Reading the president’s State of the Union and Budget Message, Americans are on the cusp of the second Age of Pericles. The economy is booming and with new taxes on the wealthy and free community college for all, lasting prosperity can be assured.
Sadly, other than falling gas prices, the realities of everyday life are moribund—rising food prices and local taxes, expensive compulsory health insurance, stagnant wages, and a jobs market that never seems to get much better for very long.
The Labor Department is expected to report the economy added 230,000 jobs in January, down from the 289,000 averaged during the third quarter. The economy faces headwinds from falling oil prices, troubles in Europe and Asia, and monopoly barriers to investment and technologies that could accelerate growth.
Evidence is mounting that apprehensive Americans are using money saved at the gas pump to pay down debt and shore up savings, rather than spending to stimulate the economy. Meanwhile, oil producers are cutting back on drilling—hurting industries ranging from drilling equipment to engineering consultants that divine where and how to poke holes in the ground to unlock black bounty.
Oil production will keep rising through much of 2015 from wells already under development before prices started falling, but layoffs will accelerate in the oil and gas sector and supporting industries and communities where wildcatters spend their cash.
America looks so good because Europe looks so bad, China’s growth machine is spurting oil, and Japan—where women are not having many babies and men abhor immigration—is imploding.
Fearing the worst, European and Asian investors are sending money to America—boosting prices for Treasury securities, real estate in the tonier locations of New York City and other urban centers, and jacking up the value of the dollar against foreign currencies.
Accelerating the consequences of those private decisions, old world central banks are printing huge amounts of money, because their governments won’t do sensible things like abandon mindless austerity and the single currency in Europe, end reckless lending to over-expanded enterprises in China, and take measures to boost the birth rate in Japan.
The bottom line for Obama’s new American paradise is a strong dollar is strangling growth by raising prices for U.S. exports competing in global markets with products from Japan, Germany and Korea, and artificially cheapening imports on U.S. store shelves. But for the resulting trade deficit, the U.S. economy would have grown 3.7 percent in the fourth quarter and created another 350,000 jobs.
Sadly, Obama and Treasury Secretary Lew simply refuse to do anything to insulate the U.S. economy from European and Asian mercantilism, even though economists right, left, and center have offered solutions.
Federal policies have encouraged monopoly pricing by banks, airlines, broadband and cable providers, professional sports franchises, universities, and hospitals and health insurance companies. Monopolies constrain supply and limit investments in new technology to enrich and provide comfortable lives for their shareholders and employees, but that limits investment, growth, and jobs creation.
If you have a job with the New England Patriots, even a nonplaying job, you’re likely better off for the NFL’s sweetheart TV deals, but most of us help finance that through ever-rising cable TV rates. If you are just an ordinary fan, you likely can’t afford a seat at the game.
Alas it’s the best of times and the worst of times.
If you are part of the chosen monopoly economy, or the Washington cabal of politicians, lobbyists, and analysts—I plead guilty—rising prices, political contributions, and consulting and media fees have made this your second Age of Pericles.
For most other Americans, it’s the Middle Ages again. Like serfs, they are tied to jobs they don’t like or dependent on government benefits.
Until perhaps like the Greeks, they elect a populist instead of an elitist to be president.
Peter Morici is an economist and business professor at the University of Maryland, and a national columnist. He tweets at @PMorici1.