#89 The Improving Economy

On October 9, 2014

Hello Everyone,

As you know from my last commentary, I attended President Obama’s speech on the economy last week at Northwestern.

He reminded us of how strongly the economy has recovered since he took office in 2008 amid the financial crisis.

However, I hasten to repeat what I said in #61 in January of 2012:

 I don’t expect a president – or anyone else – to be able to manage the economy…

 James Carville, the over-the-top Democratic strategist/entertainer, is famously credited with telling Pres. Clinton, with respect to his reelection, “It’s the economy, stupid.”

 I would submit that it is beyond the understanding, let alone the power, of any person or group of people to fix an economy. As I wrote in # 58, it appears to me that economies are prime examples of “emergent systems” – highly complex, dynamic phenomena that have no central controllers.

Nonetheless, the President aptly summarized for us the highlights of the economic recovery.  The full speech is attached; as always, I believe reading a text is a good complement to hearing a speech.  Here are some excerpts:

As Americans, we can and should be proud of the progress that our country has made over these past six years… Here are the facts:  When I took office, businesses were laying off 800,000 Americans a month.  Today, our businesses are hiring 200,000 Americans a month. The unemployment rate has come down from a high of 10 percent in 2009, to 6.1 percent today [a 5.9% rate was announced two days later, the lowest since he took office]. Over the past four and a half years… this is the longest uninterrupted stretch of private sector job creation in our history…All told, the United States has put more people back to work than Europe, Japan, and every other advanced economy combined…

And today, the number-one oil and gas producer in the world is no longer Russia or Saudi Arabia.  It’s America…

I set a goal to cut our oil imports…in half by 2020, and … we will meet that goal this year, six years ahead of schedule…

We have tripled the electricity that we harness from the wind.  We have increased tenfold what we generate from the sun…

Today, American manufacturing has added more than 700,000 new jobs…

Now, we also know that many of these manufacturing jobs have changed…And these jobs require some higher education or technical training…

We have to lead the world in education once again…

[Under the Affordable Care Act] in just the last year, we reduced the share of uninsured Americans by 26 percent [and]…health care prices have been growing at the slowest rate in nearly 50 years…

Over the past five years we’ve cut our deficits by more than half.  When I took office, the deficit was nearly 10 percent of our economy.  [Yesterday, NBC reported that “…the estimated budget deficit…in fiscal year 2014…was the smallest…recorded since 2008 [and at] an estimated 2.8 percent of gross domestic product…was slightly below the average experienced over the past 40 years…the fifth consecutive year in which the deficit declined as a percentage of GDP…”]…

So here’s the bottom line:  For all the work that remains…there are some really good things happening in America.  Unemployment down.  Jobs up.  Manufacturing growing.  Deficits cut by more than half.  High school graduation is up.  College enrollment up.  Energy production up.  Clean energy production up.  Financial system more stable.  Health care costs rising at a slower rate.  Across the board, the trend lines have moved in the right direction…

Bloomberg [News]…came out with an article today saying that corporate balance sheets are the strongest just about that they’ve ever been.  Corporate debt is down.  Profits are up.

There is a reason why I came to a business school instead of a school of government.  I actually believe that capitalism is the greatest force for prosperity and opportunity the world has ever known…

But I also believe in a higher principle, which is we’re all in this together…

So as you [Kellogg students] engage in the pursuit of profits, I challenge you to do so with a sense of purpose…

America is a story of progress — sometimes halting, sometimes incomplete, sometimes harshly challenged.  But the story of America is a story of progress…

 As the President made clear in the speech, most Americans aren’t feeling the effects of this relatively good economic environment in their paychecks.  I’ve heard him say that folks are “rightly grouchy.”

Continued productivity increases and globalization seem to be two reasons for wage stagnation.  As the President points out, he is happy that the American automobile industry survived the crisis and is doing pretty well.  But, he says when you visit a GM plant these days, you can eat off the floors and fewer people are around.

To further illustrate that point, take a quick look at this video of the Tesla plant in California (I just ordered a Tesla.) http://www.youtube.com/watch?v=8_lfxPI5ObM  A lot of automation (i.e., high productivity), few workers.

This is yet another illustration of the urgent need for a more educated workforce, as I argued in my last piece on professionalizing teaching.

All to say, it is heartening that our economy is doing better, even though it is not broadly felt. While the President can’t claim direct credit for that, he should never have been taken blame for the weak economy that followed the financial crisis that preceded him.

Please, as always, pass it on.  And, remember that previous Obamagrams are stored on www.obamagrams.com

Chuck

Remarks by the President on the Economy – Northwestern University – 10-2-14adobe pdf file

 

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