Are We In the Process of Creating a New and Enduring American Underclass?

While Obama's deficit address this week drew praise for its political acumen, he conceded the debate over cutting public spending at a time when private consumer spending remains in a trough. The discussion will now focus on what will be cut, and by how much. And what we're really talking about in this age of austerity is cutting "transfer payments" that put spending money in the pockets of the unemployed, the poor and the elderly, and sending more government workers to the unemployment lines. Those newly jobless people will, in turn, cut down on their spending and some will be unable to make their mortgages, adding to the foreclosure crisis nobody's talking about anymore. Both trends will further depress demand.

More troubling is the fact that nobody knows what the next “engine of job growth” might be. The big winners in this economic recovery appear to be large financial institutions that have less competition after several large players went under during the crash, and that's not the kind of broad growth that will help the job market.

These trends raise the frightening prospect that we're in the process of creating a permanent underclass in the United States. At the very least, history tells us that the big squeeze corporations are now putting on American workers will have enduring effects on our economic wellbeing for many years to come.