Wednesday, May 27, 2015
The Anemic State of Our Economic Recovery and a 35-Year Republican College Prank
Brad DeLong takes the measure of our anemic economic recovery:
It's been six years since the near implosion of the U.S. financial markets, and (for example) a decline in construction from 1.2 trillion to 800 billion/year, and a decline in the labor participation rates of 25-54 year old men--i.e. men in their prime working years--from 88% to 81%:
... and a decline in the labor participation rate of 25-54 year old women from 73% to 69%:
The employment of men and women in their prime working years has recovered somewhat, with lower paying jobs they say: back to 84% for men; and 70% for women. This means the recovery still is 4% shy of getting 25-54 year old men back to work, and 3% shy in getting 25-54 year old women back to work.
With an active work force of ~101 million 25-54 year olds, this represents a shortfall in the recovery of approximately 3.7 million workers--people who were working in 2008 but are without a job now.
DeLong shows us this graph:
.... and he asks, what is it that is supposed to drive a full recovery?
Looking at the four components of demand in the Federal Reserve Economic Data (FRED) above we see exports have recovered and moved ahead, and equipment purchases have recovered. The shortfall is attributable largely to a continued lackluster recovery in the housing market, .... but, above all, in the collapse in government purchases.
While interest rates have been at historic lows--essentially free for government borrowers--for the past six years, government purchases are still off 3.5% from their year 2000 levels. In the meantime there is a huge need to invest in deferred maintenance of infrastructure, and bringing infrastructure up to 21st century levels--so we can be competitive in world markets.
And whom do we have to thank for our government's inability to think clearly on these issues: Republicans ... mostly. Over the past 35 years, the ideological blinders of the modern Republican party have put a straightjacket on political discussion; the Republican party, together with their boosters and cheerleaders in the popular press, and their sycophants in think tanks and universities, have managed to move the goalposts of discussion off the playing field. I look at candidates like Ted Cruz and Marco Rubio and I think : it's quite the college prank.