Ben Bernanke's message about the economy means bad news for Democrats in November, no matter how they spin it
Ben Bernanke, chairman of the Federal Reserve and plain-spoken successor to the more infamously inscrutable Alan Greenspan, testified on Wednesday before the Senate committee on banking, housing, and urban affairs and today before the house committee on financial services, bearing one message and one big subtext: the economy is improving, but not quickly; and Democrats are in trouble.
Just look at what he had to say: fiscal policy and industrial restocking won't be able to help the economy much longer, but a 2.5% increase in household spending, especially in durable goods, might keep the economy from circling the drain. The continued housing foreclosure and vacancy rates will continue to drag down the housing construction sector. Commercial building and rental rates are hurting due to vacancies and – despite all that stimulus – a lack of available credit. The one highlight in business spending is that businesses are using their significant cash reserves to replace aging equipment – something they put off doing during the worst of the recession, but which cannot last forever.
And then, of course, there's jobs. Those that don't have them, aren't likely to. Bernanke told Congress:
After two years of job losses, private payrolls expanded at an average of about 100,000 per month during the first half of this year, a pace insufficient to reduce the unemployment rate materially. In all likelihood, a significant amount of time will be required to restore the nearly 8.5 million jobs that were lost over 2008 and 2009. Moreover, nearly half of the unemployed have been out of work for longer than six months.
Long-term unemployment not only imposes exceptional near-term hardships on workers and their families, it also erodes skills and may have long-lasting effects on workers' employment and earnings prospects.
It's not as clear as James Carville's "It's the economy, stupid!" but it may as well be. The jobs we lost in the last two years aren't coming back; unemployed people are increasingly likely to remain unemployed; and what job growth there has been is unlikely to move the unemployment rate down by much before November – which, of course, isn't a reflection of the number of people not working, but a reflection of the number of people still looking for work.
That's bad news for Democrats, no matter how they spin it. They will get their temporary unemployment benefit extension passed this week, only to have to fight for another one just before the election. They aren't pushing any retraining expenditures, even though Bernanke himself highlights why it might be the only way to reduce the long-term unemployment rate that is looking increasingly, and suspiciously, structural.
Unemployment benefits aren't a panacea, even to the unemployed: with the average weekly benefit hovering around $400 (about £262), few people can afford to remain unemployed indefinitely, especially if they have a house, a car payment, children or an unemployed spouse. The meagre nature of and little love lost for unemployment benefits, even among recipients, are among the reasons Republicans can play the demagogue: even the unemployed would rather have jobs than the benefits, and they were promised that the stimulus and jobs bills would help them get those jobs.
Instead, they're forced to watch as Democrats struggle to extend their benefits every few months, and wonder where the tax dollars they spent on the stimulus and jobs bills disappeared to.
The great Democratic strategy, going into the month of August – which is technically termed a district work period, informally known as a recess and inevitably used for campaigning – is to blame the economy on the policies of George W Bush. And, if the administration or Congress had noted in 2009 that a fiscal stimulus functioned better to prop up investors' confidence than provide short-term economic recovery, or had made mention that the jobs bill might not provide jobs for months, if not years, they might yet have had an argument.
But they sold those bills, and others, to the American people as a cure for what ailed our economy – and, while they might eventually be proven correct, Americans expected a fast fix, not a lingering malaise. Bernanke might speak more plainly about the economy than his predecessor, but Democrats should be listening to the deeper meaning: Americans need more then they've received, and they won't have it by November without significant changes. And for all that the Democrats hyped the importance of change in 2008, Americans might now decide that it's time for another.
Copyright Speakers Corner 2017