November 12, 2104--It's the Middle Class, Stupid

I promise--these will be my final comments about last week's midterm election.

My conclusion--It wasn't the economy, stupid, but the middle class.

The two are entwined, of course, but to understand what happened last Tuesday it's important to think about the economy from a middle-class perspective. This is especially true for Democrats if they, in our lifetimes, are to do better at the congressional and gubernatorial levels.

This time around, tactically, in campaigning, Democrat candidates avoided talking about the economy. This was part of their strategy to run as far away as possible from the unpopular president. The little Barack Obama said during the campaign season--again at Democrats' urging--was about how the economy was improving: unemployment was way down, the annual deficit during his first six years was more than cut in half, and the national debt was growing at a significantly reduced rate.

But if you have a job or are working two or three just to stand still, it doesn't excite or motivate you to learn that someone else, who had been unemployed, now has a job. And that person who now has a job might not be that enthusiastic either. He could be working just 20-30 hours a week, receiving no benefits, and earning only a little more than he would receive from various forms of public assistance.

So, very few in real-life situations are impressed economically, emotionally, or politically that the unemployment rate is down a percent or two. In fact, many don't even believe the numbers since they come from the government and are thus suspect. Because it has been a wageless recovery, what they are experiencing is their own precarious, deteriorating financial situation.

If you were in similar circumstances, what would you care about--the unemployment rate or your household's's bottom line?

Even more, who really cares other than theoretically about the deficit and the debt? This may sound cynical but, again, to people struggling with their own debt what's more real--what the government owes or their mortgage?

Those in the middle who are being squeezed hard--with everyone in the family working--may not know the statistics but they do know their earnings for more than a decade have not even kept pace with rising prices. They feel themselves working harder but slipping further and further behind.

And they are right.

The numbers support that perception. Since Barack Obama assumed the presidency, median inflation-adjusted middle-class income has declined. Last year it was $2,100 lower than it was in 2009. And lower still by $3,600 since 2001 when George W. Bush took office.

Blaming the government, especially those seemingly in charge (Obama and the Democrats, not Bush), is one way to deal with what has been happening to the middle class. They thought they were playing by the rules and that the miracle that has been the American economy would reward them or, more likely, their children. That trust has been betrayed.

Not to talk compassionately about this, as the Democrats didn't, not to focus all their progressive energy on the plight of the shrinking middle class, which they also didn't do, is not just politically ruinous but morally questionable.

It is hard to think what to suggest about this sad situation. What policies, what programs beyond empty promises would make a difference for the middle class? What evidence is there that any realistically realizable government policy might make a positive difference? Perhaps a middle-class tax cut? Anything else?

If true, then at least Democrats should take yet another lesson from Bill Clinton--figure out how to notice and feel people's pain and stop telling people what's good for them.

April 12, 2013--Debt

There is a great deal of misinformation in circulation about debt. It intensified two days ago when President Obama presented his budget "blueprint."

In it he calls for an additional $1.4 trillion in debt reduction over the next ten years; but at the end of the decade, the U.S would still have to borrow hundreds of millions annually to balance its books. This debt, however, is not necessarily a bad thing.

Republicans in Congress, in any case, are up in arms, ignoring the fact that Obama conceded in advance significant cuts in Social  Security and Medicare--outraging his supporters on the left. Speaker of the House John Boehner, raced to the microphones to condemn Obama's proposals, even though they are the kind of budget cuts for which Republicans have been clamoring. Once again we are seeing that whatever Obama proposes, even if it is a Republican idea, once he proposes it, GOP leaders, in knee-jerk fashion, rise to oppose it.

But one thing Boehner said in opposition is striking in its ignorance of even personal economics--he said, that like families, the government should be required to pay its bills on time and not go into debt.

If we expect families to ante up, pay all their bills on time, and not go into debt--as Boehner insists--our economy would be devestated.

Pretty much every American family is in significant debt--mortgages are debts, car loans are debts, student loans are debts; and all of these debts are essential to fueling a modern, vibrant economy. If everyone was required to pay cash for a house, car, or college education, the housing industry would collapse as would the auto industry. In addition, perhaps half the students currently enrolled in college would be forced to drop out.

Debt, as it was thankfully invented centuries ago, is what enabled our form of capitalism to develop because unless individuals, businesses, and national economies are allowed to borrow money, we would still be living in a subsistence, barter economy.

I doubt that Speaker Boehner or Congressman Paul Ryan would like to see that. They might like to roll the clock back to the good-old-days, but not those old days.

Yes, neither governments nor families should be wasteful and roll up irresponsible levels of debt, just manageable ones. Ones that can be afforded. Our deficits are too large and thus our national debt has been growing at too rapid a pace. But in the judgement of most credible economists, our national level to debt if viewed as a percentage of GDB is still manageable. But to be cautious and wise we should be prudent and chip away at it.

During the Obama years, with Republican help, the annual budget deficit has been cut nearly in half; and if his proposed blueprint is given careful consideration (don't hold your breath), it will be cut much further. So let's cool the partisan rhetoric and get to work.