Aren’t you getting tired of hearing how the economic situation today is the “new normal”? I know I am. Just this morning I heard a commentator talking about high gas prices and how $3.75 per gallon is now the new normal. (Gas prices now take up a historically high share of Americans’ household income.) An official unemployment hovering around 8% and sluggish growth are called the new normal. Well, this new normal really stinks. James Pethokoukis explained how this new normal that’s crept up on us will have long-term consequences.
It must be terribly inconvenient for the Obama White House to be reminded every quarter and every month that the $800 billion stimulus — and subsequent mini-stimuli — failed to ignite the boom Obama economists repeatedly predicted through the first term. The president has so many higher priorities, after all: immigration reform, gun control, climate change, income inequality. Stuff with which to build a legacy.
Faster growth and faster job creation apparently don’t make the cut. A president deeply concerned about growth would perhaps have followed a few more of the recommendations of his own Jobs and Competitiveness Council before letting it expire, as Obama did last week. Sure, Obama acted on agenda items that comfortably synced with his ideology, like retrofitting government buildings for energy efficiency. But he ignored commonsense ideas that didn’t mesh, such as expanding domestic oil and gas drilling and revamping the corporate tax code. More high-skill immigration? Sorry, it will have to wait for comprehensive immigration reform.
Michael Darda, chief economist at MKM Partners, points out that “it will require a multiyear period of above-trend growth to return unemployment to more normal levels.” He speaks of the “jobs gap,” the difference between current employment levels and what they would be if a few years of catch-up economic growth had reestablished the pre-recession trend. Assuming annual private-sector employment growth of 2 percent, the average of the past three decades, we’re 14 million jobs short. And because catch-up growth never happened — say, a few years of averaging 5 percent growth, as happened after the 1981–82 recession — even if the economy returns to steady 3 percent growth, GDP levels will be trillions lower in the future than they would have been otherwise, due to the lower starting point.
Read the whole thing. Unfortunately, judging by the president’s actions and his priorities, this new normal is exactly what he has in mind. It’s the decline of America the progressives have been after for decade, playing out right before our eyes.
Update: Linked by Big Pulpit – thanks!