Congress approved the American Recovery and Reinvestment Act in February 2009, authorizing $787 billion for grants and loans to businesses, small tax breaks, funds to state governments, and extending unemployment benefits to workers who exhausted the 26 weeks of state payments.
While local governments may have slowed the pace of some cutbacks, hundreds of thousands of state and city workers have been forced to take pay cuts, shortened workweeks, and layoffs.
California is tightening faster than Greece, reported the Telegraph a major British newspaper. State workers have seen a 14 percent fall in earnings this year due to forced furloughs. The paper noted that Gov. Arnold Schwarzenegger wants to cut pay for 200,000 state workers to the minimum wage of $7.25 an hour until the state legislature approves a proposed budget reducing its $19 billion deficit.
Despite federal stimulus funds, unemployment has been rising, hovering officially around 10 percent for the past nine months, and long-term joblessness has reached new heights. With Congress not extending unemployment benefits that expired in May, more than 200,000 workers a week are losing jobless payments.
New hiring in industry remains weak as the bosses seek to speed up production from workers with jobs, accompanied by worsening safety conditions.
The government has also tried to stimulate housing sales with an $8,000 homebuyers tax credit. This ended in April. The following month home sales plummeted 33 percent to the lowest level since records began being kept in 1963, according to the Commerce Department.
The cash for clunkers program, initiated by the Obama administration last summer to boost automobile sales fared no better. Up to $4,500 was offered for trade-ins, with car dealers then reimbursed by the government. In September 2009, the month after the stimulus ended, car sales dropped 23 percent from a year earlier.
Many economists say that the deep recession, which began in December 2007, ended in June 2009several months after the recovery law was passed. However, few workers have seen much of a difference and continue to face depression conditions. Future stimulus moves will be even less effective as the next downturn begins with high unemployment.
In a talk in Racine, Wisconsin, June 30, Obama hailed the Recovery Act. It staved off another Great Depression, he stated. At the same time the president said that bringing the governments debt and deficits under control would be a priority over the next couple of years.
Among those arguing for new government stimulus is AFL-CIO president Richard Tumpka. Without it state and local governments plan to lay off 900,000 workers, he said, and the economy could face a double-dip recession.
The world capitalist economy has entered a long-term deflationary crisis, a contraction that cannot be fundamentally reversed by ups and downs of the business cycle or by government pump-priming.
With declining profit rates, the capitalists continue to shy away from expanding productive capacity. Instead, they are once again investing their money in various forms of fictitious capital like derivatives, credit default swaps, and mortgage securities.
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