Pandemic shortages, Russia’s war in Ukraine, and plain old gouging are hiking prices across the globe. A dollar doesn’t go as far as it used to, and many Americans are struggling.
Higher prices at the pump and the grocery store hurt. But there is also some good news.
For one thing, we’re actually experiencing less inflation than many other countries. Inflation here is 8 percent, compared to over 10 percent in the U.K. and Eurozone. Turkey has seen rates of over 80 percent.
For another, we’re better equipped to weather hard times than we’ve been in decades.
From the Reagan era on, administrations of both parties cut the social safety net and left struggling Americans to twist in the wind. But in the face of the pandemic, just when our economic needs were highest, our policy makers heard loud, popular demands to change course. And for once, they did.
We’re now benefitting from these choices. They don’t often make the headlines, but our economy is surprisingly strong because of them.
The American Rescue Plan Act, signed by President Joe Biden shortly after he took office, broadened the safety net, lifting millions out of poverty and keeping millions more from slipping into it. The enhanced monthly Child Tax Credit alone cut child poverty in half.
As news now turns to the elections and as voters name the economy as their top issue, there’s been little coverage of the actual state of the economy.
Most obvious is the healthy annualized GDP growth rate of 2.6 percent we just saw in the third quarter of this year—and a historically low unemployment rate of 3.5 percent. Given the myriad challenges to the global economy, this in itself is newsworthy.
I recently spoke with economist Dean Baker of the Center for Economic Policy Research (CEPR) about how voters can make heads or tails of the economy going into the midterms. Baker, who famously predicted the housing bubble well before the 2008 crash, has been studying these trends for decades.
“Ordinarily,” Baker explained, “we would think of jobs as pretty central to people’s assessment of the economy. Under Biden, the economy has created almost 10 million jobs and the unemployment rate has fallen to a half-century low,” he said. “We know that many people are having a hard time making ends meet, but they would be having a much harder time if they didn’t have jobs.”
Not only do they have jobs, Baker added, but many are also making more money than they were before.
“The tight labor market has been hugely beneficial to workers at the bottom of the wage ladder,” he added. “The wages of hotel and restaurant workers have outpaced inflation by roughly 3.9 percent since the start of the pandemic. These workers are undoubtedly struggling to get by, but on average they are better off today than they were in 2019.”
A key reason workers have been able to get higher paying jobs is because they’ve been able to leave lower paying jobs. Some conservative economists say a tight labor market means higher wages that add pressure to inflation. To the contrary, it means that workers have more and better choices to support themselves when prices are rising.
In the past year, people quit jobs over 51 million times, with the largest number of exits in the lowest-paying jobs. And full-time work and wages are up, indicating workers moved to better jobs. Not all workers have enjoyed these gains. But when those most in need have come out ahead in the face of global supply chain problems, inflation, war, and a pandemic, that’s pretty good news.
Further, for many middle-income earners, the economic benefits of working from home have added an average of $5,000 in annual savings due simply to eliminating commuting costs. Even more savings come from the absence of other in-person work-related costs, such as clothes, lunch, and child care in some instances.
Also, remote working coupled with a tight labor market has proved a boon for many disabled people. Employment rates for people with disabilities have soared during the last two years, hitting a record high. The last two years have also boasted an increase in self-employment, with especially good results for Black and Latina women.
Finally, as Baker noted, low-interest rates through 2021 provided 17 million American homeowners with the opportunity to refinance their mortgages. They saved an average of $250,000 over the course of their loan. “Savings of this magnitude go a long way towards covering the increases in the price of milk and meat,” Baker noted.
Times are tough, no question. But they would be tougher had we not made smart political choices in the last two years. With successful pandemic-era programs facing expiration, the midterms could well determine whether they’re renewed or expanded.
The future will be brighter with the right political choices. We’re served best to know the real data—including the good news—so that we may choose wisely.
Karen Dolan directs the Criminalization of Race and Poverty Project at the Institute for Policy Studies.
The views expressed in this article are the writer’s own.
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