Robert B. Reich's Blog, page 149

Connecting the Dots

Connecting the Dots

Beware the "Middle Ground" of the Great Budget Debate

How debates are framed is critical because the "center" or "middle ground" is supposedly halfway between the two extremes.

We continue to hear that the Great Budget Debate has two sides: The President and the Democrats want to cut the budget deficit mainly by increasing taxes on the rich and reducing military spending, but not by privatizing Medicare. On the other side are Paul Ryan, Republicans, and the right, who want cut the deficit by privatizing Medicare and slicing programs that benefit poorer Americans, while lowering taxes on the rich.

By this logic, the center lies just between.

Baloney.

According to the most recent Washington Post-ABC poll, 78 percent of Americans oppose cutting spending on Medicare as a way to reduce the debt, and 72 percent support raising taxes on the rich – including 68 percent of Independents and 54 percent of Republicans.

In other words, the center of America isn't near halfway between the two sides. It's overwhelmingly on the side of the President and the Democrats.

I'd wager if Americans also knew two-thirds of Ryan's budget cuts come from programs serving lower and moderate-income Americans and over 70 percent of the savings fund tax cuts for the rich – meaning it's really just a giant transfer from the less advantaged to the super advantaged without much deficit reduction at all – far more would be against it.

And if people knew that the Ryan plan would channel hundreds of billions of their Medicare dollars into the pockets of private for-profit heath insurers, almost everyone would be against it.

The Republican plan shouldn't be considered one side of a great debate. It shouldn't be considered at all. Americans don't want it.

Which is why I get worried when I hear about so-called "bipartisan" groups on Capitol Hill seeking a grand compromise, such as the Senate's so-called "Gang of Six."

Senator Dick Durbin, Democrat of Illinois, a member of that Gang, says they're near agreement on a plan that will chart a "middle ground" between the House Republican budget and the plan outlined last week by the President.

Watch your wallets.

In my view, even the President doesn't go nearly far enough in the direction most Americans would approve. All he wants to do, essentially, is end the Bush tax windfalls for the wealthy – which were designed to be ended in 2010 in any event – and close a few loopholes.

But why shouldn't we go back to the tax rates we had thirty years ago, which required the rich to pay much higher shares of their incomes? One of the great scandals of our age is how concentrated income and wealth have become. The top 1 percent now gets twice the share of national income it took home thirty years ago.

If the super rich paid taxes at the same rates they did three decades ago, they'd contribute $350 billion more per year than they are now – amounting to trillions more over the next decade. That's enough to ensure every young American is healthy and well-educated and that the nation's infrastructure is up to world-class standards.

Nor does the President's proposal go nearly far enough in cutting military spending, which is not only out of control but completely unrelated to our nation's defense needs – fancy weapons systems designed for an age of conventional warfare; hundreds of billions of dollars for the Navy and Air Force, when most of the action is with the Army, Marines, and Special Forces; and billions more for programs no one can justify and few can understand.

If Americans understood how much they're paying for defense and how little they're getting, they'd demand a defense budget at least 25 percent smaller than it is today.

Finally, the President's proposed budget doesn't deal with the scandal of the nation's schools in poor and middle-class communities – schools whose teachers are paid under $50,000 a year, whose classrooms are crammed, that can't afford textbooks or science labs, that have abandoned after-school programs and courses like history and art. Most school budgets depend manly on local property taxes that continue to drop in lower-income communities. The federal government should come to their rescue.

To think of the "center" as roughly halfway between the President's and Paul Ryan's proposals is to ignore what Americans need and want. For our political representatives to find a "middle ground" between the two would be a travesty.

Extortion Politics: Why Won't American Business Stop the GOP From Threatening to Blow Up The Economy?

As the government approaches its borrowing limit of $14.3 trillion, Republicans are seeking political advantage over what conditions should be attached to raising that limit.

This is a scandal — or should be. Raising the debt limit shouldn't be subject to party politics. Economic extortion should be out of bounds.

