Great Economy, Unhappy People
Congressman
Tom Petri
Tom Petri
April 10, 2006
The economy's doing great, but a lot of people don't feel too great about the economy.
What do I mean? Consider this:
The U.S.'s gross domestic product grew by 4.2 percent in 2004 and 3.5 percent in 2005. These are strong advances for a developed economy. In contrast, growth in the European Union last year was only about 1.3 percent.
Strong job growth has resumed. Our economy has created more than five million new jobs since August, 2003. Unemployment stands at 4.7 percent. That's below the average of the 1970s, '80s and '90s. Compare that with France and Germany which have nine percent unemployment.
What about inflation? Everybody's understandably upset about the price of gasoline and fuel for heating, but the basic, underlying core rate of inflation (excluding the volatile rates for food and fuel) is expected to be about 2.5 percent this year.
That's at about the upper range of "good," but good it is, and the Federal Reserve is cautiously raising our historically low-to-moderate interest rates in order to make sure inflation stays in its box.
But, with all this good news, why do people seem so pessimistic? The answer, I think, is that we have structured our economy to be dynamic, forward-looking and fast on its feet - in other words: competitive. That's great for the economy, but creates all sorts of insecurities for employees.
What does it mean to have a highly competitive economy? Consider the U.S. versus the 25 member countries of the European Union.
As noted recently by columnist Fareed Zakaria, the E.U.'s economy is approximately the same size as the U.S.'s. But with 170 million more people, its gross domestic product per person is 25 percent lower than ours. That gap has been widening for 15 years, and if present trends continue, in 20 years the average U.S. citizen will be twice as rich as the average Frenchman or German.
Why? Because most European countries have chosen to maintain current jobs, benefits and economic structures in order to make people feel more secure. That's great in the short term for those who already have jobs, but it stifles growth to such an extent that those without work can't find a decent job in the short term, and in the long term the money simply won't be created for the health care, welfare and various other benefits that most European countries promise their citizens.
With all the insecurity caused by our dynamic, competitive economy it's natural to ask: Is it worth it? The vast majority of economists say "yes."
But, tell that to the employees of one local company whose hourly wages are being reduced.
Tell that to the employees of another local company who are being laid off.
Tell that to the workers at yet another local company which is planning to build a factory in China.
Which is better? The future is with competition. But it's no wonder that so many people feel anxious about their jobs.
We can't simply say to our friends and neighbors, "You're on your own during this painful transition."
We need to give people the transitional aid and training they need, within reason of course, to help them land on their feet.
We need to maintain our commitment to the free market and to competition, but do it with enough concern for working people so that they won't give up but will instead stay the course.
What do I mean? Consider this:
The U.S.'s gross domestic product grew by 4.2 percent in 2004 and 3.5 percent in 2005. These are strong advances for a developed economy. In contrast, growth in the European Union last year was only about 1.3 percent.
Strong job growth has resumed. Our economy has created more than five million new jobs since August, 2003. Unemployment stands at 4.7 percent. That's below the average of the 1970s, '80s and '90s. Compare that with France and Germany which have nine percent unemployment.
What about inflation? Everybody's understandably upset about the price of gasoline and fuel for heating, but the basic, underlying core rate of inflation (excluding the volatile rates for food and fuel) is expected to be about 2.5 percent this year.
That's at about the upper range of "good," but good it is, and the Federal Reserve is cautiously raising our historically low-to-moderate interest rates in order to make sure inflation stays in its box.
But, with all this good news, why do people seem so pessimistic? The answer, I think, is that we have structured our economy to be dynamic, forward-looking and fast on its feet - in other words: competitive. That's great for the economy, but creates all sorts of insecurities for employees.
What does it mean to have a highly competitive economy? Consider the U.S. versus the 25 member countries of the European Union.
As noted recently by columnist Fareed Zakaria, the E.U.'s economy is approximately the same size as the U.S.'s. But with 170 million more people, its gross domestic product per person is 25 percent lower than ours. That gap has been widening for 15 years, and if present trends continue, in 20 years the average U.S. citizen will be twice as rich as the average Frenchman or German.
Why? Because most European countries have chosen to maintain current jobs, benefits and economic structures in order to make people feel more secure. That's great in the short term for those who already have jobs, but it stifles growth to such an extent that those without work can't find a decent job in the short term, and in the long term the money simply won't be created for the health care, welfare and various other benefits that most European countries promise their citizens.
With all the insecurity caused by our dynamic, competitive economy it's natural to ask: Is it worth it? The vast majority of economists say "yes."
But, tell that to the employees of one local company whose hourly wages are being reduced.
Tell that to the employees of another local company who are being laid off.
Tell that to the workers at yet another local company which is planning to build a factory in China.
Which is better? The future is with competition. But it's no wonder that so many people feel anxious about their jobs.
We can't simply say to our friends and neighbors, "You're on your own during this painful transition."
We need to give people the transitional aid and training they need, within reason of course, to help them land on their feet.
We need to maintain our commitment to the free market and to competition, but do it with enough concern for working people so that they won't give up but will instead stay the course.
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