If the economy is so good and getting better, why do people feel so bad about it? Are they being misled by demagogues? Don’t know what they’re talking about? Nostalgic for an imaginary past?
The U. S. Council on Competitiveness, armed with data from the Gallup organization, presents an alternative answer in a new report—the popular view is right:
THE UNITED STATES HAS NOW had seven years to recover from the worst of the Great Recession. During that time, job growth has been steady, if unspectacular, and the unemployment rate has fallen from 10% to just under 5%, where it stands as of this writing. Stock prices, meanwhile, continue to reach and surpass new highs. Leading politicians and commentators reassure the public that everything is getting better.
And yet, there is a pervasive sense that the economy is not working, as documented in Gallup survey data and many anecdotal media accounts. The people are right. The economy is not working well. But the problems did not start with the Great Recession. For decades, the nation’s income, measured as GDP, has barely grown overall; on a per capita basis, median household income peaked in 1999; the subjective general health status of Americans has declined, even adjusting for the aging population; disability rates are higher; learning has stagnated; fewer new businesses are being launched; more workers are involuntarily stuck in part-time jobs or out of the labor force entirely; and the income ranks of grown children are no less tied to the income ranks of their parents
Among their key findings:
- The problem is severe.
- Conventional theories are unpersuasive and often ignore long-term problems.
- Changes in living standards are fundamentally linked to changes in how the quality of goods and services relate to their cost.
- Deterioration in the quality-to-cost ratio for healthcare, housing and education is dragging down economic growth.
- The U.S. population’s health has stagnated or even declined on several measures since 1980, especially for the working-age population.
- Housing costs have swallowed up a larger share of income without a corresponding increase in quality.
- Educational quality is weak and stagnant at all levels.
- A number of indirect consequences result from rising inefficiency in healthcare, education and housing
- In these sectors, regulations have caused damage, which has accumulated over decades.
- Reviving growth will require a new strategy
A couple of observations. None of these problems is recent. How far back do they go? More than 30 years, possibly as much as 40 years. The problems have festered for a very long time and will take a long, persistent effort to remedy.
Very few of these problems can be solved just by throwing money at them. In education we’re already spending a multiple of what was spent 25 years ago in real terms and have very little to show for it.
And the problems won’t be solved by replacing Democrats with Republicans or vice versa. The policies that put us into the fix we’re in have had bipartisan support. The “Washington consensus” has failed, whether because inadequately or improperly applied, practically unworkable, or just plain wrong.
Read it and weep.