Truthout, October 19, 2006
When election time rolls around, people ask two basic questions about the economy: how is it doing, and who is responsible? The first question is usually easier to answer than the second. People generally have a pretty good sense of how they are doing. But that doesn’t stop politicians from trying to tell them otherwise.
Right now, most of the measures that matter to most people don’t look very good. While employment did grow at a healthy pace in 2004 and 2005, this followed the longest period without job growth since the Great Depression. The unemployment rate is now at a reasonably low level, but it is still higher than it was back in 2000.
More important, the employment rate, the percentage of the work force that has jobs, is still more than 1.5 percentage points lower than its 2000 peak. This corresponds to more than 3 million people who do not have jobs. To a large extent, this drop-off in employment corresponds to young people (both men and women) just dropping out of the labor market. We don’t know what these people are doing or how they are supporting themselves, but we know that they don’t have jobs.
Other measures also don’t look very good. Wages have been virtually flat over the last five years. This is in spite of the fact that productivity growth has been very strong over this period. The number of people in poverty is up by more than 5 million from its pre-recession level, and the number of people without health insurance is up by more than 6 million.
More recently, the rate of employment growth has slowed sharply. If employment growth continues at its current pace, the unemployment rate will be ticking back up by the end of the year. Furthermore, the sharp downturn in the housing market, along with other dark clouds on the horizon, indicates that the economy is more likely to be turning down than up in the near future.
But the Bush administration is ignoring the bad news and instead is celebrating the fact that the Dow Jones stock index has passed its pre-bubble peak and hit a new record high. It is also touting the fact that gas prices have tumbled back into the range of $2.20 a gallon, relieving the burden that high gas prices had placed on many families.
As much I hate to ruin a celebration, three quarters of families own little or no stock (even including their holdings in retirement accounts), so the new stock market peak gives them little cause to celebrate. The lower gas prices are undoubtedly a relief for financially stretched families, but it wasn’t that long ago when gas cost less than $2 a gallon, so again there is little cause for celebration here. (Of course, for the sake of the environment and the country’s security, it is probably a good thing that we pay more for gas to discourage consumption. Although it would be better if higher prices provided the government with revenue that could be redistributed to ease the shock, rather than just going to increase oil company profits, as is the case now.)
In short, the “we’re doing great” crowd has a hard case to make, at least if they want the “we” to be anyone other than richest people in the country. The Bush crew would have a much better case if they focused on the “who is to blame” part of the story. President Bush came into office just as the biggest stock bubble since the Great Depression was unwinding. The collapsing bubble led to the recession in 2001, which began almost immediately after Bush took office.
There is no easy route for recovering from the collapse of a stock bubble (or a housing bubble, as we will soon find out), so President Bush faced extraordinarily difficult economic times. It is not clear what any president could have done to quickly get the economy back on its feet and generating employment at a healthy rate. But the Bush agenda of giving big tax cuts to the wealthy clearly was not the magic elixir. The economy is not doing well, and unfortunately for President Bush, it seems that most voters know this.
Dean Baker is the co-director of the Center for Economic and Policy Research (CEPR). He is the author of The Conservative Nanny State: How the Wealthy Use the Government to Stay Rich and Get Richer (www.conservativenannystate.org). He also has a blog, “Beat the Press,” where he discusses the media’s coverage of economic issues. You can find it at the American Prospect’s web site.