Let’s assume the US economy has achieved a rare soft landing, as Treasury Secretary Janet Yellen recently declared. The pandemic-driven disruption is over, jobs recovered, inflation contained.
What comes next? What’s the trajectory? Will people be better off in, say, 2044? Not unless policy makers do some profound rethinking.
If the pandemic’s end closes a chapter of economic history, it was a miserable one. The 21st Century so far has seen three brutal recessions and tech, housing and financial bubbles. Since 2000, the country has been in “jobs deficit,” with total employment beneath prior peaks, more than half the time — compared with just a third of the time in the 50 years before 2000. The government has been in a perpetual budget deficit, forecast at a whopping 6% of gross domestic product in 2024. It’s hard to believe that there was heated debate in the 2000 presidential campaign about what to do with a surplus.
Progress stalled on many fronts. The rise in women’s prime-age labor force participation petered out, as did any narrowing of the large gender and racial pay gaps. Wage growth for the lowest-paid 90% was disappointing at best and negative at worst (not a surprise, given that the federal minimum wage hasn’t increased since 2009, the longest stretch ever). Child labor violations proliferated. All the while, the share of wealth held by the top 1% kept climbing.
If deep inequality and stagnation are the goals, then America is headed in the right direction. If not, policies must change. Congress has three levers to influence the economy: taxation, spending and regulation. For things to get significantly better over the next two decades, it will have to use them in more broadly beneficial ways.
The challenges are considerable. They include deeply entrenched thinking, a tendency towards path dependency, committed stakeholders and a dearth of political will, trust and honesty. All too often, the actual merits of a policy seem beside the point.
