Is This as Good as It Gets?
June 23, 2014 --
At a climactic point in the Oscar-winning romantic comedy, “As Good as It Gets,” when Jack Nicholson is sizing up his relationship with Helen Hunt—and, to some extent, his overall life—he nervously asks, “Is this as good as it gets?” She didn’t reply directly, but we the viewers know what the poignant answer may well be. Unfortunately, two recent milestones make now an apt time to be asking the same question about the state of the U.S. economy.
The first milestone relates to the size of the U.S. labor market. Last month, the total number of nonfarm payroll jobs in America reached almost 138.5 million, which surpassed the pre-crisis peak (by a slim 98,000 jobs) from January 2008. The second milestone is that this month marks the start of year six of the economic recovery since the trough of the crisis’s downturn (according to the business-cycle-dating committee of the National Bureau of Economic Research). The U.S. current expansion is now in its 61st month and counting, which puts it past middle age. According to the NBER, the 11 previous post-1945 episodes of economic expansion averaged a duration of only 58.4 months.
Encouraging though these milestones are, so much data show how fragile the American economy truly remains. Too few jobs are being created: the employment-to-population ratio remains near many-decades lows. Real earnings are barely rising along with this feeble job growth: median household income at last count sat about 5 percent below its pre-crisis level—and about where it was back in 1989. Output growth is sluggish: for the first quarter, the best government estimate indicates that gross domestic product contracted at an annualized rate of 1 percent. And scanning today’s horizons reveals clouds. Higher oil prices hurt the U.S. economy (America’s energy revolution notwithstanding), and those prices are climbing amidst the widening humanitarian, military, and political chaos engulfing Iraq and perhaps beyond. More generally, last Wednesday the Federal Reserve Open Market Committee downgraded its forecast for U.S. economic growth in 2014 (again, for the seventh straight year), from March’s 2.8 to 3.0 percent to now just 2.1 to 2.3 percent.
What is truly remarkable about the U.S. economy is that it has grown out of the crisis—yes, too slowly and with fragility—with virtually no support from Washington leaders to spur innovation, productivity growth, and dynamism. Years of partisan posturing and other profiles in cowardice have yielded little. No simplification and expansion of immigration policy to welcome the world’s best and brightest minds. No new trade and investment agreements with the world’s emerging markets. No comprehensive reform of business taxation to reduce world-worst rates and complexity. No push to rebuild and rejuvenate the nation’s crumbling infrastructure. Historic expansion of the Fed’s balance sheet is an imperfect substitute, at best, for all the shortcomings at both ends of Pennsylvania Avenue.
It this as good as it gets? We believe America’s leaders—spurred by America’s voters—could do so much more. No disrespect to the fourth estate, but a good place to start would be ignoring the conventional wisdom of many in the media. After Eric Cantor’s shocking primary defeat, many rushed to pronounce dead immigration reform. Really? Yes, Eric Cantor wielded great power as House Majority Leader. But he was just one of 535 total Members of Congress. Are the other 534 truly incapable of finding a humane way to open further America’s doors to those yearning to breathe free?
The American psyche has long been deeply optimistic. And many have lost when wagering against America overcoming challenges. No, this need not be as good as it gets. But the economic climate is not pre-destined to get better. And the American psyche today is guarded: in a new Wall Street Journal/NBC poll last week just 25 percent of Americans reported thinking that “things in the nation are generally headed in the right direction.” Better days will require new leaders being ready to step up. And the sooner they do so, the better.
Articles © 2014 Matthew Slaughter and Matthew Rees. All rights reserved.
Publication © 2014 Trustees of Dartmouth College. All rights reserved.