September 4, 2012
Top Democrats and President Obama plan to use convention week to push back against Republican charges that average Americans are worse off today than they were four years ago. It’s a difficult sell on a question where the facts never stand in the way of a good sound bite.
Blaming the president for the economy’s sluggish rebound from the worst downturn since the Great Depression is central to challenger Mitt Romney’s strategy for winning the White House.
The vice presidential candidates crossed swords on the issue over Labor Day weekend with Democrat Joe Biden offering a fiery rejoinder to Republican Paul Ryan’s charge that Obama “can’t tell you that you’re better off.” The Wisconsin Republican compared the president to Jimmy Carter, the only Democrat in the 20th century who failed to win a second term.
“If you want to know whether we’re better off, I got a bumper stick for you: Osama bin Laden is dead and General Motors is alive!” Biden told a crowd of cheering auto workers in Detroit.
The success of the automobile industry loan program will be much in evidence here this week, part of the Democrats’ broader claim that key economic indicators are moving in the right direction. “We’ve seen 4.5 million private sector jobs created in the last 29 months,” presidential adviser Valerie Jarrett said during her first convention week appearance on Tuesday morning. “General Motors and Chrysler are back on top.”
Yet with unemployment stuck at 8.3 percent and payrolls growing at half the pace needed to make a major dent in the rate, Jarrett admitted “we’ve been through a very tough four years. . . It took a while to get us into this mess, and it’s going to take a while to dig out.”
Democratic leaders will spend a lot of time this week reminding Americans of the dire economic situation that confronted the new president in the winter of 2009. Businesses were hemorrhaging more than a half million jobs every month, a pace that only began to slow with passage of a $787 billion stimulus bill.
Since the jobs bottom was reached in February 2010, private sector employers have added more than 4.5 million jobs, an average of 157,000 per month. However, that has been offset by a loss of nearly 600,000 public sectors jobs due to cutbacks at the state and local level. After Republicans won control of the House in 2010, further federal financial support to maintain local government jobs, which had been contained in the stimulus, came to an end.
Congressman Xavier Becerra of California, a rising Latino star for the Democrats who will address the convention tonight, pointed to the nascent rebound in home prices and the sharp recovery in stock prices. And while average household incomes remain below 2007 levels, they are finally coming back from recession lows. “We absolutely are better off than four years ago,” he said.
Though rarely noted, the stock market’s performance since the worst of the downturn has stabilized millions of Americans’ retirement portfolios, returning them to within shouting distance of their peak in mid-2007. The benchmark Dow Jones Industrial Average opened above 13,000 this morning, nearly twice where it stood on March 6, 2009 when it hit 6,627.
Ryan’s claim that “the Jimmy Carter years look like the good old days compared to where we are right now” is only credible if you ignore where the economy was headed at the time. Unemployment may have averaged 7.1 percent in 1980, but prices were rising at a 13.5 percent clip while mortgage interest rates stood at 12 percent, enough to bring the housing market to a standstill. By the time Ronald Reagan took office, unemployment was skyrocketing. It would eventually reach 10.2 percent during his second year in office.
Today, inflation remains tame, slightly below the Federal Reserve Board’s 2 percent inflation target. Mortgage rates of 3.75 percent are at a historic low and the housing market is beginning to recover in most parts of the country. And while the unemployment rate remains unacceptably high, it is two percentage points below where it was 30 months ago. A new report is due from the Labor Department Friday.
Democrats will argue this week that the stage is finally set for a more robust recovery. Their plan to speed it up rests on making new investments in education and infrastructure while offering a long-term plan for deficit reduction that relies on tax reform.
Reform, in their view, will require making the well-to-do pay higher taxes. Democrats, like Republicans, would like to lower overall rates by limiting tax deductions and exclusions. Romney and the Republicans last week were silent on the question of which deductions they would scale back to lower rates. It is unlikely that the president and the Democrats will be any more forthcoming, since significant rate reduction will require putting limits on popular tax breaks like the home mortgage deduction or charitable contributions.
“The long-term growth of the economy rests on the private sector, the president knows that,” Jarrett said when suggesting tax reform that would appeal to the business community would be one of Obama’s first initiatives after the election. “There’s plenty of room for common ground.”