It's bad enough government shutdowns have become an accepted part of political negotiation. But failure to increase the amount the Treasury can borrow would have far graver results.

Not only would the government be unable to issue Social Security or Medicare checks but the United States couldn't pay interest on its current debt.

We'd go into default. The full faith and credit of the United States would be in jeopardy. Treasury bonds would go into free fall. Interest rates would skyrocket. We, and most of the rest of the world, would fall into financial chaos.

The recovery is still fragile. All this would force us and most of the rest of the world into a deeper recession or worse. 

No one in their right mind would threaten this. Yet it's talked about as if it's just another aspect of Washington politics — a threat that might be carried out in early July when the Treasury runs out of ways to keep paying our debts.

In fact, it's a giant game of highway chicken, and if one driver doesn't yield the crash will be catastrophic.

Games of chicken are won by drivers able to convince their opponents they won't swerve. That gives a strategic advantage to Republicans backed by the Tea Party, who are so convinced government is evil they've signaled they'd be willing to risk it.

But this shouldn't be a matter of political strategy. Disagreement about the nation's budget should be worked out through the constitutional process of majority votes in Congress, followed by the President's signature or veto, and Congress's right to override the veto.

No group of legislators is entitled to threaten to crash the United States economy if its demands aren't met.

The biggest surprise is the silence of American business and Wall Street. They have as much if not more to lose as anyone if this game ends in tragedy. Yet the GOP — which big business and Wall Street fund — insists on playing it.

Why isn't the Business Roundtable decrying the use of this tactic? Where are the leaders of Wall Street? Where are the corporate statesmen? They should insist this game of chicken be called off or they'll stop the funding.

Maybe they think the crash won't happen, that Obama and the Dems will cave in to Paul Ryan's and the Republicans' before that.

If so, they're wrong. The Republicans' demands are so far beyond the pale — turning Medicare into vouchers that funnel money to private insurance companies, turning Medicaid and food stamps into block grants that would deliver less to the poor, giving a giant tax windfall to the very rich — they cannot be met without causing the Democratic base (and most Independents) to revolt.

Yesterday Standard & Poor's (hardly a beacon of reliability after the Crash of 2008, to be sure) downgraded America's credit outlook. Expect more downgrades if the game of chicken continues.

President Obama's Real Proposal (And Why It's Risky)

Paul Ryan says his budget plan will cut $4.4 trillion over ten years. The President says his new plan will cut $4 trillion over twelve years.

Let's get real. Ten or twelve-year budgets are baloney. It's hard enough to forecast budgets a year or two into the future. Between now and 2022 or 2024 the economy will probably have gone through a recovery (I'll explain later why I fear it will be anemic at best) and another downturn. America will also have been through a bunch of elections – at least five congressional and three presidential.

The practical question is how to get out of the ongoing gravitational pull of this awful recession without cow-towing to extremists on the right who think the U.S. government is their mortal enemy. For President Obama, it's also about how to get reelected.

(Yes, we also have to send a clear signal to global lenders that America is serious about reducing its long-term budget deficit. But in truth, global lenders don't need much reassurance. Bond market yields in the U.S. are now lower than they were when the government was running a budget surplus ten years ago.)

Seen in this light, Obama's plan isn't really a budget proposal. It's a process proposal.

Stage 1, starting now and ending in June, requires that Republican and Democratic leaders devise a budget for 2012. Apparently they've already agreed to try.

That budget would also include a "framework" for deficit reduction over the longer haul. But that framework will be mainly for show. It will give House Republicans enough cover to vote to raise the ceiling on the amount the U.S. government can borrow. (The vote has to occur before the Treasury runs out of accounting maneuvers, in early July.)

And because the framework's details will be filled in after Election Day, it will give Obama wiggle room before the election to campaign on his priorities. If he wins big – and if Democrats retake the House – its details will look completely different from what they'd look like in the alternative.

Stage 2 occurs in 2014 – fully two years after Election Day. Then, according to Obama's proposal, if the ratio of the nation's deficit to the GDP hasn't fallen to 2.5 percent (it's now over 10 percent), automatic across-the-board cuts will go into effect to get it there.

