Taking the Country’s Economic Temperature

by Errington C. Thompson, MD

As we begin 2014, it’s important to figure out exactly where we are.

For those Americans who had their money in the stock market, their money made money. The stock market ended up this year—and not just up, but a record high. The Dow Jones Industrial Average as well as the S&P 500 both made solid gains. Orders for durable goods, things like cars and airplanes, rose during 2013.

For the first time since the Great Recession began in 2007, there has actually been good news in the housing market. Sales in October and November are the strongest since 2008. Corporate profits are up. The unemployment rate is down to 7.0%. The economy added more than 200,000 jobs in the month of November. Overall, the economy is looking up.

I find all of the numbers above relatively remarkable. This is almost like winning a basketball game against your arch-rival with one of your teammates actively helping the other team. Many Democrats have argued that we needed to spend money in order to get out of this recession in short order.

We need to invest in infrastructure, schools, roads, and other projects that would hire Americans and be beneficial to us all. We needed spending across the board—by federal, state, and local governments. But that didn’t happen.

True, Obama and the Democrats did pass a spending bill, but it was far short of what experts thought we needed. The spending bill, as a stimulus, was helpful: it stimulated the economy, which is why it’s called a stimulus. So don’t believe all the naysayers, because the data is clear: The freefall in our economy stopped months after we started spending money and stimulating the economy. It just wasn’t enough.

Conservatives have been staunchly against any further spending. They point toward deficits and assert that further spending is irresponsible. This spending would cause “runaway inflation” and cause investors “to lose confidence” in U.S. bonds, which in turn would cause the U.S. economy to collapse.

And conservatives have instead supported austerity measures in which federal, state, and local governments decrease spending dramatically in order to balance the budget and decrease our deficit. And what has happened? First, it’s clear that over the last several years there has been no runaway inflation—no inflation of any sort, in fact. Second, austerity has actively hurt the American economy by slowing the recovery and costing several hundred thousand jobs.

If local, state, and federal governments had found the money to keep  everyone who was on the payroll at the start of the Great Recession employed, our unemployment rate would be somewhere around 5.5% or less. More than 1.5 million additional Americans would have a job now. I can guarantee that our economy would be humming.

We have conclusive data from Europe that austerity can kill economic growth. As you recall, many European economies went on a fiscal diet after the Great Recession. Austerity swept Europe like the plague. Britain is an excellent example. Instead of its economy turning around, we’ve seen the exact opposite.

Instead of increasing investor confidence, investors are running for the door. The same is true in Ireland and elsewhere: the economies that embraced austerity—or were pressured to by German Chancellor Angela Merkel and other fiscal “hawks”—are worse off today than they were before they embraced fiscal restraint.

Where does this leave us? Although the national economic outlook has improved, many Americans are being left behind. We have to figure out a way to keep the economy moving in the right direction and to employ Americans at a living wage.

The District of Columbia is raising the minimum wage. The state of Washington has just increased its minimum wage to $15 an hour. Several other states have also stepped up to the plate, and President Obama has announced that he supports raising the federal minimum wage.

All this is a start—but only a start. It appears that Congress is going to pass an extension for long-term unemployment benefits and this should help millions of Americans. [At press time, the Senate had voted to move forward, but the House might even refuse to take up the legislation.] Thankfully, millions of Americans now have access to adequate health insurance thanks to ObamaCare. Now, if we can only get Republicans to expand Medicaid benefits, millions more will benefit.

I still think we need another stimulus package. I really don’t think that Congress should rest until our unemployment rate has been pushed below 4%. I simply do not believe that millions of Americans who are currently out of work are simply “lazy.” Instead, I think that they are eager to make an honest living at a good job.

A new stimulus package focusing on infrastructure and green jobs is exactly what we need in 2014 to improve our economic health.