The sharp fall in worldwide oil prices is a silver lining with a silver lining, even if the linings are a bit tarnished. The price of the world’s most widely-used commodity has fallen sharply over the last five months, from a spot market price of $115 per-barrel in late June to $77 last week. For consumers everywhere, that means major savings that will mainly go to purchase other goods and services; and those boosts in demand should spur more business investment. So, if low prices hold for another six months, analysts figure that growth in most oil-consuming and oil-importing countries could be one-half to a full percentage-point higher than forecast, including here in the U.S. and in the EU, China and Japan. It’s a blow to the big oil-producing and oil-exporting nations; but the global economy will come out ahead. After all, the U.S., EU, China and Japan account for more than 65 percent of worldwide GDP, while the top ten oil exporting countries, led by Saudi Arabia and Russia, make up just over 6 percent.
The hitch for this rosy scenario is that much of the revenues that OPEC countries now won’t see would have gone into financial and direct investments in the U.S. and EU. That means that new investments in American and European stocks and bonds could be reduced by some $300 billion per-year. The upshot may be slightly higher interest rates and slightly lower equity prices, which would dampen the growth benefits of lower oil prices.
The lower prices are driven mainly by supply and demand, but market expectations and some strategic maneuvering by Saudi Arabia play a role, too. Yes, worldwide oil supplies are up with rising production from U.S. and Canadian tar sands and shale deposits, and Libya’s fields are fully back online. Moreover, these supply effects are amplified by softness in demand for oil, coming from economic stagnation in much of Europe and Japan, China’s slower growth, and our own increasing use of natural gas. Oil prices also are influenced, however, by the prices that buyers and sellers expect to prevail months or years from now. Last week, when the “spot price” of crude oil was about $77 per-barrel, the price for oil to be delivered next month was almost $10 lower. In fact, the world’s big oil traders see crude prices continuing to decline not simply into 2015, but for a long time: The price for oil to be delivered in mid-2016 is less than $72 per-barrel and, according to these futures prices, not expected to reach even $80 per-barrel until 2023.
Don’t count on a decade of cheap oil. Yes, technological advances have brought down the cost of extracting oil from tar sands, shale and deep water deposits, as well as the cost of producing and transporting natural gas. But the economics of these new energy sources work best at prices higher than those prevailing today. A long period of low oil prices would slow the growth of supply from those sources -- and so drive oil prices back up. The Saudis are counting on it. They’ve refrained from cutting their own production, which could restore higher prices, in hopes that another year of low prices will slow down investments in all of those alternatives sources.
The truth is, oil prices will rise again whether the Saudis’ tactic works or not. While the outlook for much stronger growth remains slim for Japan and much of Europe, an extended spell of lower energy prices will support higher growth here, in China, and across many of the non-oil producing countries in Asia, Latin America and Africa. Stronger growth and energy demand will bring on line more alternative sources of energy -- so long as oil prices are high enough for the alternatives to be competitive.
This is an old story. Oil prices fell, and as sharply as they did this year, in 1985 and 1986, in 1997 and 1998, and in the aftermath of the 2008-2009 financial upheavals. Each time, oil prices marched up again after one, two, or at most three-to-four years. Of course, that volatility also makes some people billionaires. To join them, what you’ll need is patience and a hedge fund’s access to credit. With that, all you do is go out and purchase a few billion dollars in contracts to take delivery of crude in 2018 or 2020 at today’s futures prices, and then dump the contracts when oil prices once again head north of $100 per-barrel.
This post was originally published on Dr. Shapiro's blog.
President Obama deserves at least two cheers for his recent economic address. In an unusually clear-eyed assessment of how the economy has shaped our current politics and national mood, he traced most people’s disillusion with government to their “daily battles to make ends meet.” The “defining challenge of our time,” he declared, is to make “sure our economy works for every working American.” For his part, the President pledged to devote his second term to restoring upward mobility and reducing inequality.
To make progress on these fronts, the President and many progressives should first step back from some common populist myths. In his address, for example, the President stressed the populist trope that the median income today is only 8 percent higher than it was in 1979. The clear implication is that middle-class Americans have been caught in an economic squeeze for nearly 35 years, and Washington should turn away from the policies of the 1980s and 1990s.
