The Richmond Times Dispatch has an interesting article on the US economy and why it has prospered and out-paced the economies of Japan, China, and many European nations. We just haven’t heard tales of woe like one hears about Greece, Spain, Ireland, and Portugal and our pension funds haven’t been slashed nor have our civil servants been reduced to a near state of bankruptcy.
Sure, our joblessness rate needs to improve more. Yes, people are out of work. Yes we still have a rust belt and we have cities in decline. Our infrastructure needs all its underpinnings overhauled, but some things we are getting right.
The US economy is seen as making a comeback that is the envy of the developed nations of the world. Why is that? 5 major reasons are given to explain. Two seem especially worthy of closer inspection:
LESS BUDGET-CUTTING
Weighed down by debt, many European countries took an ax to swelling budget deficits. They slashed pension benefits, raised taxes and cut civil servants’ wages. The cuts devastated several European economies. They led to 27 percent unemployment in Greece, 14 percent in Portugal and 25 percent in Spain. The United States has done some budget cutting, too, and raised taxes. But U.S. austerity hasn’t been anywhere near as harsh.
A ROARING STOCK MARKET
The Fed’s easy-money policies ignited a world-beating U.S. stock market rally. Over the past five years, U.S. stocks have easily outpaced shares in Europe, Japan and Hong Kong. That was one of Bernanke’s goals in lowering rates. He figured that miserly fixed-income rates would nudge investors into stocks in search of higher returns. Higher stock prices would then make Americans feel more confident and more willing to spend — the so-called wealth effect.
Most economists agree it’s worked.
If we had listened to the Tea Party and all its doom and gloom, just where would we be? The Tea Party, if you recall, called for severe measures to cut the deficit. Dire predictions were made about the suffering of our children, grandchildren, and all future generations. Fortunately, our leaders prevented some of the more austere suggestions from slowing our economy down to a crawl. Our economy is humming and the pace of our economic growth is steadily increasing. Our banks are stronger and we are the envy of the world.
Hopefully the days of nearly bringing the country to its knees are over. No more government shutdown please. We should also raise the debt ceiling when needed. The world won’t come to an end.
The end of 2008 was mighty bleak. Many Americans had lost their jobs, their shirts in the stock market, their retirements, and some even lost their homes. As usual, the US prevailed through dark times. People tightened their belts and now, over 5 years later, things are looking fairly rosy rather than bleak.
You can’t beat this outlook with a stick, even if the goal is to make the President look bad.
You are aware of the 2014 first quarter economic data, right? It’s no bueno. If you think the stock market is doing great just look at the 1Q14 P/E ratio. It hasn’t been this low (0.9%) since 3Q12.
The P/E ratio isn’t really how you should be evaluating the stock market.
“If we had listened to the Tea Party and all its doom and gloom, just where would we be? The Tea Party, if you recall, called for severe measures to cut the deficit. Dire predictions were made about the suffering of our children, grandchildren, and all future generations.”
I think they were referring to this: http://www.usdebtclock.org/
And it wasn’t just the Tea Party talking about the effects on our children when it comes to the debt:
“over the last eight years is to take out a credit card from the Bank of China in the name of our children, driving up our national debt from $5 trillion for the first 42 presidents – #43 added $4 trillion by his lonesome, so that we now have over $9 trillion of debt that we are going to have to pay back — $30,000 for every man, woman and child. That’s irresponsible. It’s unpatriotic.” – Senator Barack Obama
So are we no longer taking out a credit card from the Bank of China in the name of our children?
Yawn. I believe the article is really about not listening to people like you. Did you fail to see yourself?
The debt is a direct consequence of the 2001 tax cuts. Which is a direct consequence of Republican rule.
I completely agree with Moon’s premise. It’s fascinating to me that Tea Party “thinkers” don’t notice that the rest of the world has the same problems that we do, and has no interest in how things play out for others. They compare us not to things that are real, or even achievable, but to idealized scenarios of childhood that play out in their head. The world is more complicated that the simplistic slogans waved at Tea Party rallies.
Cheer! Bravo!!!
