“Nobody can be a great economist who is only an economist – and … the economist who is only an economist is likely to become a nuisance if not a positive danger.” So warned the great Friedrich von Hayek in 1956. Anyone attempting to understand what is going on in America must start with Hayek’s warning in mind. The economy provides only a starting point when analyzing an America in which some eight-of-ten Americans say they are dissatisfied with the way things are going.
A Growing Economy
After all, as Federal Reserve Board chairman Jay Powell pointed out to congressional interrogators last week, the economy is “very strong”. Or if you prefer the description of former treasury secretary Larry Summers, it is “very, very hot.” In part this is because President Biden’s various spending and subsidy bills have set off a boom in spending for the construction of new factories. That spending has already jumped from an annualized rate of $91 billion in January 2022 to $189 billion in April 2023, the largest increase in twenty years, and rising. In addition, state and municipal governments are committing their flood of federal cash to anything that can be called an infrastructure or climate-cooling project, shovel-ready or not.
Preliminary data suggest the economy is growing at an annual rate of 2 per cent. It added a surprising 339,000 jobs last month; there are far more jobs available (10 million) than there are job seekers (5.7 million); the labor force participation rate for prime age (25-54 year-olds) workers is at its highest level since 2007 and youngsters (15-19) seeking summer work are chalking up wages 40 per cent higher than three years ago.
Consumers continue to spend the $500 billion in so-called excess savings accumulated during the pandemic, the number of new vehicles sold in May exceeded last year’s by about 20 per cent, and hotel bookings seem likely to exceed pre-covid 2019.
Good Is Not Problem-Free
There are, of course, also signs of weakness, prompting a majority of economists to predict a recession, and the poor souls pushing supermarket carts to moan about the shrunken purchasing power of their dollars. But those fears were tempered a bit when treasury secretary Janet Yellen reassuringly noted, “My odds of it [recession] … have gone down – because look at the resilience of the labor market, and inflation is coming down.” In any event, such negatives as exist, and they are significant, cannot so overwhelm the positive news as to make it unnecessary to follow Professor Hayek’s instruction to avoid becoming a nuisance or danger by looking only at the economy. After all, the proper title of our profession is political economy.
Bipartisan Agreement: A Pox On 2024
Much is made of the bitter partisan divisions in the United States. But Americans do agree on one thing: they do not want to be forced to choose between Donald Trump and Joe Biden in 2024. An NBC News survey found that 60 per cent of Americans (33 per cent of Republicans) do not want the morally flawed and legally challenged Trump to run again, and 70 per cent (51 per cent of Democrats) do not want Biden to seek re-election, both because of his age and the prospect of an appalling Kamala Harris picking new curtains for the White House.
In days gone by if you didn’t like Herbert Hoover, vote for FDR; if you didn’t like the way FDR turned out, vote for Tom Dewey; if you didn’t like gloomy Jimmy Carter, vote for sunny Ronald Reagan; if you were a Democrat fed up with the Clintons, vote for Barack Obama. That was power, which engendered a feeling of some control over one’s circumstance. It has been replaced by a feeling of powerlessness, that such choice as is available is between men incapable of or unwilling to manage a nation in which profound differences of opinion divide its people.
Culture Warriors To The Fore
Add the resurgent culture wars to the mix.
· Some Americans fear people who have guns, others fear people trying to take them away.
· Some feel powerless to stop the flow of nasty images on the Internet, others fear powerless to prevent Mark Zuckerberg or Elon Musk or government officials from censoring materials these billionaires or government bureaucrats find offensive.
· Some Americans fear government efforts to mandate masking for two-year olds, in the process wresting control from parents, and retarding their learning and socialization, others fear ideologues fighting to resist what they believe are precautions required to protect the health of the nation’s tots.
· Some regulators want to end gas cooking in homes and restaurants lest it warms the globe, exacerbates respiratory problems and causes cancer. Chefs, professional and amateur, see this as destroying the quality and flavour of their cooking, and claim the only thing being cooked up is the regulators’ excuse for entering the kitchen as they have already done with the bedroom and classroom.
· Some Americans believe elected school boards provide voters with a means of controlling how their taxes are spent and how their children are educated: as one governor put it, “I believe parents should be in charge of their kids’ education.” Others see these boards as threats by rank amateurs to prevent trained teachers from providing a modern, inclusive education: as one former governor put it, “I don’t think parents should be telling schools what they should teach.” Tangle this up with transgender/toilet issues, and heat will replace light in discussions.
These are visceral issues, not abstract policy matters such as redistricting, and the sanctity of checks and balances. As such, they do not lend themselves to compromise, as did differences over the budget ceiling, where a billion here, instead of there, can produce agreement. They reflect differences in world views: broadly, think coastal vs. middle America.
War And Peace
There is no mutually acceptable middle ground. But these differences could be managed by a President intent on doing just that, perhaps with a smile and a quip (Reagan), perhaps with a smile and a quiet display of authority (Eisenhower), perhaps with a display of jaunty reassurance (FDR). No bipartisan lovefest, but no uncivil war either.
No such person is likely to be on offer in 2024, leaving voters to choose between a man determined to extend the reach of government, to favour one group over another, and who calls his opponents semi-fascists, and another snorting fire, a blameless victim promising to do unto others what he believes they have done unto him. Both are what one-time British Prime Minister Benjamin Disraeli, surveying the government bench opposite, described as “exhausted volcanoes … but still dangerous.”
No mere uptick in an economic indicator can persuade Americans that the nation has switched from the wrong track to the right track. Unforeseen upsets in both parties’ primaries just might.