This view, at best, is only partly right. It is the case that today’s extraordinary inequality began in the latter-1970s. In 1976, the share of national income claimed by the top 1 percent of Americans fell to less than 9 percent, its lowest point in the 20th century. Since 1977, however, their share of the economy’s rewards has grown steadily and sharply, reaching more than 23 percent in 2008, its highest level since 1928. Nevertheless, most people’s incomes continued to grow at reasonable rates through the 1980s and 1990s. If that strikes many Americans as implausible from today’s vantage, it’s only because much of those income gains were swept away over the last decade. The challenge of restoring upward mobility comes mainly from what has happened economically since 2002.
Here is what has really happened to incomes, based on data released recently by the Census Bureau. Across all households – all ages, races, and both genders -- the inflation-adjusted median income increased by an average of 1.7 percent per-year from 1983 to 1989, or by nearly 12 percent over the course of the Reagan expansion. The recession of 1990-1991 took back about one-third of that progress, leaving a typical middle-class household with net income gains of just under 8 percent from 1983 to 1991. Those gains were followed by more income growth through the Clinton expansion, averaging another 1.4 percent per-year after inflation. The recession of 2001 took back one-fifth of those gains, leaving a typical middle-class household with net income growth of more than 10 percent from the 1990s and 18 percent from 1982 to 2002. Nor did upward mobility stall out in this period: Throughout the 1980s and 1990s, those who had long lagged behind achieved the greatest gains, namely, households headed by African Americans and by women.
The income squeeze most Americans feel today owes its bite almost entirely to the developments of the last decade. Through the Bush expansion of 2002 to 2007, household income growth plummeted to just 0.2 percent per-year. Moreover, those meager gains were followed by the Great Recession, which cost the average household an unprecedented 5 percent of their incomes. Those losses wiped out not only all of the income growth from 2002 to 2007, but also 40 percent of the net gains of the 1990s. Even worse, the economic damage from the 2008-2009 crisis, on top of some new problems, continued to eat away at incomes. In 2010-2011, American households gave back, on average, another 4 percent of their incomes. Those losses finally stabilized in 2012, when household incomes were virtually unchanged. All told, the median income of American households declined nearly 10 percent from 2002 to 2012.
To get out of this hole, policymakers have to confront the two new dynamics which largely define the last decade economically, globalization and technological change. There is no possible retreat from globalization, a historic advance that has drastically reduced poverty across much of the world and driven innovation and cost savings here at home. But the intense competition generated by globalization also produces unprecedented pressures on businesses to cut their costs, and then directs those pressures to jobs and wages. Policymakers can help relieve some of those cost pressures, starting with a stronger commitment to contain the health care costs for both employers and workers. They also could help jumpstart stronger job creation with financial reforms that link a bank’s access to the Fed’s virtually-free funds to its willingness to provide capital for young businesses.
Washington also can help tens of millions of Americans to upgrade their skills for an economy that now provides few rewards for those without the training and skills to operate effectively in workplaces dense with information and internet technologies. For a modest cost, for example, the federal government can provide grants to hundreds of community colleges to keep their computer labs open and staffed on weekends and evenings, so any adult can walk in and receive free training in information and internet technologies.
The economic record also tells us that the government got a number of things right in the 1980s and 1990s. As in the 1950s and 1960s, usually sensible macroeconomic policies tempered the business cycles, especially after dealing with the oil-shock inflations of the 1970s. Successive presidents and congresses also continued to liberalize trade in the 1980s and 1990s, encouraging businesses and workers to shift their resources to areas where they held powerful advantages even as Germany, Japan and other advanced countries began to compete actively again. And from the late 1970s onward, Washington reinforced those advantages by deregulating transportation, telecommunications, and other sectors -- including finance, where policymakers went too far in the late 1990s.
Public investments in infrastructure remained generally robust until the 1990s, and even then, the private sector sunk tens of billions of dollars into new information and telecommunications infrastructure. Higher education programs helped tens of millions of Americans expand their human capital, building on the GI Bill of the 1950s and 1960s with major expansions in student assistance in the 1980s and 1990s. And science and technology policies continued to promote innovation by aggressively funding government research institutes and through technology competitions sponsored by the Pentagon (including the internet).