Importantly, these cuts wouldn't apply to Social Security and Medicare, or to Medicaid and other programs designed for the poor. And they wouldn't be limited to spending. They'd also apply to tax expenditures – that is, to tax deductions and tax credits.

The betting in the White House is that by 2014 the recovery will be in full force, and the economy will have grown so much that the ratio of deficit to the GDP will be in the range of 3 to 5 percent anyway. That means any across-the-board cuts wouldn't have to be very deep.

The White House is also betting that a strong recovery will take the sting out of any recommendations to slow the growth of Medicare spending emanating from the Medicare board set up under the new health care law (officially known as the Independent Payment Advisory Board.) Under Obama's new plan, such proposals will be necessary if Medicare spending grows .5 percent faster than growth of the economy (under the law, it's 1 percent faster).

All told, it's a clever strategy. It might well avoid a dangerous game of chicken over raising the debt ceiling. It still allows the President to charge Paul Ryan and other Republicans who join him as ending Medicare as we know it – which they are, in fact, proposing to do. (This may help Democrats win back seniors, whose support for Democratic house candidates dropped form 49% in 2006 to 38% in 2010.) And it gives the President lots of room to maneuver between now and Election Day, and between Election Day and 2014.

But there's one big weakness. The whole thing depends on the recovery picking up steam. If the economy doesn't, the process could backfire – leading to indiscriminate budget cuts later on, as well as big cuts in Medicare. Indeed, if the recovery fails to fire up, Obama's own chance of reelection is dimmed considerably, as are the odds of a Democratic House after 2012.

Yet what are the chances of a booming recovery? The economy is now growing at an annualized rate of only 1.5 percent. That's pitiful. It's not nearly enough to bring down the rate of unemployment, or remove the danger of a double dip. Real wages continue to drop. Housing prices continue to drop. Food and gas prices are rising. Consumer confidence is still in the basement.

By focusing the public's attention on the budget deficit, the President is still playing on the Republican's field. By advancing his own "twelve year plan" for reducing it – without talking about the economy's underlying problem – he appears to validate their big lie that reducing the deficit is the key to future prosperity.

The underlying problem isn't the budget deficit. It's that so much income and wealth are going to the top that most Americans don't have the purchasing power to sustain a strong recovery.

Until steps are taken to alter this fundamental imbalance – for example, exempting the first $20K of income from payroll taxes while lifting the cap on income subject to payroll taxes, raising income and capital gains taxes on millionaires and using the revenues to expand the Earned Income Tax Credit up to incomes of $50,000, strengthening labor unions, and so on – a strong recovery may not be possible.

Mr. President: Why Medicare Isn't the Problem, It's the Solution

I hope when he tells America how he aims to tame future budget deficits the President doesn't accept conventional Wasington wisdom that the biggest problem in the federal budget is Medicare (and its poor cousin Medicaid).

Medicare isn't the problem. It's the solution.

The real problem is the soaring costs of health care that lie beneath Medicare. They're costs all of us are bearing in the form of soaring premiums, co-payments, and deductibles.

Americans spend more on health care per person than any other advanced nation and get less for our money. Yearly public and private healthcare spending is $7,538 per person. That's almost two and a half times the average of other advanced nations.

Yet the typical American lives 77.9 years – less than the average 79.4 years in other advanced nations. And we have the highest rate of infant mortality of all advanced nations.

Medical costs are soaring because our health-care system is totally screwed up. Doctors and hospitals have every incentive to spend on unnecessary tests, drugs, and procedures.

You have lower back pain? Almost 95% of such cases are best relieved through physical therapy. But doctors and hospitals routinely do expensive MRI's, and then refer patients to orthopedic surgeons who often do even more costly surgery. Why? There's not much money in physical therapy.

