Economic indicators are funny things. If you measure the right thing, they can tell you that even in bad times for most Americans that things are going well. In my previous diary, I discussed the great risk shift from multinational corporations to the average American citizen. Now, I would like to take the discussion in a different direction by looking at why we do not notice this great risk shift. One of the reasons we do notice the shift is the use of GDP as the primary indicator for the state of our economy. Indeed, right now, the GDP has begun to grow for the first time in a year. It stands up 3.5 percent.

The problem, however, in the number is several folds. One it does not address job creation, kind of jobs created or wage stagnation/deflation. Two, it does not address what is being left out of the equation, which is the subject matter of this diary. Thus, the GDP is as interesting for what it leaves out as what it  puts into the equation. However, we rarely have that discussion in America. For these reasons, I advocate that we look at the Quality of Life Index to see where our country really is for the bulk of Americans in our economy.

The bailout of the banking industry was the result of decades of Reagan policy making carried out by both Democratic and Republican neoliberals that shifted risk from corporations to the American public.  It is only the tip of iceberg. This shifting of risk is the flip side of the coin to wage stagnation and deflation that acts to increase the debt and loses of the American people.

To understand, why this is the case requires an understanding of what risk is.  This is not an easy task.  However, to have a working definition, let's just say that risk is the chance in any given transaction for one to be a winner or a loser. It is the concept of working the odds. What are the  odds that you will obtain a job that will cover your debt from college?  What are the odds that you will have enough money to pay for health care premiums and save money? What are odds of bank failure if they are too big to fail?

I am one of the biggest critics of President Obama and Democrats here, but I want to point out some economic policy news that together are signs that may be the administration and Democrats are going to move in the right economic direction. Much of this you probably already know, but I want to focus on the news in one place as well as point out some additional things that I would love to see happen toward restoring America to a country focused on "Main Street" or "middle-class" capitalism rather than neoliberal economic thought. Main street capitalism focuses on increasing wealth for the greatest number of people rather than merely increasing wealth

First the news that I think is very positive:

- Ending the antitrust exemption for health insurance moves forward

• Limiting executive pay in a way that creates incentives for long term investment
  
• Shifting bailout money to stimulate small businesses
  
• House's action regarding public option at Medicare plus 5

This will be a brief diary on an economic issue that should be a topic of growing concern.

One of the bad things that is coming out of an economy of long term systemic underemployment and unemployment is the potential for wage deflation at the same time that the cost of benefits like health care insurance will rise steeply for employees that have jobs are or are obtaining them.

The wages are still climbing, but the potential is there:

"For now, pay is still rising--a little less than 2% for the year through June 2008, according to the government's employment cost index. But the weak job market is creating the perfect conditions for a decline in pay: low inflation and high unemployment (9.7% in August). With a huge reserve army of unemployed--more than 2 million of them college-educated--it would be easy for many employers to demand concessions."

http://www.businessweek.com/magazine/con tent/09_40/b4149032652510.htm

Today, Charles Lemos wrote two diaries that say we need different policies, but leaves out significant question: What prevents us from moving to those new policies? Without asking and answering that question, it is hard to see how things will change in a substantively enough way to matter, or, for that matter, how he is doing little more than shooting at the wind.

My thesis is this: New policies  that will substantively shift the direction of the country are not going to be implemented so long as neoliberalism ideology dominates economic thought in the national Democratic Party because the set of assumptions behind neoliberalism are at loggerheads to empiricism. There may be many reasons for this, including explanations about politics, but the impact as far as reform is concerned is dire.

Perhaps, the easiest way to describe neoliberalism is by asking: Do you trust private business interests? For example, do you trust bankers to serve the interest of the entire banking system or do you believe they will provide information that will serve the individual banker? If you distrust those private sector with regard to the greater good, you are led to one set of policy conclusions. If you trust them, you are led to another. This question remains the core economic debate in Washington whether it is health reform, banking, schools, climate control or trade.

In discussing health care, I do not often explain why the issue matters so much. The core issue is that of economic mobility. That is the ability of individual actors in the economy to move up the ladder to the middle and wealthier classes.  Health care cost is one big factor in that picture along with other risk factors like education and housing. The core issue is whether we are building a plutocracy or an economy like you may find in Latin America, Russia or China. For this article, I will focus on economic mobility.

The link below includes a video of Paul Krugman and Eliot Spitzer on Bill Maher's show saying something quite surprising- that the U.S. has less economic mobility than Europe. To me, this is a stunner. I suspected it, but I had always put in the back of my mind. Here's the link:

http://www.huffingtonpost.com/2009/09/26 /krugman-the-american-drea_n_300702.html

But is this true? I decided to do a quick search of the issue on Google, and, the answer is "Yes, we seem to have less economic mobility than Europe."

A lack of long term health insurance cost containment will be the Waterloo for the Democratic Party.  As people here seek to circle the wagon, the issue is gaining traction in the mainstream media, and, even if it does not, it will become a greater and greater issue in the coming decade. There are only a few models that are known to work- price control, price negotiation or competition being three of the top choices for addressing the issue. Without cost containment, health care mandates create little more than a regressive tax.

This is how the regressive tax will work:

"The legislators' reluctance to control premium costs comes despite the fact that they intend to require virtually all Americans to get health insurance, an unprecedented mandate -- long sought by insurance companies -- that would mark the first time the federal government has compelled consumers to buy a single industry's product, effectively creating a captive market."

http://www.latimes.com/news/nationworld/ nation/la-na-healthcare-affordability2.a r1-2009sep24,0,3253631.story

To obtain cost containment, the public option needs to have the ability to negotiate pricing. This should be obvious to anyone who claims to be concerned with fiscal responsibility, the debt, the deficit and economic issues in general. The great lie of the Blue Dogs is their claim that they care about fiscal responsibility when clearly they do not give a rat's ass about fiscal issues outside of how they can use such debates to advantage regressive interests.

Indeed, one of my concerns was that the bill coming out of the Waxman committee would harm fiscal responsibility by restraining price negotiation. By so doing, the Blue Dogs showed their true color because price negotiation is one of the ways you would think one would attempt to reduce the cost of any such bill to the American voters.