The last election gave full control of congress to the Republican Party – beyond that party’s most optimistic projections. Yet it was less a positive choice than a last attempt to escape the parlous state the country is in, and for which the party in power – the Democrats – can be held responsible. If the GOP fails to satisfy, the next election’s motto will be “Plague on both your houses”.
While there are many issues, 70% of respondents to election exit polls gave the economy as their biggest problem. Yet we are, officially, in the sixth year of an economic recovery. This discrepancy between the official statistics and popular experience calls for some analysis.
Here is where some of the differences are:
According to government releases, the Gross Domestic Product is in full growth mode and has long passed the 2007 peak. This GDP number is expressed in current dollars corrected for assumed inflation – which, per the Federal Reserve, has been between 1 and 2%.
Anyone who shops regularly experiences a far higher inflation number, somewhere near or over 4%. If that number is used GDP growth flattens out and turns to stagnation. Other growth figures based on nominal dollars less inflation do likewise, matching the popular experience.
Seventy percent of GDP is consumer spending. But, while GDP has (theoretically) fully recovered, household income has not. It dropped in 2007-2008 and has remained stagnant at that lower level. Consumers cannot spend money they do not have, except by taking on debt. But household debt has declined since 2007, except for student debt – which is a negative, since it means that young people are postponing earning an income while piling on debt against future earnings.
With income down and no increase in credit there is no purchasing power – so where does the “growth” come from?
The nation is (again officially) close to “full employment” level. On the other hand the Labor Participation Rate – the percentage of the workforce actually employed – is at a 38-year low, while the number of people on income support programs, such as food stamps or disability, is at record highs. How can employment grow when less people are working and more are on some form of welfare?
After several years of trillion-plus deficits we are told that this year’s will be under $ 500 billion; and government receipts are running are a record level – some 350 billion so far this fiscal year.
Good as far as it goes. But government receipts include the income from the 3 trillion’s worth of bonds the Fed bought with printed money – 250 billion or more this fiscal year. The Fed also used its printing press to buy some two thirds of all new government borrowing over the last four years. Now that the printing press has (momentarily) stopped, the administration must borrow all its needs on the open market – including one trillion since October 1st which pushed the national debt over 18 trillion.
All the above, together with much more similar data add up to a contradictory and disturbing picture: five years of GDP growth but stagnating or falling family incomes; unending deficit spending in Washington; officially near full employment with a record number of people not working; and 70% percent of voters declaring that the economy is not well.
For several years both the administration, backed by the business press, have presented the U.S. economy as recovering, then growing at an increasing rate. Yet the statistics are dodgy and popular experience runs counter to the official view. What if the populace is right and the true economic situation is stagnation – with real depression only held back by massive deficit spending and money printing?
Compounding the uncertainty is globalization: in an integrated world economy trouble at any spot can start a global economic tsunami individual nations are unable to avoid. The problem can be in China, Russia, Venezuela or here, but recent events have shown that the repercussions will be everywhere. National economies are increasingly subject to a new version of the Domino Theory.
It is doubtful that we can entrust our economic future to the International Monetary Fund, the G20 Group, the World Trade Organization or some conclave of Central Banks. We must, to a great extent, restore a degree of national control. For this to happen the American voter must get involved to a far greater extent than is now the case.
Born in Poland, Jacek Popiel was educated in Africa, Canada, and the United States. He speaks five languages. His career spans military and international business development in the Soviet Union, Eastern and Western Europe, North America, and Japan. He is currently a freelance writer and political consultant. His book “Viable Energy Now,” grew out of his military and international business experience and his professional involvement with energy issues.