Emerging From The Great Recession

U.S. President Barack Obama waves as he departs the White House in Washington, U.S., September 13,  2016. REUTERS/Kevin Lamar
U.S. President Barack Obama waves as he departs the White House in Washington, U.S., September 13, 2016. REUTERS/Kevin Lamarque

There was some rather important economic news yesterday, which could be summed up as "things are getting better." Incomes are rising, unemployment has stayed low, the number of uninsured Americans has now dropped by half (thanks to Obamacare), and all of these things are happening at historic rates. The Great Recession is finally over, in other words.

This news didn't get nearly the attention it deserved, because bad economic news is always more enticing to the mainstream media. Think about it -- when unemployment was extremely high, each month's numbers were breathlessly reported on the day they came out, as the lead story on the evening news. These days, the fact that unemployment has now stayed close to five percent (5.1 percent or less) for over a full year is barely ever even mentioned. Even when a newspaper runs a headline like: "Middle Class Incomes Had Their Fastest Growth On Record Last Year," it mostly gets ignored on the airwaves. Hey, it's so much more fun to report on the Trump/Clinton daily molehills instead, right?

Digging into the statistics reveals gains not seen in a half-century. That's not hyperbole, either, as the Census Bureau showed (emphasis added):

Middle-class Americans and the poor enjoyed their best year of economic improvement in decades in 2015, the Census Bureau reported Tuesday, a spike that broke a years-long streak of disappointment for American workers but did not fully repair the damage inflicted by the Great Recession.

Real median household income was $56,500 in 2015, the bureau reported, up from $53,700 in 2014. That 5.2 percent increase was the largest, in percentage terms, recorded by the bureau since it began tracking median income statistics in the 1960s.

In addition, the poverty rate fell by 1.2 percentage points, the steepest decline since 1968. There were 43.1 million Americans in poverty on the year, 3.5 million fewer than in 2014. The share of Americans who lack health insurance continued a years-long decline, falling 1.3 percentage points, to 9.1 percent.

A combination of forces fueled the gains, including an improving job market, low inflation and rising wages, particularly for low-earning workers who may have benefited from state and local initiatives to boost minimum wages.

To review: wages grew more than ever previously recorded. Poverty fell at the steepest rate since L.B.J. was in the White House. According to Gallup, the rate of uninsured Americans was at 18.0 percent in 2013, and it is now down to 9.1 percent. That means the percent of people without health insurance is now half what it was, just before Obamacare started. Half! Obamacare has done precisely what it was designed to do, to put this another way. The job market continues to improve, as it has steadily throughout most of Obama's term in office (after the bottom was hit during his first year). The wage gap between men and women even slightly improved. Oh, and raising minimum wages means everyone's wages increase, and this starts from the lowest income levels and moves up -- instead of the top-down wage increases that really only benefit the one percent. From the article:

Liberal economists said it was encouraging that the gains started with the workers who earn the least. Income grew most for the lowest-earning workers and least for the highest-earning ones, though all income groups saw improvement.

"The highest income growth was in the bottom fifth" of workers, "which is very welcome news," said Lawrence Mishel, president of the liberal Economic Policy Institute think tank. Furman, of the White House, credited wage-boosting policy initiatives for some of that increase: "The fact that millions of workers have gotten a raise, as states have raised minimum wages, has definitely had an effect there," he said.

All told, the gains brought median incomes nearly back to their levels before the recession, after adjusting for inflation, though they remain below 1999 levels.

The news, however, was not universally rosy. Those who live in areas where they are represented by Republicans did significantly worse, likely due to resistance to minimum wage increases and the failure of red states to expand Medicaid under Obamacare, as the article also helpfully points out:

Median incomes did not budge significantly in rural areas, while in cities, they grew by 7.3 percent. The South saw significantly weaker income growth than the West.

On health care, states that expanded Medicaid under the Affordable Care Act continued to see a decline in their uninsured rate, widening a coverage gap with those states that did not expand the program.

Put slightly differently, living under Republican rule is dangerous to both your health and your paycheck.

Democrats running for office really need to point this disparity out, from Hillary Clinton on down to individual House races and gubernatorial candidates. They should be shouting from the campaign trail: "We want to raise the minimum wage, but Republicans refuse to do so, even though it is proven to raise everyone's wages without inflation. The data don't lie. Democrats want to improve workers' lives, Republicans refuse to even consider it."

Of course, some Democrats are too timid to make this case. It's always politically risky to tell voters that things are getting better when it's not yet true for all. This leads voters to the assumption that politicians are not only out-of-touch but are actually blaming them for their economic woes: "See? Everyone else is doing better, so there really must be something wrong with you if you aren't," is the way this comes across, in other words. And that's not exactly the way to get people to vote for you. Some Democrats walk this tightrope by tempering their outlook: "Things are getting better, but they haven't gotten better for all, because we still have work left to do." This is more polite than saying: "If the Republicans keep the House, your lives are never going to improve much, because they refuse to consider Democratic solutions that have been proven to work."

It's always politically risky to tell people things are getting better (or worse, for that matter) when their own experiences run counter to the national average. A politician talking in rosy terms about the improving economy isn't going to be welcomed by people who lost their job and still can't find another one. But there's a flip side to this as well, which I'll get to in a moment.

If this were a normal presidential election year, the recent excellent economic news might have guaranteed the race to the incumbent party. Some political science professors use only two basic data points to predict presidential election outcomes, which sounds too simple to be true but actually works remarkably accurately. Just by looking at the state of the economy and presidential job approval ratings, most presidential elections can indeed be predicted. If the economy's bad, or if the sitting president is below 50 percent approval, then the "out" party will likely win the White House. If the economy's good and the president has a clear majority who approve of the job he's doing, then his party will hold onto the White House.

Barack Obama's job approval was just rated at 58 percent in a recent poll. That was higher than other polls, but he's been comfortably above 50 percent in almost all of them for the past few months. Taken together with the economic good news, this would normally mean Hillary Clinton will be elected president in November.

Of course, this isn't exactly a normal election year. The phenomenon that is Donald Trump has already broken many of the rules and safe assumptions people have made. He could continue to do so, running a campaign that is so outside the normal way campaigns are run that it's hard to predict what will happen based only on conventional data and conventional prediction models.

Still, an economy improving at historic rates certainly undercuts one of the main arguments Trump has been making. According to Trump (and Fox News, of course), we are currently still in a post-apocalyptic hellscape of an economy. Things are bad for everyone, across the board. Life sucks and is getting suckier by the day.

But what this could mean is that it is Trump who is risking people rejecting his view of the economy more than any Democrat talking the economy up. Especially for middle-class suburbanites who may have weathered the Great Recession and are now seeing fatter paychecks. For this crucial demographic, Trump's doom-and-gloom on the economy doesn't ring true. Which means it could be Trump who is seen as out-of-touch in his viewpoint rather than Hillary Clinton, Barack Obama, or any other Democrat pointing out that all the economic news is good. Really good, in fact.

Trump's view still rings true to a lot of his supporters, of course. Regions left behind by manufacturing jobs leaving (never to return) are still open to Trump's viewpoint. But they're probably not going to vote for Clinton anyway. The election may instead be decided in the suburbs, as it often is. If Hillary Clinton is making more sense on the economy than Donald Trump to these suburbanites, that will give her a decisive edge. The Great Recession was a deep and lasting blow to the American economy. Barack Obama turned this around, and things have slowly improved over the course of his presidency. But last year, things started improving at historic rates for the poor and middle class. This good news hasn't reached everywhere, but it has reached enough places that might just make the doom-and-gloom message the one that's not believable.

 

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