THIS IS NO ZOMBIE ECONOMY
Beware those cherry-picking economic data, or anyone claiming credit
As 19th century British Prime Minister Benjamin Disraeli said, there are three levels of deception: “lies, damned lies and statistics.” Nowhere is this more beautifully illustrated than the attempts of politicians, in their efforts to get elected, to nitpick and focus on microdata points during times of economic health.
The U.S. economy is in good shape. However, now that the election season is upon us, Republicans are doing what we’d expect an opposing party to do: use semi-obscure data to undermine the president’s economic credibility and, by extension, the credibility of the Democratic Party’s 2016 presidential nominee.
This isn’t the first time, and it won’t be the last.
In his 1984 Democratic nomination acceptance speech, Walter Mondale said it was “the worst trade year in American history.” He neglected the fact that the jobs situation had been steadily improving since the early ’80s recession inherited by President Reagan. The unemployment rate was hovering around 7.5% in July of 1984, compared with more than 10% in early 1983.
In 1996, Bob Dole criticized the “high taxes and stagnant wages” of the Clinton administration. He ignored the historically low unemployment that year.
2016 ELECTION
And we’re seeing this tactic applied by the GOP presidential candidates, embodied most dramatically in Jeb Bush’s recent lament about President Obama’s “zombie economy.” This line of logic has been echoed by virtually every other major GOP candidate. In last week’s debate, Marco Rubio voiced concerns about an economy that is “not growing;” John Kasich outlined his plan to “get this economy moving again;” Ted Cruz declared that “we’ve gotta turn the economy around.” What makes a good economy? We want people to be employed; we want people to have well-paying jobs; we want our currency to be worth roughly the same as it would be worth a year later; we want people to be able to borrow at attractive rates; we want the value of the goods and services produced by the country to increase every year; and finally, we don’t want an unacceptable number of people living in poverty. Looking at the most recent data in all of these areas, it’s clear that the U.S. economy is strong.
Unemployment is 5.1%, and it has steadily declined since 2009. While it is a valid concern that the labor participation rate is at a 37-year low, the big picture is that we were at 10% unemployment at the trough of the recession just a few years ago.
Gross domestic product grew last year at the highest annual rate since 2010, 2.4%.
The median weekly earnings of full-time wage and salary workers were $802 in the first quarter of 2015, more than $100 greater than the first quarter of 2007.
The Consumer Price Index increased 0% as of the 12 months ending in September, indicating an extremely low rate of inflation. The annual change in the CPI last year was 1.6%, which is fairly low historically. Interest rates also remain low. According to Freddie Mac, the average 30-year fixedrate mortgage was less than 4% as of September.
Finally, in 2013, the most recent annual Census estimate, the poverty rate fell to 14.5% from 15% the year before, the first annual decline since 2006.
STATE OF THE UNION
Taken together, these figures reveal a country where citizens can find jobs and borrow at attractive rates; a country with solid GDP growth, low inflation and companies in sound financial shape; a country with a long way to go on reducing poverty levels and boosting wage growth, but one that has made important strides over the past few years; a country whose economy resembles not a zombie, but something very much alive.
Will this bode well for the Democrats in 2016? Probably. But should it? Probably not.
The connection between a sitting president and the economy is overstated. This isn’t to say the government does not impact the U.S. economy. But causality between policy and results is nearly impossible to prove in the short term, unless a grave policy mistake has been made. It is possible for politicians to derail economic progress, but the engine of the economy is in the private sector. The employees of our 27 million small businesses are the true agents of U.S. production. I’m not sure how much credit should be given to Obama, or any president, for work he didn’t do. To paraphrase Obama himself: “You (presidents) didn’t build that.”
As we head into what will surely be a long election season, be skeptical of anyone on the right trying to trivialize the economic progress we’re seeing; and be equally skeptical of anyone on the left trying to take credit for it.