Asking Obama and the DNC: Are we better off than we were four years ago?

Yesterday Governor O'Malley said Photo: Associated Press

WASHINGTON, D.C., September 3, 2012 — It’s a simple question: Are you better off today than you were four years ago? Is America better off than it was four years ago? 

For Republicans the answer is an easy “no.” For President Obama and leading Democrats in Charlotte, that answer is harder.

To answer “no” is dangerous. If the president or his supporters say “no,” they admit failure. “No” leaves little reason to vote for Obama again, and it isn’t an answer that anyone at the DNC is going to give you after Maryland’s Governor Martin O’Malley blurted it out yesterday.

“Yes” has its own hazards, greatest among them seeming out of touch. A lot of Americans don’t feel better off. To tell the 8.3 percent unemployed that America is better off is to invite derision. You don’t tell a homeless man that everyone else in town has a nice house, and isn’t that just great? You don’t tell millions of people without jobs, and millions more who work from month to month and are insecure in their jobs that things are better without throwing in a lot of qualifiers.

“Yes, if you look at the fact we were shedding jobs four years ago and we’re adding them today.”  “Yes, if you look at the trends.” “Yes, when you stop to think that we’re crawling out of the hole that George Bush dug for us.” “Yes” will work in most cases if it’s sufficiently well qualified, either by reminding the listener of George W. Bush or by defining “better” in hair-splitting ways. 

One problem here is that unemployment remains at 8.3 percent and labor force participation is down to 63.6 percent. Recall that unemployment rate looks at the civilian work force and asks, what percentage of that workforce is without a job? If you’re in the military, in prison, or not actively looking for a job, you aren’t part of the workforce. It’s actually possible for the unemployment rate to fall without job creation simply by discouraging people and sending them out of the workforce to live in a relative’s basement. 

That’s where labor force participation comes in. The participation rate is calculated by counting the civilian labor force, counting the total population in that same age cohort (the number of people of working age), and calculating the percentage of the latter represented by the former. If there are a thousand people aged 18 to 65, and if 636 of them are in the labor force (they have jobs or are looking for jobs), then the labor force participation rate is 63.6 percent.  

And at that rate, it’s at its lowest level in 30 years. 364 people of every thousand of working age aren’t in the labor force. They might have gone back to school, they might be playing video games in their parents’ basements, they might be dealing drugs for a living, they might be stay-at-home moms or dads with no outside employment. Whatever they are, they aren’t in regular jobs and they aren’t looking for jobs. 

If jobs are being created, unemployment is static, and the labor force participation rate is falling, then we are creating jobs at a much lower rate than we need to be. Job creation isn’t keeping up with population growth, the GDP is growing at a much slower rate than it could, and unemployment is worse than it seems.

If labor force participation were at the same rate it was when President Obama took office, the unemployment rate would be above 11 percent. Even then there were a lot of discouraged workers, a lot of people in part-time jobs (underemployed workers are still employed), and a much higher “real unemployment rate” than the official figures gave us. And if we go back to the labor force participation rate when George W. Bush took office, the unemployment rate today would be above 13 percent.

So is America better off today than it was four years ago? Half of new college graduates are unemployed or underemployed (your Starbucks barista may be a chemist or have a law degree). Based on the job creation figures that Administration supporters trot out to say “yes,” the answer has to be “no.” We aren’t digging out of the unemployment hole, we’re digging deeper in. This hole no longer belongs to George W. Bush; it belongs to Barack Obama, and it’s sucking in half our college grads. 

That answer is of course too simple, and perhaps too partisan. A more correct answer might be, “it’s complicated.” 

All else equal, we’re clearly better off with an economy that has net job creation than an economy that’s shedding them. But all else is never equal, and net job creation doesn’t tell us that we’re better off. Also, if people not in the labor force really do become more optimistic about the chances of getting a job, they might start entering the labor force, causing unemployment rates to rise even as the economy is improving. It gets complicated. 

If the response to our initial question is “yes,” followed by a glowing description of job creation, we’re being fed a lie. After their responses to speeches at the at the RNC, we know how Democrats feel about lies; Debbie Wasserman Umbridge needs to start passing out the quills. 

There are other data we can look at, other measures of “doing well.” Ultimately, there’s no precise, easy answer to the question. Some trends are positive, some are negative. We value different things, thus have different ideas of what it means for the country to be doing well. Federal deficits continue to mount, and unfunded government liabilities at every level exceed our $16 trillion debt. The laws of supply and demand haven’t been repealed, and if we continue down the path we’ve set, there will be a reckoning. 

But as Keynes said, “in the long run we’re dead.” Or retired to the lucrative ex-presidents’ lecture circuit. From that perspective, America is doing fine and the future is nothing but rosy. 

 

James Picht is the Senior Editor for Communities Politics and teaches economics at the Louisiana Scholars’ College in Natchitoches, La., where he went to take a break from working in Moscow and Washington. But he fell in love with the town and with the professor of Romance languages, so there he stayed. Now he teaches, annoys his children, and makes jalapeno lemonade. Does he feel better off now than four years ago? He’s just glad to have a job. He tweets, hangs out on Facebook, and has a blog he totally neglects at pichtblog.blogspot.com.

 


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Jim Picht

James Picht is the Senior Editor for Communities Politics and teaches economics and Russian at the Louisiana Scholars' College in Natchitoches, La. After earning his doctorate in economics, he spent several years working in Moscow and the new independent states of the former Soviet Union for the U.S. government, the Asian Development Bank, and as a private contractor. He returned to Ukraine recently to teach principles of constitutional law and criminal procedure at several Ukrainian law schools for a USAID legal development project. He has been writing at the Communities since 2009.

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