Next time you hear an economist or denizen of Wall Street talk about how the "American economy" is doing these days, watch your wallet.

There are two American economies. One is on the mend. The other is still coming apart.

The one that's mending is America's Big Money economy. It's comprised of Wall Street traders, big investors, and top professionals and corporate executives.

The Big Money economy is doing well these days. That's partly thanks to Ben Bernanke, whose Fed is keeping interest rates near zero by printing money as fast as it dare. It's essentially free money to America's Big Money economy.

Free money can almost always be put to uses that create more of it. Big corporations are buying back their shares of stock, thereby boosting corporate earnings. They're merging and acquiring other companies.

And they're going abroad in search of customers.

Thanks to fast-growing China, India, and Brazil, giant American corporations are racking up sales. They're selling Asian and Latin American consumers everything from cars and cell phones to fancy Internet software and iPads. Forty percent of the S&P 500 biggest corporations are now doing more than 60 percent of their business abroad. And America's biggest investors are also going abroad to get a nice return on their money.

So don't worry about America's Big Money economy. According to a Wall Street Journal survey released Thursday, overall compensation in financial services will rise 5 percent this year, and employees in some businesses like asset management will get increases of 15 percent.

The Dow Jones Industrial Average is back to where it was before the Lehman bankruptcy filing triggered the financial collapse. And profits at America's largest corporations are heading upward.

But there's another American economy, and it's not on the mend. Call it the Average Worker economy.

Last Friday's jobs report showed 159,000 new private-sector jobs in October. That's better than previous months. But 125,000 net new jobs are needed just to keep up with the growth of the American labor force. So another way of expressing what happened to jobs in October is to say 24,000 were added over what we need just to stay even.

Yet the American economy has lost 15 million jobs since the start of the Great Recession. And if you add in the growth of the labor force -- including everyone too discouraged to look for a job -- we're down about 22 million.

Or to put it another way, we're still getting nowhere on jobs.

One out of eight breadwinners is still out of work. Most families in the Average Worker economy rely on two breadwinners. So if one out of eight isn't working, chances are high that family incomes are down compared to what they were three years ago.

And that means the bills aren't getting paid.

According to a recent Washington Post poll, more than half of all Americans -- 53 percent -- are worried about making their mortgage payments. This is many more than were worried two years ago, when the Great Recession hit bottom. Then, 37 percent expressed worry.

Delinquency rates on home loans are rising. Distressed sales are up as a percent of total sales.

Most people in the Average Worker economy own few shares of stock, if any. Their equity is in their homes. But with all the delinquencies and distressed sales, the housing market has a glut of homes for sale. As a result, home prices are still dropping. So the net worth of most Americans is still dropping.

And even though interest rates are falling, most people in the Average Worker economy can't refinance their homes. They can't get home equity loans. Banks don't want to lend to the Average Worker economy because people in it are considered bad credit risks. They still owe lots of money, their family incomes are down, and their net worth has fallen.

And according to the Reuters/University of Michigan survey of American consumers, expectations about personal finances are at an all time low.

Inhabitants of the Big Money economy are celebrating Republican wins last week. They figure financial regulations will be rolled back, environmental regulations will be canned, the Bush tax cut will be extended to the top 1 percent, and it will be harder for workers to form unions.

Inhabitants of the Average Worker economy aren't so sure. The economy has been so bad they're angry at politicians. They showed their anger at the ballot box. They took it out on incumbents.

But if nothing changes in the Average Worker economy, there will be hell to pay.

Robert Reich is the author of Aftershock: The Next Economy and America's Future, now in bookstores. This post originally appeared at RobertReich.org.

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VP Joe Biden Unveils Home Energy Efficiency Program

November 09, 2010 3:45 PM

ABC News' Mary Bruce reports:

The White House announced a new federal program today designed to help Americans make their homes more energy-efficient, which Vice President Joe Biden said it would save consumers money and create jobs.

“We believe that retrofitting homes has the potential to save us billions of dollars. And we believe that these projects that we are announcing today will go a long way toward growing an industry and in the process create good jobs for a very good public purpose,” Biden said at a Middle Class Task Force event at the White House this afternoon, noting that the new initiative could create tens of thousands of jobs.

The Recovery Through Retrofit program will enable homeowners to get low-cost energy audits of their homes and federally insured loans to pay for improvements.

“Look, folks, investing in this stuff is the only way to build an economy capable of not just competing in the 21st century, but actually leading, as we have in the past,” Biden explained. “Making our homes more energy efficient, a major part of this, is a no-brainer. It saves consumers money on their electricity, reduces our dependence on foreign oil, it creates jobs. It's all part of efforts to fundamentally reimagine the American economy by fundamentally changing our approach to energy consumption.”

Biden also said that retrofitting homes is “one of the quickest jolts” to move the country toward energy independence. “It is the low-hanging fruit out there. It doesn't require many significant technological breakthroughs to have gigantic impact on our consumption patterns,” Biden said.

Under the new program, homeowners will receive a “Home Energy Score” that ranks their home’s efficiency on a scale of one to ten and shows how it compares to others in the neighborhood. Trained and certified contractors will then estimate how much money a homeowner could potentially save through upgrades and will recommend improvements.

To pay for retrofitting, consumers will be eligible for up to $25,000 in low-interest, federally insured “PowerSaver” loans. The program also sets new guidelines for contractors that identify the skills needed for workers in the retrofit industry.

Several communities across the country are testing the new energy scoring system this fall before it's rolled out nationally next summer.

“I don't want to oversell this, but this is a significant start,” Biden concluded

The White House announced a new federal program today designed to help Americans make their homes more energy efficient, which Vice President Joe Biden said will save consumers money and create jobs.

“We believe that retrofitting homes has the potential to save us billions of dollars. And we believe that these projects that we are announcing today will go a long way toward growing an industry and in the process creating good jobs for a very good public purpose,” Biden said at a Middle Class Task Force event at the White House this afternoon, noting that the new initiative could create tens of thousands of jobs.

The “Recovery Through Retrofit” program will enable homeowners to get low-cost energy audits of their homes and federally insured loans to pay for improvements.

“Look, folks, investing in this stuff is the only way to build an economy capable of not just competing in the 21st century, but actually leading, as we have in the past,” Biden explained. “Making our homes more energy efficient, a major part of this, is a no-brainer. It saves consumers money on their electricity, reduces our dependence on foreign oil, it creates jobs. It's all part of efforts to fundamentally re-imagine the American economy by fundamentally changing our approach to energy consumption.”

Under the new program, homeowners will receive a “Home Energy Score” that ranks their home’s efficiency on a scale of one to 10 and shows how it compares with others in the neighborhood. Trained and certified contractors will then estimate how much money a homeowner could potentially save through upgrades and recommends improvements.

To pay for retrofitting, consumers will be eligible for up to $25,000 in low-interest, federally insured PowerSaver loans. The program also sets new guidelines for contractors that identify the skills needed for workers in the retrofit industry.

Several communities across the country are testing the new energy scoring system this fall before it's rolled out nationally next summer.

“I don't want to oversell this, but this is a significant start,” Biden said.

-Mary Bruce

November 9, 2010
in Joe Biden, Mary Bruce, White House
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