Dow 10,000

With the Dow flirting with five digits again, what's going on? Consumer spending is in the basement, jobs are still being cut, unemployment is twice is high as it was a year ago and the dollar is toxic. What gives?

Robert Reich explains: Viva Socialism!

The explanation is simple. The great consumer retreat from the market is being offset by government's advance into the market. Consumer debt is way down from its peak in 2006; government debt is way up. Consumer spending is down, government spending is up. Why have new housing starts begun? Because the Fed is buying up Fannie and Freddie's paper, and government-owned Fannie and Freddie are now just about the only mortgage games remaining in play.

Why are health care stocks booming? Because the government is about to expand coverage to tens of millions more Americans, and the White House has assured Big Pharma and health insurers that their profits will soar. Why are auto sales up? Because the cash-for-clunkers program has been subsidizing new car sales. Why is the financial sector surging? Because the Fed is keeping interest rates near zero, and the rest of the government is still guaranteeing any bank too big to fail will be bailed out. Why are federal contractors doing so well? Because the stimulus has kicked in.

In other words, the Dow is up despite the biggest consumer retreat from the market since the Great Depression because of the very thing so many executives are complaining about, which is government's expansion. And regardless of what you call it -- Keynesianism, socialism, or just pragmatism -- it's doing wonders for business, especially big business and Wall Street. Consumer spending is falling back to 60 to 65 percent of the economy, as government spending expands to fill the gap.

The problem is, our newly expanded government isn't doing much for average working Americans who continue to lose their jobs and whose belts continue to tighten, and who are getting almost nothing out of the rising Dow because they own few if any shares of stock. Despite the happy Dow and notwithstanding the upbeat corporate earnings, most corporations are still shedding workers and slashing payrolls. And the big banks still aren't lending to Main Street.

Trickle-down economics didn't work when the supply-siders were in charge. And it's not working now, at a time when -- despite all their cries of "socialism" -- big business and Wall Street are more politically potent than ever.

In other words, the stimulus package and the various bailouts are making up the difference. The problem is that ends next year, and that's when the real problems will begin. We're on borrowed time right now, the same government that conservatives rail against is the same government keeping everything together right now, literally the difference between a recession and a depression.

But that rate of government influx is unsustainable. A new solution must be found by Obama and company, or we're all in serious trouble.

Read more at: http://www.huffingtonpost.com/robert-reich/why-the-dow-is-hitting-10_b_294682.html