Written by JHPNYC   

Is Our Economy Headed in the Right Direction?

We’ve heard it said many times, ‘People vote their pocket books’ and ‘It’s the economy stupid.’ It’s largely true. So let’s look at the economy. Notwithstanding all the political rhetoric and competing economic claims on the debate stage and campaign trail, three salient facts indicate that our economy is indeed headed in the right direction.

Job Growth

According to the Department of Labor, the country’s unemployment rate has fallen to 7.8% – the first time under 8% since February 2009. This is not a fluke but a trend. The initial estimates for job creation during July and August this year of 141,000 and 96,000, respectively, have had to be revised upward in line with more accurate data to 181,000 in July and 142,000 in August. Moreover, the number of hours that employees on private nonfarm payrolls work per week has also increased, which usually indicates that employers plan to boost hiring. These improvements are not limited to a single industry, but come from across several sectors of the economy, including health care, transportation, warehousing, and financial services.

Economists variously estimate that our economy needs to generate 90,000 to 125,000 jobs per month to match the number of people entering the work force. Since January 2012, our economy has added an average of 146,000 per month. That’s not enough to return the economy to full employment, but considering that the Democrats inherited the worst economy since the Great Depression of 1929, it’s a good economic trend line. Clearly we are moving in the right direction when it comes to job growth.

The alternative, returning to Republican economic policies, would be the worst thing for our economy. Consider the historical data compiled by the Bureau of Labor Statistics. Notwithstanding how Mitt Romney and Paul Ryan like to beat up Barack Obama and Joe Biden on unemployment and job growth, the fact is that Obama’s Democratic economic policies are demonstrably more job-creating. The facts don’t lie. The prospect of returning to Republican economic policies should send a shudder down the backs of any rational voter.

Government Deficit

When Messrs. Obama and Biden took office in January 2009, the Congressional Budget Office forecast the deficit for that year would total $1.2 trillion. That omelet was cooked under the Bush Administration thanks primarily to a huge tax cut that primarily benefitted the wealthy, and secondarily to the cost of fighting two wars in Iraq and Afghanistan, all financed by Republican deficit spending. We now know that the federal deficit ended up at $1.41 trillion.

Of course, neither the Bush nor Obama deficits are sustainable over the long term. Everyone agrees that the deficit must come down. But severe austerity now would be counter productive. Those are largely the policies that were enacted by many European governments which have contributed to the stagnation that much of Europe is experiencing. America has avoided that stagnation because the Obama Administration has led our economy along a slow but steady growth curve of sensible fiscal policies supported by the Federal Reserve Bank’s careful monetary policies. The effectiveness of this approach was again brought home this past week when the International Monetary Fund (IMF) encouraged governments in Europe to ratchet back the severity of their austerity plans. In America, austerity is the Republican’s new found mantra and if implemented could derail the nascent economic recovery that we are now experiencing thanks to the Democrats’ more balanced approach.

So when it comes to our government deficit, voters can welcome this week’s Treasury Department report that our deficit has declined to $1.1 trillion, a $207 Billion reduction from 2011, thanks to modest economic growth which allowed more people to get jobs and pay taxes on their wages and which saw taxes paid by corporations rise by 6.4%. The improvement in the deficit wasn’t just from more revenue. Under the Obama Administration, federal spending fell 1.7% thanks primarily to ending the unnecessary Iraq War, (which perversely strengthened Iran’s hand in the Middle East), to beginning to wind down the Afghanistan War, (the longest in American history), to aggressively prosecuting fraud and abuse in government contracting, and to shrinking the budgets of many domestic programs. The Obama Biden balanced approach of spending cuts and revenue increases is having a positive effect on reducing our nation’s deficit.

The Democrats want to reduce the deficit by another $4 trillion over the next decade by using a similar balanced approach of spending cuts and revenue increases. For example, they want to eliminate the Bush era income tax cuts just on families that make more than $250,000 year. Unfortunately, the Republicans refuse to take that vote, fighting tooth and nail to preserve tax cuts for the wealthy. Romney and Ryan support their party’s position in Congress. The result is that the GOP is holding hostage a tax cut for families making less than $250,000 year. It doesn’t make economic sense. Obama is proposing tax rates comparable to the levels they were during the Clinton Administration when our economy boomed and both the middle class and the wealthy all did well financially.

And what of the charge by Republicans that Obama’s tax proposal would hurt the small business ‘job creators?’ Under Obama’s proposal, 97% of small businesses would not see their taxes go up. So why do the Republicans resist sensible tax policy?

Perhaps it has something to do with the pledge that most Republicans have made to powerful conservative lobbyist Grover Norquist that they will not vote for any tax increases no matter the country’s circumstances. We saw in the 2010 mid-term elections that centrist Republicans who defied the conservative lobby were cannibalized by their own party, with many of them losing their seats in Congress to more right wing Tea Party candidates. Republicans who historically governed from the center have either been defeated by their more extremist peers or they are retiring. Here is the pledge that Mr. Norquist has convinced the vast majority of Republicans to sign:

"I, ______, pledge to the taxpayers of the ( _______ district of the) state of _____________ and to the American people that I will: ONE, oppose any and all efforts to increase the marginal income tax rate for individuals and business; and TWO, oppose any net reduction or elimination of deductions and credits, unless matched dollar for dollar by further reducing tax rates.

By signing such a pledge, most Republican Senators and Congressmen have committed themselves to advancing an agenda in favor of big business and the very wealthy. There is no room for nuance, for flexibility, for governing as circumstances require as opposed to governing in pursuit of an ideology.

Which begs the question, if the Republicans win the White House and retain control of Congress, Will Our Economy be Headed in the Right Direction? Whether one loves or hates Obama, any rational reading of the factual record comparing the economic impact of Democratic versus Republican policies should leave no one confused about the greater effectiveness in the American economy of Democratic policies.

Perhaps that may be why consumer confidence was reported in earlier this month to be at its highest level since September 2007. The Thomson Reuters / University of Michigan index on consumer sentiment came in at 83 from 78 the month before, the highest during the Obama Administration. As the economy continues its slow but steady recovery, as more people gradually find jobs, as the stock market continues its upward trajectory, people are feeling that the economy under Obama is indeed headed in a more positive direction.

Stock Market

And how has that third important economic indicator, the stock market, been doing? Diehard Republicans say that President Obama has been disastrous for U.S. business. Messrs. Romney and Ryan echo this criticism on the campaign trail. Something else must be motivating their animus because, as Forbes reports, the facts tell a different story. The Standard & Poors 500 Index is up 74% since Obama Biden took office in January 2009. This is the strongest first-term performance of any president since Dwight Eisenhower’s first term in the 1950s. After Obama, the second and third best stock market performances also came under Democratic Administrations, those of John F. Kennedy and Lyndon Johnson. Ironically, the supposedly ‘pro-business’ policies of Republicans Ronald Reagan, George Bush Sr. and George Bush Jr. rank near the bottom of the list in stock market performance.

So what are we voters to make of this data? Well, with job growth increasing, the deficit shrinking, and the stock market flourishing, I think it’s pretty clear that there is a huge disconnect in what we hear from Republican politicians and pundits and what the actual economic facts are. The GOP can use clever debate ‘zingers,’ pithy sound bites and emotion stirring advertisements to paint a negative picture of Obama Biden performance while praising their Republican economic plans. But the economic facts - evident to any Republican, Democratic or Independent voters - clearly favor Democratic economic policies.

So when we step into the voting booth next month and ask ourselves the question, Is Our Economy Headed in the Right Direction, the economic facts provide a resoundingly positive answer of Yes.


© 2012 JHPNYC