The state of the economy is, in a word, LOUSY. The friends of President Barack Obama – the bankers and moneychangers on Wall Street – are doing just fine. They have improved their wealth – without contributing to the expansion of the economy – by leaps and bounds. So much so that in a June 4, 2013 tongue-in-cheek column I wrote that I had decided to become an Obama liberal:
“I could live with all of that, but a recent squib in the Wall Street Journal finally showed me the error of my ways. Michael Derby reports:
‘. . . The bank said data that shows a near complete recovery in total aggregate wealth is misleading. The analysts argue aggregate household net-worth data aren’t adjusted for inflation, population growth or the nature of wealth. They note a lot of the recovery in net worth has been tied to the stock market, thus is concentrated in holdings of wealthy families.’ ‘Americans have recovered only 45% of the wealth they lost during the recession, adjusted for inflation, the Federal Reserve Bank of St. Louis estimated. . .
“Bingo!! There it is. While the recession may have begun under President George W. Bush, the “recovery” is all Mr. Obama’s. All of the major stock market indices have recovered and/or surpassed their pre-recession highs. Wall Street moneychangers and investors like me have increased our net-worths beyond pre-recession levels even when adjusted for inflation. Thank you very much Mr. Obama – the overwhelming campaign contributions given to you have paid off handsomely. (Well, the money changers’ campaign contributions, not mine – there are some things not even a pig will do.)”
But back to reality. The criticism of our moribund economy has found a succinct voice in a recent in USA Today article by Trish Regan:
“The world economy faces massive challenges – but you sure wouldn’t know it by looking at the stock market, which, despite the recent sell-off, remains near record territory.
“A poor report on the health of the U.S. economy during the first three months of the year confirms what many already believed – the U.S. Economy is stuck in the doldrums.
“Though some investors and even the Federal Reserve try to blame the weather, our nation’s economic malaise stems from a larger, fundamental problem. A problem that neither President Obama nor Fed Chair Janet Yellen seem capable of fixing: a lack of demand.
“Without a vibrant consumer to buy their goods and services, U.S. companies are hesitant to invest in the future. As such, they don’t hire, and they don’t build. The administration likes to tout the hundreds of thousands of jobs the economy has added this year. Let’s not kid ourselves. These are lousy, low-paying jobs, and they haven’t grown the economy.”
To put it in succinct terms, the gap between the rich and poor has increased, the average income for the working class has declined, and the labor force participation rate remains at a nearly four decade low. If you are Mr. Obama or his friends on Wall Street, if you are President Bill Clinton and have accumulated over a hundred million dollars – much of it from foreign governments and companies doing business with the government – while your wife, former-Secretary of State Hillary Clinton was in office, or if you are a member of Millionaires Club known as the United States Senate, it’s all good.
While Mr. Obama and his progressive friends, including a succession of Democrat governors in Oregon (Gov. Kate Brown being the latest iteration), tout the number of jobs created and the reduction in unemployment, the fact of the matter is that both such number are misleading as used. Yes, the unemployment rate has dropped on a national level to 5.5% nationally and 5.4% for Oregon, but the fact of the matter is that the Labor Force Participation Rate stands at 62.7% nationally and about 62.0% for Oregon – it has been nearly forty years since the rate was so low. Why the disconnect? It’s pretty simple. The unemployment rate is simply a tally of those receiving unemployment welfare benefits and thus, by definition, does not include those who have given up looking or who have exhausted the time period in which they are eligible for benefits. On the other hand, the Labor Force Participation Rate represents the percentage of the total available work force that is actually working or actively seeking work.
Yes, the total number of jobs, nationally, has finally exceeded the number of jobs prior to the Bush/Obama recession but the total number of people of working age has increased faster. In Oregon, the total number of jobs finally exceeded the pre-recession levels (1,752,289) in September of 2014 (1,760,878) but fell back below that level by the end of the year (1,727,275). The total number of private sector jobs surpassed its pre-recession level (1,493,853) in July of 2014 (1,495,572) but fell back below that level by the end of the year (1,455,163). It is interesting to note that while the private sector lost 40 thousand jobs between the 2014 high and the end of the year, the government sector actually increased employment by 7,000, thus accounting for only a 33,600 job loss on a total basis.
And what of the jobs created in Oregon? Well, they reflect Ms. Regan’s characterization as “lousy, low-paying jobs, and they haven’t grown the economy.” For instance, the Construction sector remains 30,000 jobs (30%) below pre-recession levels. The Manufacturing sector remains 32,000 jobs (14%) below pre-recession levels. And the Transportation and Utility sector remains 12,000 jobs (3%) below pre-recession levels. And even that underestimates the losses in those sectors because the figures do not account for working age population growth. In contrast, the Leisure and Entertainment sector (primarily replete with minimum wage jobs – maids, dishwashers, etc.) grew by nearly 17,000 jobs and the Other sector (characterized by laundry workers, animal groomers, and auto detailers) grew by 5,000 jobs. The largest growth was in the Education and Health Sector (private) which grew by 35,000 jobs – almost all of which were non-professional and were characterized by janitors, nursing home workers, etc.
The point of this is that it is not sustainable. If the labor force available continues to grow faster than the job availability it is a license for disaster. If the labor mix continues to migrate from good paying skilled jobs to unskilled minimum wage jobs, it is a license for disaster. If the stock market continues to grow based upon increased profitability from efficiency gains (doing more with less) instead of growing based upon expansion and job creation it is a license for disaster – there is only so much “inefficiency” that you can wring out of a system. In the end we are setting up even the Wall Street class for a catastrophic failure when continuing expectation of future profitability fails to materialize.
Progressive policies have concentrated on redistributing the existing wealth rather than expanding the total wealth so that others may claim their share of the American dream. The results in major city after major city have been disastrous – Baltimore being the latest. And states such as California and Illinois have incurred debts (mostly unfunded PERS liability that clearly exceed the ability to pay and are unfortunately coupled with a stubborn refusal to address the causes because they are dominated by the public employee unions – the source of the excesses. They have compounded the problem by increasing the regulatory burden on small business – the primary job creators – exponentially. As reported by the New American:
“Just in the last few weeks, the Obama administration has proposed or imposed over 1,200 new regulations on the American people that will add even more to the already crushing $2 Trillion per year cost burden of the federal regulatory machine. According to data compiled from the federal government’s Regulation.gov website by the Daily Caller, most of the new regulatory schemes involve energy and the environment — 139 during a mere two-week period in December, to be precise. In all, the Obama administration foisted more than 75,000 pages of regulations on the United States in 2014, costing over $200 billion, on the low end, if new proposed rules are taken into account.”
Three major changes will provide the necessary incentives for economic expansion – tax reform incorporating a flat tax and elimination of most tax credits, deductions and deferrals; re-imposition of “workfare” standards for public assistance, and imposition of a “right-to-work” standard for public employees to reduce the self-serving influence of public employee unions. But I don’t hear anyone talking about these concepts other the Gov. Scott Walker (R-WI). Absent addressing these issues, ten years from now our economy will look like France and we will be wondering how China, India and Japan passed us in a walk.