The economy is a mess. It’s one thing many Americans and political candidates of all stripes seem to agree on. While it may be somewhat less of a mess than five years ago, the thinking goes, the current administration and Congress have done little to address the crushing challenges faced by large swaths of the American public.
We know this from poll after poll and from the rhetoric of political candidates across the country. Gallup’s daily U.S. economic poll still shows 51 percent of Americans believe that economic conditions are getting worse. In state after state, challengers assail incumbents on the grounds that the unemployment rate is too high and job creation is anemic. In Georgia, Democrat Jason Carter — grandson of the former president — accused the Republican governor of “watching this economy in Georgia leave the middle class behind.” In North Carolina, Republican challenger Thom Tillis attacked incumbent Sen. Kay Hagan as emblematic of failed policies: “Government kills jobs.”
Meanwhile, both the tea party and Democrats find themselves unexpectedly aligned around the thesis that the financial crisis saw a rescue for Wall Street and abandoned the middle class. President Obama may have done better than the Republicans would have, but “when the going got tough, his economic team picked Wall Street,” Sen. Elizabeth Warren (D-Mass.) said last week in an interview with Salon. And now, even as the jobless rate dips to lows not seen since the mid-2000s, many point to the stagnation of wages, the shrinking labor force and the lack of tenable jobs. And then both sides point to the White House.
It’s a powerful narrative. But is it true? Has the whole middle class stagnated while a tiny sliver at the top has reaped rich rewards? Is the jobless rate low only because millions have ceased looking for work and hence shrunk the size of the statistical labor force? Is “the economy” really getting worse?
Obama has pressed a vigorous defense. In a widely touted series of speeches, he cited trends from employment to GDP growth to make his point. Judging from recent polls, Americans aren’t buying it. And the turmoil in financial markets in the past weeks has only reinforced the widespread sense that all is very much not well in the economic world.
Still, in many respects, the guiding narrative is wrong. Not because many of the specifics are wrong but rather because the generalization is. Those generalizations simplify a complicated reality and reduce this thing called “the economy” to something binary: It’s good or it’s bad; it’s getting worse or it’s getting better.
It is unequivocally true that tens of millions of suffering Americans cannot find work or can find only poorly paid work and are unable to meet basic needs such as health care and a living wage. It is unequivocally true that a small number, a few million perhaps, have reaped incredible rewards from the flourishing of capital, from the rise in stocks over the past five years (which has barely been dented by the recent sharp moves down), from tax codes that privilege investments, and from a global capital system that sees capital enriching itself.
But while those trends are unequivocally true, there are other unequivocal truths that are just as accurate, statistically. For instance, that the jobless rate in the center of the United States from North Dakota to Texas is less than 5 percent and has been well below the national rate for five years. It is low there largely because of the boom in hydraulic fracking and before that the boom in agricultural prices. All of those states except Kansas also have GDP growth well above the national rate of 2 percent.
It is true that wages and home prices in the greater Washington area have been growing for years, even as Detroit has been imploding, just as Houston has been thriving, even as swaths of the Central Valley in California have been struggling. Women with a college degree find a favorable labor market close to what economists consider “full employment.” Young African American males with a high school degree or less are well above 20 percent unemployment, with a high incarceration rate.
Generalizing from these huge disparities in race, education, gender and geography should be impossible. Yet that is what our statistics — and then our national conversation — do all the time. If a bar is full of working-class people earning a mean income of $45,000 a year, and Bill Gates walks in, the per capita income would soar millions of dollars per person. The resulting number would tell us very little about the actual composition of the workers in that bar or whether they are flourishing or suffering, yet we still use “per capita income” as a gauge of national affluence.
Even the preferred census measure of “median” income tells us only what the midpoint is, and then very little about distribution. The same is true with a national unemployment rate, or inflation gauge, neither of which gets to the nitty-gritty of just how varied the experience and numbers of individuals can be.
Even the accepted explanation these days that wealth has accrued to the wealthy and left the rest of the country behind isn’t quite as it seems. Yes, the wealthy (especially the top 1 percent) have reaped almost all the income gains in the past six years and much of the gains in the decade before that. But the top two income quintiles saw annual gains of a percent to a percent and a half until 2008.
That isn’t what it was in the 20th century, but we tend to forget that the 20th century also saw much higher inflation. And we forgot that just as income growth has slowed, the costs of many basic goods and services also dropped. In 1950, food represented 32 percent of a family’s budget, according to federal statistics; today, it accounts for less than 15 percent. Energy use has seen similar declines, along with clothing and basic necessities. Health care costs more, but that in part is because we are living longer. Education eats up more costs, but many more people are going to college.
In some sense, we have gone to the other extreme from where we were 50 years ago. Then, Lyndon Johnson announced a War on Poverty because he believed it was intolerable that 20 percent of the country lived in poverty and remained invisible. Today, the 15 percent who are officially below the poverty line and the 30 percent of the population who dip that low at some point, along with tens of millions of others who struggle, are not invisible. In fact, they are brightly visible.
But 50 years ago, far greater attention was paid to what was working in society economically. There was no national business media reporting numbers weekly and compelled to simplify the story. Political campaigns hinged on more than just pocketbooks, with issues ranging from the Cold War and race to safety, the fate of cities and women’s rights. We have ample problems today; we had ample problems then. But our national narrative now is largely dominated by one perspective.
That is a problem because it prevents us from crafting effective answers, whether in the form of national or local policies. If our media and politics can only encompass one reality at a time — economy good; economy bad — then we can’t possibly craft specific solutions to specific problems. Instead, we are left for one-size-fits-all policies. But we don’t have one-size-fits-all problems.
As was true 50 years ago, far too many people struggle mightily in a country that remains one of the world’s richest. That is not the same, however, as saying that only the wealthy are doing well. Income is not, and never was, the sole gauge of living standards; and while it is hard to measure standards of living, in multiple ways — from health, to life expectancy, to education, literacy, personal safety, personal freedoms, housing — those have improved significantly for more people than not. Sweeping those facts to the side is as egregious in its way as ignoring poverty was in the 1950s.
If we acknowledged the variety and complexity, maybe we could think of ways to boost and support where such support is needed. We could use some of the tens of billions of dollars we spend on a safety net for the unemployed and the tens of billions more on disability payments and find meaningful work for those people. That was one of the undisputed successes of the New Deal: deploying the underutilized labor of millions to work on the commons, to lay roads, revitalize cities, help with schools. Yes, we are light-years from that seeming possible today, but in part because we don’t even try.
We could recognize, for instance, that cycles of poverty have everything to do with mass incarceration of young males, and especially young males of color, often for drug crimes. Some states have begun to change, but perhaps more would happen more quickly if we recognized this as an economic problem of the first order.
That’s just one thing. The list is long. If we stopped with the fiction of a binary economy that either points up or down, we might start discussing our economic challenges and thinking of solutions in more creative and effective ways. But we are locked in this cage of our own making, boxed in by national numbers that are loose averages at best, and by a political and media conversation that is seemingly incapable of complexity in a complex world.
Karabell is head of global strategy for Envestnet. His latest book is “The Leading Indicators: A Short History of the Numbers That Rule Our World.”