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Failure by Design

Failure by Design: The Story behind America's Broken Economy

Josh Bivens
Foreword by Lawrence Mishel
Copyright Date: 2011
Edition: 1
Published by: Cornell University Press,
Pages: 120
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  • Book Info
    Failure by Design
    Book Description:

    In Failure by Design, the Economic Policy Institute's Josh Bivens takes a step back from the acclaimed State of Working America series, building on its wealth of data to relate a compelling narrative of the U.S. economy's struggle to emerge from the Great Recession of 2008. Bivens explains the causes and impact on working Americans of the most catastrophic economic policy failure since the 1920s.

    As outlined clearly here, economic growth since the late 1970s has been slow and inequitably distributed, largely as a result of poor policy choices. These choices only got worse in the 2000s, leading to an anemic economic expansion. What growth we did see in the economy was fueled by staggering increases in private-sector debt and a housing bubble that artificially inflated wealth by trillions of dollars. As had been predicted, the bursting of the housing bubble had disastrous consequences for the broader economy, spurring a financial crisis and a rise in joblessness that dwarfed those resulting from any recession since the Great Depression. The fallout from the Great Recession makes it near certain that there will be yet another lost decade of income growth for typical families, whose incomes had not been boosted by the previous decade's sluggish and localized economic expansion.

    In its broad narrative of how the economy has failed to deliver for most Americans over much of the past three decades, Failure by Design also offers compelling graphical evidence on jobs, incomes, wages, and other measures of economic well-being most relevant to low- and middle-income workers. Josh Bivens tracks these trends carefully, giving a lesson in economic history that is readable yet rigorous in its analysis. Intended as both a stand-alone volume and a companion to the new State of Working America website that presents all of the data underlying this cogent analysis, Failure by Design will become required reading as a road map to the economic problems that confront working Americans.

    eISBN: 978-0-8014-6065-4
    Subjects: Political Science

Table of Contents

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  1. Front Matter
    (pp. I-IV)
  2. Table of Contents
    (pp. V-VI)
  3. List of Figures
    (pp. VII-X)
  4. Acknowledgments
    (pp. XI-XII)
  5. Foreword
    (pp. 1-4)
    Lawrence Mishel

    For more than 20 years The State of Working America has provided an unvarnished look at the living standards of low- and middle-income Americans. Along the way, it has established a reputation as the gold standard in tracking trends in income, wages, hours, jobs, and inequality, leading the Financial Times to call it “the most comprehensive independent analysis of the U.S. labor market.” This effort has reflected two core values of the Economic Policy Institute since its founding: (1) a belief that judgments on how well the economy is performing should depend upon whether it is delivering rising living standards...

  6. The Great Recession: The damage done and the rot revealed
    (pp. 5-10)

    The unemployment rate in the United States stood at 9.6% in August 2010, well over double the rate that prevailed in the same month in 2007, the year before the Great Recession hit. August 2010 also marked the fifth anniversary of Hurricane Katrina making landfall on the Louisiana coast. Drawing parallels between Katrina and the Great Recession may sound like the beginning of an argument for complacency in the face of the worst economic crisis since the Great Depression—after all, you can’t change the weather.

    But the scale of damage done by Katrina wasn’t really about weather but rather...

  7. The Great Recessionʹs Trigger: Housing bubble leads to jobs crisis
    (pp. 11-28)

    December 2007 marked the official end of the economic expansion that began in November 2001. The official end of the Great Recession occurred in June 2009, making it the longest recession to hit the U.S. economy since before World War II. This chapter details the damage done since the recession began and the failure of the recovery so far to repair it.

    While an increase in housing foreclosures provided the spark, it was the poor economic choices and mismanagement of the previous decade that provided the tinder for the ensuing conflagration. The economic expansion from 2001 to 2007 was among...

  8. The Policy Response to the Great Recession: What was done, and did it work?
    (pp. 29-44)

    While the official beginning of the Great Recession is the first month of 2008, the first defensive actions traditionally taken to fight recessions—cuts in the short-term interest rate controlled by the Federal Reserve—were already well underway by then. As the first ripples of the housing bubble’s burst were felt in the financial sector, the Federal Reserve (exquisitely sensitive to the needs of banks and financial institutions) had begun aggressively cutting rates months before.

    The rationale behind interest rate cuts is that cheaper debt will spur families to buy more houses and durable goods (like cars) that require financing...

  9. The Great Recession Ended More Than a Year Ago—so, ″Mission Accomplished″?
    (pp. 45-52)

    The official recovery from the Great Recession began in the middle of 2009. So, is the work of policy makers done?

    Not by a long shot.

    The Recovery Act stopped the downward spiral, but unless further action is taken to spur job growth, then the unemployment rate is likely to hover between 9.5% and 10% for the next year, making it two straight years at this elevated level. This extended period of high unemployment will continue to inflict great damage and cause insecurity among America’s working families. Wages, incomes, poverty, and health insurance coverage all moved in the wrong direction...

  10. The Cracked Foundation Revealed by the Great Recession
    (pp. 53-92)

    Just as Hurricane Katrina revealed underlying weaknesses in the physical, economic, and social infrastructure of New Orleans, the Great Recession has revealed similar weaknesses in the overall American economy.

    In the quarter-century following World War II, economic growth in the United States was rapid and equitably distributed. To be sure, social and economic inequalities were rife, but the trajectory for the typical American family was steady economic progress. Beginning in the late 1970s, this trajectory flattened as wage growth slowed to a crawl. Any increases in the typical families’ living standards thereafter were essentially bought through increased working time and...

  11. Where to from Here?
    (pp. 93-98)

    The pressures placed on America’s working families by economic policies that produced slow-and-unequal growth ended up not just stressing them, but also breaking the economy. And there is little relief on the horizon.

    In August 2010, the unemployment rate stood at 9.6%, essentially the same level it had been a year before. Most forecasts (private and public) for 2011 project that it will be at essentially the same level a year from now. The economic challenges over the next few years are daunting; just returning to the 2007 status quo will take several more years. But even this won’t be...

  12. Bibliography
    (pp. 99-100)
  13. About EPI
    (pp. 101-102)
  14. About the Author
    (pp. 103-103)
  15. The State of Working America 2010/2011 UNBOUND!
    (pp. 104-108)