U.S. Economic History in Brief

"The president has made jobs and growth an intermittent priority, when it should really be the only priority. Many. . . truly believe jobs and growth are the byproducts of government spending. If that were true, we’d be living in paradise."

--Thomas Donohue, U.S. Chamber of Commerce CEO  

"growing jobs is not Obama's real priority. Growing government is."

--Nolan Finley, Detroit News

Being president is always about the economy. Except when the president’s economy is bad. Then it’s never about the economy.

Twice before, we have quoted the Weekly Standard’s Jay Cost writing:

The modern press is at times sycophantic of the incumbent president and at other times trying to mimic Woodward and Bernstein; it all depends on which party is in office. With a Democratic president cut from the same cloth as they, many journalists have done everything in their power to set the national conversation in ways that favor Obama.

In deference to the importance a strong economy plays in insuring a healthy America, we have rewritten Cost's quote to read:

The modern press is at times sycophantic with “It’s the economy, stupid!” and at other times trying to hide economic performance; it all depends on which party is in office when the economy is bad. With the economy underperforming under a Democratic president cut from the same cloth as they, many journalists have done everything in their power to set the national conversation in ways that ignore the economy.

The U.S. before the Civil War was an agricultural country divided between free farmers in the North and West and slave-owning plantations in the South. Slavery split the nation, killed off the Whig Party, gave birth to the Republican Party, and led to war.

After the Civil War, Republicans dominated the victorious North and West, nurtured an increasingly powerful industrial state, and supported liberal immigration that both populated the West and filled Northern factories with cheap labor.

Progressives came to power under Democrat Woodrow Wilson 100 years ago to check capitalism’s excesses, but government failed to sustain economic growth after the Great War concluded (1918-20), leading first to depression, then under Republicans to “return to normalcy” limited government and “roaring twenties” prosperity.

The Crash of 1929 brought Democrats back to power, creating the big government mixed economy we know today. Big government, big business, and big labor shared power under largely Democratic control (the “Blue Model,” blue as in Democrat “blue states”), and presided over post-World War II prosperity that lasted to 1968.

National security (Vietnam/"9.11"/Iraq), social issues (civil rights/busing/fair housing/affirmative action/welfare/crime/equal rights for women/abortion/religious secularization), and government growth/taxes have divided the parties since. If the economy does well, incumbents generally retain power. If not, incumbents turn to non-economic issues, often without success.

Parties ignore the economy’s importance at their peril. Since 1968, the economy has been a leading issue in 15 out of 23 elections, and a winner in 11--or 73%--of those (see chart below).

Obamanomics: Conservatives See Broken Economy

"The commitments we make to each other. . . do not sap our initiative; they strengthen us. They do not make us a nation of takers; they free us to take the risks that make this country great."

--Barack Obama, Inaugural Address (2013)

“The commitments we make to each other.” Obama is talking about robbing Peter to pay Paul--taxes to pay for government.  But what has Obamanomics--bigger government--done for Paul?  

From conservative Robert Samuelson at the Washington Post:

there are 3.2 million fewer jobs now than at the previous high. The official unemployment rate is 7.9%, but it would be 14.4% if it included part-timers who would like full-time work and discouraged workers who have stopped looking. . . Scarce jobs are the nation's first, second and third most important economic and social problem.

Samuelson notes unemployment isn’t expected fall below 7.5% until 2015, making six years above 7.5%-- the longest stretch of high joblessness in 70 years. America, he believes, has gone from being “an expansive, risk-taking society to a skittish, risk-averse one.”

Samuelson points out that while in the boom years, personal saving as a share of income fell from 10.9% in 1982 to 1.5% in 2005, by 2012, it was back up to 4.4%, limiting the economy's expansion to rates -- lately, 1% to 2%-- too weak to absorb our jobless.

To Samuelson, “Pessimism produces a sluggish economy; a sluggish economy produces pessimism,” a psychological shift grounded in the fact that the financial crisis and Great Recession were largely unpredicted. Americans are now building wealth to protect themselves against unknown dangers, making the country “hostage to a stubborn, restraining psychology.”

From Rich Karlgaard, publisher of the conservative Forbes:

“It once was true that as General Motors goes, so goes the U.S. economy. Today that is truer of Wal-Mart, and that's a problem.”

Karlgaard believes Wal-Mart faces a “long season of headwinds:”

• The expiration of the payroll-tax cut will continue to hurt, as Wal-Mart's customers will sorely miss that lost $80 per month. 

• Food prices are rising faster than overall inflation--going up 3%-4% in 2013. 

• Gas prices are up 30 cents a gallon in 2013, and to get to nearly all of Wal-Mart's more than 4,000 American stores, one must drive. 

• Wal-Mart shoppers have a higher unemployment rate than the national average. 

