The National Bureau of Economic Research, which dates business cycles, says the current expansion began in July 2009 and has now entered its 49th month. It is now the fifth longest of the 33 expansions NBER has measured since the 1850s. Economic growth is not fast enough for anyone’s liking, but that’s what you get when you deleverage in a post-financial crisis period, and when government austerity becomes part of the problem...
Yes, lots of problems remain. But the economic declinists are willfully turning a blind eye to some pretty important and fundamental shifts in the U.S. over the last several years...Simply put, the shape of the U.S. economy has changed in the last four years, in some subtle ways, and in some obvious ones. My colleagues who focus only on the downside, or only on the financial sector and the dysfunctional political sector, have missed some very important developments – beyond the stunning recovery of the U.S. financial markets.
Gross documents the decreases in budget and trade deficits, unemployment claims, bankruptcies, and bank failures. He also describes the growth in the stock and housing markets and consistently improving job numbers. These positive indicators are particularly striking when contrasted with the economic decline of most of the other countries in the world.
What needs to happen to sustain and extend this positive trend?
Yes, there are significant issues. Washington doesn’t work, largely because the Republican party can’t, or won’t, participate in governance. The Federal Reserve will unwind its support of the economy at some point in the future. And above all, there’s a crisis in employment and wages. Faced with a great deal of slack, weak unions, and a corporate culture that prioritizes dividends and stock buybacks and CEO pay over wages, companies are under very little pressure to pay people more. And so they don’t.
Government assistance, the impulse toward regeneration, and a rapidly growing global economy have brought the U.S. a great distance in the past four years. But if the economy is going to enjoy another 48 months of growth, the private sector will have to do its part. The next form of stimulus -- the only remaining form of stimulus – will have to come from companies. We don’t need America’s bosses to do anything radical like double the wages of their employees, as Henry Ford did nearly a century ago. They just have to rechannel a portion of the cash earmarked for dividends, stock buybacks, and executive compensation into paychecks.
Gross documents the decreases in budget and trade deficits, unemployment claims, bankruptcies, and bank failures. He also describes the growth in the stock and housing markets and consistently improving job numbers. These positive indicators are particularly striking when contrasted with the economic decline of most of the other countries in the world.
What needs to happen to sustain and extend this positive trend?
Yes, there are significant issues. Washington doesn’t work, largely because the Republican party can’t, or won’t, participate in governance. The Federal Reserve will unwind its support of the economy at some point in the future. And above all, there’s a crisis in employment and wages. Faced with a great deal of slack, weak unions, and a corporate culture that prioritizes dividends and stock buybacks and CEO pay over wages, companies are under very little pressure to pay people more. And so they don’t.
Government assistance, the impulse toward regeneration, and a rapidly growing global economy have brought the U.S. a great distance in the past four years. But if the economy is going to enjoy another 48 months of growth, the private sector will have to do its part. The next form of stimulus -- the only remaining form of stimulus – will have to come from companies. We don’t need America’s bosses to do anything radical like double the wages of their employees, as Henry Ford did nearly a century ago. They just have to rechannel a portion of the cash earmarked for dividends, stock buybacks, and executive compensation into paychecks.
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