@Rick Bentley
So the premise is that the economy sucks, it just doesn’t suck as bad as other countries?
Conservatives prefer a tanking economy than anything that would benefit Obama politically.
It does sound that way. I hope it isn’t true though.
Germany did not increase spending. Their economy is growing.
OURS is tanking. Our unemployment is growing. We increased spending.
Our president called this type of spending “unpatriotic.”
The debt is NOT a direct consequence of that small cut. It is a consequence of out of control spending and the stagnant, if not shrinking, economy due to Obama’s policies and agendas.
There are many reasons why we are where we are. One very major reason is the attitude of a Vice President that said deficits do not matter – and the administration went on to start two wars (which is lasting a very long time) and enact a tax cut at the very same time. At the time of recession, and we had a very severe recession (if not a depression) and a financial crisis and home crisis at the same time – it is not time for Government to stop all spending. Our problems are also lingering due to Congress not achieving their number one goal of making Obama a one term President – so instead of actually enacting legislations to fix – tax reform, immigration, healthcare, etc – they are doing nothing which is hurting the US economy long term (and short term).
Yet we still compare favorably with other countries.
Cargo, you are missing the point–compared to other developed countries in the world, we are in great shape because our leaders acted swiftly and smartly.
First the entire city of Norfolk (and surrounding regions) were wrong and now the Richmond Times Dispatch is wrong, according to you.
By the way, you just sound small and mean trying to hang all debt on Obama. Remember that thing called a recession?
@Moon-howler
Compared to other countries in the world…we are in the SAME shape.
Our economy is contracting. We are in unsustainable spending and debt.
Our employment is actually tanking…NOT growing.
The Times-Dispatch is spinning.
They may have acted swiftly…its easy to print and spend money. But they did NOT act smartly.
Yes..I remember the recession. And I believe that Obama’s and the Democrat’s policies have extended it. We keep hearing that that we are recovering. Remember the “summer of recovery” in 2009?
I don’t care if I sound small and mean…… its the truth. Why do you keep trying to paper over the disaster that is democrat policy and Obama’s lies?
If the entire city of Norfolk thinks the seas are rising due to global warming….they ARE wrong.
Cargo, you weaken your own veracity when you make those kinds of pronouncements.
Norfolk is doing the right thing. They are studying the problem. It sounds like you have closed your mind.
Do you think having two wars and enacting major initiatives costing billions is good? Do you think keeping the country from going into recession is a good thing? I do.
Also…compared to what other countries?
Germany…better
Greece, Spain, Portugal, Italy…overspent…and now tanking.
France…. stagnant
Japan….. stagnant and dropping.
We are merely drowning last……
@Moon-howler
Right…. Norfolk is studying the problem. Now…if they spend all their money on a false problem…what happens?
Funny…. having ONE war with two theaters was necessary. Obama didn’t mind Afghanistan theater…..he said it was the one we were supposed to be fighting…that is, until he took office. Now he’s doing some sort of slow surrender. Personally, if he wants us home, he should have left when we killed Bin Laden. THAT is why we were there.
Enacting major initiatives costing billions. You mean…like the “stimulus bill” that cost almost 1 TRILLION dollars? Or ObamaCare? Those types of expensive initiatives? Or Bush’s Medicare program? Or the Prescription Drug Plan? Those Democrat supported plans?
Why is Bush’s spending so bad….even though when he left his deficit was 450 billion dollars…and Obama’s ongoing 1 trillion dollar deficit isn’t? Obama has already spent more than the cost of the Iraq theater.
You assume you know the right answer. Don’t you think you are being a little premature or is that just the uber right kicking in?
I say two wars. The second one was totally unnecessary and cost untold numbers of lives and dollars. I also question its legality.
Thank goodness for Obama and tim Geitner and Bernanke being there and keeping us from bobbing around in a financial crisis we haven’t seen since the great depression. Did I leave out Hank Paulson? I like how my world looks far better than the one you would have painted for us.
You left off NCLB. That major crock of you know what.