Your diabetes, asthma, or heart condition is acting up? If you go to the hospital, 20 percent of the time you're back there within a month. You wouldn't be nearly as likely to return if a nurse visited you at home to make sure you were taking your medications. This is common practice in other advanced countries. So why don't nurses do home visits to Americans with acute conditions? Hospitals aren't paid for it.

America spends $30 billion a year fixing medical errors – the worst rate among advanced countries. Why? Among other reasons because we keep patient records on computers that can't share the data. Patient records are continuously re-written on pieces of paper, and then re-entered into different computers. That spells error.

Meanwhile, administrative costs eat up 15 to 30 percent of all healthcare spending in the United States. That's twice the rate of most other advanced nations. Where does this money go? Mainly into collecting money: Doctors collect from hospitals and insurers, hospitals collect from insurers, insurers collect from companies or from policy holders.

A major occupational category at most hospitals is "billing clerk." A third of nursing hours are devoted to documenting what's happened so insurers have proof.

Trying to slow the rise in Medicare costs doesn't deal with any of this. It will just limit the amounts seniors can spend, which means less care. As a practical matter it means more political battles, as seniors – whose clout will grow as boomers are added to the ranks – demand the limits be increased. (If you thought the demagoguery over "death panels" was bad, you ain't seen nothin' yet.)

Paul Ryan's plan – to give seniors vouchers they can cash in with private for-profit insurers — would be even worse. It would funnel money into the hands of for-profit insurers, whose administrative costs are far higher than Medicare.

So what's the answer? For starters, allow anyone at any age to join Medicare. Medicare's administrative costs are in the range of 3 percent. That's well below the 5 to 10 percent costs borne by large companies that self-insure. It's even further below the administrative costs of companies in the small-group market (amounting to 25 to 27 percent of premiums). And it's way, way lower than the administrative costs of individual insurance (40 percent). It's even far below the 11 percent costs of private plans under Medicare Advantage, the current private-insurance option under Medicare.

In addition, allow Medicare – and its poor cousin Medicaid – to use their huge bargaining leverage to negotiate lower rates with hospitals, doctors, and pharmaceutical companies. This would help move health care from a fee-for-the-most-costly-service system into one designed to get the highest-quality outcomes most cheaply.

Estimates of how much would be saved by extending Medicare to cover the entire population range from $58 billion to $400 billion a year. More Americans would get quality health care, and the long-term budget crisis would be sharply reduced.

Let me say it again: Medicare isn't the problem. It's the solution.

Robert Reich: "Patriotic" For Rich To Pay...

Robert Reich: "Patriotic" For Rich To Pay "Fair Share"

Why the Right-Wing Bullies Will Hold The Nation Hostage Again and Again

When I was a small boy I was bullied more than most, mainly because I was a foot shorter than than everyone else. They demanded the cupcake my mother had packed in my lunchbox, or, they said, they'd beat me up. After a close call in the boy's room, I paid up. Weeks later, they demanded half my sandwich as well. I gave in to that one, too. But I could see what was coming next. They'd demand everything else. Somewhere along the line I decided I'd have a take a stand. The fight wasn't pleasant. But the bullies stopped their bullying.

I hope the President decides he has to take a stand, and the sooner the better. Last December he caved in to Republican demands that the Bush tax cut be extended to wealthier Americans for two more years, at a cost of more than $60 billion. That was only the beginning — the equivalent of my cupcake.

Last night he gave away more than half the sandwich — $39 billion less than was budgeted for 2010, $79 billion less than he originally requested. Non-defense discretionary spending — basically, everything from roads and bridges to schools and innumerable programs for the poor — has been slashed.

The right-wing bullies are emboldened. They will hold the nation hostage again and again.

In a few weeks the debt ceiling has to be raised. After that, next year's budget has to be decided on. House Budget Chair Paul Ryan has already put forward proposals to turn Medicare into vouchers that funnel money to private insurance companies, turn Medicaid and Food Stamps into block grants that give states discretion to shift them to the non-poor, and give even more big tax cuts to the rich.

There will also be Republican votes to de-fund the new health care law.

