant, over 130,000 people were evacuated creating a closed protective zone. The indirect and long term effects of the incident are still unknown to this day.
"These days, the level of radiation is not as high as at the moment of the explosion. It’s enough to just not stray from the asphalt roads, which are naturally less contaminated, and to not go where you’re not supposed to. However, you should also know that in the zone there are places where you only have to go a few hundred metres into to inadvertently receive a high dose of radiation. And so in the zone, I make a new friend- Geiger. The Geiger counter, to be exact. Without this it’s quite possible to end up somewhere you shouldn’t be. There are many unknown places in the zone where radioactive waste has been buried. It’s also worth knowing that grass and moss, which are abundant everywhere, are hundreds of times more radioactive than asphalt. Bringing the Geiger counter close to such moss causes it to freeze instantly. The counter is not capable of measuring such high radiation and simply jams. Thus it is worth avoiding strange looking and bright green moss and grass…
"And it is safest to have a Geiger counter with you and have it switched on the whole time."