@Cargosquid
cargo – the facts are that the deficit was $1 Trillion dollars before Obama was in office. I have shown you those facts before. Do you think it was a good move to go to war and cut taxes at the same time? Obama has actually voted for very little spending – the deficit is to pay for things that were voted for and enacted before he ever stepped foot into the Oval Office.
Cargo, you are once again simply wrong on the foundations of your arguments (post #13). We’ve been over this before- I’ve referenced information proving your claims false, and you just keep on making them.
“Our economy is contracting.” WRONG- our economy has been expanding since 2009: http://www.multpl.com/us-gdp-growth-rate/table/by-year
“Our employment is actually tanking…NOT growing.” WRONG- The unemployment rate has been decreasing since 2010: http://data.bls.gov/timeseries/LNS14000000
“We keep hearing that that we are recovering.” MAYBE that’s because we are (see above). We’ve been in recovery since 2010.
Additionally, the health care market is growing faster than the economy in general: http://www.nasdaq.com/article/closing-update-healthcare-stocks-lead-markets-to-narrow-gains-although-nasdaq-composite-falls-just-short-of-positive-ground-cm367262
And finally, the stock market has nearly TRIPLED in value since the recession: http://stockcharts.com/freecharts/historical/djia2000.html
Yes, the P/E ratios are problematic in some cases, but that doesn’t change the fact that American business is confident and happy in general, as judged by the market.
Cargo, just like with a house, when your foundation is faulty, everything on top of it is in question, as Moon has said. You continue to deny reality, apparently just because it doesn’t fit your arguments. No question that there’s still a ways to go for our economy to be where we want it to be, but we’ve made great strides and done better than most of Europe and the rest of the world in the process. Those are facts.
Now THAT is funny! 🙂
What do you suggest we, and most economists, use to evaluate the stock market then?
You don’t buy much stock, do you? The p/e ratio is one tool to evaluate an individual stock.
Overall…what does it really tell you other than trends when taking an average on the indexes.
Point out to me how a general p/e ratio indicates that the stock market is failing. This I have to hear. Waiting for the explanation.
Actually, the S&P 500 P/E ratio is 19.47, which is well within the average range for the past 100 years.
I am sitting here shrugging. It isn’t out of line. I agree. Let’s let the stock wizard explain what he means.
@Moon-howler
Oh yes….that POS of a bill.
@middleman
Yes…we have been over this. And you are wrong.
The last quarter has been revised to negative numbers. And that is without the false inflation numbers bolstering the gov’t numbers.
The unemployment “rate” has been sinking not due to more employment but due to more people dropping out of the job markets. 92 million unemployed. Its not even keeping up with population growth.
Health care stocks may be up. Medical costs are up. Millions lost their insurance…that they liked and it was replaced…IF they were able to get it, with more expensive insurance that they did not want. Doctors are refusing to take the reduced gov’t payments and doctors/hospitals are not in the Obamacare networks….so people could not keep their policies OR their doctors if they wanted to keep them.
Speaking of stocks….yep..up.. Nice bubble isn’t it? Free money does that.
Did someone say my name?
Cargo, you’re fast becoming ridiculous. One negative quarter doesn’t negate four years of growth- I hope you can understand that.
That 92 million unemployed number, if correct, counts folks who have retired, gone on disability, etc. And that still doesn’t negate four years of declining unemployment, including this year.
Medical costs are actually trending down: http://www.pwc.com/en_us/us/health-industries/behind-the-numbers/assets/medical-cost-trend-behind-the-numbers-2014.pdf
A four-year stock market “bubble?” Lots of countries would kill for that.
You’re just being silly, Cargo. Your bias is affecting everything to the detriment of your assertions.
Growth…as reported by the same people that say we have no inflation.
Yes…that 92 million does include retirees, etc….but there has not been enough job creation over the last 5 years to match even population growth.
http://www.theospark.net/2014/07/the-inflation-you-do-not-havefrom-rico.html
Yes, a four year stock bubble. How long did that property bubble last? Amazing how high prices can go when free money is being thrown at it. In this case, its quantitative easing.
