Reply #26: On what planet do you live? [View All]

[recidivist]

The core issue of the '92 Clinton campaign was the economy, and the basic Democratic mantra was "the worst economy in 50 years." That, of course, wasn't true, although it WAS politically effective, mainly due to the sheer fecklessness of the Bush campaign, plus Ross Perot.

I suppose one could squint at the numbers in some pretty peculiar ways to rationalize the '92 Clinton claim, but the truth is that the '91 Bush recession was very mild by historical standards, certainly as compared to the '79-82 recessions. In fact, the '91 "recession" economy looked pretty good compared to what we had come to accept as normalcy in the LBJ-Nixon-Ford-Carter "stagflation" era. My personal memory does not extend to the earlier postwar recessions, but several of them were deeper as well.

There are some interesting issues buried in all this. For one thing, the economy is very different than it was even 30 or 40 years ago. The center of balance of employment has shifted from manufacturing to services. The government sector, including transfer payments, is much larger. A majority of working families are dual income. Production has been internationalized, so domestic producers have lost much of their pricing power. On the other hand, computer based information systems have greatly enhanced internal business efficiency and, in particular, improved inventory management, which used to be a major driving force in recessions.

Adding it all up, recent recessions have been shorter and milder than their historical predecessors. On the other hand, as the public has become habituated to routine prosperity, even short and mild recessions can produce a quite exaggeraged sense of loss. The recession from which we are now emerging is a good example. For those of us who remember the late 60's and 70's, the overall 2000-2002 economy still looked pretty good, recession and all.

The emphasis here is on "overall." The tech sector overbuilt in the boom years and is going through a painful rationalization as it reaches maturity. That is the classic boom-bust pattern. The other sector that has taken a spectacular hit is the stock market, where we have had the collapse of a classic bubble. Again, painful for some, but the fundamental fact remains that the Dow was in the 700's when Reagan took office. Long term investors were sitting on truly huge gains from a 17 year bull market. They've given some of it back, but still enjoy significant gains from any long term perspective. That's why there has been very little panic.

I generally don't like Chicken Little politics because it tends to get people oriented to the shortest of short term events, when what we need to be focusing on is a handful of major structural problems. Social Security is going off the cliff financially in about a dozen years, and raising taxes is not a good answer. Medicare and Medicaid are breaking the bank. The dominant "answer" in the Democratic Party today is to rope everyone into a single payer system in order to effectuate comprehensive rationing. We can and should do better. The crisis in urban public education has to be solved if we are to make progress on our intractable cluster of social/racial/urban issues.

I could add some more, but these are the Big Three (keeping to domestic issues) in my book. All are tough issues. I suppose it is easier to run on symbolic issues, identity politics, and minor ticks in the unemployment rate, but that is the politics of evasion.