Before We Forget the Lessons of the Great Recession

Daniel Acker/Getty Images

By Rick Patelunas

Entering 2015, we’re greeted with upbeat reports of stock exchanges setting new records, gas prices falling to levels not seen since 2009 and unemployment declining to pre-Great Recession rates. Consumers are said to be feeling more confident and secure, which translated into an 11 percent increase in holiday spending and a similar 11.4% increase in auto sales over last year. At the same time though, wages continue to stagnate, improving only slightly better than inflation, with a paltry 1.7% increase over last year.

As was the case over the past three decades, consumers are responding to the lack of wage growth by funding their purchases with additional debt. CardHub, a credit card comparison website, projected that consumers would add more than $60 billion of new credit card debt during 2014, which would be at least 55% more than in 2013. Sadly, where this oftentimes leads is to unending payments. CNBC reports that nearly one in five survey respondents said they will never be able to pay off their debt.

Increasing consumer debt didn’t begin with the holidays; it’s been developing for some time. Total household debt steadily trended down from its peak at the end of 2008, about half a year before the official government end of the Great Recession in June 2009. During the Great Recession, consumers saw tighter credit and were hesitant to take on more debt than they could handle. However, since Quarter II of 2013, total household debt increased over $550 billion to regain roughly 44% of the debt paid off since June 2009.

In addition to credit card debt, auto loans increased 26%, reflecting growing consumer confidence, falling gas prices and relaxed credit. Falling gas prices are putting money into the hands of consumers and they are reacting as if it was a pay raise. On the one hand, falling gas prices clearly demonstrate how putting money into the hands of those who spend it stimulates the economy. On the other hand, the uncertainty of gas prices in the future shows the fragility of any optimism. If gas prices begin to rise, not only does disposable income decrease, but the relative gas expenditure increases, because SUVs, trucks and other less fuel-efficient vehicles top the list of purchases.

Relaxed credit for auto loans may prove to be a more vexing issue. Behind the Great Recession were the predatory subprime mortgages that made it too easy for consumers to get credit they couldn’t afford. In November, for the first time, the New York City Department of Consumer Affairs launched an investigation into possible predatory subprime auto loans. The investigation focuses on local used car dealerships that may be targeting low-income New Yorkers with predatory schemes. That follows a New York Times editorial in August arguing that the federal government needs to outlaw the predatory auto loans the same way it outlawed predatory mortgage loans. Major banks are buying up the auto loans and packaging them to be sold as investments, much like what was done prior to the Great Recession with mortgage loans.

Consumer spending accounts for about two thirds of GDP, so the increased holiday spending and auto sales are greeted as good news, but the underlying problems haven’t changed. Wages are stagnating and after deleveraging their debt during the Great Recession, consumers have returned to debt financing. Big banks are as profitable as ever, and in December, Congress reversed part of the Dodd-Frank legislation covering derivatives, the financial instrument that helped cause the Great Recession. The stock market’s bullish run is reaching six years and there’s no reason to suspect that the growing inequality between the working class and the top 10% or top 1% is going to change.

None of this is lost on the working class, but many feel that they don’t have a voice. Right-to-work laws stymie organization and high unemployment leaves workers fearing the loss of their jobs. Unlimited campaign spending creates a political market in which the most money has the loudest voice. Polls before the November elections and exit polls afterwards revealed that the economy and jobs were still the most important issues, but few candidates directly addressed those issues or had anything concrete to contribute to a solution. Voters responded by not voting. Voter participation was at its lowest point since WWII. And for those who did vote, their seemingly conflicted messages showed their concern with the economy and jobs. Voters approved minimum wage increases while voting in politicians who are against minimum wage increases.

For those in power, disarray and malaise are good, apathy even better. When people give up, there’s no opposition. The Left, socialists, progressives, liberals, need to articulate, discuss and educate that the status quo isn’t inevitable. Workers don’t have to take on more and more debt to survive or hope for lower gas prices. There are alternatives. Voters were disillusioned, but they organized and some minimum wage increases were approved. Cooperatives and alternative economic arrangements are being tested in places like Greensboro, NC.* State banks like the Bank of North Dakota can be alternatives to the too-big-to-fail banks. A works council as an alternative to a traditional union is being discussed for the VW plant in Chattanooga, TN.

*For more information, see: Crisis, Recovery, and the Transitional Economy:  The Struggle for Cooperative Ownership in Greensboro, North Carolina (Michael Joseph Roberto, Monthly Review Press, May 2014).


Rick Patelunas is a DSA member from Myrtle Beach, South Carolina.


Individually signed posts do not necessarily reflect the views of DSA as an organization or its leadership. Democratic Left blog post submission guidelines can be found here.




New Member Orientation Call

February 25, 2018

You've joined DSA - Great. Now register for this New Member Orientation call and find out more about our politics and our vision.  And, most importantly, how you can become involved. 

Sunday February 25th

9 PM ET; 8 PM CT; 7 PM MT; 6 PM PT.

Click here to RSVP

Webinar on Compliance and Endorsement Process

February 28, 2018

Click here to RSVP

The National Electoral Committee is sponsoring the first of a series of webinars on electoral organizing. This session will focus on compliance issues and chapter endorsement processes.

This call in on Feb 28th at 8pm ET/7pm CT/6pm MT/5pm PT

Click here to RSVP

Talking About Socialism Webinar

March 06, 2018

Click here to RSVP.

Join Steve Max, a founder of the legendary community organizing school, the Midwest Academy, to practice talking about socialism in plain language. Create your own short rap. Use your personal experience and story to explain democratic socialism. Prepare for those conversations about socialism that happen when you table or canvass. This workshop is for those who have already had an introduction to democratic socialism, whether from DSA's webinar or from other sources. Questions? Contact Theresa Alt <talt@igc.org607-280-7649.

This training is at 8:00pm Eastern, 7:00pm Central, 6:00pm Mountain, 5:00pm Pacific, 4:00pm Alaska, and 3:00pm Hawaii Time.

Click here to RSVP.

Introduction to Democratic Socialism

March 14, 2018

Click here to RSVP

Join Bill Barclay, Chicago DSA, and Peg Strobel, Chicago DSA and national Socialist Feminist Working Group co-chair, on this webinar for an overview of what we in Democratic Socialists of America mean when we talk about "socialism," "capitalism" and the goals of the socialist movement. 1.5 hours. 9 pm PM ET; 8 pm CT; 7 pm MT; 6 pm PT.

This webinar is free for any DSA member in good standing. You need a computer with good internet access to view the PowerPoint slides, but you may participate by audio only.

Click here to RSVP