Back in the beginnings of the 2008 Global Financial Meltdown, there was  a lot of talk about how and whether the troubles on Wall Street would affect “Main Street”. After all, not all downturns on Wall St. result in recessions. Of course, in the actual event, Wall Street’s troubles were severe but quickly remedied by federal government and Federal Reserve bail-out and rescue efforts.  Unfortunately, the rescue efforts were could not prevent the spill-over onto Main Street.  The real economy of everyday goods and services production and consumption (“Main Street”) has suffered mightily.  Extraordinarily high and persistent levels of unemployment, declines in real wages and hours worked, evaporating credit for small businesses, etc. have inflicted real pain.  Most distressing is the the disconnect between the ideology pursued by policymakers in Washington and the reality of distress.  The policymakers continue to pursue a belief that subsidies and tax cuts for Wall Street and Global Multi-nationals will encourage them to lead the recovery on Main Street.  The evidence says otherwise.

Robert Reich agrees and summarizes as:

Recovery depends on Main Street, by Robert Reich, Commentary, Financial Times: Can the American economy recover if only its big global companies, Wall Street and high-income Americans are doing better, but its small businesses and middle and lower-income Americans are not? The short answer is no. …

US companies have lots of cash… But this cash is not going into new investment. … None of this is stopping supply-side fanatics from arguing government needs to cut taxes on big corporations to spur the recovery. Their argument is absurd. Big companies do not know what to do with all the cash they have as it is. They are not investing it in new plant or jobs. So why should the government cut their taxes and enlarge their cash hoards even more?

The picture on Main Street is the opposite. Small businesses are not selling much as they have to rely on American consumers and Americans still are not buying much.

Small businesses are also finding it hard to get credit. … While big companies are finding it easy to borrow in the bond markets, smaller companies depend on bank credit, whose supply remains limited. … This is a problem because companies with fewer than 100 employees accounted for almost half of net job growth during the last two recoveries…

Unemployment or fear of it continues to haunt the population. That is a major reason why consumer confidence is still dropping. There is also the extra need to save as boomers face retirement. Given all this, it is sensible for Americans to continue holding back from the malls, but this means a painfully slow recovery. …