by Brian Howey
MICHIGAN CITY, Ind. — Americans and Hoosiers are angry. They are seeking political retribution. Some are resorting to Republican presidential nominee Donald Trump and Democrat Bernie Sanders, both having framed powerful indictments of the political and economic status quo.
Why are We the People so ticked?
Appearing in Elkhart earlier this month, President Barack Obama laid out the template for the sizzling anger that is fueling one of the most unpredictable political climates in modern times. And Prof. Robert J. Gordon of Northwestern University, a macroeconomist and economic historian, supplies an array of data that helps understand why the political contours of 2016 are being framed in the current troubled context.
At the Lerner Theater in Elkhart, PBS moderator Gwen Ifill asked Obama why there is such a disconnect in a county where the jobless rate fell from 19 percent to 5 percent during his two terms in office. “Here’s what has changed in the economy over the last 20 to 30 years,” Obama began. “Right after World War II, America was ascendant. It was dominant around the world because Europe was blown up, Japan was digging itself out of the rubble, China was still a backwater, Eastern Europe was behind the Iron Curtain. There wasn’t much competition. We were the only folks who were seriously making cars and trucks and appliances. We had strong unionization, which meant that workers had leverage so that they could get a good share of a growing pie. And people saw, each year and each generation, their standards of living going up pretty rapidly.”
Indeed, growing up as a middle class Baby Boomer, the implicit promise of the “American dream” was the notion that each successive generation would do better than the last. By the time Obama took office in January 2009, not only was the jobless rate up, but home values had tanked and mortgage foreclosures were rampant. The $400 billion budget surplus under President Clinton had ballooned to an almost unfathomable $1 trillion. “What started happening is you started seeing foreign competition,” Obama continued. “Unions started getting busted, so workers had less leverage, which meant their wages didn’t go up quite as fast.” Indeed, per capita income in Indiana had declined by more than 10 percent in the prior decade.
“You started seeing the end of defined benefit pension plans,” Obama explained. Work place health plans were cut. “College costs started going up because the public university system, which used to be generously funded by state governments so that tuition was low” were cut to build prisons and cut taxes. On that front, Hoosier taxpayers are now funding less than 10 percent of the annual budgets of Indiana and Purdue universities. Students are picking up the difference.
“You add all those things together and people then start feeling more stressed,” Obama said.
This is where Prof. Gordon picks up the narrative. As the Baby Boomers entered into adulthood, he cites what was essentially the end of a historical anomaly, the termination of what he calls the “special century” from 1870 to 1970. “The century of revolution in the United States after the Civil War was economic, not political, freeing households from an unremitting daily grind of painful manual labor, household drudgery, darkness, isolation and early death,” Gordon writes in his book, “The Rise and Fall of American Growth.”
A century later, there was air-conditioning, instant dinners, appliances and color TV that connected the masses to the world. Life expectancy rose from 45 to 72. “The economic revolution of 1870 to 1970 was unique in human history, unrepeatable because so many of its achievements could come only once,” Gordon writes.
And there are choppy times ahead. Gordon observes, “The problem created by the computer age is not mass unemployment, but the gradual disappearance of good, steady, middle-level jobs that have been lost not just to robots and algorithms but to globalization and outsourcing to other countries, together with the concentration of job growth in routine manual jobs that offer relatively low wages. It combines disappointing productivity growth over the past decade with a steady rise of inequality over the past three decades.”
Gordon predicts “four headwinds,” citing income inequality; education deficits that have produced lower college graduation rates and decreased vocabulary levels of poor pre-schoolers, and more than $1 trillion in college loan debt; demographics with the Baby Boom retirement bubble and a declining labor force; and government debt with unsustainable entitlement expenditures, something Purdue President Mitch Daniels described in 2011 as the “new red menace.” The presidential candidates have not discussed entitlement reform.
“The combined effects of growing inequality, a faltering education system, demographic headwinds, and the strong likelihood of a fiscal correction imply that the real median disposable income will grow much more slowly in the future than in the past,” Gordon said. “When all the headwinds are taken into account, the future growth of real median disposable income per person will be barely positive.”
In reviewing Gordon’s book, New York Times columnist and Nobel Prize winning economist Paul Krugman, while not quite buying into the theory, observed, “Perhaps the future isn’t what it used to be.”
As for the present tense, this is why such rage is gathering in 2016.
— Brian Howey is publisher of the Howey Political Report, a weekly briefing on Indiana politics. Contact him at 317-506-0883 or at howeypolitics.com.