robertreich:

September 15 will mark the tenth anniversary
of the collapse of Lehman Brothers and near
meltdown of Wall Street, followed by the Great Recession.

Since hitting bottom in 2009, the economy has grown steadily, the stock market has soared, and corporate profits have ballooned.

But most Americans are still living in the shadow
of the Great Recession. More have jobs, to be sure. But they haven’t seen any rise
in their wages, adjusted for inflation.

Many are worse off due to the soaring costs of
housing, healthcare, and education. And the value of whatever assets
they own is less than in 2007.

Last year, about 40 percent of American families
struggled to meet at least one basic need – food, health care, housing or
utilities, according to an Urban Institute survey.  

All of which suggests we’re
careening toward the same sort of crash we had in 2008, and possibly as bad as 1929.

Clear away the financial rubble from
those two former crashes and you’d see they both followed upon widening imbalances between the capacity of most people to buy, and what they as workers could
produce. Each of these imbalances finally tipped the economy over.

The same imbalance has
been growing again. The richest 1 percent of Americans now takes home about
20 percent of total income, and owns over 40 percent of nation’s wealth.

These are nearly the same
peaks as in 1928 and 2007. 

The U.S. economy crashes
when it becomes too top heavy because the economy depends on consumer spending
to keep it going, yet the rich don’t spend nearly as much of their income as
the middle class and the poor.

For a time, the middle
class and poor can keep the economy going nonetheless by borrowing. But, as in 1929 and 2008, debt bubbles eventually burst.

We’re getting dangerously
close. By the first
quarter of this year, household debt was at an all-time high of $13.2 trillion.

Almost 80
percent of Americans are now living paycheck to paycheck. In a recent Federal
Reserve survey, 40 percent of Americans said they wouldn’t be able to pay their
bills if faced with a $400 emergency. 

They’ve
managed their debts because interest rates have remained low. But the days of low rates are coming to an end. 

The underlying problem isn’t that Americans have been living beyond their means. It’s that their
means haven’t been keeping up with the growing economy. Most gains have gone to
the top.

It was similar
in the years leading up to the crash of 2008. Between 1983 and 2007, household
debt soared while most economic gains went to the top. Had the majority of households
taken home a larger share, they wouldn’t have needed to go so deeply into debt.

Similarly,
between 1913 and 1928, the ratio of personal debt to the total national
economy nearly doubled. As Mariner
Eccles, chairman of the Federal Reserve Board from 1934 to 1948, explained: “As
in a poker game where the chips were concentrated in fewer and fewer hands, the
other fellows could stay in the game only by borrowing.” 

Eventually
there were “no more poker chips to be loaned on credit,” Eccles said, and “when
… credit ran out, the game stopped.”

After the
1929 crash, the government invented new ways to boost wages – Social Security,
unemployment insurance, overtime pay, a minimum wage, the requirement that employers
bargain with labor unions, and, finally, a full-employment program called World
War II.

After the
2008 crash, the government bailed out the banks and pumped enough money into
the economy to contain the slide. But apart from the Affordable Care Act, nothing
was done to address the underlying problem of stagnant wages.

Trump and
his Republican enablers are now rolling back regulations put in place to stop
Wall Street’s excessively risky lending.

But Trump’s real contributions to
the next crash are his sabotage of the Affordable Care Act, rollback of overtime
pay, burdens on labor organizing, tax reductions for corporations and the
wealthy but not for most workers, cuts in programs for the poor, and proposed cuts in Medicare and
Medicaid – all of which put more stress on the paychecks of most
Americans.

Ten years after Lehman Brothers collapsed,
it’s important to understand that the real root of the Great Recession wasn’t a
banking crisis. It was the growing imbalance between consumer spending and
total output – brought on by stagnant wages and widening inequality.

That imbalance is back. Watch your
wallets.