"Americans of different beliefs came together," he announced late last night. It was the "largest spending cut in our history." He sounded triumphant. In fact, he's encouraging the bullies onward.

All the while, he and the Democratic leadership in Congress refuse to refute the Republicans' big lie — that spending cuts will lead to more jobs. In fact, spending cuts now will lead to fewer jobs. They'll slow down an already-anemic recovery. That will cause immense and unnecessary suffering for millions of Americans.

The President continues to legitimize the Republican claim that too much government spending caused the economy to tank, and that by cutting back spending we'll get the economy going again.

Even before the bullies began hammering him his deficit commission already recommended $3 of spending cuts for every dollar of tax increase. Then the President froze non-defense domestic spending and froze federal pay. And he continues to draw the false analogy between a family's budget and the national budget.

He is losing the war of ideas because he won't tell the American public the truth: That we need more government spending now — not less — in order to get out of the gravitational pull of the Great Recession.

That we got into the Great Recession because Wall Street went bonkers and government failed to do its job at regulating financial markets. And that much of the current deficit comes from the necessary response to that financial crisis.

That the only ways to deal with the long-term budget problem is to demand that the rich pay their fair share of taxes, and to slow down soaring health-care costs.

And that, at a deeper level, the increasingly lopsided distribution of income and wealth has robbed the vast working middle class of the purchasing power they need to keep the economy going at full capacity.

"We preserved the investments we need to win the future," he said last night. That's not true. The budget he just approved will cut Pell grants to poor kids, while states continue massive cutbacks in school spending — firing tens of thousands of teachers and raising fees at public universities. The budget he approved is cruel to the nation's working class and poor.

It is impossible to fight bullies merely by saying they're going too far.

Paul Ryan's Plan, the Coming Shutdown, and What's Really at Stake

I was there in 1995 when the government closed because of a budget stalemate. I had to tell most of the Labor Department's 15,600 employees to go home and not return the next day. I also had to tell them I didn't know when they'd next get a paycheck.

There were two shutdowns, actually, rolling across the government in close succession, like thunder storms.

It's not the way to do the public's business.

Newt Gingrich got blamed largely because his ego was (and is) so big he couldn't stop blabbing that Clinton should be blamed. (Gingrich's complaint of a bad seat on Air Force One didn't help.)

But the larger loss was to the dignity and credibility of the United States government. When average Americans saw the Speaker of the House and the President of the United States behaving like nursery school children unable to get along, it only added to the prevailing cynicism.

Cynicism about government works to the Republicans' continued advantage.

Case in point. House Budget Chair Paul Ryan unveiled a plan today that should make every American cringe. It would turn Medicare into vouchers whose benefits are funneled into the pockets of private insurers. It would make Medicaid and Food Stamps into block grants that allow states to ignore poor people altogether. It would drastically cut funding for schools, roads, and much else Americans need. And many of the plan's savings would go to wealthy Americans who'd pay even lower taxes than they do today.

Ryan's plan has no chance of passage – as long as Democrats are still in control of the Senate (even Democratic deficit hawks like Kent Conrad and Ben Nelson are appalled by it) and the White House.

But this so-called "blueprint" could be a blueprint for America's future when and if right-wing Republicans take charge.

Which is where the cynicism comes in – and the shutdowns. Republicans may get blamed now. But if the shutdowns contribute to the belief among Americans that government doesn't work, Republicans win over the long term. As with the rise of the Tea Partiers, the initiative shifts to those who essentially want to close it down for good.

That's why it's so important that the President have something more to say to the American people than "I want to cut spending, too, but the Republican cuts go too far." The "going too far" argument is no match for a worldview that says government is the central problem to begin with.

Obama must show America that the basic choice is between two fundamental views of this nation. Either we're all in this together, or we're a bunch of individuals who happen to live within these borders and are mainly on their own.

This has been the basic choice all along — when the Founding Fathers wrote the Constitution, in the Civil War, when we went through World War I and World War II and the Great Depression in between, during the Civil Rights movement and beyond.