Karlgaard points out that only 23% of Wal-Mart shoppers have a four-year college degree. The degree-less suffer more, with an employment-to-population ratio of only 54%, as compared to the general population’s 62%.

Only 54% of the college degree-less population working!

 From Nicholas Eberstadt of the conservative American Enterprise Institute:

empirical evidence points to increasing dependency on state largess. The evidence documents . . . perverse and disturbing changes that this entitlement state is imposing on society.

Eberstadt wants us to consider that:

• since 1960, government payments of cash, goods and services to citizens have grown twice as fast as overall personal income, and now account for nearly 18% of all personal income in America—up from 6% in 1960. 

• social-welfare programs currently dispense entitlement benefits of more than $2.3 trillion annually, and the burden of entitlement spending is now over $7,400 per American man, woman and child. 

• in 1960, social-welfare programs accounted for less than a third of all federal spending.  Today, entitlement programs account for nearly two-thirds of federal spending, nearly twice as much as defense, justice and everything else combined. 
 

• 49% of Americans live in homes receiving one or more government transfer benefits, up 20% from the early 1980s, with only 10% due to old-age pensions and health-care for seniors.  The real cause: public reliance on "means-tested" programs such as Medicaid and food stamps. About 35% of Americans accept money, goods or services from "means-tested" programs, a percentage that has doubled in three decades. 

• entitlement outlays have sent men out of the work force--the proportion of adult men 20 and older working or seeking work dropped 13% from 1948 to 2008.  The male flight from work is so acute that more than 7% of men in their prime working age late 30s had totally checked out even before the Great Recession. Our workforce opt-out was twice that of contemporary Greece, and higher than in practically any Western European economy. 

• our flight from work has largely been a flight to government disability programs. The number of working-age Americans relying on Social Security disability increased dramatically to more than 8.8 million working-age men and women in December 2012, nearly three times as many as in December 1990. For every 17 workers, there is now one on Social Security disability. And another 3.6 million working-age Americans in 2011 obtained disability support from other government programs. 

• the biggest increases in disability claims come from "musculoskeletal" problems (e.g., back pains) and mental disorders (including mood disorders), meaning a government disability-insurance program originally intended to address genuine need is now set to run out of funds while Obama's still president. 

• Social Security and Medicare "social insurance" programs meant to pay for themselves cannot do so, having already made tens of trillions of dollars in future promises not covered by current funding streams. Using outside resources to keep them solvent will make them transfer programs, not insurance programs. 

Eberstadt argues that the “moral hazard” the social-welfare program explosion generates “is plain” to see. Transfers funded by other people's money foster a "something for nothing" mentality—especially when the transfers relentlessly grow year by year. We end up with a "taker" mentality that weakens our nation.

Obamanomics in short: hurting Peter and ruining Paul.

Obamanomics: Liberals Live with No Growth?

“Roosevelt. . . was tired of utopias. [He] formulated a bet. If he followed his political instincts, furiously converting ephemeral bits of legislation into solid law for specific groups of voters, then he would win reelection. He would focus on farmers, big labor, pensioners, veterans, perhaps women and blacks. He would get through a law for pensioners, one for organized labor. . . would take care of the poor and homeless of the countryside.”

--Amity Shlaes, The Forgotten Man, Chapter 9, “July 1935: Roosevelt’s Wager,” pp. 246-47.

Shlaes’ amazing study of the Great Depression overturns much of the history I grew up with. It turns out that economically, nothing really worked for Roosevelt (unemployment in 1940, the Depression’s 11th year, was still over 14%). In his first two years (1933-34), Roosevelt tried everything, and did lift a nation’s spirits even as the economy continued underperforming.

Shlaes highlights a real turning point for Roosevelt: July 1935, when he gave up on grand economic schemes and turned instead to government paying off enough constituencies to assemble a winning political coalition. Politically, he succeeded--massively in 1936--in the process building the coalition of government-dependent special interests that is the prototype of today’s Democratic Party.

Obama and company today seem similarly focused on holding a government-based coalition together, rather than clearing a path for economic growth. But is this a fair assessment?

Jonathan Cohn, in the liberal New Republic, makes the case for turning America into social democratic Scandinavia, with no mention of the region’s low growth rate (Norway, 2.1%; Sweden, 0.7%; Finland, -1.8%; Denmark, -0.3%; Scandinavian average: 0.7%):

In the red states, government is cheaper, which means the people who live there pay lower taxes. But they also get a lot less in return. The unemployment checks run out more quickly and the schools generally aren’t as good. Assistance with health care, child care, and housing is skimpier, if it exists at all. The result of this divergence is that one half of the country looks more and more like Scandinavia, while the other increasingly resembles [Guatemala. T]he liberty the red states seek is the liberty to let a whole class of citizens suffer.

