But the recovery has reached a point where it looks to be self-sustaining, that magic point when growth begets more growth, hiring begets more hiring, spending begets more spending.
The data points for this optimism are to be found in recent reports on private payrolls (averaging just under 200,000 jobs per month for the past year), gross domestic product (growing at an annual rate of 3 percent), consumer confidence (as high as its been since 2008) and income (up 5 percent in the past year before adjusting for inflation).
On Wall Street, the Dow is at its highest point in nearly four years and Nasdaq at its highest point in a decade, reflecting both record profits and renewed investor confidence. Federal and state tax revenues are beginning to come in better than projected and households are continuing to whittle down their debt, with a savings rate of 4.5 percent. There are even enough green shoots in the housing market to suggest that residential construction might contribute to GDP growth this year rather than subtract from it. Revisions of government data are now reliably up rather than down.
And yet, there are those on the Republican right and the Democratic left who have so much invested in a bad economy that they are reluctant to acknowledge any of this good news.
If all you did was to listen to Republican presidential candidates (a cruel and unusual punishment, I realize), you would surely be under the impression that the country was teetering on the brink of bankruptcy, businesses were barely getting by under the weight of excessive taxation and regulation, and most of the middle class was standing in bread lines. Their relentless demagoguery has undermined the recovery as much as the gridlock politics practiced by their Republican counterparts in Congress. When forced to confront the facts about the economy and the financial markets, the best response these jeremiads can come up with is that it could have been better.
There are some on the left who also cling to the view that the economy is stuck in a depression — lest it undermine their critique about the woeful inadequacy of fiscal stimulus and the desperate need for more.
There is no denying that an official unemployment rate of 8.3 percent is too high and understates the weakness in the job market. But too much of their gloomy analysis is based on a misguided assumption that it’s possible to put the nation on a sustainable growth path without making the painful but necessary structural adjustments required to an economy left badly out of balance by the Bubble Economy.
It is true, for example, that with additional borrowing and spending, we could rehire laid-off teachers and police officers. That would certainly boost employment in the short term, reduce class sizes and make us all feel safer. But the reality is that, even if the economy were to improve as a result, it would be many years before tax revenues return to where they were at the height of the bubble. At some point, spending by state and local governments will have to be brought down to match the level of taxes that their voters are willing to pay. The notion that once unemployment falls below 6 percent everyone will join hands and finally put the fiscal house in order — well, that’s nothing more than political fantasy.