President Obama has been to a number of different speaking venues recently trying to convince Americans that they are better off today than they were five years ago just following the financial crisis. This is a hard sell for the President to the American public. Things in the U.S. economy have noticeably improved. Unemployment is down from 10% to under 6.0 %. More than 3 million new jobs have been created, and monthly job growth now is averaging about 240,000 new jobs a month. The country’s budget deficit has been cut in half as a percentage of GDP (this should be good news to the Tea Party radicals), and there is an additional 129 billion dollars of real personal discretionary income (going into the 4th quarter)versus this time last year. This too is good news for retailers in the coming Christmas season.
These are all positive economic signs, and something the President has a right to trumpet on his behalf. But people aren’t feeling it, and they don’t believe it. When polled, 65% of Americans say they are dissatisfied with the economy, and an almost equal percentage say the country is headed in the wrong direction. Just 41% say they approve of the President’s handling of the economy, and 54.6 % disapprove — in spite of the rosy speeches and declarations of growth, the up-beat numbers being put out by the government. Notwithstanding all of the positives — and there are some real pluses in the over-all economic picture — the President gets no credit, and no respect. This, of course, makes Republicans happy (almost giddy) with the November mid-term election less than two weeks away.
There are, however, some very good reasons for the gloom and dome being voiced by average working people around the country. Real median incomes haven’t increased (for the average working person) since 1999. Since 2009 at least 95% of income gains have gone to the top 1% of earners — not exactly an egalitarian ideal . Earnings for the middle class have been flat for 15 years, while costs in some areas — food, energy, health care and education — have increased, in some cases dramatically. So there are good reasons why the average person is feeling poorer, why they are not quite so ebullient about the outlook for the economy and their own personal situation — why President Obama’s speeches are falling on deaf ears..
In spite of the improvements in the economy, the things the President tries to emphasize in his speeches, there are still problem areas. For instance, much of the improvement in the unemployment rate is attributed to discouraged workers leaving the working force. Also, many of the three million new jobs are low wage service sector jobs, not the good, high paying jobs this country needs to sustain a solid business recovery. Plus, with wage growth virtually flat, consumer spending has been insufficient to encourage corporate America (our much celebrated CEO’s) to hire new employees and invest in new capital equipment. And that’s the reason we’ve not seen the kind of growth in the economy needed to produce a rising standard of living for everyone.
In contrast, however, in just the last quarter, more than 80% of the U.S. corporations (those that have so far reported) have beat their earnings estimates. Corporate America, it would seem, is doing just fine — thank you. The prosperity in the corporate sector is not, however, “trickling down” to the average worker. In just the last five years the 10% of Americans who own more than 50% of the country’s financial assets (stocks and bonds) have seen their net worth increase more than 236%. This at a time when — as already mentioned — the average worker’s income has been virtually flat.
In a pluralistic economy like ours, there’s the public sector and the private sector. In the private sector, labor and capital come together (in an often contentious partnership) to produce wealth in the economy. Workers (labor) are paid wages. Capital earns income in the form of interest or dividends, or the growth (capital appreciation) of financial assets owned. The public sector entities (federal, state or local) collect taxes — income taxes from wage earners and corporate taxes on the earnings of corporations (because of the many corporate tax loop holes, 25% of S&P 500 corporations pay no income tax). In a spoils system like we have in the U.S., politics and public debate (public policy) decide the important questions regarding how the federal government spends the money — in other words, who gets what in the society? And this, as you might expect, is where all the trouble starts.
(to be continued)
The Money Trader