The New Yorker’s progressive Hendrik Hertzberg likewise speaks not of growth but of “an energetic public sphere” and “collective action,” phrases associated with European-style democratic socialism:

[Obama’s] Inaugural Address . . . added up to a quietly passionate brief for both the necessity and the Americanness of an energetic public sphere—a manifesto for what the President dared to call, with a touch of sly provocation, “collective action.” That mainstream newspaper editors [subsequently] felt free to trumpet what is still sometimes called “the ‘L’ word” in such a charged context, and with no discernible fear of giving offense, suggests that the Arctic isn’t the only place where the ice is melting.

Yet there are some on the left who recognize the economy’s poor performance poses a problem. Shortly after Obama had been re-elected, NBC’s Brian Williams actually said, “With the election now over, it is once again safe to talk about the economy and jobs. Now that it is not a campaign issue, it’s back to reality.” Kudos to Williams for honestly admitting the media--in the tank for Obama--stayed away from discussing America’s poor economic performance during election season.

So what do liberals think about today’s economy? Tom Blumer of “PJ Media” showed us the pessimistic outlook of America’s major wire service:

[AP’s] three-part series bemoaning the rapid advancements in technology and smart machines [summed up the current “recovery”]: “This time it’s different. For decades, science fiction warned of a future when we would be architects of our own obsolescence, replaced by our machines. … [T]he future has arrived.”

Katrina vanden Heuvel, editor/publisher of the progressive Nation, while faithful to the left’s traditional concern with re-cutting the national pie into more equal pieces, does at least recognize something has to be done about the economy:

The media now chronicle the flailings of Republican leaders slowly awakening to the weaknesses of a stale, pale and predominantly male party in today’s America. . . In his inaugural address, President Obama spoke powerfully to this rising American electorate — single women, minorities, the young —. . .But today, the progressive coalition must address the challenge faced by the original progressive movement, at the dawn of the last century — of extreme economic inequality, which is turning the American dream into a bygone memory.

Who can fail to see that this rising American electorate is sinking economically? More than 20 million people are in need of full-time work— and single women, minorities and the young have fared the worst. . . The young find good jobs scarce, even as they carry record student loan debts, now higher than credit card debt. . . Making this economy work once more for working people will require a new strategy for growth — and a confrontation with the current complacency and its entrenched interests and exhausted ideas.

Right on, vanden Heuvel, you do see the problem clearly! But her solution is a stale return to the Democrats’ New Freedom (Woodrow Wilson, 1913-21) and New Deal agendas of 100 to 80 years ago:

in the Gilded Age at the dawn of industrial America at the turn of the last century. . . hundreds of thousands of farmers created a people’s movement for a new monetary policy. Workers organized unions in the face of police billyclubs. Muckrakers exposed the tentacles of the trusts, the miseries inflicted on working people. It took years — and a Great Depression and a world war — but we built the first broad middle class the world had known.

Groan. Those are the very class warfare policies failing today!

Further evidence of a party stuck in the past comes from liberal Jonathan Chait of New York magazine, who writes, “asked whether deficit spending had helped prevent a depression, as the vast majority of economists believe[, Paul Ryan] said, “I think that it’s pretty clear that [Keynesian economics] doesn’t work.”

It’s pretty clear Chait and vanden Heuvel think Keynesianism--government spend, spend, spending to prosperity--does work. But no, what works is private sector ingenuity, as we found out during that most important value-of-spending test case of all, World War II.  

New York Timesman Tom Friedman likes to position himself between liberals and conservatives, and champion a “radical center”. So what does Friedman tell us to do? His advice:

to sustain the kind of public institutions and safety nets that we’re used to [requires] a lot more growth by the private side (not just more taxes), a lot more entrepreneurship, a lot more start-ups and a lot more individual risk-taking — things the president rarely speaks about. . . for the last two centuries it happened that productivity, median income and employment all tracked each other nicely. . . But there is no economic law that says technological progress has to benefit everyone. It’s entirely possible for the pie to get bigger and some people to get a smaller slice. [It’s] why we have record productivity, wealth and innovation, yet median incomes are falling, inequality is rising and high unemployment remains persistent.

Uh oh. Is Friedman going down the conventional pessimism path we saw from AP’s study (above), the liberal pessimism recorded in an earlier blog entry here? Maybe not. Certainly, it’s nice to have him conclude with a call both for more personal responsibility and for moving beyond the SAT meritocracy, and in the process talking language conservatives understand:

How to adapt? [M]ore individual initiative. . . more of the “right” education. . . The winners won’t just be those with more I.Q. It will also be those with more P.Q. (passion quotient) and C.Q. (curiosity quotient). . . the president needs to explain that this won’t just be an era of “Yes We Can.” It will also be an era of “Yes You Can” and “Yes You Must.”

The Other America: 2013

 
"People do not believe lies because they have to, but because they want to.”