The President needs to remind us that as members of the same society we have obligations to one another — that the wealthiest among us must pay their fair share of taxes, that any of us who loses our jobs or homes or gets terribly sick can count on the rest of us, and that we have collective obligations to our elderly, our children, and the rest of the planet.

This is why we have government. And anyone who wants to shut it down or cut it down because they say we can't afford it any longer is plain wrong. We are the richest nation in the world, richer than we've ever been. We can afford to remain a society whose members are in it together.

Why We Must Raise Taxes on the Rich

It's tax time. It's also a time when right-wing Republicans are setting the agenda for massive spending cuts that will hurt most Americans.

Here's the truth: The only way America can reduce the long-term budget deficit, maintain vital services, protect Social Security and Medicare, invest more in education and infrastructure, and not raise taxes on the working middle class is by raising taxes on the super rich.

Even if we got rid of corporate welfare subsidies for big oil, big agriculture, and big Pharma – even if we cut back on our bloated defense budget – it wouldn't be nearly enough.

The vast majority of Americans can't afford to pay more. Despite an economy that's twice as large as it was thirty years ago, the bottom 90 percent are still stuck in the mud. If they're employed they're earning on average only about $280 more a year than thirty years ago, adjusted for inflation. That's less than a 1 percent gain over more than a third of a century. (Families are doing somewhat better but that's only because so many families now have to rely on two incomes.)

Yet even as their share of the nation's total income has withered, the tax burden on the middle has grown. Today's working and middle-class taxpayers are shelling out a bigger chunk of income in payroll taxes, sales taxes, and property taxes than thirty years ago.

It's just the opposite for super rich.

The top 1 percent's share of national income has doubled over the past three decades (from 10 percent in 1981 to well over 20 percent now). The richest one-tenth of 1 percent's share has tripled. And they're doing better than ever. According to a new analysis by the Wall Street Journal, total compensation and benefits at publicly-traded Wall Street banks and securities firms hit a record in 2010 — $135 billion. That's up 5.7 percent from 2009.

Yet, remarkably, taxes on the top have plummeted. From the 1940s until 1980, the top tax income tax rate on the highest earners in America was at least 70 percent. In the 1950s, it was 91 percent. Now it's 35 percent. Even if you include deductions and credits, the rich are now paying a far lower share of their incomes in taxes than at any time since World War II.

The estate tax (which only hits the top 2 percent) has also been slashed. In 2000 it was 55 percent and kicked in after $1 million. Today it's 35 percent and kicks in at $5 million. Capital gains – comprising most of the income of the super-rich – were taxed at 35 percent in the late 1980s. They're now taxed at 15 percent.

If the rich were taxed at the same rates they were half a century ago, they'd be paying in over $350 billion more this year alone, which translates into trillions over the next decade. That's enough to accomplish everything the nation needs while also reducing future deficits.

If we also cut what we don't need (corporate welfare and bloated defense), taxes could be reduced for everyone earning under $80,000, too. And with a single payer health-care system – Medicare for all – instead of a gaggle of for-profit providers, the nation could save billions more.

Yes, the rich will find ways to avoid paying more taxes courtesy of clever accountants and tax attorneys. But this has always been the case regardless of where the tax rate is set. That's why the government should aim high. (During the 1950s, when the top rate was 91 percent, the rich exploited loopholes and deductions that as a practical matter reduced the effective top rate 50 to 60 percent – still substantial by today's standards.)

And yes, some of the super rich will move their money to the Cayman Islands and other tax shelters. But paying taxes is a central obligation of citizenship, and those who take their money abroad in an effort to avoid paying American taxes should lose their American citizenship.

But don't the super-rich have enough political power to kill any attempt to get them to pay their fair share? Only if we let them. Here's the issue around which Progressives, populists on the right and left, unionized workers, and all other working people who are just plain fed up ought to be able to unite.

Besides, the reason we have a Democrat in the White House – indeed, the reason we have a Democratic Party at all – is to try to rebalance the economy exactly this way.

