It would be hard to find an economist or Wall Street analyst these days who doesn’t speak positively about an economic recovery. At the same time, polls show that more than two-thirds of the American public think the economy is not improving, is not recovering, or is actually getting worse.
How is one to explain this dichotomy? Are the experts lying? Are two-thirds of the American people too stupid to understand what’s going on in the economy? The answer to both these questions, of course, is ‘no.’ This discrepancy in views is simply the result of what’s being measured.
We’re now experiencing a statistician’s recovery. The gross domestic product (GDP) is growing. Profits are up at many companies. Wall Street is soaring. Jobs are reappearing, slowly, but reappearing. Consumer spending is up a bit. If you look at numbers such as these, which is what economists and analysts are looking at, there’s no doubt that a modest recovery is underway.
So why don’t two-thirds of Americans see things that way? Because as has been true for decades, most of this GDP growth is gravitating to a relatively few people at the top. And because the jobs that are still around and the new ones reappearing are often lower paid than in the past, have fewer and smaller benefits, and are less secure. And because increased company profits are mostly at big companies not the more numerous smaller ones, and such increased profits often come from reduced outlays not more revenue. And because increases in consumer spending aren’t coming from a lot of new income (except for that top tier) or a surge in the ability to borrow but from savings, and is therefore not sustainable. And because public services of all kinds at the local government level are being cut back, making real people’s real lives seem less rich and more difficult.
O.K. So one group of Americans, economists and analysts, look at certain measurements to assess the state of the economy and come to one conclusion, while the majority of Americans who have to live within another set of measurements come to a different conclusion. So what?
The so-what here might be summed up in that old accountant phrase, “what gets measured gets done.” Policy makers in Washington are looking at the economist-analyst measurements and acting as if we are finally getting out of that deep, deep recession. In consequence they are not moving to address the root causes of economic discontent in this country — an overblown financial services sector that produces too little of real worth for the wealth it consumes; excessive discrepancies in wealth that have nothing to do with true economic value; and a wacky tax system that in essence takes from the poor to help the rich.
What gets measured gets done. In Washington, they aren’t looking at the right yardsticks. And since this is the case, they aren’t doing the only things that will make our economy better in the long term.
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