--Malcolm Muggeridge (1903-1990)  

So here we are. To vastly oversimplify, America is divided into two supertribes, red for conservatives and blue for liberals (because the left is frightened of being called “red”). Red for Republicans, blue for Democrats (see map, colored red for Romney congressional districts, blue for districts carried by Obama).  

How did we get here? In 1964-68, civil rights and the Vietnam war blew up the country, and when the debris settled, liberal Democrats and the welfare state had lost. Conservatives had the upper hand from 1968 to 2004, especially if one concedes that Clinton, who shared power with a Republican congress for six years, truly meant his 1996 state of the union pronouncement that “the era of big government is over.” In a time of conservative domination, liberals gained power only when conservatives failed to tend to the economy (Carter, 1976; Clinton, 1992).

Race put the conservatives on top.  New Deal white working class Democrats, frightened by rising crime, disgusted by a federal government determined to force blacks into their schools and neighborhoods, and resenting having their taxes finance welfare programs for minorities, abandoned the party that once cherished them to vote for Republicans Nixon, Reagan, and two Bushes (1968, 1972, 1980, 1984, 1988, 2000, 2004).

But today, with race still a major issue, the roles have reversed. Barack Obama, our first non-white leader, has stitched together a supertribe of government-related white liberals, government employees, unmarried women, minorities, and youth who vote Democratic even when the Democrats’ economy doesn’t work.

So it seems that by 2016, America will have marked 50 years of division significantly based on race. The two sides don’t talk to each other; rather they are tribes that converse, work, and play among their own, that even live in separate parts of cities, states, and the country. Each now have their own sources of information, their own cultures, their own religions. Maybe this isn’t such a surprise. After all, we are a nation first sharply divided by slavery, then by its segregation aftermath. It’s our history.  

What to do? I’m still trying to understand the depth of what seems an unhealthy division. Last year, science taught us that in their drive to survive, humans have learned to be biased against those who 1)  are inconsistent and 2) operate outside their own tribe. These instincts help keep our divisions sharp and continuing. Ronald Bailey, in the libertarian journal Reason, told us:

people cling to selected “facts” as a way to justify their beliefs about how the world works. [Samuel Arbesman, author of the new book The Half-Life of Facts: Why Everything We Know Has an Expiration Date,] notes, “We persist in only adding facts to our personal store of knowledge that jibe with what we already know, rather than assimilate new facts irrespective of how they fit into our worldview.” All too true; confirmation bias is everywhere.

Discouraging. I myself fell into "confirmation bias" when I missed that which Obama’s folks understood--race would hold Obama’s 2008 coalition together in 2012, even though Obama failed to fix the economy. A year ago, I incorrectly reasoned that the blue supertribe included large numbers of minorities hit hard by unemployment who would vote their pocketbooks over tribal loyalty, thereby turning Democrats out of power. Only last September did I finally realize minorities most affected by unemployment would stick with Obama anyway. As they did.

So it seems tribal loyalties set over half a century may continue to trump America’s poor economy as the factor determining minority, unmarried female, and other votes. Our divisions are deep. Crossing over the bridge separating us--very difficult.

Will Democrats Capture the House Next Year?

Israel

 

Alexander Burns at the liberal website “Politico” reports Democrats are counting on Obama to play an “unprecedented” role in the fight to win the House by keeping the Democrats’ successful 2012 coalition engaged this year.

 From a memo by Democratic Congressional Campaign Committee Chairman Steve Israel:

In 2012, President Obama was completely focused on his own re-election, as he should have been. But for 2014, he will be able to focus on Congressional races, and he has already made early commitments that are unprecedented and transformational. President Barack Obama has agreed to eight events just in 2013 for House Democrats, with additional support from Vice President Biden and other surrogates. In addition, [Obama for America’s] ground game, which was a vital part of the Obama campaign’s success in 2012, will now be focused on Congress — energizing the critical ‘New American Electorate’ that we need to keep engaged through the 2014 elections.

In preparation for 2014, the DCCC and Democratic-aligned outside groups hope to use 2013 to soften up closely divided and Republican-leaning districts. Israel specifically mentions the outside House Majority PAC (HMP) as a key ally:

Unlike in the 2010 election cycle, where outside spending only existed on one side of the ledger, Democratic allies like HMP have proven themselves to be successful. In the 2012 election cycle, HMP spent over $40 million in 56 races, and they have already released their top target list for 2014.

Conservative James Taranto, writing in the Wall Street Journal, has a response for Democrats predicting any House take-over next year. In a column entitled, “The House of His Dreams,” Taranto writes:

President Obama's . . . State of the Union address reinforced the perception that he has. . . given up on working constructively in a divided government. His supporters will say he is resolute and the Republicans are pigheaded[. A] neutral way of describing it is that the two parties' worldviews are irreconcilable.

