Tag Archives: defining our terms

Define “A Great Economy”

Our demented President continues to brag about the economy, claiming sole credit for producing good numbers, and (as usual) fabricating many of them.

That said, according to the metrics used by most economists and pundits, the economy is doing quite well.

Republicans running for the House and Senate are trying hard to emphasize that economic “good news,” and one of the more puzzling aspects of the midterm campaigns has been the lack of traction those efforts have generated. Usually, when the economy is humming along, that’s good news for the incumbents; this time, economic arguments don’t seem to be convincing many voters.

The “chattering classes” attribute this to a variety of factors– Trump’s extreme unpopularity, concerns about the negative effects of Trump’s tariffs and the escalating trade war with China. Those things clearly matter, but I have a different explanation: we are using the wrong metrics to measure economic performance . I’ve misplaced the link, but I copied the following paragraph from an MSN website that makes the same point.

A humming national aggregate economy does not necessarily translate into improved livelihoods for most workers. Since the recession, nominal wage growth has been anemic compared to past business cycle peaks. Health-care and education costs keep rising while job benefits disappear. Most households are still in rather precarious financial straits. And there’s still a large population of “shadow” unemployed the official unemployment rate isn’t catching.

According to official statistics, the net worth of the typical American household is still about 20 percent below where it was when Lehman Brothers’ failure triggered the financial crisis. It is true that the gross domestic product is now substantially higher than it was — but a majority of Americans have not seen their incomes improve. And as the above quote notes, the admittedly very good unemployment rate ignores people who have given up looking for work.

If a “good economy” is measured by stock market performance and corporate profitability, then yes, we currently have a good economy. If, however, it is measured both by aggregate indicators and the degree to which citizens share in the prosperity, our economic performance doesn’t look quite so good.

A recent analysis from the Brookings Institution addresses that disconnect. After conceding the positive indicators, the report notes that the labor market continues to struggle.

 Wage growth is still sluggish, with modest gains offset by inflation. Despite recent increases, the share of prime-age Americans in the labor force is still slightly below the pre-Recession level. Levels of unemployment vary widely across places and the population by key demographic characteristics.

The report was generated as part of Brookings annual update of the employment rate gap (which, as the authors explained, differs from the jobs gap), calculating each indicator  by race/ethnicity and level of education. The employment rate gap is the  difference between the demographically adjusted 2007 employment-to-population ratio and the same ratio at other points in time.

As the report concluded,

The Great Recession inflicted economic pain on many American families, but its burden was not equally distributed. Ultimately, the brunt of the Great Recession was borne by those without the protection of postsecondary education. College raises average lifetime earnings, and it also helps insulate workers from economic downturns, providing economic security in the times they need it most. Finally, racial disparities have been less severe in recovery than in the worst years of the Great Recession, though differences in employment rates persist. For the American labor market to be truly healthy, it needs to work for all people—not just some.

A truly “great” economy distributes its largesse widely. It is that often-referenced rising tide that lifts all boats.

When most of the benefits generated by economic productivity enrich only the top 1%–or even the top 10%–that economy is only “great” for the pigs who have monopolized access to the trough.