TEXT OF COMMENTARY
Kai Ryssdal: The Dow Industrials made another run at that theoretically magical 10,000 mark today. The blue chips topped 9,900 at one point before running out of gas. So how long can the rally last? I don’t really know.
But commentator Robert Reich say that’s not really the question we ought to be asking anyway.
ROBERT REICH: So how can the Dow be flirting with 10,000 when consumers, who make up 70 percent of the economy, have had to cut way back on buying because they have no money? Jobs continue to disappear. Houses can no longer function as piggy banks because they’re worth far less. And Americans are compelled to pay off their debts and start to save, for the first time in a decade.
Even more curious, how can the Dow be so far up when every business and Wall Street executive I come across tells me government is crushing the economy with its huge deficits, and its supposed “takeover” of health care, autos, housing, energy, and finance? Their anguished cries of “socialism” are almost drowning out all their cheers over the surging Dow.
The explanation is simple. The great consumer retreat from the market is being offset by government’s advance into the market. Consumer debt is way down from its peak in 2006, government debt is way up. Consumer spending is down, government spending is up. Why have housing prices stopped falling and new housing starts begun? Because the Fed is keeping mortgage rates low by buying up Fannie and Freddie’s paper.
Why is the health care sector booming? Because the government is about to expand coverage to tens of millions more Americans. Why is the financial sector surging? Because the Fed is keeping interest rates near zero, and the rest of the government is still guaranteeing any bank too big to fail will be bailed out. Why are federal contractors doing so well? Because the stimulus has kicked in.
In other words, the Dow is up despite the biggest consumer retreat from the market since the Great Depression because of the very thing so many executives are complaining about, which is government’s expansion. And regardless of what you call it — Keynesianism, socialism, pragmatism — it’s doing wonders for business, especially big business and Wall Street.
The problem is, it’s not doing all that much for average working Americans, who continue to lose their jobs, whose belts continue to tighten, and who get almost nothing out of the rising Dow.
RYSSDAL: Robert Reich is a professor of public policy at the University of California, Berkeley.
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