Taranto then quotes the New York Times writing, “Obama's broad second-term agenda is . . . what won him re-election. His task now is to turn his widespread public support into a wedge to break Washington's gridlock.” That, to Taranto, means winning the House, to which Taranto responds

If the Democrats win the House next year, it would be a historic first. Never has the president's party taken control of the chamber in a second-term midterm election. . . to win the House in 2014, the Democrats would have to carry districts that not only sent Republicans to the House in 2012 but preferred Romney to Obama. If Obama is betting his presidency on a Democratic House in 2015-16, it's a long shot.

As I wrote here, “Poltico” may be right and Taranto wrong. Democrats have a real shot at winning the House next year.

1,360 days to go--liberals already after Rubio

From liberal Stephanie Condon of CBS News:

“delivering the minority party's response to the president's State of the Union address [can] be a perilous moment, leaving one open to criticism. Rubio smiled throughout his address, but in one uncomfortable moment, he stooped down off camera to grab a plastic bottle of water.”

Liberal “how it’s done” maven Maureen Dowd of the New York Times wrote:

“[Rubio] looked as if he needed some saving . . . Tuesday night as he delivered the party’s response to the State of the Union address in English (and Spanish). He seemed parched, shaky and sweaty, rubbing his face and at one point lunging off-camera to grab a bottle of water. He needed some . . . swagger.”

Responding to the obvious, Rubio himself tweeted a photo of the water bottle. He later told “Good Morning America” host and Clinton administration veteran George Stephanopoulos, “I needed water, what am I going to do? God has a funny way of reminding us we’re human.”

And it's “human” for liberals to make Rubio’s speech all about his gulp of water. Gotcha!

More seriously, liberal former TIME White House correspondent Karen Tumulty, 58 and now with the Washington Post, wrote (with Manuel Roig-Franzia):

“the spotlight that has fallen on this relatively new arrival to the national scene says as much about the state of the Republican Party as it does about the 41-year-old senator. And it remains to be seen whether he represents the solution to the GOP’s problems, or whether the party’s sky-high hopes in an untested newcomer are just another measure of its drift.”

“state of Republican Party. . . GOP’s problems. . . measure of its drift,” “relatively new,” “untested newcomer.” That's a lot of loaded language sent Rubio’s way in just two sentences--and so early in the 2016 campaign! I believe that if we could crawl inside Tumulty’s head, we’d hear, “Of course Hillary should be our next president, Rubio is the major obstacle in her path, and we must do everything to knock this Obama-lite phony ethnic out of her way!”

Finally this piece, “Marco Rubio Can’t Save GOP,” from progressive Jamelle Bouie, American Prospect staff writer and frequent Washington Post contributor:

"Latino voters are more liberal than their white counterparts. . . the Pew Research Hispanic Center [reports] 75% of Hispanics say they support bigger government with more services, compared with 41% of the general population. 51% say abortion should be legal, and 59% say 'homosexuality should be accepted by society.' Compare this to the actual rhetoric of Rubio. . .Latinos might be proud of having their own in the Senate, but pan-ethnic pride isn’t a substitute for substantive representation."

I decided to go to the Pew Research Hispanic Center for their poll’s actual findings on Hispanics. Here’s what I learned:

1. “Latino voters are more liberal”

While Latino voters are 30% liberal, more (32%) are conservative, not too far from the general population, which is 34% conservative, 21% liberal.

2. “75% of Hispanics say they support bigger government with more services, compared with 41% of the general population.”

True, but misleading. The question posed a choice between those who want smaller government with fewer services, or bigger government with more services. Latinos, still more concentrated toward the lower end of the economic scale, responded as would any group so positioned, favoring more government services over less by 75% to 19%, while the ratio of a general population less reliant on government was 41% for bigger to 48% for smaller government.

3. “51% say abortion should be legal”

Should you trust anything Bouie writes? Actually, 51% of Hispanics said abortion should be illegal, not legal, as against only 43% who want it legal. Contrast that to the “less liberal” general population, which favors legal abortion by 54% to 41%. Such an error betrays Bouie’s overriding desire to fit statistics to his own (inaccurate) world view.

4. “59% say ‘homosexuality should be accepted by society.’”

True, but the Hispanic answer hardly makes Latinos more liberal, since general population acceptance of homosexuality is a nearly identical 58%.

Long before even the 2014 mid-term elections, it’s surprising liberals are so driven to reassure themselves Rubio isn’t what they fear: a full-on threat to their hanging onto the White House after 2016.

Rubio has plenty of time to bring his water supply closer; liberals fortunately have time to start getting their facts straight.

“Let them eat cake.”

David Brooks, house conservative at the New York Times, liberal America’s Pravda, sees something mostly invisible to us mortals: “an enormous race, which you might call the race between meritocracy and government.” Brooks is fixed on the contrast between meritocracy, which widens inequality, and Obama’s government supposedly fighting for equality.

