November 8, 2012
One of the most
interesting aspects of every presidential election is the inevitable
postelection trauma suffered by the roughly 50% of Americans who supported the
unsuccessful candidate. Those of us with long memories will recall Americans
vowing they would leave the country after George W. Bush won the disputed 2000
election, and again four years later. Judging by President Bush's extremely low
profile during the 2012 presidential election campaign, his eight years in
office were not considered an unqualified success even by his own party. Yet
the country has survived, and one can predict with confidence that it will weather
any political issues (and policies) that arise during a second Obama
presidency.
In fact, if the citizens
whose candidates won can come down from their highs, and those whose candidates
lost can shake off the depression, they would notice that the country's
economic system has been remarkably resilient despite the dysfunctional political
process that virtually everybody, on both sides of the spectrum, rightly
deplore. Despite the selloff the day after the recent election, the American
stock market has actually delivered better performance under Democratic than
Republican presidents--for no visible economic reason. (The accompanying chart
shows the evidence pre-Obama.)
The biggest economic
problems that America faces today have actually accrued slowly, gradually, and
under the stewardship of multiple presidents from both parties. There is some evidence
that the U.S. electorate doesn't yet understand the high cost of avoidance, of political
one-liners offered by candidates from both parties that have trivialized very
real long term problems or suggested that they can be solved quickly if the
right person is elected.
Fortunately, it is
possible to understand the nature of these bigger-picture, bigger-than-asound- bite
problems--and the solutions. You just have to put up with a lot of charts.
The charts can be
found here: http://www.businessinsider.com/politicseconomics-facts-charts-2012-6#
courtesy of Business Insider. What you see first is a long, relatively
smooth avenue of growth in the U.S. economy since 1947, punctuated by a significant
drop in 2008 and a recovery to the former highs since then. A second chart
shows real per capita income--the amount of money, inflation-adjusted, that the
average worker takes home, and here we see a bigger drop for a longer period of
time. Perhaps the most remarkable chart shows essentially the same thing for
corporations: you see a very steep drop in corporate profits after tax from
2008 through 2010. But then, unlike the worker income, corporate profits zoom
back up again, surpassing record highs. What is most remarkable is that most of
the rise in corporate profits--literally much more than half--has been recorded
in the last 11 years. Before that, corporate profit growth was slow and steady.
In the past decade, it has been very uneven and spectacularly fast.
The next chart shows
that companies are making more profit per dollar of sales than ever before. The
next set of graphs is about jobs, and you see a big drop in civilian employment
as a percentage of the total population during the recession, which bottomed
out in 2010 and continues to scrape along at roughly 58%--well below the late
1990s high of 64%. But if you look at the chart as a whole, those high employment
rates were a historical anomaly. The current total employment-population ratio
is actually higher than it was at any time from 1940 to 1976, and is well above
levels in the early 1980s. In the following chart, we see that wages as a
percent of the economy have reached an all-time low (roughly 44%). Companies are
sharing less of their revenue with employees than ever before.
What about debt and
spending levels? You already know that total debt in our economy is at an
all-time high, although individual debt has leveled off since 2008. In
subsequent charts, this is broken down into household debt, corporate debt, state
and local debt, and federal government debt. All of them have risen dramatically
over the past 30 years; the lines practically jump off the page. So, of course,
you look for where to cut. A chart looks first at the number of state and local
workers, and finds that they now represent about the same percentage of total
U.S. employees as there have been for the last 40 years. The next chart, the
39th in the series, shows that, despite what you may have heard about a
ballooning Washington bureaucracy, the total number of federal government
employees has held steady for nearly 50 years, and is actually below levels in
the late 1960s. Looked at another way, federal government workers now make up a
smaller percentage of the total workforce than at any time since the 1940s.
The federal debt
problem is not complicated: charts show that spending has gone up as federal
tax revenue (due to the recession and slow recovery) has fallen dramatically.
The most interesting subsequent chart shows that by far the biggest contributor
to the increase-- really, the reason there has been any increase at all--has been
an explosion in the cost of Social Security, Medicare and Medicaid. You look at
the line rising from 1960 through 2011 and it looks a bit like the slope of the
Matterhorn: straight up. These programs now make up a record 16% of all
American economic activity--up from roughly 4.5% in 1960. And, of course, every
year sets a new record.
The inescapable
conclusion of this economic graphic slideshow is that corporations have done
very well during the four-year term of a president who business leaders have
accused of being a socialist. Individual workers have suffered under what many
have called a "populist" president. Overall debt has leveled off, but
somehow, the U.S. is going to have to gradually fix the out-of-balance social
programs, by reducing benefits and collecting more revenue to pay for them.
The slide show
commentary suggests that it took us 30 years to get into this mess; it may well
take us 30 more to climb back out of it. Let's see; that covers the span of
between four and seven future presidents, and the White House will almost
certainly change hands (or parties) several times over that time period. We will
need all of them, plus Congress, to recognize what you now know. And we will need
all citizens, even those who were disappointed by the recent election, to
continue to push for meaningful solutions rather than take their money and vote
to Canada.
