Just how much midterm juice will Democrats get out of the fabulous 0.1% GDP growth from 2014Q1, or from the 1.9% growth in all of 2013? Plenty, promised Debbie Wasserman Schultz yesterday at a Christian Science Monitor breakfast meeting. The economy will be a big plus for Democrats in November, “no question,” although at the same time the DNC chair dismissed the national mood as “not as relevant”:
“No question the economic issues are an advantage for Democrats,” Wasserman Schultz, head of the Democratic National Committee, said at a May 7 breakfast hosted by the Christian Science Monitor.
The GOP’s attempts to repeal Obamacare, and its support for the budget plan drafted by Rep. Paul Ryan, show “Republicans are focused on making sure a select few are able to do even better,” she said.
But she latter admitted that her constituents are unhappy with President Obama’s economy, even as she spun the admission to highlight Democrats’ spending plans. Voters, she said, “are asking about investing in education, focusing on continuing to create jobs, on making housing more affordable, the bread and butter kitchen table issues that will add to the confidence that Americans have that this economy is continuing to improve.”
“There is certainly room for improvement” in the economy, she acknowledged, as she downplayed a river of bad economic news about income, the middle-class, the widening wealth gap, more use of foreign workers, and the rising number of people who have lost hope for economic change.
We’ll have a few chasers to this absurd statement, but let’s start with my column today in The Fiscal Times. Extending my previous remarks on the latest Brookings Institution study on the decline of entrepreneurialism in the US, I point out that Obamanomics is the worst possible prescription for what ails the stagnant American economy:
What happened? Hathaway and Litan shrug their shoulders after finding that these trends held steady across all states and metropolitan areas. Clearly, “business dynamism and entrepreneurship are experiencing a troubling secular decline,” they conclude, but “our findings stop short of demonstrating why these trends are occurring, and perhaps more importantly, what can be done about it.”
However, the chart itself suggests one answer in particular. The decades involved in this study saw a significant and accelerating expansion of federal regulatory power, which only had one period of significant reversal – the Reagan era. That period shows the only significant return to a higher rate of business births in the last thirty-five years.
The consistency of the decline across regions and states also bolsters this interpretation. Some states and regions have better economic growth rates than others; Texas Governor Rick Perry has recruited major employers from California on that basis, most recently Toyota’s US headquarters and its 5,000 jobs. Despite a friendlier tax and economic climate, though, Texas still has a lower business birth rate than it did thirty years ago, and so does every other state, and every metropolitan area save one (unnamed). …
As a share of private sector GDP, the federal regulatory burden has increased over the same period as this study. The Phoenix Center recommended at the time that even a small decrease in federal regulatory burden – just 5 percent, roughly decreasing the regulatory budget by less than $3 billion – would generate an additional $75 billion in the economy and add 1.19 million new jobs to the private sector.
Instead, we passed Obamacare.
There’s plenty more, so be sure to read it all. But that’s not the only contraindications of Wasserman Schultz’s declaration, even today. For instance, the housing market recovery suddenly looks a lot less realistic, Yahoo’s Rick Newman reports:
For most of 2013, it looked as if a robust housing recovery was underway. Since housing is a huge part of the overall economy, that bred hope for stronger growth in 2014, along with the hiring and spending that ought to come with it.
But housing has the blahs in 2014, prompting concern that the 2013 spurt may have been a false spring driven by temporary factors or a misreading of events. The latest data show sales of new homes down 13% year over year and sales of existing homes — which is most of them — down 8%. Applications for new mortgages recently hit a 14-year low, as potential buyers seem to be backing away.
The pullback led Federal Reserve chair Janet Yellen to say in Wednesday’s Congressional testimony, “The recent flattening out in housing activity could prove more protracted than currently expected, rather than resuming its earlier pace of recovery.” That raises the prospect of a change in Fed policy if an unforeseen housing downturn materializes. The Fed has been winding down its controversial “quantitative easing” policy, which helped pushed interest rates to record lows during the past five years. But Yellen has said all along the Fed may reverse course if new developments give it a reason to.
American mobility has become increasingly constrained, which is one of the driving forces of the housing stagnation. Robert Samuelson lays the blame on the Obama economy:
Aside from a general couch-potato attitude — a reluctance to move — many theories have been advanced to explain this shift. Among them: an aging society (the middle-aged move less than the young); the rise of two-earner couples (if one loses a job, the other still has one); homeowners with “underwater” mortgages (if they sell their homes, they’ll suffer large losses); and the fading appeal of the South and West with lower costs and warmer weather.
All these sound plausible, but they’re mostly wrong, argues a new study by economists Raven Molloy and Christopher Smith of the Federal Reserve Board and Abigail Wozniak of the University of Notre Dame. A better explanation, they assert, is the job market. Jobs do cause people to move, but jobs are not as plentiful as before and wage premiums are lower. So people move less. (Their study is Working Paper 20065 from the National Bureau of Economic Research.)
For within-county moves, the aging population and homeownership do explain some of the drop in mobility, the economists found. But that’s not true for interstate moves. Declines here occurred among all age groups, suggesting that larger forces are at work. Similarly, renters as well as homeowners experienced big drops; this, too, indicates larger forces. As for the South’s and West’s fading allure, migration declines aren’t concentrated in these regions.
What has changed is the nature of the labor market, the study says. Both firms and workers have become more defensive. Companies are more reluctant to hire; perhaps in reaction, workers are more reluctant to quit existing jobs. The result: fewer job offers to tempt workers to move. In addition, bargaining power seems to have shifted to employers. In the 1980s, young workers received an average 7 percent wage increase for moving to a new job, the economists estimate; more recently, the premium is about half that. The lower wage premium also discourages people from costly and uncertain moves.
It’s not just the middle-aged and elderly who are getting defensive, either. Those emerging from college have high hopes, CBS News reports, but are going to face bitter disillusion shortly:
The college seniors who will graduate in the next few weeks have unrealistic expectations of the job market they are entering, according to a new national survey.
Only 18 percent of 2014 graduates expect to earn $25,000 or less, but more than 41 percent of 2012 and 2013 graduates are earning salaries in that range, according to the Accenture 2014 College Graduate Employment Survey. …
At the time the Accenture survey was conducted in March, only 11 percent of the new grads had secured a job, compared to 16 percent for last year’s graduates.
Another survey released this week from AfterCollege, an online entry-level job and internship resource, showed that 17 percent of grads had jobs lined up as of April, with nearly 73 percent of college seniors saying they were looking for work. At this time last year, 20 percent of seniors had jobs, according to the survey.
It’s not just the art history majors (as Obama once framed the issue) having trouble finding work in their field:
Students with degrees that are supposedly in demand did not fare any better in finding work, according to the AfterCollege survey. Nearly 82 percent of students with degrees in engineering, technology and math hadn’t found jobs.
These are the Democrats’ core age demographic – young adults with college degrees. If they’re flipping burgers rather than applying their education in higher-income jobs, they’re not going to buy the chirpy “Happy Days Are Here Again” campaign that the DNC chair apparently wants to conduct. If they’re not motivated to turn out in November, Democrats up and down the whole ticket had better start making contingency plans for their own careers after November.