At the rate the US economy is recovering, it will take 28 years to get back to where we were in December 2007 if something doesn't change, David Stockman, former federal budget director under President Reagan, told CNBC Friday.
AP
David Stockman
"When we look below the surface and the job outlook and the trend that we've been in, it's a lot worse then people think," Stockman said.
"The jobs that they count every month and people get excited about are really part-time jobs," he said.
Now that we are in the "new normal," it's important to rebucket the data the Labor Department releases on the big picture of the 130 million jobs in the economy, Stockman said.
Take themiddle class, Stockman said, which is at the heart of the economy—about 54 million jobs. This is everything you can think of in terms of bread-winner jobs. The annual median wage is $50,000.
"If we are going to have recovery, it has to happen here," he said, adding, "we lost 7 million jobs in two-year downturn in the 'Great Recession."
In order to achieve true middle class job growth, Stockman believes the US needs to become more competitive in the global marketplace and regain some of the manufacturing production jobs lost.
"A big chunk of that 54 million jobs is construction. We overbuilt the economy for twenty or thirty years with the housing boom. Now we have huge overhang," Stockman said.
For the first time in history, the number of government jobs, which have been evergreen growth for the last 50 years and make up about 11 million jobs, is shrinking, Stockman said, adding, "over the last year we've lost 100,000 jobs."
"Governments are broke—California, Illionis, New Jersey—and the federal government is not far behind," he said.
After appearing on CNBC, Stockman said in a follow-up interview that the following moves could help solve the dismissal economic picture in the US:
- Raise revenue across the entire population by a large magnitude to pay our (government's) bills; probably a half trillion dollars a year.
- Social Security and Medicare: Cut benefits for better-off retirees by $100 billion a year through a means test for retirement entitlements.
- Reduce defense spending by at least 20 percent from planned levels (by 2015), which is projected at about $800 billion.
- Cut domestic discretionary spending by $100 billion—transportation, national parks service, education, farm subsidies, business subsidies (such as ethanol plants).
Stockman believes these solutions will be feasible if a "big breakdown" in the bond market occurs, which he believes will happen and will be forced on the US, as in the case of the PIIGS.
"You can not issue debt indefinitely and get away with it," he said.
