Obama likes to continuously remind us of McCain’s recent claim that “the fundamentals of the American economy are very strong.” You see, Obama supporters argue, McCain is clearly out of touch with mainstream America — if not reality — if he thinks the economy is in good shape. Obama instead advocates exactly the opposite position: the U.S. economy is in shambles.
So who’s right, Obama or McCain? It all depends on one’s point of view.
At the macroeconomic level, McCain is absolutely right. McCain said that the fundamentals of the economy are strong –- not every aspect of it. Fundamentals like what? Well, the economy grew at a very respectable 3.3 percent last quarter. Exports are booming. The stock market, though highly turbulent these days, is mostly up and, critically, has by no means “crashed.” Unemployment, though it ticked up recently, is still impressively low, especially compared to other western nations. Inflation? Interest rates? Yeah, those ticked up a bit, too, but again, not to unmanageable levels. By the technical definition of the term, no, folks, we are not in a recession. And the current economic climate is nothing like the Great Depression, the oil shock days of the 1970s, or the ludicrous economic climate of the late 1970s and early 1980s. It’s not the go-go economic days of the 1990s, but it’s not terribly far from it.
The notable exception to all of this is of course the credit crisis. Sure, it’s harder to get credit these days. That’s annoying to first-time home buyers, car buyers, and businesses looking to expand. But I see a silver lining to this: it’s about time that financial institutions got pickier about to whom they lend money. It was precisely because for years they were willing to dole out money to unqualified people that the financial markets crashed in the first place. This hurts in the short-run, but your kids will thank you someday.
So how is Obama right? Because Joe Voter doesn’t live at a macroeconomic level. Down at the micro level, a lot of people are feeling some very real economic pain. Yes, gas prices are higher than ever. Yes, healthcare costs continue to spiral upward. Yes, the price of certain foods has gone up. If you have an adjustable rate mortgage that recently adjusted, you’re not a happy camper. And if you looked at the price of imported French cheese lately, you may be thinking about switching to Wisconsin Colby. These are the kinds of economic mini-shocks that “the people” see every day. The average Joe or Jane doesn’t care, if they even know, about those “fundamentals” McCain referred to.
And yet, despite these micro-level problems, there’s always a flip side. For example, high gas prices (that’s bad) are steering people looking for a new vehicle to think small. But if you’re in, say, the construction trade, you probably need a pickup truck. Lucky for you, right now you can buy a brand new one for thousands off sticker price and get lower-than-average finance rates — and that’s good. Another obvious example: it’s a bad time to be a house seller, but it’s a great time to be a house buyer.
My point: there’s no such thing as a universally good or bad economy. (Okay, there are exceptions: Zimbabwe’s economy is really bad no matter how you look at it.) What’s good for one person may be bad for the next, and there is often a disconnect between micro and macro economic conditions.
So Obama, quit your whining about McCain’s comment. The economy isn’t that bad, and the Republicans aren’t entirely to blame for the bad news that does exist. Even so, McCain, you and your fellow Republicans need to demonstrate some enhanced appreciation of the fact that a lot of Americans are feeling economic pain. You might want to have the count of how many houses you own at the ready, for instance.