[credit: Steve Breen, San Diego Union-Tribune]
That is about all Joe Sixpac can expect from the Bubble 3.0 economy. The Wall Street bonanza is fueled by QE3 ($85 billion a month) which is another way of saying printing mo' money. You don't have to be a rocket scientist or even a hedge fund manager to turn a profit on near zero percent money from Uncle Sam. The Congressional Budget Office says the real economy--not the casino running on joy juice--will grow by only 1.4%. Recovery from the Second Great Contraction will take until 2017 and cost us $7.5 trillion or one half of the nation's annual GDP. The CBO also expects official unemployment to remain at 7.5%. There is a great debate over how much government deficit spending can spur economic activity. America has deficit spent for so long some economists think its economic effect has lessened. Like an alcoholic who needs to drink more to get comfortable. And as in the drug case, the nation's recovery will be long and difficult. Unfortunate Detroit, once the Mecca of America's industrial empire, is now wallowing in poverty. Everyone who could afford to leave has left the city; only America's underclass remains. A third of Detroiters live in poverty and 17% are unemployed. Unable to raise revenue from its impoverished residents despite having the highest legal tax rates in Michigan on property and income, the city has closed almost half its schools since 2005 and the number of police reduced by half between 2000 and 2008. Only 57 of over 300 parks will open this year. The entire city departments of health and human services have been cut for the current fiscal year. This bitter austerity is still not enough for Detroit to pay operating costs; it has simply shrunk too much to support the budget of a much larger city. It is $14 billion in debt. Detroiters feel they have been deserted by the rest of America, and indeed this country is unique among western developed countries for its willingness to cut losses and leave the unfortunate behind. Perhaps it is a psychological legacy from hard days on the frontier trail where stragglers were left to fend for themselves.
"Pikes Peak or Bust" was more bust than riches. The vast majority of wealth seekers who did not strike it rich resorted to laboring for wages from union-busting robber barons like J.D. Rockefeller*. This is how austerity works: it enriches the rich by denying the working poor. The policy is aided and abetted by politicians who owe their livelihood to plutocrats. If they do well protecting their masters' interests they get to join the club. Former Security and Exchange Commission chief Mary Shapiro joins the board of General Electric. She entirely missed Maddoff's biggest Ponzi scheme in American history, did nothing to regulate high frequency trading or derivatives, and failed to implement the very modest reform regulations of the Dodd-Frank legislation. But who cares, right? The Dow is up and so is the S&P! Happy days are here again and we will all be rich. Don't count on it, buddy; you do not have to visit Greece, just ask someone from Detroit.
*after Baldwin-Felts detectives and the Colorado National Guard burned out striking miners at Ludlow killing women and children huddled in makeshift bunkers beneath their canvas tents, Rockefeller sent Rockefeller Jr. to attempt to quell further violence. Rather than adopt his father's hard anti-union line, Junior agreed to conciliate the miners and address their grievances in an internal process. In return the miners gave up their attempt to unionize. Rockefeller Jr. was amply rewarded by his father for keeping unions out of his Colorado Fuel & Iron mining operations. A modest monument to those loosing their lives the cause to live better ones was erected by the UMWA on the site of the tent colony two years after the massacre in 1916. For more on Colorado's often violent anti-labor history in which the police powers of the state were used as an employers' weapon against unions see the Wikipedia entry, "Colorado Labor Wars".