Check the major newspapers. Everyone is writing about the economy. For almost five years now, they’ve been predicting strong economic growth just around the corner. And for almost five years, they’ve been wrong. Stumped. Surprised.

The recession ended three years ago, they say. How can unemployment still be so high? How can growth be so slow?

So they make up explanations, usually political. Their economic models failed. Their credibility is in doubt. They must blame someone else. So they blame the government.

Taxes are too high, they say, even though taxes are lower than they were before the recession. Regulations are too strict, they say, even though corporations are making record profits. The stimulus slowed growth, they say, even though it created or saved over 3 million jobs.

And they never mention the housing bubble. Even though everyone and their dog knows that the collapse of the housing bubble caused the recession.

From the end of World War II to the late 1990s, housing prices tracked inflation. There were booms and busts in the 1970s and 1980s, but they always came back to the same long-run average. Then, from 1998 to 2006, they rose approximately 90 percent, after adjusting for inflation. They’ve been falling ever since.

Real housing prices are now about 10 percent above their long-run average, as is the price-to-rent ratio. Which means they still have further to fall, but we can finally see the light at the end of the tunnel.

If you’ve taken Econ 101, you’ve probably heard of the “housing wealth effect.” It says that, for every dollar that housing wealth declines, consumption shrinks by 5 to 7 cents. Since the peak of the housing bubble, we’ve lost almost $8 trillion in housing wealth. That’s $400 to $560 billion less consumption. And that doesn’t include indirect effects, like the resulting stock market decline, which lost another $4 trillion in wealth.

It takes an even bigger chunk out of overall output when you add residential investment, which fell 24 percent in 2008, 22 percent in 2009, and 4 percent in 2010.

Given that knowledge, it’s hard to imagine anyone predicting a strong economic recovery while housing prices still have further to fall.

But the housing market is improving. Residential investment has started to grow again, as has construction employment. Whereas there was a huge glut of unsold homes in 2009, that inventory is almost back to normal levels. Existing home sales have been increasing for the last six months, though new home sales are still stuck near their post-recession low.

The decrease in unemployment is what everyone is talking about, but it’s mostly due to people dropping out of the workforce — being so discouraged that they stop looking for work — rather than a significant increase in jobs. The number of job openings was unchanged in November. 200,000 new jobs in December may sound like a lot, but it would take 100 more months just like it – that’s 8 years — to return to full employment.

A lot is riding on a turnaround in the housing market, including Barack Obama’s re-election. If the administration wants to increase its odds of staying in the White House, it’s not taxes or regulations or government spending that need easing. It’s struggling homeowners.

They can start by appointing an FHFA director who will encourage borrowers with government-backed loans to refinance at lower interest rates. And they need to be more aggressive in investigating widespread mortgage servicing fraud at major lenders.

We are nearing the end of the Great Housing Bubble. It has gone up, and now it’s almost done coming down. Let’s hope we learned our lesson…at least for a little while.

==========

This op-ed was published in yesterday’s South Florida Sun-Sentinel.

Related posts:

1. A Failure to Communicate, Not a Failure to Stimulate It’s a little difficult to reply to Prof. Mishra’s latest...

Related posts brought to you by Yet Another Related Posts Plugin.

– Nick Hanauer (Second Avenue Partners)

No related posts.

Related posts brought to you by Yet Another Related Posts Plugin.

– Mark Thoma (University of Oregon)

Related posts:

1. Quote of the Day: Mark Thoma We have enough money to pay for military action in...
2. Quote of the Day: Paul Krugman Stroking your chin and saying, well, I don’t believe in...
3. Quote of the Day: Michael Hudson [If] the Treasury and Federal Reserve can create $13 trillion...

Related posts brought to you by Yet Another Related Posts Plugin.

Think about it. By definition, every op-ed columnist is employed — by the newspaper (or a syndicate). Unemployed people don’t have a voice in the press. Literally.

There are 14 million unemployed people in the United States, and not a single one gets to tell the world how they feel.

So when we debate the $447 billion American Jobs Act proposed by President Obama earlier this week, the people who are most affected by it have the least say in its success or failure. There’s something fundamentally undemocratic about that.  

The same goes for cable news. Last month, the Center for American Progress counted the number of times that CNN, Fox News, and MSNBC used the word “debt” in a typical week: 7,583. Then they counted how many times they used the word “unemployment”: 427. Finally, how many times they used the word “unemployed”: 75.

We have the lowest interest rates in sixty years, the lowest inflation since the Johnson administration, and the highest unemployment in my lifetime. And we’re all talking about budget deficits.

You know who’s not talking about budget deficits? Unemployed people.

They’ve got bigger problems. 42 percent say unemployment has strained their family relations, 40 percent have lost contact with close friends, and 33 percent report a loss of self-respect. Almost half of the unemployed have difficulty sleeping due to their job loss. One in five had to seek professional help for anxiety and depression as a result of their financial situation.

To pay the bills, half of them had to borrow money from a family member or friend, and over half withdrew money from their retirement savings. 43 percent had trouble getting or paying for medical care. One in three had problems paying their rent or mortgage.

So much for living the easy life on unemployment insurance.

When laid-off workers do get a new job, they earn about 30 percent less than they used to. Even after the recession has long since passed, college graduates who entered the workforce during a recession earn significantly less than those who graduated when times were good.

