If, as is often said, presidential elections hinge on the state of the economy, barring a stock market crash or some other unforeseen event, Hillary Clinton will be the next president. Led by Donald Trump, Republican candidates have been running on how bad things are and what a 97-pound weakling America has become. But where is the economy on the eve of the 2016 presidential election?
This week, the U.S. Census Bureau reported that median household income in 2015, adjusted for inflation, was up 5.2 percent to $56,516. That’s the strongest growth since the economy began to struggle, and it almost brings middle-class incomes back to their inflation-adjusted high of $57,909 in the last year of Bill Clinton’s presidency.
The nation’s unemployment rate, which peaked at 10.8 percent, fell as low as 4.5 percent and is now approximately 5 percent. That could be considered full employment. Private job growth has increased in each of the last 78 months, a big change from the days when thousands of jobs per day were being lost.
The Dow Jones Industrial Average, which fell below 7,000 in 2009, topped 18,000 last week. People who hung onto their 401(k) accounts have seen them restored and then some. Gasoline, which topped $4 per gallon, costs half what it once did. The poverty rate fell to 13.5 percent in 2015, more than a point lower than the year before but still two points higher than during the Clinton presidency.
Health care costs, though still worrisome and unsustainable, once increased by an average of 8 percent per year and hit double digits some years. That rate has been halved, and fewer Americans are uninsured.
Best of all, while the rich indeed do continue to get richer, after decades of stagnant or falling incomes, low-income workers have also benefited. More than a million fewer people are earning less than $25,000 per year, which has reduced the demand for welfare benefits and the Earned Income Tax Credit.
Though the near poor have gained, taxes have largely eroded the gains of many in the middle class who, with higher earnings, found themselves in a higher tax bracket, wrote Pulitzer Prize-winning economics journalist David Cay Johnston. That travesty would presumably disappear if Congress ever enacted tax reform.
The economic gains of the Obama years have not fallen equally. The very wealthy, of course, continued to benefit the most, despite a small tax increase, as well as people whose skills command a high income. The tax increase, and Obama administration efforts to close loopholes, did reduce the number of households earning $1 million or more that paid no income taxes from 1,693 in 2012 to 444 last year.
More than ever, this is an education economy. Left behind are the unskilled or low-skill workers. The goal of the next administration should be making education and job training available to all who want it.
High-paying manufacturing jobs that once employed millions of union workers are gone, and so is the power of the unions.
They were lost less to global competition and trade deals than to technology and automation, which, as artificial intelligence improves, will continue to reduce the need for human labor.
Is America, as conservatives are given to say, going to hell in a welfare handbasket? Not hardly.
Listen to Warren Buffet, the sage of Omaha, who said: “For 240 years it’s been a terrible mistake to bet against America, and now is no time to start. America’s golden goose of commerce and innovation will continue to lay more and larger eggs. America’s Social Security promises will be honored and perhaps made more generous. And, yes, America’s kids will live far better than their parents did.”