Response to the President on economic anxiety

Response to the President on economic anxiety

At a Manhattan fundraiser this evening President Obama said the U.S. economy has “bounced back”:

Over the last five years, our economy has recovered faster and stronger from the worst financial crisis and economic crisis since the Great Depression, better than any other developed country on Earth.  And you can take a look at the charts and see that because of the actions we took — because of the Recovery Act, because of the Fed — because of swift, coordinated action, we have bounced back.

We’ve created 8.5 million new jobs over the last five years. We’ve had four years of consecutive job growth as well as economic growth.  We have seen an auto industry that was basically flat-lining rebound in ways that very few people would have anticipated.  The stock market is close to the highest that it’s ever been; close to $10 trillion of wealth has been recovered that was lost.

Presidents always want to be optimistic, but even so this is a very positive framing. He then offers his analysis of why, notwithstanding this good news, Americans are so “anxious and uncertain” about their economic future:

That’s not bad.  And yet, if you talk to folks around the country, there is still enormous anxiety and people feel uncertain about their futures, and more importantly, their children’s futures.  And why is that?  Because although we have rebounded and we are growing and there are all kinds of indicators that tell us that the 21st century can be the American Century just like the 20th was, that growth has been uneven and the beneficiaries of that growth have been uneven.

Set aside for the moment the irony of President Obama saying the problem is increasing income inequality when speaking at a $32,400/plate fundraiser in Manhattan. There’s a better explanation than the increasing income inequality explanation offered by the President. CBO gives it to us:

Employment at the end of 2013 was about 6 million jobs short of where it would be if the unemployment rate had returned to its prerecession level and if the participation rate had risen to the level it would have attained without the current cyclical weakness.

President Obama’s thesis is that the economy has “bounced back,” things are looking pretty good in the aggregate, and people are down because income inequality is increasing and the middle class isn’t benefiting sufficiently from economic growth.

The reality is that the economy is growing, but way too slowly, and only fast enough to roughly keep up with population growth. The economy is still about 6 million jobs short of where it should be if it were firing on all cylinders. Income inequality is increasing, but that trend goes back to the 1970s. It’s not a credible explanation for recent economic pessimism.

President Obama’s diagnosis is wrong in two respects. While the economy is growing slowly, it has not “bounced back.” And people are pessimistic about the economy because there aren’t enough jobs, period. Even worse, President Obama has no proposal to even try to fix that.

(photo credit: Family O’Abé)

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