If you lose your job just before you’re about to retire, you’re twice as likely to have a stroke or heart attack. Your chance of dying increases 50 percent. Even if you’re not near retirement, you’re 54 percent more likely to experience bad health.

The unemployed aren’t the only ones who suffer from unemployment. Their children are 15 percent more likely to perform so poorly in school that they have to repeat a grade. From 2007 to 2010, the percent of children with an unemployed parent more than doubled. Largely as a result, one in five children now live in poverty.

And the best excuses we can come up with for inaction are that unemployment insurance will only give them another reason not to get a job or that Congress is taking money away from companies who will invest it more efficiently. Except it won’t and they’re not.

Unemployment didn’t increase because the government started paying more to the unemployed. It increased because people stopped buying and banks stopped lending and companies stopped hiring. Every sensible research study finds that unemployment insurance increases unemployment by less than half a percentage point.

And Congress isn’t taking money away from anybody. If they borrow that money, it’s at negative real interest rates, and it’s money that companies aren’t spending anyway. It’s cheap, and it’s not being used. There’s no excuse not to give it to people in need.

If Congress does take money away from anybody, the President wants them to take it away from Big Oil and other corporations that don’t need it in the first place. If Congress really believes in the free market, they shouldn’t be giving away these tax breaks. They should be giving tax breaks to people who don’t have stockpiles of cash sitting on the sidelines.

You know the people I’m referring to. They’re your neighbors and your classmates, your friends and your family, the guy next to you in line at the supermarket and the woman begging the bank not to foreclose on her house. They’re everywhere except on your newspaper’s op-ed page. They’re the unemployed.

==========

This op-ed was published in today’s South Florida Sun-Sentinel, alongside an opposing view from Prof. Chandra Mishra of Florida Atlantic University. We were asked to discuss President Obama’s American Jobs Ac

Related posts:

1. The Greeks Are Coming! The Greeks Are Coming! Ronald Reagan signed the first of two famous tax cuts...
2. Don’t Blame the Fed for Holding Back the Recovery Rick Perry must not spend much time in banks. How...
3. Why Jon Huntsman Is More Dangerous Than You Think If you’ve been reading this blog over the last couple...

Related posts brought to you by Yet Another Related Posts Plugin.

Bachmann is too extreme to be elected president. Even if the Republican primary voters completely lost their minds and nominated her, she’d lose the general election by a landslide, even in her home state of Minnesota.

Huntsman, on the other hand, is a very good match for President Obama. He’s moderate, handsome, polished, and well-spoken. His positions on Afghanistan, Libya, climate change, gun rights, the national debt, and gay marriage line up directly with the public’s opinions. (It’s almost as if he’s just saying what the public wants to hear. Naw, politicians don’t do that…) If he can overcome the powerful extremists in his party, you might consider voting for him.

That’s what makes him dangerous.   Before you pull that lever: Isn’t something missing? In the 6,000-word Esquire article, did he forget to mention anything?

Among the words not included in those 6,000: recession, unemployment, financial, Wall Street, profit, wage, labor, and inflation. All he could muster on the economy was an observation that we’re “on the brink of economic collapse, crushed by debt and overregulation and taxes.” Granted, he’s pandering to the base, and the reporter didn’t include Huntsman’s speech word-for-word. But he delivered the same message to George Stephanopoulos on ABC: cut payroll taxes, repeal the Affordable Care Act, pass Paul Ryan’s budget, and cut spending. Not so moderate after all.

At least we know what his priorities are. 13.9 million unemployed Americans are not on the list. Nor are the 47 million Medicare beneficiaries or 58 million Medicaid enrollees who would pay significantly more for health insurance under RyanCare. And since the Affordable Care Act will reduce the projected national debt, we can surmise that he doesn’t really care about the debt — which means he isn’t cutting spending and taxes to reduce the debt. He’s cutting spending and taxes because, apparently, Americans are “crushed by…overregulation and taxes.”

Who, exactly, is overregulated? Is it Wall Street, whose systematic erosion of financial regulations resulted in the largest financial crisis and deepest recession since the Great Depression? Is it Big Oil, whose offshore drilling resulted in the biggest environmental disaster in American history? Is it the health insurance industry, who are making record profits since Congress passed the Affordable Care Act? Is it corporate America, whose profits are at an all-time high? Is it small businesses, whose concern for “government requirements” has shrunk since the 1990s (when, by the way, the economy was booming)?

If you read Trading 8s, you know that blaming taxes is equally ridiculous. As a share of the economy, federal tax revenue is the lowest it’s been since the 1940s. The United States has lower tax revenue, as a share of the economy, than every industrialized country except Australia. The average federal income tax rate for a median-income family of four is the lowest it’s been in over five decades, as is corporate tax revenue. Small businesses are less concerned about taxes than they were in the 1990s (or in 2006, for that matter). Taxes don’t seem to be stopping corporate executives, whose compensation increased 18% in 2010, or nonresidential investment, which has long since returned to its pre-recession growth rate.

Either Jon Huntsman doesn’t know all this, or he doesn’t care. I don’t know which is more dangerous.

Related posts:

1. What to Read on Jon Huntsman Jon Huntsman on the Issues — Ezra Klein So he...
2. What to Read on Taxes Nine Things the Rich Don’t Want You to Know About...

Related posts brought to you by Yet Another Related Posts Plugin.