All the President has to do is connect the dots – the explosion of income and wealth among America's super-rich, the dramatic drop in their tax rates, the consequential devastating budget squeezes in Washington and in state capitals, and the slashing of vital public services for the middle class and the poor.

This shouldn't be difficult. Most Americans are on the receiving end. By now they know trickle-down economics is a lie. And they sense the dice are loaded in favor of the multi-millionaires and billionaires, and their corporations, now paying a relative pittance in taxes. 

The President has the bully pulpit. But will he use it?

The Truth About the Economy that Nobody In Washington Or On Wall Street Will Admit: We're Heading Back Toward a Double Dip

Why aren't Americans being told the truth about the economy? We're heading in the direction of a double dip – but you'd never know it if you listened to the upbeat messages coming out of Wall Street and Washington.

Consumers are 70 percent of the American economy, and consumer confidence is plummeting. It's weaker today on average than at the lowest point of the Great Recession.

The Reuters/University of Michigan survey shows a 10 point decline in March – the tenth largest drop on record. Part of that drop is attributable to rising fuel and food prices. A separate Conference Board's index of consumer confidence, just released, shows consumer confidence at a five-month low — and a large part is due to expectations of fewer jobs and lower wages in the months ahead.

Pessimistic consumers buy less. And fewer sales spells economic trouble ahead.

What about the 192,000 jobs added in February? (We'll know more Friday about how many jobs were added in March.) It's peanuts compared to what's needed. Remember, 125,000 new jobs are necessary just to keep up with a growing number of Americans eligible for employment. And the nation has lost so many jobs over the last three years that even at a rate of 200,000 a month we wouldn't get back to 6 percent unemployment until 2016.

But isn't the economy growing again – by an estimated 2.5 to 2.9 percent this year? Yes, but that's even less than peanuts. The deeper the economic hole, the faster the growth needed to get back on track. By this point in the so-called recovery we'd expect growth of 4 to 6 percent.

Consider that back in 1934, when it was emerging from the deepest hole of the Great Depression, the economy grew 7.7 percent. The next year it grew over 8 percent. In 1936 it grew a whopping 14.1 percent.

Add two other ominous signs: Real hourly wages continue to fall, and housing prices continue to drop. Hourly wages are falling because with unemployment so high, most people have no bargaining power and will take whatever they can get. Housing is dropping because of the ever-larger number of homes people have walked away from because they can't pay their mortgages. But because homes the biggest asset most Americans own, as home prices drop most Americans feel even poorer.

There's no possibility government will make up for the coming shortfall in consumer spending. To the contrary, government is worsening the situation. State and local governments are slashing their budgets by roughly $110 billion this year. The federal stimulus is ending, and the federal government will end up cutting some $30 billion from this year's budget.

In other words: Watch out. We may avoid a double dip but the economy is slowing ominously, and the booster rockets are disappearing.

So why aren't we getting the truth about the economy? For one thing, Wall Street is buoyant – and most financial news you hear comes from the Street. Wall Street profits soared to $426.5 billion last quarter, according to the Commerce Department. (That gain more than offset a drop in the profits of non-financial domestic companies.) Anyone who believes the Dodd-Frank financial reform bill put a stop to the Street's creativity hasn't been watching.

To the extent non-financial companies are doing well, they're making most of their money abroad. Since 1992, for example, G.E.'s offshore profits have risen $92 billion, from $15 billion (which is one reason it pays no U.S. taxes). In fact, the only group that's optimistic about the future are CEOs of big American companies. The Business Roundtable's economic outlook index, which surveys 142 CEOs, is now at its highest point since it began in 2002.

Washington, meanwhile, doesn't want to sound the economic alarm. The White House and most Democrats want Americans to believe the economy is on an upswing.

Republicans, for their part, worry that if they tell it like it is Americans will want government to do more rather than less. They'd rather not talk about jobs and wages, and put the focus instead on deficit reduction (or spread the lie that by reducing the deficit we'll get more jobs and higher wages).

I'm sorry to have to deliver the bad news, but it's better you know.