Medical cost rate INCREASES are trending down according to your article. Premium rates are going up. Your article also admits that.
An in-depth discussion
“For 2014, PwC’s Health Research Institute (HRI) projects a medical cost trend of 6.5%. Taking
into account likely adjustments to benefit designsuch as higher deductibles, HRI projects a net
growth rate of 4.5%”
Higher deductibles. Hmmmm, wasn’t Obamacare supposed to save every family $2500?
Read the whole thing. Its a great spin on how the medical industry is hurting from lower reimbursements and are cutting services.
A 6.5% increase in cost. And that is the LOW estimate. They were estimating a 7.5% increase.
How is this a downward trend? You must be using government math….the math that says a lower increase is a cut.
Free money is not being thrown at the stock market. In fact, quantitative easement deals with treasuries not stocks. What bump the stock market gets from QE has to do with the fact investing in bonds, treasuries etc pays nothing so the stock market is a better place to invest. High interest rates and inflation have always been like kryptonite to the stock market so low interest rates and low inflation rates allow it to flourish.
Additionally, companies are sitting on a boat load of cash.
@middleman
Oh..you have long since become ridiculous in your apologetic defense of all things Obama. You keep ignoring reality and even use “proofs” that actually hurt your arguments.
One negative quarter…..
You’re the one that stated that our economy has been growing and has grown since 2009.
Here ya go: http://www.forbes.com/sites/realspin/2013/04/12/the-worst-four-years-of-gdp-growth-in-history-yes-we-should-be-worried/
Looking at the economy in 10-year increments starting from 1948 (when declines from wartime spending had ended), averaging GDP’s annual growth percentage shows the following:
1948-57: 3.80%
1958-67: 4.28%
1968-77: 3.18%
1978-87: 3.15%
1988-97: 3.05%
1998-2007: 2.99%
2008-2013: 0.73%
Even if 2008 (-0.3%) and 2009’s (-3.1%) negative annual GDP percentages are dropped (something undone for the other periods) and only the 2010-13 period is averaged, the result is just 1.95% – still over a full percentage point below the previous decade’s.
And with the downturn in the first quarter……its not looking good. Stagnant and now falling.
3 years compared to 10….hmmmm…did you think we wouldn’t notice?
@Moon-howler
Three years compared to 10?
You have to use the data that one has. The trend for that three year period, in its BEST analysis, dropping off the negative 2008 and 2009 is still only 1.95%.
So the time is irrelevant. If you wish to use the longer 2008-2013, which is five years… you’re perfectly welcome to use the 0.73% “rise” in the GDP.
We have been stagnant since 2008.
@Cargosquid
That article is a crock of shit. First off, it was written in 2013 which would not include the 2013 results as it indicates. Secondly, it is showing information based on decades, where as the last (and what the article focuses on) is only on 5 years (but really 4 because one cannot include 2013). Arbitrarily picking the start year at 1948 is also a crock in order to skew the numbers to what they want to emphasize.
Our economy is still hurting but is on a sounder footing – especially after the past 10 years – which is known as the lost decade – but one would not know that from the Forbes article.
@Pat.Herve
Sounder footing?
I would agree with that. As I said….stagnant.
We were sinkng.
However, it is not improving. Real unemployment is still high. And inflation is growing. Regulations are killing growth. The lack of the rule of law is killing growth.
@Cargosquid
It is improving.
The Bush years were on a sugar induced high – deficit based war spending, tax cuts, tax rebate checks, stimulus, etc – all came together to help create the financial crisis and almost succeeded in devastating our economy and collapsing our financial system. It takes a long time to unwind all those financial transactions and absorb the losses. We were facing problems no matter who was elected.
@Pat.Herve
Pat, I agree- they’re doing the same thing here that they do with climate data- carefully parsing the dates and data to achieve the preordained result.
Cargo- I give up with you. You win- up is down and black is white. Unemployment is up, the economy is in recession, the climate isn’t warming, sea level isn’t rising, and corporations are people (who can have religious beliefs). Ted Cruz for president!!
Running finger down throat!!!
Noooooooooooooo!!!!