To restore income gains and upward mobility, Washington also needs to revisit what works. Recommit macroeconomic policy to healthy growth by ending mindless austerity and doubling down on public investments in infrastructure and basic research and development. Further expand the markets for innovative American goods and services by completing the current trade liberalization talks with the European Union and much of Asia. Help millions of young people complete their higher education by reforming student assistance – for example, by replacing most current loan and grant programs with federally-funded free tuition at public institutions that limit their future cost increases to overall inflation.
There is no iron-clad guarantee that these approaches will restore the reasonable income gains of the 1980s and 1990s, much less the stronger progress seen in the 1950s and 1960s. Nevertheless, they provide a credible place to begin, one based on the real economic record and the actual nature of our economic problems.
This post was originally published on Dr. Shapiro's blog
Yesterday I offered some thoughts on the volatility we are seeing in American politics today. The New York Times's Matt Bai, writing from his new perch in the main paper, offers this take:
But to suggest that this week’s primaries are just part of the latest revolt against incumbency, brought on by pervasive economic angst, is to miss some deeper trends in the electorate that are more consequential — trends that have brought us to an unprecedented disconnect between, on one side, the traditional shapers of our politics in Washington and, on the other, the voters who actually make the choices.
The old laws of politics have been losing their relevance as attitudes and technology evolve, creating a kind of endemic instability that probably is not going away just because housing prices rebound. Nor is that instability any longer driven only by ideological mini-movements like MoveOn.org or the tea parties, as some commentators suggest. Voter insurrection has gone as mainstream as Miley Cyrus, and to the extent that the parties in Washington take comfort in the false notion that all this chaos is fleeting, they will fail to internalize the more enduring lessons of Tuesday’s elections.
As someone who has been making the case that a "new politics" is emerging in America, driven by vast changes in demography, media/technology and the global economic and geopolitical landscape, I have great sympathy with Matt's thoughtful take. But at the same time, those who discount the large structural economic changes at work now (driven to some degree by these same changes in media and technology Bai describes), and how they are leaving way too many Americans behind, miss what may be indeed the most consequential set of societal changes underway in America today.
We are in no ordinary economic times. We are leaving one economy, a 20th century economy, with a certain set of rules, global players, skills and knowledge required for success, and entering a new and very different 21st century economy. This new economy is more globally competitive, technology-dense, universally-wired together and in need of transition to a low-carbon foundation. So far America has not done a particularly good job in transitioning to this new economy of the 21st century, as we are both leaving too many in our current workforce behind, and critically, not making the needed investments in our infrastructure and the knowledge and skills of our future workforce to ensure our future success.
I agree with much of Matt writes this morning, but challenge him to look a little deeper at what may be the most consequential societal changes afoot today - the birth of a new and much more challenging 21st century economy. This economy is one which America still has not come to adequately come to understand, and is certainly far away from having a compelling national strategy to transition our 20th century economy and strategies into the 21st.
For years now American have been disappointed with those running the country. In 2006 they swept the governing party from power. In 2008 they gave the Democratic challenger, Barack Obama, a true outsider in every sense of the word, the largest share of the vote for a Democratic Presidential candidate since 1964. In this cycle we've seen establishment figures of both parties get roundly defeated again and again. The disappointment with those in power continues. So what gives?
In 2005 Rob Shapiro and I wrote then that the lack of wage and income growth we had seen in the US economy in the first five years of the decade, if unaddressed, would begin to sweep those in power from office. As the appendix to this essay I wrote recently about the centrality of the economy to American politics today shows, public opinion about the state of the economy tanked in 2005, years before the Great Recession. Since 2005 the economy has consistently been the number one issue in most polls. Since 2008 it has been the overwhelmingly dominant concern of Americans. As it should - the last decade was a lost decade for the American people. We just finished an entire decade where the average American gained no ground, with many - way too many - even ending the decade with lower wages and income than they began it.
