The US Economy is Slow but Steady, with Signs of Increasing Equality
As a child of the modern world, I love infographics. They’re catchy, fun, and accessible. Sometimes, they tell a fuller story than full articles. They have fewer words and more information than the clickbait that no one admits to reading. In recent years, one set of infographics has kept me visiting Mother Jones over and over again.
They’re from a piece entitled “It’s the Inequality, Stupid!” and they chart who has benefited from the gains of productivity. The answer? The very wealthy. You can see my favorite graph from the article. It’s this story’s cover photo.
You might wonder what this has to do with a discussion of our economy. It has everything to do with it. A glance into the numbers, instead of relying on political rhetoric reveals that America’s growth isn’t stunted; it just isn’t being shared.
I have nothing against corporations. In fact, their earnings are a good measure of our nation’s GDP, which has also been on a steady rise for decades. I do, however, have a problem with corporations reaping the vast majority of the economy’s profits, which they have been doing since the 1980s.
Luckily, it looks like this behavior may be starting to change. The New York Times reports that the trend is small and recent, but it’s definitely there. In the past few years, workers have been getting a bit more of the economic pie, while corporations have been getting a bit less. The Financial Times may be complaining about diminished corporate profits due to the upward pressure on wages, but I’m not. It has been a long time coming and hopefully this is only the beginning.
It’s been seven years, but the United States economy is still feeling the remnants of recession. It isn’t that we aren’t recovering well – we are. We just aren’t recovering as quickly as people would prefer. 2016 projections aren’t helping the matter. The United States is estimating the lowest economic growth since the 2009 recession. Economists are expecting between 1.5 and 2.3 percent growth. It isn’t bad, but it isn’t the rocking growth Americans grew accustomed to in the 1980s and 1990s.
Despite the fact that our economy isn’t rocketing through the roof, Americans have a lot to be grateful for. The Conference Board Leading Economic Index, which tracks a range of economic indicators of growth, agrees with the general consensus: it isn’t stellar advancement. However, they leave us on a more upbeat note than many other sources: “While the U.S. LEI declined in August, its trend still points to moderate economic growth in the months ahead.” Add this message to the other economic indicators we have access to and there is little reason to worry.
Consumer Confidence and Spending
Consumer confidence and spending is a major predicator of economic health. When households stop spending, the economy goes into savings mode and economic growth slows. This isn’t necessarily a bad thing: people change their spending habits in response and in anticipation to real economic indicators. Long-term low spending can, however, create a vicious cycle that prevents an otherwise healthy economy from recovering.
The Consumer Confidence Index is one measure of this indicator. It measures how consumers are feeling about U.S. business and economy current and how their economic expectations in six months. It rose to 101.8 in August, and then to 104.1 in September. With a 1984 benchmark of 100, these aren’t bad scores. In fact, these are the highest scores reported since the recession. If confidence is anything to go on, the U.S. economic climate is looking pretty good.
Balance of Trade
Trade deficits are nothing new to the American economy, in fact, US trade surpluses have been associated with recession and depression. It can sound counter-intuitive, but deficits in this department are often a sign of economic health, growth and recovery. This is because American households buy more foreign goods and the country attracts more investment during times of economic growth. In comparison, Americans stop spending and investors look elsewhere when we fall on hard times. Neither of these scenarios is “bad,” each is just a measure of how individuals and companies are responding to economic cues. The cues they point to, however, are different. A trade deficit more likely points to economic growth, while a surplus is more likely to occur during times of hardship.
Our latest balance of trade report, released August 2016, had grown to $40.73 billion. This is up 3 percent from the July 2016 report, but there is no cause for alarm. Our other indicators point to a healthy, growing economy and our growing trade deficit is an expected piece of the picture.
The Budget Deficit
The budget deficit isn’t counterintuitive at all. Any deficit in our budget is bad. Higher deficits are worse. A high deficit when measured as a percentage of GDP is the absolute worst. Of course, every politician is pressured to lower taxes while increasing public services. As anyone who had ever had to run a household budget knows, it doesn’t work that way. According to the U.S. Elections Special Report published by Focus Economics, neither Clinton or Trump are proposing “tax and spending plans [that] add up to the budget outcomes they advertise.”
This is hardly surprising. The only modern-day president to actually deliver a balanced budget is President Bill Clinton, who was aided by a Republican Congressional majority. Before Clinton, you need to look all the way back to Andrew Jackson. Politicians, it turns out, are simply terrible at budgeting. Our national estimated debt is estimated at $19.4 trillion.