The state of the economy is a major issue in every presidential election. As Yale economist Ray Fair has documented, people really do vote their pocketbooks: Below-trend GDP growth, rising unemployment or increasing inflation almost always dooms the incumbent party.
That reality has Democrats more scared than Hillary Clinton’s emails or her dismal likeability and trust ratings.
Simply put, the current “recovery” is the weakest on record. GDP growth has been below the long-term trend of 3.1% in all but seven of the last 30 quarters. Fair’s statistical model of election outcomes predicts a Republican victory on that basis alone.
The Democrats are doing their utmost to distract attention from these facts. President Obama continues to brag that his policies rescued the economy from the brink of another Great Depression. As for Clinton, she vacillates between promising to jump-start the economy and defending the Obama administration’s record. Clinton surrogates tell us the economy is a whole lot better than it was when Obama took office, and even better than we think it is.
There is a much larger issue here, though. Absolute numbers on job growth sound impressive, but they must be put into historical and relative perspective. There were 130 million people employed on average in 2010. A 14-million increase therefore represents a 10.76% expansion of the job base over a six-year period. That’s a paltry achievement.
Contrast Obama’s record with the Reagan years, when the economy also had to recover from a deep recession. From 1982 to 1988 — a comparable six-year period — net job growth exceeded 15 million. The employment base in 1982 was only 91 million, for a growth rate of 17.49% .
Had the Obama recovery package been as successful as the Reagan policy package, the net job growth over the last six years would have been nearly 23 million, not the 14 million that Clinton considers so impressive.
Below-trend GDP growth, rising unemployment or increasing inflation almost always dooms the incumbent party.
While Clinton tries to sell the notion that the Obama recovery was robust, she does concede that wages haven’t risen nearly enough. The liberal Economic Policy Institute estimates that the median hourly wage has increased only 5.7% since 1973. Whether Clinton realizes it or not, the stagnation she deplores is another indictment of Obama’s growth policies: Wages tend to increase faster when the economy grows more vigorously.
Clinton’s proposed solution — among others — is to raise the minimum wage. But minimum wage laws affect only a small percentage of the workforce, and a significant jump in the minimum wage (e.g., to $12 an hour, as Clinton now advocates) can also constrain job growth.
In general, Democrats tend to view the wage structure and workers’ position in it as rigid. For them, it’s always a zero-sum game, in which the top 1% get all the gains while the workers at the bottom languish. They don’t understand that the composition of the top 1% changes every year. This year’s wage champs aren’t necessarily next year’s champs. Likewise, a steady stream of immigrants, high school graduates and others enter the labor market every year, usually at the lower rungs of the wage ladder. But those at the bottom this year are unlikely to find themselves at the bottom next year.
Indeed, among minimum wage workers, the rate of upward mobility is extraordinary, with less than 30% still working minimum wage jobs after three years of labor market participation. Even when the average real wage doesn’t increase, the average worker can still be significantly better off. Upward mobility in a growing workforce is the key.
As always, voters in this election cycle are concerned about macro growth and micro mobility. We want robust GDP growth and continued access of all workers to every rung on the wage ladder. Clinton wants us to believe that the economic policies of the last eight years have at least delivered strong growth and job creation. But that’s not the case. If she continues to pitch the notion that the Obama/Clinton economic record has been a blessing, she will lose more credibility -- and just maybe the election.
Brad Schiller is emeritus professor of economics at American University and author of “The Economy Today.”
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