It has been our contention that the performance of the American economy has been the central driver of the great volatility in the American electorate these past several cycles. While Americans are concerned about many things - education, immigration, health care, terrorism at home and wars oversees - there is really only one issue the American people have been and will continue to vote on until they see improvement. And that is their sense that their economic struggle has increased, their leaders seem inadequately focused on their plight, and have certainly been unable to make it better. They will continue to "throw the bums out" until they see their own lives getting better.
What that means for the fall is more than anything else voters are looking for a party, a set of leaders with a plan for them and their families. They are looking to see if their leaders "get it," and are offering a plan - a set of actions, proposals, arguments - which has a reasonable chance to end the conditions which created the lost decade, is commensurate to the size of the problem itself, and will help them and their families have a change to improve their station in life. This plan must be focused on rising standards of living and growing employment for every day people, and not on important but more distant concerns of fiscal austerity or Wall Street Reform. It is, to quote an old line, about "putting people first."
My gut is that this fall will be all about winning the economic debate. The party that wins the big economic argument and convinces voters they have a plan for the future will prosper. The parties which talk about other matters, or fail to make a convincing case they have a plan will once again be rebuked by a public asking for more than they have been getting from their leaders for way too many years now.
More on this tomorrow.
PS - Was quoted talking about these matters in the FT yesterday.
In a federal budget filled with mind-boggling statistics, two numbers stand out as particularly stunning, for the way they may change American politics and American power.
The first is the projected deficit in the coming year, nearly 11 percent of the country’s entire economic output. That is not unprecedented: During the Civil War, World War I and World War II, the United States ran soaring deficits, but usually with the expectation that they would come back down once peace was restored and war spending abated.
But the second number, buried deeper in the budget’s projections, is the one that really commands attention: By President Obama’s own optimistic projections, American deficits will not return to what are widely considered sustainable levels over the next 10 years. In fact, in 2019 and 2020 — years after Mr. Obama has left the political scene, even if he serves two terms — they start rising again sharply, to more than 5 percent of gross domestic product. His budget draws a picture of a nation that like many American homeowners simply cannot get above water.
For Mr. Obama and his successors, the effect of those projections is clear: Unless miraculous growth, or miraculous political compromises, creates some unforeseen change over the next decade, there is virtually no room for new domestic initiatives for Mr. Obama or his successors. Beyond that lies the possibility that the United States could begin to suffer the same disease that has afflicted Japan over the past decade. As debt grew more rapidly than income, that country’s influence around the world eroded.
Or, as Mr. Obama’s chief economic adviser, Lawrence H. Summers, used to ask before he entered government a year ago, “How long can the world’s biggest borrower remain the world’s biggest power?”
The Chinese leadership, which is lending much of the money to finance the American government’s spending, and which asked pointed questions about Mr. Obama’s budget when members visited Washington last summer, say it thinks the long-term answer to Mr. Summers’s question is self-evident. The Europeans will also tell you that this is a big worry about the next decade.
Mr. Obama himself hinted at his own concern when he announced in early December that he planned to send 30,000 American troops to Afghanistan, but insisted that the United States could not afford to stay for long.
“Our prosperity provides a foundation for our power,” he told cadets at West Point. “It pays for our military. It underwrites our diplomacy. It taps the potential of our people, and allows investment in new industry.”
And then he explained why even a “war of necessity,” as he called Afghanistan last summer, could not last for long.
“That’s why our troop commitment in Afghanistan cannot be open-ended,” he said then, “because the nation that I’m most interested in building is our own.”
Mr. Obama’s budget deserves credit for its candor. It does not sugarcoat, at least excessively, the potential magnitude of the problem. President George W. Bush kept claiming, until near the end of his presidency, that he would leave office with a balanced budget. He never got close; in fact, the deficits soared in his last years.
Mr. Obama has published the 10-year numbers in part, it seems, to make the point that the political gridlock of the past few years, in which most Republicans refuse to talk about tax increases and Democrats refuse to talk about cutting entitlement programs, is unsustainable. His prescription is that the problem has to be made worse, with intense deficit spending to lower the unemployment rate, before the deficits can come down.
Mr. Summers, in an interview on Monday afternoon, said, “The budget recognizes the imperatives of job creation and growth in the short run, and takes significant measures to increase confidence in the medium term.”
