Judging by the presidential campaigns, you would think that the American people are one ballot away from decades — or at least four years — of prosperity. Just get rid of the guy in office, or give the guy in office four more years, and all will be well.
Dr. Mark Zandi, the chief economist at Moody’s Analytics, would say otherwise.
Using computer models, Zandi predicts that the unemployment rate four years from now will be 6.6 percent — better than the eight percent we have now, worse than the five percent we had before.
Recently, National Public Radio paid Zandi a visit and asked him what it would take to get the rate back to five percent, so he started punching data into his computer.
I don’t know how he did it, but he got the Republicans and Democrats to agree to a long-term budget plan to address the national debt through spending cuts and tax increases. That reduced the unemployment rate down to 6.1 percent.
A series of equally unlikely attempts to fix the world followed. Peace in the Middle East dropped the price of oil by $20, and when that wasn’t enough, Zandi cut the price to half what it is now. With a few keystrokes, Europe’s, China’s and Africa’s economies brightened, which would benefit the United States. He also turned today’s somewhat gloomy Americans into confident consumers who then became downright giddy.
Despite these unrealistically rosy scenarios, the unemployment rate reached no better than 5.2 percent. There are so many people looking for work, and the Great Recession was so devastating, today’s economy faces so many headwinds, and the world is just so messed up, that Zandi said it’s going to take a generation to recover.
The takeaway? Well, it’s possible that neither the chief economist at Moody’s Analytics nor his computer know what they are talking about. Republicans would point out that Zandi didn’t cut taxes. Democrats might say he didn’t create a cleaner, greener energy source.
Or there’s this perspective: that, while undoubtedly flawed, Zandi’s approach is more or less correct and the go-go days of the 1990s aren’t coming back for a while.
If it’s the latter, and I think it is, then it’s time to re-examine some assumptions. For the past four years, the federal government has run enormous annual budget deficits under the theory that if we Americans can just get through this rough patch, then the economy will start to grow. When the good times return, we’ll responsibly start trying to balance the budget and, far in the distant future, even pay down the debt a little.
The result is a sluggish economy (that, granted, would have been worse short-term), persistently high unemployment, and a national debt that has reached $16 trillion.
If what Zandi says is true, then at some point, the country will have to stop throwing its bills away hoping it will win the lottery. It will have to adopt policies that cause some economic hardship in the short term in order to get the country out of the deep hole of debt it has dug.
Assumptions might have to change at the state level, too. This past week, the directors of the teacher and state employee retirement systems told legislators that their funds have lost some money lately while basing their projections on having to generate eight percent returns each year. The state employee director said her fund might drop that target a little, maybe to 7.75 percent. That still seems like a lot to have to rely on.
The most important assumption is one made by average citizens: That this is America, and that we can keep doing what we’re doing, perhaps with minor changes such as electing someone else president, and things will get back to normal.
This may be the new normal.
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Steve Brawner is an independent journalist in Arkansas. His blog — Independent Arkansas — is linked at Arkansasnews.com. His e-mail address is firstname.lastname@example.org