In summing up economic issues and events, one might begin with the 12 months followed by a colon and a catchy subtitle. But what adage, catchy or trite, for the 12 months just ending? How concerning the following?
2023: The perfect of times, the worst of times.
2023: The gathering storm.
2023: What the hell (or heck) were we pondering?
2023: It may well’t get much worse, but it would before it gets higher.
2023: The relative calm before the storm.
Take your selection or coin your personal, but few people would mimic Frank Sinatra or Michael Jackson and say, “2023: It was a excellent 12 months!”
It is evident that the period from 2020 through 2025 will go down in U.S. history as critical ones for our society, our economy and our democracy. But we may not understand exactly why and the way for a very long time.
When recently-deceased Henry Kissinger made his covert flight to China in 1971, there was a tea break within the negotiations. The participants were all well-schooled in history and a debate broke out over the consequences of the French Revolution on world history. Chinese Premier Zhou Enlai stood by silently because the discussion raged. Then, 180 years after the events under discussion, he opined: “Perhaps it is just too early to inform.”
We’re still interpreting and reinterpreting how the Sixties affected us. Indeed, the political turmoil we face now has seeds planted six many years ago. The Great Depression is 90 years in our past, but economic and social historians still ponder it and accepted interpretations fade away. The identical will probably be true for the 2020s.
All said, a possible subtitle could also be “2023: The 12 months Congress (almost) died.” Whether the parenthetical “almost” will probably be deleted depends upon what we collectively do in 2024 and the remaining of the last decade.
Start with key background. By key indicators of output, employment and unemployment, prices, business profits, trade and stock prices, the U.S. economy is doing by far the very best of any of the main industrialized democracies. Yet many within the American public think the economy is doing very badly and such dissatisfaction may prove crucial within the 2024 elections.
Statistical indicators aside, we’ve many problems.
Homelessness stays high and visual in lots of areas. Despite growing average incomes, earnings remain low for a big fraction of the workforce and workplace conditions and management practices essentially the most onerous in a century. Unemployment stays high for low-education employees whilst employers in any respect levels bemoan labor shortages.
Large numbers of immigrants are entering our country, many illegally and lots of quasi-legally under an asylum system that’s outdated and overwhelmed. The influx of individuals from other nations overwhelms services available in cities where they cluster.
And the massive supply of powerless and docile illegal employees definitely suppresses wage rates for low-skill residents. Satirically, tens of millions of such undocumented immigrant employees are hired by businesses whose owners contribute to the campaigns of politicians who vow to stop immigration.
There may be a big disparity between the situations of those over age 40 and with college educations in comparison with those under 40 with highschool diplomas or less. Easy money boosted housing prices for 15 years and so they haven’t yet fallen as rates of interest were boosted to scale back inflation. Baby boomers saw equity of their houses burgeon and now are once more having fun with good returns of their investment accounts. Younger people could barely afford houses even when mortgage rates were low and don’t have a prayer now with higher ones.
One could go on and on. Yet I’ll wager that future historians will zoom in on the self-induced collapse of Congress as a key actor in U.S. governance as a root explanation for many economic and social problems. Its willful impotence casts inconceivable burdens on the president, the Supreme Court and the Federal Reserve as institutions to unravel all challenges. This inevitably results in failure and increases tensions in our body politic.
Understand that until the Thirties, Congress was the dominant policy maker. Presidents could ask for actions, but it surely was as much as the House and Senate to authorize recent agencies or programs and to appropriate money for them. Key leaders, including committee chairs, in each house shaped laws that a president either accepted or rejected.
That modified with the Great Depression. The economy imploded but the brand new president, Herbert Hoover, seemed unable to supply leadership and Congress dawdled. The 1932 election brought Franklin Roosevelt, who had a number of action-oriented advisers, and powerful Democratic majorities in each houses who gave FDR most of what he wanted. Then we faced essentially the most difficult foreign war in our nation’s history. That was followed by a half-century of confrontation with countries dominated by a totalitarian ideology contrary to our political and economic identity.
All this transformed the presidency into the first branch of presidency. Congress trailed behind. It still held the facility of the purse and still shaped laws, but Capitol Hill was secondary to the White House. What power it had trusted a broad consensus of bipartisan consultation and cooperation.
The avuncular Irish-American House Speaker Tip O’Neill, a Democrat, would go in late afternoon to the White House to sip whiskey and negotiate with an equally avuncular Irish-American President Ronald Reagan, a Republican, and hash out compromises on key issues. Senate Foreign Relations Committee chair Richard Lugar would seem on Charlie Rose’s interview show along with the committee’s minority head Joe Biden, and it could be hard to search out much gap between them on the way to take care of a collapsing U.S.S.R. or an aggressive Saddam Hussein.
That cooperation began to crumble with the House speakership of Republican Newt Gingrich. Democrats had controlled the House for 50 of the preceding 60 years and Gingrich thought the one approach to get conservative laws passed was aggressive confrontation moderately than cooperation. After 2010, the Tea Party Patriots ratcheted this approach even higher. And Congress has been AWOL on all major issues ever since.
Perennial deficits are decried, but Congress has not passed a budget bill on time in 40 years. Immigration is a big issue, but Congress has not passed any laws for the reason that 1986 Simpson-Mazzoli Act sponsored by a Republican senator and a Democratic House member and signed by a Republican president. And so, as on nearly all other issues, government is stalemated. As long as our democratic processes are paralyzed, the long-term cancers in our economy will grow.
So we end 2023 with the economy booming by virtually all numerical indicators within the short term but resting on rotting foundations. We face a constitutional crisis in our elections systems and in our selection of a president. The primary large land war in Europe in 80 years continues and recent fighting within the Mideast threatens commerce through the Suez Canal and hence the world economy. China flexes its muscles as its economy idles in neutral.
What does this all mean for specifics of what we face in our country’s economy in 2024? That could be a subject for next week.
St. Paul economist and author Edward Lotterman might be reached at stpaul@edlotterman.com.