We’ve argued this is a sham fight, since our meritocracy values its privileges and only makes gestures in the direction of leveling the playing field. What seems to be the meritocracy’s greater concern is their desire to keep their children and families at the top, and finding highly stressful the somewhat meritocratic rules they face in doing so.

The meritocracy, as we have said, does feel guilty about coming out on top in a society that to them consigns a majority to more-or-less permanent underclass status. As Brooks says, a “self-reinforcing” sorting “seems to grow more unforgiving every year.” And Brooks calls efforts to resist the meritocracy’s spreading inequality “like shooting a water gun into a waterfall.” But it’s false to call this, as Brooks does, a “race between meritocracy and government,” for the simple reason that government and meritocracy are so intertwined.   It’s those outside meritocracy+government who are the real losers.

Meritocracy-led government, in fact, is ruining the country.

Byron York, at the conservative Washington Examiner, has unearthed evidence unemployment is wreaking ordinary people’s lives as much as it ever has. He draws on a survey by Rutgers University scholars showing that

many more Americans than previously reported have been profoundly touched by joblessness and its related hardships. . . 23% of those surveyed -- have lost a full- or part-time job in the last four years. An additional 11% who have not lost a job said someone in their immediate family had. "Together, the data indicate one-third of American households -- approximately 39 million -- lost work as a result of the recession during the past four years," the report concludes.

The researchers found that an additional 26% had an extended-family member -- parent, cousin, aunt or uncle -- who had lost a job in the last four years. Still others reported having an unemployed close friend. Add them all together, and nearly everyone has been affected. "What we showed is that unemployment and what happened in the recession are society-wide experiences," says Rutgers professor Carl Van Horn, a co-author of the report.

Are we doomed to some sort of permanent unemployment problem, one like America lived through during the 1929-40 11-year Great Depression?

Jay Cost, writing in the conservative Weekly Standard, doesn’t think so. He believes Democrats (and their meritocratic government) will lose power unless they fix the economy.

According to Cost:

majority coalitions inevitably depend on how well the party they empower governs. . . since the 1830s, no issue has mattered more to the question of “Who governs?” than the performance of the economy. [And] since the recession of 2001, the economy has been in stall speed, [averaging] just 1.6% since then, [with] real incomes [stagnant and] paychecks [unable to keep] pace with the rising cost of health care, education, and energy.

the most recent GDP number is inconsistent with where the economy should be at this point in the business cycle. We should be hitting 3% growth or higher, not saddled with a modest contraction. And let us not forget [that w]ithout growth, there is no way for the United States to meet its social welfare obligations, which has in turn [given us] the budget deficit. If the Democratic party cannot bring about improvement in the economic numbers, it will not retain control of political power. It is as simple as that.

Cost sees a particular problem facing any Democratic coalition attempting to reform the economy, for the party has many powerful factions “isolated from the ebbs and flows of the private economy.” These factions include “upscale” Northeast and Pacific Coast social liberals “so well off that they are basically recession-proof,” along with government workers and “far-left gray-collar labor unions like the SEIU” more interested in expanding government than the economy.

Cost ends by asking, “Can the Democrats keep these groups happy and grow the economy? The evidence to date suggests the answer is no.”

Will Youth Culture Doom GOP?

Polling guru Stu Rothenberg has just written:

the president beat Mitt Romney 60% to 37% among voters 18-29 years of age, a much better showing than Obama’s 4-point win in the final popular vote (though not as good as his 66% showing among younger voters in 2008). Romney did carry white voters in the 18-29 age group last year, but by only 51% to 44%. In contrast, he won whites 65 years and older by 61% to 39% and whites 45-64 by 61% to 38%.

So 38-39% of older whites voted for Obama, and 44% of white youth? It’s a difference, but merely a 5% difference. Isn’t it possible white youth are at least 5% more likely than their elders to be living, playing, and working with the non-whites who voted overwhelmingly for Obama?

Still, Rothenberg has a point when he says, “Republican strategists have to consider the possibility that younger voters have different values and views than their parents have now and had when they were 20 or 25 years old.”

I’m concerned not only about “different values = poor values,” but also about the truly scary thought that people in power want those out of power to be dependent on them (on government), which means the national elite have little interest in 1) truly better schools, 2) truly viable, affordable medicine, and 3) a job-creating economy. After all, the more helpless the mass of voters, the more dependent they are on government.

Let’s review some of what we’ve seen here, in this blog:  

1. We found liberals delight in Hollywood’s domination of our culture.

From New York’s liberal Jonathan Chait:

[Hollywood propagates] an ethos in which greed [i.e., capitalism] is not only bad but the main wellspring of evil, authority figures of all kinds are often untrustworthy, sexual freedom is absolute, and social equality of all kinds is paramount.