Got an action packed line up this week for those either able to make it to lunch in our offices, or watch on-line. Tomorrow we start with the Chairman of the Financial Crisis Inquiry Commission, Phil Angelides, who will be talking about the necessity of understanding where we have been to help inform the decisions about how to best move forward.
Next up on Thursday is the unveiling of a major new paper by our Green Project Director, Michael Moynihan, proposing a new way to help unlock the transformative power of the clean tech and renewable energy revolution. Michael has been working on this paper for close to a year now, and if these are areas of interest, you won't want to miss it.
Finally, on Friday, an old friend, Joel Kotkin, returns to NDN with one of the first public events discussing his compelling new book, The Next 100 Million: America in 2050.
So, a full week. To RSVP or to get more information click here. And look forward to seeing you at one of these wonderful events.
This week, President Obama and Senators Schumer and Hatch proposed important job creation ideas similar to those advocated by NDN and Dr. Robert Shapiro over the past several months. At the core of these proposals sit payroll tax cuts or tax credits that reduce the employer’s cost of hiring, which NDN has advocated as the most effective way to spur employment in the near-term.
Dr. Robert Shapiro, Chair of NDN's Globalization Initiative and former Under Secretary of Commerce for Economic Affairs, said this about the White House and Schumer-Hatch proposals:
Reducing the cost to hire at a time when the economy is encountering special problems creating jobs simply makes good economic sense, and reducing the employer's payroll taxes on new hires, when the employer is also expanding its overall workforce, is the most effective way to do it. The proposals advanced by the White House and Senators Schumer and Hatch do just that. NDN has long promoted versions of this approach, and while there are no silver bullets for unemployment, understanding the dynamics responsible for weak job creation now and throughout the 2002-2007 recovery is a necessary first step to restoring real prosperity. Taking targeted action now by reducing the payroll tax for new hires a vital next step.
NDN congratulates the Obama Administration and Senators Schumer and Hatch for offering this important proposal and will work for the rapid passage of this measure. For Shapiro's advocacy of such an approach, which dates back to October, please see:
January 20, 2010, The Path to More Jobs and Growth – "It’s virtually the only proposal that’s actually targeted directly at job creation, and it’s effective because it directly reduces a company’s cost to create new jobs. Its’ projected power to boost GDP follows directly from its success in creating jobs, since the new workers would spend virtually everything they earn, boosting output in the goods and services they choose and the jobs required to provide those goods and services."
December 4, 2009, Video of the White House Forum on Jobs and Economic Growth: Encouraging Business Investment, Competitiveness and Job Creation working group in which Dr. Shapiro discusses this proposal.
December 2, 2009, How to Create Jobs in a Troubled Economy – "Exempt from payroll taxes the first $3,000 to $5,000 of wages paid in each of the first two years to new hires by firms that expand their work forces."
November 2, 2009, The Storms on the Economy’s Horizon – "An even better idea would be to jumpstart new job creation by exempting the first few thousand dollars of wages from payroll taxes."
In prepping for my Fox News appearance this morning, I thought a lot about that old conservative bogeyman of "tax and spend liberal," and the current attacks on Obama for being for high taxes and big government. I've always thought that one of the greatest accomplishments of the 20th century conservative movement was to reduce the conversation about our economic future into a purely fiscal discussion, about tax cuts and size of government talk - as if there was no difference between the two. For in ideological terms, the right has believed that tax cuts and smaller government create growth, high taxes and big government stifle it. But is this true?
The Clinton Presidency - Raised taxes, size of government shrunk, deficits became surpluses, growth exploded, incomes went up.
The George W Bush Presidency - Cut taxes, size of government exploded, debt and deficits went to historic levels, most challenging recession in 70 years, incomes dropped.
Oops. Guess the conservative bromide of big taxes and big government is just that, a terrible and inaccurate bromide. The economy is a little more complicated than it first appears, I guess.
