George Will: Ignoring the path to recoveryGEORGE WILL
May 28. 2014 8:27PM
IT IS SAID that the problem with the younger generation — any younger generation — is that it has not read the minutes of the last meeting. Barack Obama, forever young, has convenient memory loss: It serves his ideology. His amnesia concerning the policies that produced the robust recovery from the more severe (measured by its 10.8 percent unemployment rate) recession of 1981-82 has produced policies that have resulted in 0.1 percent economic growth in 2014’s first quarter — the 56th, 57th and 58th months of the recovery from the recession that began in December 2007.
June begins the sixth year of the anemic recovery from the 18-month recession. Even if what Obama’s administration calls “historically severe” weather — aka, winter — reduced GDP growth by up to 1.4 percentage points, growth of 1.5 percent would still be grotesque.
America has a continental market, a reasonably educated and remarkably — considering the incentives for not working — industrious population, an increasingly (because of declining private-sector unionization) flexible labor market, an efficient financial system, extraordinary research universities to fuel innovation, and astonishing energy abundance. Yet the recovery’s two best growth years (2.5 percent in 2010 and 2.8 percent in 2012) are satisfactory only when compared to 2011 and 2013 (1.8 and 1.9, respectively).
The reason unemployment fell by four-tenths of a point (to 6.3 percent) in April while growth stalled is that 806,000 people left the labor force. The labor force participation rate fell by four-tenths of a point to a level reached in 1978, which was during the Carter-era stagflation and early in the surge of women into the workforce. There are about 14.5 million more Americans than before the recession but nearly 300,000 fewer jobs, and household income remains below the pre-recession peak.
Paul Volcker, whose nomination to be chairman of the Federal Reserve Board was Jimmy Carter’s best presidential decision, raised interest rates to put the nation through a recession to extinguish the inflation that, combined with stagnant growth, ruined Carter’s presidency. Then came the 1983-88 expansion, when growth averaged 4.6 percent, including five quarters over 7 percent.
Ronald Reagan lightened the weight of government as measured by taxation and regulation. Obama has done the opposite. According to the annual “snapshot of the federal regulatory state” compiled by Clyde Wayne Crews Jr. of the Competitive Enterprise Institute, four of the five largest yearly totals of pages in the Federal Register — the record of regulations — have occurred during the Obama administration. The CEI’s delightfully cheeky “unconstitutionality index,” measuring Congress’ excessive delegation of its lawmaking policy, was 51 in 2013. This means Congress passed 72 laws but unelected bureaucrats issued 3,659 regulations.
The more than $1.1 trillion of student loan debt — the fastest-growing debt category, larger than credit card or auto loan debt — is restraining consumption, as is the retirement of baby boomers. In 2012, more than 70 percent of college graduates had student loan debts averaging about $30,000. This commencement season’s diploma recipients are entering an economy where more than 40 percent of recent college graduates are either unemployed or in jobs that do not require a college degree. This is understandable, given that 44 percent of the job growth since the recession ended has been in food services, retail clerking or other low-wage jobs.
In April, the number of persons under 25 in the workforce declined by 484,000. Unsurprisingly, almost one in three (31 percent) persons 18 to 34 are living with their parents, including 25 percent who have jobs.
So, the rate of household formation has, Neil Irwin reports in The New York Times, slowed from a yearly average of 1.35 million in 2001-06 to 569,000 in 2007-13. And investment in residential property is at the lowest level (as a share of the economy) since the World War II. “If,” Irwin writes, “building activity returned merely to its postwar average proportion of the economy, growth would jump this year to a booming, 1990s-like level of 4 percent.”
However, a Wall Street Journal headline announces that Washington has a plan: “U.S. Backs Off Tight Mortgage Rules.” It really is true: Life is not one damn thing after another, it is the same damn thing over and over.
There is, however, something new under the sun. The Pew Research Center reports that Americans 25 to 32 — “millennials” — constitute the first age cohort since World War II with higher unemployment or a greater portion living in poverty than their parents at this age. But today’s millennials have the consolation of having the president they wanted.
George Will’s email address is email@example.com.