Friday, November 7, 2014

Election and the Economy- perception v. reality

I wish someone would re-examine some of conventional wisdom about the economy in light of seemingly contradictory facts.

  While the economy is improving statistically, people, we are told, don't feel that things have gotten better.

We are told that median income has been flat or falling.  Therefore the middle class has not benefited from the recovery, and that's why Obama hasn't gotten credit for the robust improvements during his tenure.

 I don't buy it. The latest University of Michigan survey of consumer confidence shows consumer confidence to be exceptionally strong, highest in seven years..

I think the problem arises from the media and politicians, from both parties, focusing on the median income and income inequality too much, and not focusing on the how much the economy has improved.

 The fact that the Dow is up 10,000 points since Obama took office ( remember 65% of American are in the market); unemployment is down from over 10% to under 6%; over five million new jobs have been created; GDP growth has been solid ( especially from  a global perspective) and housing is recovering--- ought to count for something!  And don't forget inflation has been pretty tame.

As I have written several times before, the problem is not between the 1% and the 99%, but rather between the "haves" and the" have nots". That's a real problem as well, but it's a different one, and explains why the economy is growing and things are improving, while the median income has not grown.

 As I've also written , while it's true that the middle class is shrinking, it's shrinking in two directions.  Almost half of those who have left the middle class have gone up ; while the other half have gone down. If many go up and an equal number go down, the median stays the same.  This would mean that there are more people with more income who are doing spending  and growing the economy, even though others have less.

 The 1% couldn't have done all that purchasing  all by themselves. But an increasing group of "haves' could. Note also that consumer debt has continued to go down, so more debt doesn't explain the increase in spending.

 Think about it.  Who's buying all those cars ( especially GMs and Fords).  Who's going to all those malls and restaurants. The 1% don't shop at Wall Mart, or even Macy's, or eat at Applebee's or Chipolte. The growing class of "haves" do and they are not borrowing to do so. Who's going to all those sporting events? The 1% are in the skyboxes!

 My guess is the growing group of "haves" are reluctant to tell people they are doing well , so they have joined the chorus that things are better only for the rich.

 Why am I so hung up on this? It's makes a big difference in the attitudes of people in this country, and politically it's killing the Democrats.

Of course  the Democrats are partly to blame themselves because they keep on refusing to acknowledge that the economy is better. They'd rather focus on the negative aspects of the recovery, to their detriment. Perhaps it's because they are often  just so anti-business that they rarely like to concede improvements have occurred, unless the government did it.

I get where the GOP  is coming from ( they want to win), but not the Democrats.

 Let's just recognize that many people are much better off today, not just the 1%, and work to improve things for those who have fallen behind .
Remember Democrats "don't let the perfect be the enemy of the good".