PORTLAND – Virtual or real: Consumers and corporations are living in totally different worlds — and current conditions find the two in conflict.

The American consumer is the big engine required to grow our economy, representing over two-thirds of our GDP.

But consumers are beset with a lack of confidence because of high unemployment, loss of value in their houses, and gasoline prices that drain their wallets. Recent behavior in our nation’s capital does little to help confidence at any level.

Yet corporations are flush with cash and profits have reached record highs — truly a dichotomy worth pondering.

The question is, “What changes need to be made so that American consumers and corporations can both enjoy life once again?”

Losses in the past decade and uncertain market conditions have created a bunker mentality for consumers. This is not surprising, as American families, who once considered their homes to be the cornerstones of their wealth, don’t feel very good about having lost more than $6 trillion in housing values since the housing bubble popped in 2007.

But they are replacing this asset with savings. Recent government data shows that residential real estate has declined to less than one-third of net worth. The balance is made up individual stock holdings, bank accounts, retirement accounts and mutual funds.

As a result, many Americans are now more vested in stocks and bonds. Consumer’s confidence, rooted in how “wealthy” they feel, is uncertain.

The economic recovery is moving at a snail’s pace, and I’ve yet to find one single person who is satisfied with the progress. Banks have been hesitant to loan money and many businesses are staring at increased regulation. The catalyst needed to jump-start consumers and the economy lies in adding more jobs.

As more workers are hired, consumers will be able and willing to buy more. As consumer demand increases, corporations can increase production and hire more workers. Consequently, the employed are able to increase consumption and this would then allow the cycle to continue.

Unfortunately, employers are also uncertain: Costs from impending regulations mean they are hesitant to hire new workers. In fact, after two years of economic “recovery,” America has 7 million fewer jobs than before the recession.

After we withstood the loss of 8.8 million jobs, we have created only 1.8 million new ones.

The current debate in Washington regarding a government default does little to instill confidence that constructive change can be part of our national agenda.

There are many reasons that can be cited and, on first glance, there is plenty of blame to go around. But at the end of the day there are some reasonable explanations. The U.S. has become more efficient at making products and this has displaced workers.

Some of these workers must now be retrained for new, different jobs. This takes time, effort and money. We have had too little of all of these. Could government stimulus have been directed at retraining and providing employers with an incentive to provide on-the-job training?

Other countries are growing faster than the U.S. and we have seen positive effects from global growth. Ironically, this has occurred in the industries where we are the most efficient — agribusiness, technology and health care. This has benefited fewer workers than would normally be expected and implies employment conditions will improve sluggishly.

Hiring needs to be encouraged via targeted stimulus particularly to small businesses that account for the lion’s share of new jobs. Over a recent 15-year period, small businesses created 65 percent of the net new jobs in the private sector.

Finally, many complain about exporting jobs overseas. But our cost structure here is more burdensome and less competitive compared with the markets to which we export.

This may due to labor costs, fewer benefits or less regulation, but these are real barriers to competition that can only be resolved by fundamental change at home. Government must become less restrictive and proactively reduce costs that burden businesses.

The health of corporations cannot be sustained indefinitely while American consumers deal with a lousy job market and rising costs for food and gasoline. The current deficit issues are inescapably linked to excessive spending, economic growth and employment.

Certainly, improved employment here will lead to stronger economic growth which helps all Americans. Congress holds the power of spending.

Targeted programs that will stimulate hiring can start a positive chain reaction and lead to a better world in which both consumers and corporations can live comfortably.

– Special to the Press Herald