Tom Power - October 08, 2012
The Economic Glass Is both Half-Full and Half-Empty
The Economic Glass Is both Half-Full and Half-Empty
As the first presidential debate made clear, it is quite easy to describe the current American economy in dramatically different terms and come either to the conclusion that the economy is stalled and making little progress towards recovery or conclude that the economy has been moving steadily through an impressive recovery from a very serious collapse.
Depending on which of those perspectives you take, you might conclude that President Obama’s economic policies have been a complete bust or that they have moved the economy slowly but surely out of the worst economic downturn since the Great Depression.
Obama and his supporters look back to where the economy was when he took office. In the last year of President Bush’s term, job losses in the private sectors of the economy rose from losing about 100,000 jobs a month to 400,000 job losses and then about 800,000 jobs losses a month for his last four months in office.
Job losses, of course, did not abruptly stop just because Obama took the oath of office. The losses continued at that high level for another two months. Then the hemorrhaging of jobs dramatically fell to half the previous level, around 400,000 lost jobs a month until a year after Obama took office when the job losses ended and job growth began. There now have been 31 continuous months of private sector job growth that added 5.2 million jobs back to the economy. That has brought the unemployment rate back to where it was when Obama first took office.
The number of people laid off last month was at the lowest level every reported, bringing new unemployment insurance claims down to pre-recession levels. These incremental improvements have, apparently, been felt by the citizenry as consumer confidence has climbed back to where it was before the recession began. In Obama’s first full month in office the consumer confidence index was at 25. Last month it had risen to 70.
Of course Obama and his supporters believe that the economic recovery policies adopted by his Administration immediately after taking office had something to do with staunching the flood of job losses and reversing it into substantial job gains.
That is the economic glass half full and still filling point of view. Note that it goes back to the worst days of the financial crisis when it looked like the economy might collapse into a decade-long Great Depression, and it measures progress from that terrible low point.
Obama’s critics, including Governor Romney, do not use the previous low point as the reference but rather use the previous levels of prosperity and full employment that we have had in the past. Obama starts with the cracked glass out of which the water was gushing as the reference point. Romney chooses the full and over-flowing glass from prosperous years past as his reference point and sneers at Obama’s half-full glass as unworthy of Americans.
This assures distorted and exaggerated political dialogue about the economy as each side tries to get voters to take either a pessimistic or an optimistic view of the half-filled economic glass. So the crazy political ads will continue until somebody invents a device that automatically substitutes music videos, comedy central, or cartoons of our own choosing every time a political ad tries to come onto our TV.
But there are also important economic considerations associated with the glass half-full or half-empty contrast. Unemployment is still quite high. Many of our productive resources are currently unemployed or under-employed. It would be a mistake to adopt public economic policies now that, while perfectly appropriate for periods of full employment, would currently damage job recovery when we are still struggling to get the job creation rate high enough to create jobs for the still unemployed as well as the new entrants into the workforce. In particular, to call for austerity measures that in the name of cutting the deficit slash government spending across the board, could potentially add millions to the unemployment rolls while undermining our public safety, educational institutions, and basic social services, undermining further the overall productivity of our economy. Such austerity measures would also choke off consumer spending just as businesses have begun to expand again.
A big chunk of our deficit has little to do with government overspending. It is associated with the economic collapse and slow recovery that choked off tax payments just as the government was expanding its support to the families of the unemployed and trying to support new job creation. Until we put our under-employed resources back to work in productive economic activity, we will remain poorer than we need to be and we will find it hard to fund basic public services. We know we can do better. All of us are eager to make our contribution to a full national economic recovery. We are slowly regaining our confidence that we can collectively rebuild a shared prosperity.
Now is not the time purposely crack the half-full and slowly filling economic glass and begin to drain it again, all in the name of austerity and ideological purity. Anger and frustration and anti-government rage may make that path look attractive as a way of venting frustration and getting some immediate emotional satisfaction. But that will just push us back into the economic hole out of which we have been systematically climbing.