The economist Dean Baker is right: The recent economic uptick in the United States is not a boom, and comparisons to the 1990s are insane. Still, growth has clearly picked up, and the public seems to be noticing. So what can we say about the Obama nonboom?
I’d argue that much of what we’re seeing reflects the tapering off of austerity. The United States has never had a proclaimed, British-style austerity plan, but we’ve had a lot of austerity nonetheless, especially in the form of cutbacks on state and local spending. And while spending hasn’t rebounded yet, it has at least stopped shrinking.
And it’s important to realize that, despite all the talk about how Obamacare, the president’s anti-business rhetoric and his Kenyan Islamic atheism are destroying business, the private sector has actually been relatively strong under President Obama. Since he took office, we’ve gained 6.7 million private sector jobs, compared with just 3.1 million at the same point under President George W. Bush. But under Mr. Bush we’d added 1.2 million public sector jobs, while under Mr. Obama we’ve cut 600,000. The point is that relatively good private sector performance has been masked by public sector cutbacks; this is the opposite of what you usually hear, but that’s no surprise.
What about our prospects looking forward? As I’ve pointed out before, business investment has been relatively strong. Residential investment, however, has been very low since 2006, suggesting that there’s a backlog of pent-up demand, which should come into play in an improving job market.
So that’s one source of strength. But there’s also low oil prices, which will mostly be a positive thing for the economy, although there will be some adverse regional effects.
Overall, then, the next two years are probably going to be pretty good. This doesn’t mean that the overall track record of policy has been good – we’ve wasted trillions in foregone output and damaged the lives of millions, if not tens of millions.
But it will feel a lot better than the years before.
Moscow on the Brazos
O.K., not really. But falling oil prices will have very different effects on different regions of the United States: The states that have benefited most from the shale oil boom will hurt a lot, even as most Americans gain.
The big losers will be in the Dakotas and Nebraska, but that whole region has a population not much bigger than that of Brooklyn. The big enchilada is Texas. How big a deal will the oil slump be there?
If you look at regional data from the Bureau of Economic Analysis, you learn that mining output nationally is up a lot – 39 percent between 2007 and 2013 – but that this is still fairly small change on a national basis, 0.7 percent of 2007 gross domestic product.
However, more than half the mining growth took place in Texas, which was only 8 percent of the national economy. So in Texas, mining directly contributed 4.7 percent to G.D.P. If we use a multiplier of 1.5, which is what the best research suggests, we conclude that the shale boom added 7 percent to Texas’s growth – and what shale giveth, shale may now taketh away.
We’re not talking real disaster here. I mean, it’s not as if Texas is a one-party state with a culture of corruption and crony capitalism. Oh, wait. But seriously, we surely aren’t looking at a Russia-style crisis. We could, however, be looking at a situation in which Texas slides into recession even as the rest of the country does fairly well. That is, after all, what happened after the 1985 oil price collapse.
Should be interesting to watch.