To hear the media tell it, all eyes are on the fiscal cliff. Which side is compromising and which side isn't? Which side's numbers add up? How can votes in the House and the Senate be structured for maximum political gain? What will the deal ultimately be? And, most important, which side will win and which side will lose? Is this great drama gripping the entire nation? Actually, only Washington and the media are transfixed. The rest of the nation is still absorbed by trying to make it in the struggling economy -- the same economy that will still be struggling after the champagne corks are popped as soon as the fiscal deal, whatever it may be, is announced in a few weeks. In fact, wherever you look, there are ominous signs that threaten to take our struggling economy over a much bigger cliff than the one looming on December 31st. And yet none of our political leaders seem to even be looking beyond the cliff, let alone planning for what happens next. No one is talking about a plan for real growth. Right now our entire conversation stops at the cliff's edge. But, unfortunately, our problems won't.
Consider this past weekend's Sunday shows, which were wall-to-wall fiscal cliff. But the talk wasn't about the underlying economic issues. Rather, it was mostly just analysis of the political gamesmanship afoot. "Today it looks like we shall continue to get all flushed in the face about the so-called 'fiscal cliff,' and the grand bargains that both sides are trying to reach," wrote HuffPost's Jason Linkins, "so everyone can go home for the holidays and forget about the fact that they've ignored the short term economic emergencies in America for several years now."
The horserace coverage of the election has been replaced by the horserace coverage of the fiscal cliff. And just as the real issues went largely unaddressed in the former, they're also being swept under the rug in the latter. To the extent that growth and jobs get mentioned at all, it's only as fodder for the political football game. "Democrats and Republicans seized on November's job numbers on Friday to press for a compromise on a deficit deal," Jonathan Weisman wrote in the New York Times. "The jobs report gave both sides a new talking point to press for compromise."
But these numbers, along with other economic indicators, provide a lot more than talking points. They provide a very dire picture of the economy -- and not just ours -- heading down a very steep cliff. It's a measure of just how long our economy has been stagnant and how low our expectations have become that the latest jobs numbers were somehow presented as something positive ("jobless rate plunges to four-year low!").
Yes, the unemployment rate ticked down to 7.7 percent, and 146,000 jobs were added. But the drop in unemployment was largely the result of people leaving the workforce, as an estimated 350,000 of them stopped even looking for work, dropping the civilian labor force participation rate down to 63.6 percent, a near 30-year-low. In addition to the 12 million counted as unemployed, there are now nearly four million people who have left the workforce or who didn't even try to enter after graduating from school. Nearly five million people have been unemployed for six months or more, accounting for 40 percent of the unemployed.
As Dean Baker notes, with the previous two months being revised down by nearly 50,000 jobs, the average growth for the last three months is only 139,000. "At the current pace," he writes, "we would not see the economy returning to full employment for another decade." Or, as the New York Times put it in an editorial:
"...the jobs report, released on Friday, offers plenty of bad signs, and no reason to believe the picture will improve unless Congress starts dealing with high unemployment and the needs of those already out of work for months. The job market is not getting better or, worse, is slowing down."
So, far from being good news, the numbers are more a reflection of why, as the Washington Post's Neil Irwin put it, "The bottom is falling out of economic forecasters' expectations for U.S. economic growth in the final months of 2012." Macroeconomic Advisors revised their estimate downward to 0.8 percent from 1.4 percent. JPMorgan went from 2 percent to 1.5 percent. And RBC Capital Markets went from 1 percent to "slightly above zero at 0.2 percent."
Slightly Above Zero. If we were looking for a slogan for our times, it would be hard to pick a better one. Indeed, Slightly Above Zero might seem on the rosy side given what's already happening in Europe. From July through September, the EU actually shrank by 0.1 percent and the jobless rate stands at 11.7 percent, a record level. In the U.K., estimates are that the economy will have shrunk 0.1 percent for the entire year. Even in economic powerhouse Germany, "a fourth-quarter contraction" is "all but certain." And for the EU as a whole, the European Central Bank has downgraded its 2013 growth forecast from 0.5 percent to -0.3 percent. Referring to the effect of the U.S. economy on Europe, David Tinsley said, "They really need some growth now."
Very true. And yet, far from having a debate about growth, all we're currently talking about is how to avoid the latest self-imposed disaster. Right now, what's really being debated is how to preserve the status quo. And the status quo -- slightly above zero -- isn't very good. In fact, for millions it's an utter disaster. And if you dig down into the meager job growth we've had, it's easy to see that not all job growth is created equal. As Barry Ritholtz points out, jobs from low-wage industries have made up 51 percent of private sector job growth in the past year. "Growth itself is increasingly not much of a solution to a weak economy, when so many new jobs are like those in retail," writes David Callahan of Demos. "We can't build a good economy on bad jobs."
So, yes, let's say President Obama, as seems likely, wins the current political tug-of-war. What's next? What's the plan for his second term? Jumping over a series of low bars set by the Republicans isn't enough. Avoiding the fiscal cliff is no small accomplishment and it's very important that we do, but it's not enough. Avoiding decline isn't the same thing as creating growth. And yet the ideal window for the president to make things happen is early in his second term, before the political jockeying related to the midterms takes over the discourse.
And so far, the way the president is winning the fiscal cliff fight might actually make it harder to have that larger conversation. He's winning by essentially taking a page from the GOP playbook. That is, by making an appeal largely based on tax cuts -- even naming his campaign "my2K," in reference to the $2,000 middle-class Americans will get to keep under his plan. Now, I agree that middle-class Americans should have their tax cuts continued, and that the wealthy should start paying more. But that's just one small element of the larger conversation we need about growth, investing in infrastructure, education and finally doing what we need to do to safeguard the real economy from the serial risk-taking of the financial sector. Instead it's "my2k" that's front and center.
And after the Democrats win by successfully taking the tax cut page from Republicans, what then? Who will be the party of growth and real job creation? The Democrats will have won this fight, but they'll have done so by taking the country further from what it needs.
I have no doubt that the president will give great speeches for his second inauguration and the State of the Union address to follow. There will be lots of proposals and soaring rhetoric. But we need more than that -- we need follow through. When JFK proclaimed in 1962 that the country would put a man on the moon by the end of the decade, it was an ambitious, even shocking goal,laid out with bold language. "It will be done," he said. "And it will be done before the end of this decade." He said "we must be bold" and "we ought to do the job" and "we must pay what needs to be paid." He said it was "part of a great national effort of the United States of America." But it was what came after the rhetoric that turned the lofty goal into a historic achievement.
Getting our economy moving and turning around the decline of America's middle class will also require a great national effort. But it will require a larger, bolder and more forward-looking conversation than the one we're currently locked into. If all we focus on is who wins political battles like the one over the fiscal cliff -- and, no doubt, there will be others -- we all lose.
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