The most recent majorly publicized gaffe of the presidential campaign is, in a sign that we are truly entering the general election, now from Barack Obama in saying that the private sector of the United States is “doing fine,” as just today the Romney campaign let loose an ad contrasting the sound byte with statistics on the continued economic suffering of Americans. This, of course, was met with expected anger from many Americans who were suffering from unemployment and the substantial loss of prosperity since the recession began. Americans, who oftentimes have interpreted the economy through their own personal suffering just as much as statistics, object to the characterization of any part of the economy as fine. However, this shows an ongoing issue in American economic discourse – the idea that the success of American business must lead to the success of American workers. Statistics showing that the two are not necessarily bonded together – the former has gone up as the latter has stagnated during the recovery – shows both Obama’s higher-than-one-might-think accuracy and the need for a shift in how we approach the economy.
Firstly, it is necessary to understand the President’s quote in context. The private sector was being contrasted to the public sector, the president saying that the “weaknesses in our economy have to do with state and local government” having to cut spending and thus jobs due to the inability to, like the federal government, borrow to pay off a deficit. The loss of government jobs correlates with data from the Bureau of Labor Statistics, which cited a loss of 13,000 government jobs in May, up from a loss of 10,000 in April and 4,000 in March. At the same time the private sector added 82,000 jobs in May, 87,000 in April, and 147,000 in March. This all worked out to the addition of 69,000 jobs the previous month, not much more than half of the 125,000 needed to keep the unemployment rate steady with population growth – meaning that the private sector is still not moving fast enough for a good recovery, if government is to assume its proportion of industry in our economy.
Let’s try comparing these figures to those of 5 years ago, with the statistics for May released in June of 2007, while our economy was in the calm before the storm. Then, our economy added 157,000 jobs with 22,000 of them in government – meaning that government job growth was about 14% of total growth, with the private sector picking up the other 86%. Of the needed 125,000 jobs every month, 86% works out to 107,500 jobs needed by the private sector to keep our unemployment rate stable without major movements toward the government for production. The private sector isn’t doing fine.
But Obama is accurate in that it’s doing a whole lot better than the public sector, what he was trying to communicate in the original quote. In terms of where to look into for boosting the economy, the government does seem like a good place to start – if any other industry was posting massive losses while the private sector as a whole was posting gains, it would be considered the responsibility of the government to step in and focus on returning that particular industry to form – the issue of perception here is that that industry is government. One might even say that the private sector is working fine as a means of adding jobs, but needs the government as a customer in order to fuel that job growth – it’s hard for companies that sell paper to add jobs when townships go digital to save costs.
However, this is just one aspect of how well-to-do the private sector currently is. Obama further clarified his contention by citing that corporate profits have risen 58% since 2009. Viewing the analysis of the private sector as one of the sector’s revenue and costs, as opposed to its ability to generate economic prosperity for Americans, the private sector is indeed doing well as governments continue to face deficits and debts on the local, state, and federal levels. The idea that the private sector’s success is indicated solely by the prosperity of the American people is, while an optimistic one, not necessarily accurate no matter how much Mitt Romney’s ad may imply. Companies don’t profit by ensuring economic prosperity, they profit by charging high and paying low. While during the recession both the private sector and the American people suffered, and the former is made up of the latter, it’s reckless to view the success of companies as the success of our economy as a whole in terms of establishing more wealth for citizens, especially since facets such as house worth and failing mortgages require more aid than just the addition of jobs.
The problem here is the idea of our economy as one organism – something that is either doing well or not. If it’s doing well, like it was before the recession, the government has money, companies have profits, and people have jobs and wealth, right? However, an in depth study shows that none of those three are necessarily correlated to each other – and to not go further than seeing them as such is just shallow analysis.