For an alternate point of view see “Point: This Labor Day Don’t Let Pols Take Credit for the Economy”
“In the wealthiest country in the history of the world, tens of millions struggle to put food on the table, find affordable housing, affordable healthcare, affordable prescription drugs, affordable childcare and affordable educational opportunities.”
That was Bernie Sanders, in New Hampshire last week, summing up some of the injustices at the source of many Americans’ discontent.
It’s Labor Day 2023. The election cycle will be moving into high gear, and 2024 could determine how much we can fix these problems or whether we move backward toward increasing inequality of income, wealth and access to education.
Let’s start with some good news: Over the past year, inflation has fallen from 9.1 percent to just 3.2 percent. Many economists, including Nobel Prize winners and others prominent in the profession, would say that the job is about done. The Fed’s goal is still 2 percent and will likely get there. But it doesn’t really have an argument that 3 percent is a problem.
In any case, the economists and others who said that inflation would become semi-permanent or accelerate turned out to be wrong. Those of us who saw no self-reinforcing mechanism — as with the wage-price spiral of the 1970s, where wages push up prices, which then lead to higher nominal wages, and so on — were correct. The spike in inflation was overwhelmingly caused by disruptions associated with the pandemic and the war in Ukraine. And for these and other reasons, it turned out that inflation could recede without creating mass unemployment or a recession.
This is good news because the Fed, by raising interest rates, has actually caused most of the recessions we have experienced since World War II.
Instead, we have full employment. This is a big deal, not only for the millions of people who would otherwise be unemployed and their children. The historical record shows that when the economy approaches full employment, real (inflation-adjusted) wages increase. They increase more for lower-wage workers than for the higher paid, so inequality — by workers’ income, gender and race — is reduced. The bargaining power of labor, including unions, increases. This is all happening now and can accelerate with smart economic policies.
When the pandemic recession hit, we had the strongest stimulus ever, running deficits of 14.9 percent of GDP in 2020 and 12.4 percent of GDP in 2021. That is how we got back to full employment with record speed. Some 13.4 million jobs have been created since President Biden took office.
But the problems raised by Bernie Sanders — who strongly supports the successful economic policies implemented — remain. And there is a deep partisan divide over how to deal with them.
On the Democratic side, there is an emphasis on full employment and real wage growth. This includes meeting the climate crisis with major investments. The Infrastructure Investment and Jobs Act, the Inflation Reduction Act and the CHIPS Act have boosted manufacturing construction, which has doubled since the end of 2021.
The Biden administration has also been supportive of workers’ collective bargaining rights. On August 25, the National Labor Relations Board issued a historic decision that will make it more difficult for employers to violate labor law, as they routinely have done, to deny union recognition and collective bargaining. On Tuesday, the administration announced the first 10 medicines subject to price negotiations with Medicare — a landmark development for lowering drug costs.
Republicans hope to capitalize on the anger generated by the injustices they have by far taken the lead role in creating. We lost 5.8 million manufacturing jobs in the 2000s; the real (inflation-adjusted) median wage has barely grown from 1979-2019 (pre-pandemic); patent monopolies have been strengthened so that they cost Americans more than $400 billion annually just for prescription drugs (note at least five Moderna billionaires were created from COVID); unions now represent 6 percent of the private-sector workforce, as compared to a peak 35 percent in the 1950s; Republicans have repeatedly opposed minimum wage increases.
No Republican candidate raised their hand at the Milwaukee debate when asked to do so if they believed that human behavior is causing climate change. Republicans have also been trying to cut non-military spending as much as possible without regard to harm caused. And they have consistently opposed efforts to expand healthcare coverage for Americans.
Hence the partisan divide. This election could change the country and the world for decades to come.