I have been surprised recently at how often I hear from people who tell me how our economic recovery is now finally on firm ground. This claim is based upon the fact that the stock market is at historical highs, the U.S. government can borrow money at historically low rates, the federal budget deficit is lower now than it’s been in years, inflation rates are extremely low, gasoline prices are lower than they've been in a long while, and the unemployment rate is down to a very nice level. Most of those who express this exuberance are left-leaning Democrats, who in the same breath, knowing I’m no fan of our current President and believed he would lead us to some version of ruin, give me a version of “How does it feel to have been so wrong?”
What I find most ironic is that this recovery that the President and his fans are bragging about having engineered has benefited that dreaded 1% and has not delivered much if any benefit to anyone else. Back in the 1980’s Republican economists coined the term “trickle down economics,” which meant initiating policies that would benefit the people at the top so that ultimately crumbs would fall and thus raise the lots of the masses. Democrats ridiculed this notion then and have for years since until now when they have not only embraced it themselves but are actually bragging about how successfully they've pulled it off. The only problem is that there has been no trickle down benefit to speak of. The 99% are not doing any better than they were five years ago, and many, if not most, are doing worse.
Indeed, the cost of capital is super low, which many believed would spur corporate spending and hiring, as well as inspire the creation of new businesses. None of this has happened. Companies have hoarded cash, especially multi-nationals who do not wish to repatriate overseas earnings and pay huge tax bills. Massive natural deflationary pressures born from the efficiencies brought about by technological innovation as well as globalized trade have rightfully spooked business leaders who have managed their companies with great frugality. And, even though the cost of capital is low, restrictive lending policies that were introduced after the subprime crisis has limited its availability mostly to those who don’t need it or don’t want it. New business creation has hovered near historical lows. Real wages are stagnant, especially for a post-recession period, and people basically haven’t received a raise in decades. The labor participation rate, which measures the percentage of people employed out of those eligible for employment, and is a far more accurate barometer of the employment situation, is at historical lows. And, part time employment in the service sector (such as flipping burgers at McDonald’s) makes up far too large a portion of employment gains in recent years. Low wage jobs account for more than 40% of all jobs added in this recovery.
The Obama recovery has been a huge success for those at the very top of the food chain, and a complete bust for everyone else. This is the reality. Trickle down economics, Democrat-style, has not worked.