Of the many things all this means is that Democrats should not give into arguments and statements which however attractive they may sound are untrue. My own read of the polls is that people don't want the economic conversation to be reduced to a fiscal one. They want their government to have a strategy that ensures broad based prosperity first and foremost. They understand, perhaps unlike Washington, that such a strategy must have many parts, of which taxes and spending are only a part. The message goal here this week is for the President to stay focused on his "strategy," and explain that his strategy is big enough to actually solve the problem most feel - which is ten years of no income games.
People are willing to give the Democrats time to get the economy going, tackle the deficit, create jobs because they understand more than wealthy folks how long the economy has been bad for them, and reasonably, don't expect it to be fixed overnight. But the American people are only going to give Democrats time if they feel that the government has a plan big enough to actually fix the economy in the years ahead. Small bore ideas - like small tax cuts for middle class families as we saw in 2009 - aren't going to cut it. This is not the 1990s. The troubles with the middle class and the economy are not small - they are big, perhaps the biggest in all of American history. Small bore initiatives - the "school uniforming" of the economy - aren't going to cut it this year. In fact there is a strong argument that doing a series of small things may in fact be the very opposite of what is needed, and reinforce that the President and his party really don't get how tough it is out there.
And along the way the President and his party will have to do everything they can to stare down the high tax, big government bogeyman who will be very present in the national debate this year. People don't like taxes, but they will like governments who are unwilling or unable to do what is required for them and their families to succeed even less.
Last week I penned a piece for Salon on the economic way forward, Crafting A Response to the Rise of the Rest. You can find it here.
My thoughts tonight? I repost an essay, The Key to the Fall Debate: Staying Focused on the Economy, I originally published on September 3, 2009. It ran all day on the front page of the Huffington Post, and I think still speaks to the political moment:
Sept 3, 2009 - The last few months have not been particularly good ones for Democrats. That's the bad news. The good news is there a clear roadmap for how they can use the coming months to get back on track, and it revolves around staying relentlessly focused on the economy and the struggle of every day people.
1) The Lack of Income Growth for Average Families is the Greatest Domestic Challenge Facing America Today. Depending on how you cut the data, American families have not seen their incomes rise in at least eight, and perhaps, ten years. Even in the Bush recovery, which was by many measures, robust, median incomes declined, poverty levels increased, debt loads exploded. The typical American family ended the Bush era making $1,000 less than at the beginning.
Basic economics tells us when productivity increases wages and incomes rise. When GDP expands, jobs are created at a certain rate. Neither of these events took place in the Bush era, leading us here at NDN to argue that there is a large structural change being brought about by globalization that is making it harder for the American economy to create jobs and raise the standard of living of every day people.
That median incomes dropped during a robust economic recovery made the Bush recovery different from any other recovery in American history, and has made the current Great Recession different from other recessions. The American consumer was already in a very weakened state before the current recession, which is why the recession has been more virulent than many predicted, and why the coming "recovery" might be so anemic. The economy seems to be going through profound, structural change, making old economic models anachronistic. We are literally in a "new economy" now, one that is not well understood, and one that is confusing even the President's top advisers.
Simply put, getting people's incomes up is the most important domestic challenge facing those in power today. It is not surprising that other issues like health care, energy policy and climate change are being seen through a prism of "will this make my life, my economic struggle better today?" because so many families have been down so long, and things have gotten an awful lot worse this year. Regardless of what they hope to be graded on by the public, the basket of issues that will do more to determine the success of the President and his Party is both the belief that things are getting better, and the reality that they are for most people.
2) The Public Believes the Economy Is By Far and Away the Most Important Issue Facing the Nation Today. In poll after poll this year, the public has made it clear that the economy is their most important issue, with really nothing coming in a strong number two. The new Pew poll out this week maintains the basic ratio we have seen for months: mid 50s say the economy is number one; 20 percent of the American people say health care is their number one concern; and literally "zero" pick energy (see the chart to the right).
While one could mount an argument that one should not govern by polls, one can also ignore them at their own peril. The country wants their leaders focusing on what is their number one concern - their ability to make a living and provide for their families in a time of economic transformation - which also happens to be, in this case, the most important domestic issue facing the country.