2. We wrote that liberal domination of our culture is driving politics, and we learned from conservative Charles Murray that Hollywood’s culture is destroying working class lifestyles, even lives.

As conservative Matt K. Lewis of The Week told us:

A lifestyle of addiction, promiscuity, and chaos comes with a hefty price tag. Sadly, our elites are exporting those values to the people least capable of sustaining them. Most will likely spend the rest of their lives paying for the sins of their youth. The rich kids, on the other hand — well, they will likely land on their feet.

3. We do worry conservatives could lose any political contest between makers and takers (which media are already making an unacceptable framework for understanding today’s politics).

California-based Republican political strategist Reed Galen a year ago argued:

The messages that President Obama and his re-election campaign officials espouse -- that the system is “unfair” that the playing field must be “leveled” -- are code words for letting Americans off the hook. . . But a citizenry that expects -- even demands -- its government to provide happiness is surely bound to end up unhappy with their lives and with their government.

The Democratic message . . . neither requires nor expects anything from citizens. It doesn’t want anything from them other than lemming-like acquiescence. . .What the president and his surrogates should be speaking about is opportunity. [But t]he last thing [Democrats] want is to encourage individual initiative; that would begin to abrogate the need for Uncle Sam to . . . say everything is going to be all right if we have just a little more taxation, a little more debt, a little more government.

If the party of Roosevelt, Kennedy, and Clinton is going to abandon the old-time religion of personal responsibility, then, Galen says, Republicans in their place

should try to articulate what Thomas Jefferson really meant. If you [want happiness,] you are going to have to take the initiative to make that happen. That is inherently American. This ethos doesn’t excuse leaving the most vulnerable among us out in the cold. [But the rest] of us [should] get up every morning and figure out how we’re going to improve our situation -- because in many cases that’s the only thing we can control.

George Will, Washington Post, provides a much-needed lesson on public choice theory, which:

demystified politics by puncturing . . . the fiction that elected politicians and government administrators are more nobly motivated, unselfish and disinterested than are persons acting in the private sector. [It] extend[s] the idea of the profit motive to the behavior of politicians and bureaucrats, two groups seeking to maximize power the way many people in the private sector maximize monetary profits. Public-sector actors often do this by transactions with [other “pie cutters”]— private factions trying to maximize their welfare by getting government to give them benefits, such as appropriations, tax preferences and other subsidies.

[C]ritics cling to a comforting — and, for advocates of ever-bigger government, a convenient — theory. It is that in politics and government, people, acting as voters or legislators or administrators, do not behave as people do in markets — they supposedly are not responsive to incentives for personal aggrandizement. [Public choice] theory supplanted an ideology — the faith in government as omniscient and benevolent. It replaced it with realism.

So both sides are greedy. Both sides fear loss. Youngins, here’s the difference. Conservatives want the pie to grow so that we can all be greedy; liberals in the name of a higher cause (a cause that public choice theory exposes as false) want to re-cut the pie to give themselves and supporters more, business less.

Stocks Peak Through a Cloudy Climate

Wall Street on Friday reached highs not seen since 2007. The Dow broke through 14,000 to 14,010, and the S&P, now above 1,500, reached a new post-2007 high of 1,513. Both indexes were not far from their all-time highs, also reached in 2007 (NASDAQ peaked in May 2000 at over 5,000 before the dot-com bust dropped it below half its value; on Friday, it too at 3,179 hit near its post-dot-com-bust high of 3,197).

Our FOX Index (see chart), which tracks the distance from 15,800, the “healthy” market minimum total of a Dow of 12,000, an S&P 500 of 1,300, and a NASDAQ of 2,500, reached its all-time high of +2,902 (the Index is 5+ years old). Is the market telling us recovery is on the way? Well on Monday, the FOX Index gave up 295 points, as stocks suffered their worst single-day decline in 2013.

GDP

The U.S. economy shrank in the fourth quarter for the first time since the Great Recession ended in June 2009, with GDP (Gross Domestic Product) contracting by a 0.1% annual rate, down from 3.1% growth in the third quarter; well below the consensus forecast of 1.0% growth. But the fourth-quarter retreat mostly stemmed from lower inventories and a plunge in military spending.

Consumer Confidence 

“MarketWatch” reported University of Michigan-Thomson Reuters sentiment gauge of consumer sentiment rose in January more than expected, but remains relatively low with respondents concerned over higher payroll taxes. January’s gain made back only a portion of the sentiment drop during December, when consumers worried about the “fiscal cliff.”

Consumer confidence data from the Conference Board was less encouraging, with moods falling to their lowest level in more than a year as Americans became more pessimistic about the general economic outlook and their specific financial prospects in the wake of rising taxes. Consumers' views on the labor market were also weaker, with the "jobs hard to get" gauge rising for the first time since September.

