If you've got a job, chances are you're better off than you were two years ago, when Americans elected Barack Obama president. But that's not likely to be the message voters convey in the upcoming midterm elections.
The Democrats who control the White House and Congress are poised for a historic smackdown in the midterms, with polls suggesting that Republicans will gain control of the House and possibly the Senate. There's one big reason: the economy. The unemployment rate was 6.9 percent when Obama got elected. It's 9.6 percent now. America has lost nearly 5 million jobs over the last two years. The economy is supposedly recovering, yet the huge stimulus plan from 2009 hasn't accomplished what Democrats said it would. Many Americans worry that prosperity is gone forever.
But the whole country isn't down and out, and if Obama were to ask voters if their lives have improved over the last two years, many could credibly answer yes. One of the things that's happened over the last two years, however, is an accelerated partitioning of American society, with higher walls between the haves and have-nots. It's harder for a lot of people to get ahead and many others are falling behind. Economic uncertainty and endless political mudslinging may make people feel even more uneasy about their prospects. So here's a dispassionate breakdown of the winners and losers of the last two years.
WHO'S BETTER OFF
Investors. This includes the Wall Street fat cats that Obama once denigrated, plus anybody with a retirement fund, college fund, pension plan, or personal investment portfolio. When Obama was elected, the stock markets were in a nose dive. Since then, the S&P 500 has risen by about 22 percent. That's no coincidence. The bank bailouts that began under President Bush and continued under Obama were intended to end a financial panic and stabilize the banking sector. It was ugly, but it worked. Federal Reserve actions, including a huge asset-purchase program that began in the spring of 2009, were further meant to boost stock values, which also worked. And the Fed is now poised to do that again, which is already lifting stocks. While still down from peak levels in 2007, the total value of Americans' financial assets has risen by nearly $3 trillion since Obama was elected, helping offset losses in home values and making people feel better about the future. Stock market gains have helped push overall consumer confidence a few points higher than it was when Obama got elected, despite a job situation that's worse today.
Corporations. Many big companies feared for the worst during the 2008 financial panic, when there was a chance that banks would stop lending, even to the soundest firms. But corporate America has rebounded strongly, thanks to the bank bailouts, Federal Reserve asset purchases, and other help from Washington, plus their own aggressive cost-cutting. The result has been a surge in corporate profits, which hit $1.6 trillion in the second quarter of 2010—60 percent higher than they were in the fourth quarter of 2008. Ordinary people can rightfully wonder what's in it for them, since big companies have laid off millions in order to survive. Yet strong profits have been a big boost to the stock market and to investors, and with a record amount of cash on hand, big companies are ready to hire once the economy picks up steam for real.
Home buyers. If you've got a job and the money for a downpayment, it's a pretty good time to buy a home. Prices have been falling since 2006, which hurts owners but helps buyers. And since interest rates have been falling too, home affordability is much better than it was two years ago. Average mortgage rates, now about 4.4 percent, are about 1.7 points lower than they were in the fall of 2008. Plus, many buyers today feel that a market bottom is near, so they're more inclined to buy. Two years ago, in the midst of panicky markets, buyers were much more likely to sit on their money.
Consumers. Stuff is cheap. In the two years since Obama was elected, overall prices have risen just 2.6 percent, or barely 1 percent per year. And total consumer debt is about 3 percent lower than it was at the end of 2008, so consumers are slowly improving their finances. Banks and credit-card companies are tighter with money, and of course many consumers are suffering from lost jobs and shrunken income. But more rational lending and spending is making the economy healthier.
WHO'S WORSE OFF
The undereducated. Those with the least education are clearly suffering the most in a weak economy. The unemployment rate among adults without a high school degree, for example, is 15.4 percent, which is 4.5 points higher than it was in November 2008. For those with a college degree or higher, the unemployment rate is just 4.4 percent—and that's a scant 1.1 points higher than it was two years ago. Wherever you look on the education scale, the trend holds: More education equals better job prospects. And that disparity is likely to continue no matter who's running the government, as housing, construction, manufacturing, and other industries that tend to employ less-skilled workers lag far behind the overall economy. Companies that are hiring, meanwhile, are cherry-picking workers with "multiple skill sets" and educational attainments that set them apart from hordes of others looking for work. The vast gap between the educated and uneducated gets bigger every day and is likely to become permanent.
Homeowners. The housing bust still isn't over, and the erosion of home values has been a serious setback even for people with secure jobs and solvent finances. The housing bubble started to lose air in 2006, with the steepest losses in home values coming before Obama was elected. But since November 2008, home owners have lost an additional $300 billion or so in the value of their homes, according to the latest data from the Federal Reserve. That has obviously crimped the real estate market, but it also hurts homeowners with no plan to sell, because it makes them feel less wealthy and less optimistic in general. Those feeling the worst pinch are homeowners who have endured a loss of home equity and also pulled investment money out of the stock market during the scariest moments of late 2008 or early 2009—absorbing all the losses of the housing and stock market busts, without the offsetting stock-market gains that followed.
Low-income Americans. The poverty rate has risen from 12.5 percent to 14.3 percent over the last two years, with nearly 44 million Americans living on a subsistence income or less. And over the last few years, the percentage of Americans in the middle-brackets—the "middle class"—has gotten smaller, while the portion in the lower brackets has gotten bigger. That's the wrong kind of socioeconomic mobility—downward. Many of those falling out of the middle class or sinking further into poverty are victims of unemployment, which means the trend may improve once jobs return. But before that happens, the pain could get worse. Some members of Congress argue that Washington can no longer afford open-ended aid programs, like continued extensions of unemployment insurance. Newly elected members of Congress arriving in January could be even stingier with government largesse.
Job seekers. There were 10.6 million unemployed people when Obama got elected. Today there are 14.8 million. And for every job opening, there are 4.6 applicants, up from 3.8 two years ago. So by that measure, it's harder to get a job today. This trend has been improving for nearly a year, however, and the good news today is that the lowest point of the recession is behind us, not ahead. That could make employers more willing to hire than they were at the end of 2008, when the economy seemed certain to get worse. But any improvements in the job market will come too late for Democrats this year. Maybe in 2012 they'll have something convincing to boast about.