Economy

The world will need 50 percent more energy by 2035. To compete in the world economy and generate manufacturing jobs in the coming decades, the United States needs to both nurture a green economy and reduce our reliance on fossil fuels. By comparison to other government energy investments, Solyndra's failure is more symbolic than fatal. Taxpayers have lost far more money to previous government bets on risky energy projects. Chief among them is nuclear power, which depends on hundreds of millions in government subsidies.

As the U.S. government starts planning budget reductions that will slash everything from defense spending to health care to bridge repair, potential cuts worth around 0.00025 percent of the value of the deficit reduction agreed on in the recent $2 trillion deal appear to have garnered outsized attention: support to farmers' markets. Those $5 million of subsidies are likely to disappear as part of cuts in the 2012 farm bill, and that is provoking much concern.

This is the second column in a series by Bruce Jentleson, Professor at Duke University, and Jay Pelosky, Principal of J2Z Advisory. It originally appeared on the Huffington Post.

From the president to Congress to nearly every neighborhood in America, the focus today is on job creation. But for millions of Americans, just having a job doesn't mean prosperity or anything like it. Nearly one in six Americans lived in poverty in 2010, according to data released today by the Census Bureau. That's 46.2 million people, the highest number ever recorded in the 52 years that poverty estimates have been calculated.

A new report by the Brookings Institution says minorities are now the majority population in many of the nation’s largest metropolitan areas, a demographic development with major political, social and economic consequences for the nation.

The study found that 22 of the country’s 100 largest metropolitan areas are now “majority-minority,” with ethnic majorities making up more than half the populations in New York, Washington, Las Vegas, San Diego, Memphis and other metro areas. That’s an increase from 14 cities in 2000 and five in 1990.

Is the American Dream of opportunity and increasing prosperity out of reach for the average American worker? What is happening to the American middle class? If the labor market ‘polarizes’ into low- and high-income jobs, what does this mean for continuing inequality in America? What does it mean for the American social contract, and the American Dream?

The latest batch of data released by the Census Bureau provides a new perspective on the impacts of the Great Recession. The overall trend lines look continue to look particularly poor for families up and down the economic ladder. In the aggregate, income is down and poverty is up.

For the average family, income declined 2.3% in real terms over the last year. We can no longer say that wages are stagnant because, in fact, they are going down. And it’s getting worse for those at the bottom. The official poverty rate in 2010 topped 15%, up from 14.3 last year and the fourth consecutive year where the rate increased. Last year, 46.2 million people were classified as poor, an increase of 2.6 million people.

We’ve had other recessions in the last fifty years but the impacts of this one, which was supposed to have officially ended in 2009, is turning out to be especially severe. Compared to ten other recessions since the late 1940s, income declines and poverty increases have never been as pronounced in the subsequent year as this time around. There’s little evidence around right now that the economy is on a sustained path toward recovery. Instead, we are gathering more and more data which points to extended economic hardship for families across the country.

It’s frustrating to digest this information but not see any concerted policy action designed to reverse these trends. Meanwhile, the evidence mounts that our society is no longer providing the type of opportunities we have come to expect as Americans. It feels like entire cohorts are being left to fend for themselves.

The rising child poverty numbers are simply tragic; this rate rose last year to 22%. The social costs of this level of child poverty will not be felt today, they will rise substantially over time. A credible estimate is that we should expect child poverty to cost the economy almost $500 billion a year in lost productivity, increased health expenditures, and other factors.

Another set of people we should be particularly concerned about is young adults. They had the worst decline in income as a demographic group, lowering their income 9.3% over the previous year. To cope with dimming economic prospects, young adults have been forced to double-up with other family members. The official definition of a “doubled-up” household is one that includes at least one “additional” adult, who is older than 18 and not enrolled in school but is not the householder, spouse, or “cohabiting partner.”

Over the course of the recession, the number and share of doubled-up households has increased dramatically, rising over 25% among young adults. Last year, 14.2 percent of people ages 25 to 34 lived with their parents, up two percentage points since the start of the recession. Most are not counted as poor, but if their own income status were considered, over 45% would have incomes below the poverty threshold. On top of that, we can infer that many of the doubled up are also saddled with rising levels of student loan debt. It’s been pretty tough out there for recent college grads.

Now, we certainly can celebrate the ingenuity of families who come together in tough times, but we need to recognize the hole being dug for the demographic cohorts we traditionally count on to invigorate our economy.

Incomes certainly need to go up, along with job opportunities. That is a fundamental precondition for future prosperity. But to forge new pathways toward economic security, millions of families need to rebuild their balance sheets. They must be able to build up a stock of assets that they can access in times of need or as strategic investments. This underscores the necessity of responding to this recession (and these rising poverty numbers) by crafting a complementary set of policies that promote savings and asset building over the long term.

Imagine that the twin towers still dominated the Manhattan skyline. Imagine that the Pentagon's western facade had remained intact. Imagine that there was no reason to build a memorial in Shanksville, Pa. And imagine that the numbers 9 and 11 meant nothing more than an emergency telephone call.

The world changed on Sept. 11, 2001, that much is clear. But how much, and how radically?

Six months ago, 42-year-old Michelle thought her life was finally turning around. She had conquered her addiction and been sober for four years. She was paying off old college debt. Her daughter and grandson were staying with her and, despite battling dyslexia, she had been on her job as an administrative assistant for three years, a job she just knew would help her get to the next level of her career.

"The job was starting to open up doors for me," said the District of Columbia resident. "I felt like it was an opportunity to turn my life around. I was feeling really positive."

Over the next 14 months, Barack Obama may well save his presidency. But he didn't begin that effort tonight. Obama outlined a jobs bill. It may be a good one. What he didn't outline was a story that connects that jobs bill to the economic crisis we've been facing for almost three years.

Obama laid out a solution, but he didn't define the problem: He didn't talk about the causes of the economic crisis, and the reason it has lasted so long. He also didn't talk much about his past efforts at stimulating the economy.