Opinion pieces and speeches by EPI staff and associates.
[ THIS OP-ED ORIGINALLY APPEARED IN TOMPAINE.COM ON JANUARY 23, 2007. ]
Bush’s whitewashed economic report
When it comes to the economy, President Bush’s State of the Union speeches tend to stick to a pretty standard strategy. Any economic problems are a) due to things that occurred before his watch or outside of his control, b) the result of not enough tax cutting or c) not really happening. Any positive trends are evidence that the tax cuts are working.
Tuesday night’s speech will surely contain a couple of paragraphs touting recent trends in job growth, unemployment and even real wages, which finally started to climb over the last few quarters. You’d be hard-pressed to find an economist without a rightward agenda who would link those outcomes to the Bush tax cuts, but in Bush’s defense, you’d be even more hard-pressed to find a president who doesn’t connect such dots on their watch.
So since we can’t expect to hear an objective assessment of how the economy’s doing from the perspective of the majority of families who aren’t riding the stock market or floating in golden parachutes, let’s take a brief look at what’s going on.
As the president will note, unemployment is low: 4.5 percent in December, and below 5 percent for a year now. What’s more, for the first time in this recovery, the relatively tight job market is helping to generate some pretty decent wage gains. Earlier in the recovery, higher-than-average inflation was gobbling these gains (and more) up, but as prices have moderated, real wages of most workers are up.
The momentum of the full employment economy of the latter 1990s kept real earnings rising for the middle-income earner through 2001, even as unemployment rose. But the jobless recovery that followed—the longest on record—eventually caught up with earnings, and they stagnated or fell thereafter. Despite an improving job market since late mid-2003, energy-driven spikes in prices led to real declines through 2005. When these abated, real earnings grew sharply over the last two quarters.
Note, however, that the buying power of the median weekly paycheck is barely back to where it was a few years ago. Bush will almost surely throw off some of the statistics you can find on the White House website, most of which sound good but don’t amount to much. True, payrolls are up over 7 million since August, but that’s just cherry-picking the start date. If you look over the recovery, Bush still has a lousy jobs record. The figure shown here again puts these gains in context, revealing that employment growth has proceeded at about half the rate of the 1990s recovery, and even slower relative to prior recoveries.
According to the White House website, real after-tax income is up, but this is an aggregate measure combining the incomes of CEO with multimillion dollar bonuses and wage slaves waiting for the minimum wage to get a boost. The most recent median income data on working households, through 2005, shows a 5 percent real loss since 2000. We’ll probably find out that they bounced back a bit in 2006, but not enough to offset that loss.
And so on. Unless the economy is truly in the tank, a president can always find stuff to brag about.
But how will this happy talk resonate with Tuesday’s listeners? During the midterm campaigns, much of what Bush and other economic cheerleaders said tended to backfire because the rosy statistics didn’t match people’s experience. Now that their experience is improving, will he get a little more respect?
I doubt it, for a few reasons. First, the fact that a broken clock is right twice a day doesn’t mean you trust it to tell time. On the economy, the president has spun himself into a hole he can’t get out of. He looks at the economy from 40,000 feet, and it always looks great to him up there above the clouds. Unlike Clinton, you just never get the sense from Bush (nor did you from his dad, for that matter) that he gets the struggles that people face, even people with decent jobs and rising incomes.
Second, his high disapproval ratings associated with Iraq will hurt here, too. Anyone paying attention to national politics right now is likely focused on and nervous about Bush’s single-minded commitment to troop escalation. There may not be much room in the public consciousness for warm feelings about Bushonomics when our last good nerve is constantly being frayed by the war.
And finally, the middle-class squeeze is still on. A few good quarters of wage growth don’t change the equation regarding some of the big insecurities. For families who are squeezed trying to pay for health care, college and housing, not much has changed. (Given slumping housing prices, you’re looking better if you’re a buyer; woe betide the sellers.) For those in most corners of the factory sector, historically large trade deficits and relentless export strategies from Asia are crushing their livelihoods. Those toiling in low-wage jobs without much in terms of health care or pensions are unlikely to be soothed by references they will hear Tuesday night.
Bush’s fundamental problem is that his ideology precludes him from having anything to offer here. His only tool is the tax cut, and with the Dems in charge and large deficits on the horizon, his toolbox is all but locked by the escalating costs of the war and pay-as-you-go strategy that appears to be holding: Any tax cuts must be paid for with more revenue or less spending. He’ll introduce his poorly designed, market-driven health care plan—tax deductions for people to purchase their own health insurance; he might even say something nice about the minimum wage.
But after six years, the inherent limitations of his economic agenda are clear to most of us. We’ve seen the tax cuts and heard the privatization rap and we’re left with much more economic anxiety than should be the case in such a prosperous economy. Now, we anxiously await his successor.
Jared Bernstein is a senior economist at the Economic Policy Institute in Washington, D.C.
[ POSTED TO VIEWPOINTS ON JANUARY 29, 2007. ]