From Frank Barnes, Professor Emeritus of Business at UNC Charlotte, in response to Jack Bass’s “Worst economic recovery in 70 years? These data say otherwise” (Aug. 15 For the Record):
Prof. Bass gets an F on his apology for the economy, but he is a humanities, not a business, professor. In the first half of his piece he mistakenly equates the stock market with the economy. The economy is where the jobs are – where people live! The stock market is just some place people put their extra money in the hope of some improvement in its value in the future. However, if they stop investing, business would eventually be strangled. The market and the economy are in trouble.
Investors are not happy. Many may be returning to where they were in 2007, but that leaves them with no gains for five years; they are about a third short of having the retirement funds they planned on. And if they tried to avoid risk by putting their money in savings accounts or traditionally safe investments, like banks, they are hurting even more. A $200,000 retirement account a few years ago may have given a person $16,000 a year, but they now get less than $2,000. Current federal policy is clearly bailing out less responsible people at the expense of the responsible ones.
The economy is in even worse shape. When Prof. Bass does get to the economy, he quotes a few random statistics which are all misleading because they claim a percentage improvement from an invalid base. One example: “delinquent mortgages down 13 percent from last year”! Mortgage problems have been at record-breaking highs, and just a 13 percent improvement doesn’t mean the problems are solved. Many working people I talk to are having a rough time, and may yet fail.
Obama doing opposite of what’s needed
Our government’s policies are not helping them. In fact, more impediments are being thrown in their way. The focus of our government’s actions are now on adding to the cost of business. In general, increased costs lead to lower sales and profits, then to lower employment. We need just the opposite, because our economy faces strong headwinds: competition from energetic new economies, the long-term loss in the number of well-paid factory jobs, a shift from “production” concerns to “social” concerns, and many more.
Things will improve, but not at the pace people expect. Our problems predate this latest fiasco. Thirty years ago the public hid from the problem by working more hours, then it was home equity loans to pay their daily bills, and then bubble-like loans. The problems remain. Unless there is a dramatic change, my study of the situation warns of a long-term growth rate for the U.S. of only half what we are used to.
We need to confront our problems, not apologize for them.
On to politics: It seems fair to say this is “the worst economic recovery in 70 years.” President Obama has shown his policy orientation in increasing the “welfare” overhead in the country and his overestimation of government’s role in creating a strong economy. His opponents do a service to point out how these policies may take the country toward a weaker economic future than they hoped for.