Monday, January 19, 2015

State of the Economy ... "Saving the MIddle Class"

By the politicians' definition, the middle class has the most votes. Accordingly, the middle class voters, however the class may be defined and by which group of politicians, will invariably determine who wins elections.

Accordingly, all politicians pay lip service to serving the needs of the vast middle class. That strongly suggests to me that the political discussion about the causes and solutions to the problem of growing income inequality will be the subject of an intense and ongoing  24/7 political debate throughout America.

President Obama will undoubtedly make this the central topic during the State of the Union address Tuesday evening. He'll take credit for what's gone well and assign blame to others for what hasn't. It's the political way.

The State of the Economy, in Eight Charts, is presented below to provide some perspective and fact based background information:

"When President Barack Obama delivers his annual State of the Union speech on Tuesday, the economy will be as strong and bright as it has been in years.

Although the economic recovery is clearly accelerating, the improvements did nothing for the Democrats in the November midterm elections. Nor is it likely the economy will much help Mr. Obama’s ability to pass his legislative agenda through the Republican-controlled Congress.

In anticipation of his remarks, here are eight charts that describe the state of the union in economic terms.
For the duration of his presidency, Mr. Obama has sparred with House Republicans over the budget. Over calendar year 2014, the budget deficit was the smallest since 2007.
* * *
While large in absolute terms, as a share of the economy, neither spending or revenue are extraordinarily high at the moment.
 * * *
One of the most welcome pieces of news for many consumers, especially those with long commutes, is the plunge in gas prices.
In this week’s speech, Mr. Obama can talk about some of the lowest gas prices of his presidency.
* * *
The jobless rate is far lower than when Mr. Obama first took office.
Unemployment and underemployment were at their worst around the time of Mr. Obama’s 2010 State of the Union. Both measures have come down significantly and are now the lowest of Mr. Obama’s presidency by a significant margin.
* * *
While unemployment has come down, this hasn’t translated into rising incomes for most families. The median household income in the U.S., adjusted for inflation, climbed as high as $56,800 in 2000 and has since been in decline.
Income is still significantly lower than the $54,059 during Mr. Obama’s first year in office.
* * *
Different industries always have different growth rates. Under Mr. Obama’s presidency, professional and business services and health and education services have done especially well. Leisure and hospitality and retail trade have also added many jobs, though traditionally these industries can be low wage.
Manufacturing, construction and state and local government all continued shedding jobs several years into Mr. Obama’s presidency. These industries have begun to grow again in recent years, but have fewer jobs than when Mr. Obama took office.
* * *
Mr. Obama has often talked about a renaissance in U.S. manufacturing. While manufacturers have been adding jobs, the sector remains a diminished piece of the U.S. economy, with no signs of significant turnaround.
* * *
Mr. Obama’s presidency had the worst two initial years of any president since John F. Kennedy, though since then Mr. Obama has gained ground, surpassing the total number of jobs gained during President George W. Bush‘s two terms, and passing the (briefer) presidencies of Mr. Kennedy, Gerald Ford and George H.W. Bush."

Summing Up

Get ready for the 'save the middle class' conversation.

To paraphrase what the famous bank robber Willie Sutton said when asked about his reasoning for bank robbing --- that banks were where the money was --- politicians know what's most important to their success and popularity --- the middle class voters --- they have the most votes.

Politicians have two goals: (1) to get elected; and (2) to get reelected.

Based on simple math, all politicians of both parties will go for the 'middle class' votes.

That's my take.

Thanks. Bob.

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