ROBERT REICH'S INACCURATE ECONOMIC REPORTS

ROBERT REICH -- INEPT ECONOMIC PREDICTIONS OR COVERING FOR PRESIDENT OBAMA AND HIS DYSFUNCTIONAL ECONOMIC ADVISERS?

Recently, Robert Reich issued the statement below published as a meme in a Face Book group in which I'm a participant. Innocent people, who want to trust his advice because of his “status,” bought into his theory. I dissented because his opinion made no sense, was even a reversal of normal economic consequences of corporate actions. I even pondered if Reich was setting up a straw man for coming unfavorable economic news to protect President Obama and his economic advisers, whom I've long viewed as dysfunctional. The economic news of the last few days strongly suggest the latter.

Reports today are that the GDP retracted 1% in the last quarter. There were indicators that this was coming. If some of us laymen saw it, why did Reich not know it?

The recent retail sector reports are strong indicators of a downturn also. Did Reich not know this? Did he know and ignored the data? I will post some retail reports in a separate article.

Is this a pattern of performance? I still remember Dr. Reich's statements as late as 2004 that the good economy of the 90's was because “we invested in education and healthcare that made workers more productive.” That naivete (?) ignored all the drivers of the 90's economy, including the dot com boom.

I rebutted this in a blog post here entitled “Economy of the 90's.” Reich's assertion follows. Note: The economy has already turned down with a GDP report today of negative 1%. Reported in another post.

Robert Reich

Why do I think the stock market will plunge this year? Because most companies are boosting their stock prices not by developing new products or selling more goods and services but by slashing their payrolls and buying back their shares of stock. These steroidal tactics are generating temporary boosts in share prices, but they can’t be sustained. There are only so many workers to be sacked and so many stocks to be repurchased. These companies remain as incapable of generating things people want as before. Consider Hewlett-Packard, which yesterday announced plans to cut an additional 11,000 to 16,000 jobs. Wall Street is enthusiastic, pushing the stock up more than 6 percent today. But the tactic won’t work over the longer term because Hewlett-Packard's PC sales are dropping and business customers are shifting toward cloud computing, where it’s not a major player.

More to the point, as big companies across America continue to shed middle-class jobs in pursuit of lower costs, median household income continues to drop. Which means fewer Americans can afford to buy what these companies have to sell. Which means these companies' profits are bound to shrink and their stock prices to drop. Get it? Workers are consumers. As these companies' workers do worse, so do their customers, and so, ultimately, do they.