Dr. Tyrus W. Cobb: U.S. economy surges amid global slowdown
No doubt things are looking up for the American economy. The U.S. is adding 200,000 jobs a month, corporate profits are at record highs, and U.S. GDP is the best for any developed country.
The dollar is at its strongest level in years, the stock market is at record highs, gasoline prices are falling, and U.S. oil imports are dropping while production is rapidly increasing. Perhaps most importantly, the annual deficit is also declining at an impressive rate.
The Dow Jones topped 18,000 recently for the first time, as the American economy expanded 5 percent in the third quarter, supported by robust consumer spending and business investment, marking its strongest growth in more than a decade. The private sector has recovered many of the jobs that were lost after the financial crisis, as unemployment fell to 5.9 percent in November, down from 8 percent at the same time in 2012. Economists point to the U.S. as one of the few bright spots in a global environment of disappointing economic growth.
The price of oil per barrel rose to as much as $147 a few years back, but has now dropped below $55 … and is still falling! Chalk that up not only to decreased demand, but to the flood of oil coming on the world market–due to North American fracking, Saudi reluctance to cut exports, and a Russian imperative to get all the oil it can out to bring in badly needed hard currency. Great news for the American family, as gasoline has dropped to $2 a gallon in many places.
The new economic reality has created winners and losers. Countries suffering serious setbacks from the oil and gas price drop include Iran, Venezuela, and especially, Russia — no tears need to be shed there. Winners include major oil importers as well as new producers, with the U.S. as a prime example.
However, Americans have not shared equally in the recent economic boom, as income inequality has soared. Ninety percent of the gains have gone to the top 10 percent. Now the wealthiest of the wealthiest — just the miniscule top 0.01 percent — hold 14 percent of the nation’s wealth. That is, just 700,000 have total holdings more than that of 280 million Americans taken together.
Despite a booming stock market and a rising GDP outstripping those of the world’s other major developed economies, wages are not rising and the quality of the jobs being created is disturbingly low. Companies are relying more on part time workers, and are trimming benefits. We are, in fact, witnessing America’s first major post-recession recovery that has bypassed its middle class.
Consequently, we are seeing an America of large patches of affluence and poverty, alongside a shrinking middle. The portion of American families living in middle-income neighborhoods has declined significantly since 1970, as rising income inequality left a growing share of families in neighborhoods that are either mostly low-income, or mostly affluent.
The challenge to America’s leadership is to devise mechanisms that promote growth whose benefits are widely shared. A failure to do so will lead to demands for government imposed wealth redistribution, a step that would likely only stymie economic growth while providing few gains for the middle class.
But we’d better figure a way soon for the masses to share in our growing prosperity.
Dr. Tyrus W. Cobb is a retired Army colonel and a former special assistant to President Ronald Reagan. He’s the founder and president of the Reno-based National Security Forum.