My own belief is that one of the reasons the President and the Democrats have seen their poll numbers drop is that they have spent too much time talking about issues of lesser concern to people while the economy has gotten worse. There is a strong argument to be made that the President and the Democrats have taken their eye of the economic ball, and are paying a price for it. This doesn't mean the President shouldn't be talking about health care, climate change, education, immigration reform, but they must be addressed in ways that reflects both their perceived and actual importance; and as much as possible discussed in the context of long term and short term benefit for every day people and not abstract concepts like "recovery," "growth," "prosperity," which in this decade are things that have happened to other people.
We have long believed that the lack of a sufficient governmental response to the increasing struggle of every day people has been the central driver of the volatility in the American electorate in recent years (see here and here). Given the poll and economic data of recent months it is possible that the conditions which have created this volatility remains, and simply cannot be ignored for too long.
3) The Way Forward - Make The Struggle of Every Day People The Central Focus Of the National Debate. The great domestic challenge facing President Obama is to ensure that, in this new age of globalization and the "rise of the rest," the country sees not "growth" or "recovery" but prosperity that is broadly shared. Until incomes and wages are rising again, fostering broad-based prosperity has to be the central organizing principle of center-left politics. It is a job we should be anxious to take on given our philosophical heritage, and one that we simply must admit is a little harder and more complex than many have led us to believe.
Luckily, the President has been given three significant events in September to begin to make this rhetorical and governing turn - Labor Day next week, and the G20 and UN General Assembly meetings in late September. He can use this events to re-knit together his argument, weaving in health reform and energy/climate change (and we believe immigration reform too) along the way. For there is no broad-based prosperity in 21st century America without health care costs coming down (which has to happen to allow us to cover more people), and a successful transition to a low-carbon economy. Even though the Congressional committee and legislative process requires these to be separate conversations, in fact they are one conversation, one strategy for 21st century American success, one path forward for this mighty and great nation.
Vice President Biden's speech about the economy today is a very good start in this needed repositioning. But much more must be done. In a recent essay I wrote:
There have been calls from some quarters for a 2nd stimulus plan, an acknowledgment that what the first stimulus has not done enough to stop the current economic deterioration. This may be necessary, but I think what will need to be done is much more comprehensive than just a new stimulus plan. Future action could include a much more aggressive action against foreclosures, a more honest assessment of the health of our financial sector, an immediate capping of credit card rates and a rollback of actions taken by credit card issuers in the last few months, a speeding up of the 2010 stimulus spending, a completion of the Doha trade round and a much more aggressive G20 effort to produce a more successful global approach to the global recession, the quick passage of the President's community college proposal, enacting comprehensive immigration reform which will bring new revenues into the federal and state governments while removing some of the downward pressure on wages at the low end of the workforce, and recasting both the President's climate and health care initiatives as efforts which will help stop our downward slide and create future growth.
These are some thoughts on how to re-engage the economic conversation but many other people also have great ideas on what to do now that the specter of a true global depression has been averted, and we have the luxury of talking about what to do next. Which is why NDN is launching a new series of discussions on the global and American economies. We begin next week with Dr Jagdish Bhagwati and Dr. Rob Shapiro. Keep checking back on our site for the next events in this important new series based in Washington, DC but also webcast for anyone to watch no matter where they are.
The bottom line - the recent decline in the President's poll numbers are reversible. The key is for he and his Party to make the struggle of every day people their number one rhetorical and governing concern. A "new economy" is emerging in America, and it is not has been kind to most Americans. Getting incomes and wages up in this new economy of the 21st century is in fact the most important dmoestic challenge facing the country, and one the American people are demanding a new national strategy for. This fall is the time for the President to make it clear to the American people that he understands their concerns, has a strategy to ensure their success in this new economy, and will make their success the central organizing principle of his Administration until prosperity is once again broadly shared.
Update: In early July I wrote an essay, Not Taking the Presidential Eye Off The Economic Ball, which also looked at some of these same themes.
This month’s off year elections sent one message to Washington that has been heard loud and clear. Voters expect Congress to focus on the economy, especially employment, and take decisive and affirmative steps to deal with both the causes and ravages of the greatest economic downturn in the U.S. since the Great Depression. As the Obama administration considers a variety of new proposals to help bring down the unemployment rate, one key constituency is raising its voice and asking for a return on the investment it made in his presidency.
