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GUEST OP: Earnings report for Main Street
To add insult to injury to working America, in came the earnings reports from Goldman Sachs and JPMorgan Chase. At these mega banks, balance sheets are healthy, profits are up and bonuses for top executives are bigger than ever. JPMorgan Chase just reported $11.7 billion in profits and $26.9 billion in compensation and bonuses. Goldman Sachs made a record-high profit of $13.4 billion in 2009 and is slated to hand out $16.2 billion in compensation and bonuses.
These are some of the same institutions whose predatory and unethically risky actions brought our economy to its knees. But, thanks to billions of dollars in government resuscitation, they seem to be recovering nicely from their near-death experiences.
The “earnings report” for the rest of the U.S., however, includes – drum roll, please – higher unemployment and continued foreclosures, with no relief in sight. It sounds like a raw deal because it is. Big banks and Wall Street financiers ignited the foreclosure crisis, setting our economy ablaze, resulting in the loss of millions of homes and jobs.
While Americans everywhere are suffering, not all are suffering equally. Communities of color are, once again, experiencing the brunt of this recession. The unemployment gap between African-Americans and whites has grown wider this past year, jumping from a 5.4 percent spread to 7.2 percent. The unemployment rate among African-Americans now stands at 16.2 percent, higher than any annual rate in 27 years. The unemployment rate among Latinos is 12.9 percent. Both are far higher than the 9 percent rate among whites.
While these racial disparities are deeply troubling, inequality is a challenge facing every American. It weakens our nation’s economic foundation and tears communities apart. Before this recession even began, income inequality was at its highest level since just before the Great Depression.
As of two years ago, the top 1 percent of Americans took home as much income as the bottom half of Americans together. These inequalities are likely to grow as mass layoffs continue and homes are lost in unprecedented numbers.
Unfortunately, the policies coming out of Washington are not targeted well enough to support those struggling the hardest. Most job-creation projects to date, including those in the American Recovery and Reinvestment Act (ARRA), have been broad-spectrum, “universal” initiatives like rebuilding transportation infrastructure and core funding for schools.
Despite the merit of these investments, the jobs being created are disproportionately in areas where they are least needed. One study showed that communities with the lowest unemployment rates were getting 50 percent more per capita in job creation funds than communities with the highest rates of unemployment. But, while an un-targeted approach to job creation is failing to adequately serve communities in the direst straits, the big bank bailouts are proving to be even less effective.
The evidence is clear – a rising tide does not lift all boats, and it never will. When Congress bailed out the banks, the understanding was that by returning them to solvency, they would start lending again and all Americans would benefit. Instead, the banks cleaned up their books, patted themselves on the back, stuffed their pockets with fat bonuses, and then failed to provide significant lending to working Americans. The stock market posted huge gains last year and bank profits are up, but foreclosures and unemployment continue to grow at alarming rates. So far, the rising tide has lifted a few gilded yachts, while others are left gasping for air.
A new report by "United for a Fair Economy, entitled State of the Dream 2010": Drained, documents the need to prioritize and target economic recovery spending toward communities hardest hit by joblessness and foreclosures. The Put America to Work Act is one bill that aims to do just that. Even with limited recovery dollars available, we still have choices. We know what doesn’t work – putting our trust in the big banks and Wall Street in the hopes that by helping them, they will in turn help the rest of America. And, while the large-scale job-creation programs of ARRA for “shovel-ready” projects are certainly a step up from the bank bailout strategy, they are still not focused enough to reach those communities needing it most.
A targeted strategy offers our best hope for a robust economic recovery. It will help ensure that communities in greatest need are receiving the greatest support. At the same time, it will help narrow the vast disparities of income and wealth – including those drawn along lines of race – and will strengthen our economic foundation.
Prakash Laufer is President of the board of United for a Fair Economy (UFE) and Executive Director of The Brick House Community Resource Center. UFE’s new report, State of the Dream 2010: Drained – Jobless and Foreclosed in Communities of Color, is available on-line at http://www.faireconomy.org/dream/