Federal Reserve Chairman Ben Bernanke

FOX Business financial analyst Charles Gasparino, writing in the New York Post, believes:

It’s been Bernanke’s unprecedented money-printing and super-low interest rates that keep inflating stock prices while keeping banks’ borrowing costs so low that it’s nearly impossible for them not to make money. . . The price of Bernanke’s medicine, of course, is a debased currency, plus a high risk of serious inflation if the economy ever picks up steam. But that’s a big “if,” since nothing [the Obama administration] did in . . . four years on the job gives anyone confidence that the slowest economic recovery in modern history will speed up anytime soon.

Housing

Nin-Hai Tseng, in Fortune, agrees with Gasperino that Bernanke is artificially boosting stock prices. Tseng writes it all comes down to housing:

as the Federal Reserve moved to buy up billions of dollars worth of bonds to stimulate the economy, Chairman Ben Bernanke said that higher stock prices boost consumer wealth. And in turn, the extra spending helps the economy grow. While that might be true, as it turns out, home prices trump any run-up on Wall Street. . . U.S. housing market authorities Karl Case and Robert Shiller. . . found that households spend more when home prices go up[, and] they spend less when prices fall. . . the findings might explain why the stock market's rally hasn't really helped the economy grow that much faster.

The most recent S&P/Case Shiller composite index of 20 metropolitan areas, in fact, rose 5.5% over the previous 12-month period, making for the strongest yearly home price increase in more than six years. But Tseng reminds us that while the increase has helped thousands of borrowers reclaim what they originally paid for their homes, prices would have to increase much higher to save the millions more borrowers who owe more on their mortgages than their properties are worth.

No Jobs

The chart below is a sobering look at the Obama administration’s four-year job creation record. The unemployment rate increased. The number unemployed rose more than 250,000.

While the separately-measured establishment survey showed a gain of 1.2 million jobs, that was less than the labor force increase of 1.4 million--and a gain of just 25,000 jobs a month over the full four years.  Employment only made it back to its January 2009 level in July 2012, and has averaged 177,000 new jobs a month since.

And look at the declining labor force participation rate during Obama’s first term.  At 63.6%, it's at its lowest rate in over 30 years.  If jobs had merely expanded with population growth, 6.5 million more Americans would be working.

In short, Wall Street and the Obama administration just aren’t creating jobs.

The South Rising

“Between 2000 and 2010, the population in the eight states without income taxes grew by 18%, while all others grew by 8%; the (then) 22 states with right-to-work laws grew by 15%; the others grew by 6%. Population flowed from north to south, with warm sun and friendly Republican governors. Florida grew by 17.6%, Texas by 20.6%... and New York by 2.1%. (As it grew bluer, [New York] became less important. It has no more electoral votes than does Florida, and it now trails Texas by nine.)”

--Washington Examiner Columnist Noemie Emery

The biggest states with no income tax are in the South. All southern states except Kentucky are right-to-work states; among the industrial states outside the South, only Indiana and Michigan (! as of just last year) are right-to-work.

Joel Kotkin has studied the demographic shift to the South as closely as anyone. Writing in Forbes, Kotkin tells us:

The South still attracts the most domestic migrants of any U.S. region. Last year, it boasted six of the top eight states in terms of net domestic migration — Texas, Florida, North Carolina, Tennessee, South Carolina and Georgia. Texas and Florida alone gained 250,000 net migrants. The top four losers were deep blue New York, Illinois, New Jersey and California.

the South will expand its dominance as the nation’s most populous region. In the 1950s, the South, the Northeast and the Midwest each had about the same number of people. Today the region is almost as populous as the Northeast and the Midwest combined. . . it’s because economic growth in the South has outpaced the rest of the country for a generation and the area now constitutes by far the largest economic region in the country.

Why is this happening?

• Southern states are business friendly, with lower taxes, and less stringent regulations, than states the Northeast or on the West Coast. CEO Magazine says the four best states for business are Texas, Florida, North Carolina and Tennessee. Southern states are also much less unionized, and last year, Texas, Louisiana, Georgia and North Carolina were four of the top six destinations for new corporate facilities. 

• The education gap is shrinking, particularly in metropolitan areas. Over the past decade, the number of college graduates in Austin and Charlotte grew by 50%; Baton Rouge, Nashville, Houston, Tampa, Dallas, and Atlanta by 35% or more. They easily eclipsed the performance of “brain centers” Los Angeles, New York, San Francisco, and Chicago. 

• Many of these new educated residents come from places such as New York, Boston, Chicago and Los Angeles, bringing diplomas, skills and high wage jobs with them. They are attracted by jobs, lower housing prices, lower taxes, and a more affordable quality of life. 

Kotkin concludes that we should expect Southern influence to grow. "It is more likely that the culture of the increasingly child-free northern tier and the slow-growth coasts will, to evoke the past, be the ones gone with the wind."