Whatever Happened To The Economy?
Originally published on Tue May 14, 2013 12:36 pm
Remember the economy?
The election year was dominated by talk about jobs and the economy, but neither the administration nor Congress seems to have any grand ideas for jump-starting a still sluggish recovery — and they're not even talking about it much.
President Obama sought to turn attention back to economic issues with a speech last week in Texas on manufacturing, but that's already long since been forgotten. A cascade of scandals has driven the issue entirely off the Washington radar.
Even before Benghazi, the IRS and the Department of Justice controversies started heating up, the economy had consistently taken a back seat to issues such as immigration and gun control.
"The economy is by far the most important issue for voters," says Karlyn Bowman, a polling expert at the American Enterprise Institute. "It's not unusual for Washington preoccupations to be different than those of the public."
She says that the public is skeptical that Washington can provide economic answers at this point. Politicians themselves seem a little dubious.
The two parties remain far apart on economic issues. The type of debt reduction Republicans seek through overhauling entitlement programs is gaining little traction among Democrats, while the GOP-controlled House will never approve further stimulus of the type Democrats would like.
"We've moved away from proposals for big changes and toward piddle policy," says Stephen Weatherford, a political scientist at the University of California, Santa Barbara. "My impression is both the president and the people around him have ratcheted back their expectations, so they've ratcheted back what they're willing to send to Congress."
The Economic Picture
If you looked only at Wall Street, it would seem that happy days might be nearly here again. The Dow Jones average passed a milestone last week, closing above 15,000 for the first time — nearly double its value at its trough early in the Obama presidency.
Looking at Main Street, however, the picture looks entirely different. "We're just sort of worn down by this subpar recovery that continues but doesn't ever seem to accelerate, and if so, not for very long," says Sean Snaith, director of the University of Central Florida's Institute for Economic Competitiveness.
Wall Street cheered last week's jobs report, which showed more people found work in April than expected. But it was still far from enough to take up much slack in the labor market.
"That level of growth will not get us up to pre-recession levels of unemployment until 2020," says Heidi Shierholz, an economist at the Economic Policy Institute. "We are still in a massive crisis in the labor market."
No Agreement In Washington
Liberal economists like Shierholz argue that current conditions demand more stimulus — federal spending on things like infrastructure and aid to states and localities that would put people back to work.
"We have a situation where we have persistent high unemployment and interest rates near zero," Shierholz says. "This is precisely the time when you want to do fiscal stimulus."
Conservatives couldn't disagree more. Rather than increases in spending, Republicans are concerned with the nation's debt problem, which they see spiraling out of control.
"The administration is not willing to put forward a serious proposal to address the fiscal challenge, which would include meaningful reforms to Medicare and Social Security," says Phillip Swagel, who served as a Treasury Department official in the Bush administration. "Instead, the administration has put forward modest proposals in both areas to intense opposition from progressive supporters."
No Ideas To Sell
For some, the deficit is starting to feel like a less pressing concern. In April, the Treasury Department ran a relatively rare monthly surplus, of $113 billion.
Still, spending cuts demanded by the sequester are proof enough that Washington will not be getting back into the stimulus business, says Jason Seligman, an economist at Ohio State University.
The nation can't spend more in the short term if it can't get its long-term budget in order, he says. But there's no agreement about how to get long-term spending under control.
"Really, we can't agree on anything," Seligman says.
Indeed, there appears to be no appetite in Washington for further talk of a "Grand Bargain," in which both parties would put cherished priorities on the table. Such cooperation would be politically risky at any point, but seems especially unlikely now, at what appears to be the beginning of a season of scandal and myriad congressional investigations.
The end result is that any help the economy could use from Washington is going to remain long in coming.
"The issues circulating around the economy are so central to both parties' ideologies that their incentives for obstruction are even larger than they are for other issues," says Weatherford, the Santa Barbara professor.