Members of the Millennial generation, born between 1982-2003, who were eligible to vote in 2008 went for Barack Obama over John McCain by a 2:1 margin and made up over 80% of the President’s winning margin. They continue to support his presidency and identify as Democrats by similar margins. A late October Pew survey indicates that Millennials identify as Democrats over Republicans by almost 20 percentage points (52% vs. 34%), well above the 8-point Democratic advantage among older generations. In the latest Research 2000 weekly tracking survey conducted for Daily Kos, 80% of Millennials had a favorable opinion of the president; only 14% of everyone in this generation viewed him unfavorably. This compares with a 55% vs. 39% favorable/unfavorable ratio among the entire electorate in both the Research 2000 survey and in a series of November surveys conducted by organizations ranging from ABC News and the Washington Post to Fox, although some other polls put the President’s job performance ratings closer to 50%.
But despite the clearly stronger support the President has among their generation, Millennials are increasingly restive about the lack of action in Congress to address the economic problems they face – both now and in the future.
Recent Pew research studies underline the major impact that the recession has had on individual Americans and their families. Thirteen percent of parents with grown children told Pew researchers that one of their adult sons or daughters had moved back home in the past year. Pew found that of all grown children living with their parents, 2 in 10 were full-time students, one-quarter were unemployed and about one-third had lived on their own before returning home. According to the census, 56 percent of men 18 to 24 years old and 48 percent of women were either still under the same roof as their parents or had moved back home.
The lack of jobs was particularly acute among adult members of the Millennial Generation (18-27 year olds), 61% of whom said that they or someone close to them was jobless recently. A clear plurality (46%) says that the “job situation” rather than rising prices (27%), problems in the financial markets (14%) and declining real estate values (7%) is their major economic worry.
As a result, the number one concern among Millennials is the state of the economy and the need for jobs, but they have a unique perspective on how to deal with this issue.
Millennials believe there is a clear link between education and employment and are increasingly concerned that the pathway through the educational system into the world of work is becoming increasingly more difficult and expensive to navigate. Last week, about one hundred of the nation’s top private sector and government leaders gathered for the Wall Street Journal’s CEO Council also identified education as the nation’s top economic priority.
For Millennials, the problem is personal. A smaller share of 16-to-24-year-olds – 46 percent – is currently employed than at any time since the government began collecting that data in 1948. A job market with Depression-level youth unemployment (18.5%) and a wrenching transformation in the types of jobs America needs and produces makes the implicit bargain of education in return for future economic success harder for Millennials to believe in every day.
Recently Matt Segal, Executive Director of the Student Association for Voter Empowerment (SAVE) and Founder and National Co-Chair of the “80 Million Strong for Young Americans Job Coalition” presented some ideas to the House Education and Labor Committee on what Congress could do to address this challenge. He advocated increased entrepreneurial resources be made available to youth; more access to public service careers through internships and loan forgiveness programs; and the creation of “mission critical” jobs in such fields as health care, cyber-security and the environment that would tap the unique talents of this generation. Since two-thirds of Millennials who graduate from a four-year college do so with over $20,000 in debt, debt, his testimony also urged immediate Senate approval of the student debt reform bill recently passed by the House.
There is more that can be done beyond these excellent recommendations. This summer, the President's Council of Economic Advisors released a report outlining the importance of community colleges in making America's workforce more competitive in the global economy. "We believe it's time to reform our community colleges so that they provide Americans of all ages a chance to learn the skills and knowledge necessary to compete for the jobs of the future." The report urged Congress to pass House Democratic Caucus Chairman John Larsen’s bill, The Community College Technology Access Act of 2009, in order to help meet President Obama’s goal of graduating five million more Americans from community colleges by 2020.
Millennials, like their GI Generation great grandparents in the 1930s, are facing economic challenges that caught them by surprise and for which no one prepared them. But Millennials aren’t looking for a handout or sympathy. Instead, in the “can do” spirit of their generation, they are organizing to overcome the challenges created for them by their elders. It’s time for the Democrats who control Congress to recognize these concerns and to act decisively on their behalf.