Best columns: Business
Issue of the week: Inheriting the Obama economy
President Obama is handing his successor a remarkable gift: “an economy that’s the envy of the world,” said Ben White in Politico.com. The unemployment rate fell to 4.6 percent in November, “the lowest level since August 2007.” The stock market and U.S. home prices are at record highs, consumer spending and wages are both rising steadily, and the economy grew a betterthan-expected 3.2 percent in the third quarter. The situation couldn’t be more different from the one Obama inherited when he moved into the White House in the depths of the financial crisis—or from Donald Trump’s campaign rhetoric about a U.S. economy suffering from high unemployment and stagnant growth. In fact, Trump will take office against the rosy backdrop of an “Obama boom.”
“Presumably, our fact-agnostic president-elect will one day try to take credit for all this,” said Jordan Weissmann in Slate.com. Trump repeatedly dismissed positive economic statistics in the run-up to the election, but I get the feeling he’s going to learn to love them once he’s in office. “Assuming the U.S. is still sailing smoothly a few months from now, there’s no reason to assume we won’t be hearing about the glories of the Trump economy.” Let’s not sugarcoat Obama’s economic record, said Ray Keating in RealClearMarkets.com. Annual economic growth has averaged a mere 2.1 percent since the recession ended in 2009, “compared with the historic average of 4.3 percent.” As for the recent jobs report, the unemployment rate dipped mostly because people stopped looking for work, not because they found new jobs. In reality, Obama is “handing over a badly underperforming economy.”
“Of course, presidents are ultimately judged little by the economy they inherit, and more about where it goes under their watch,” said Josh Zumbrun in The Wall Street Journal. It’s true that Trump will inherit one of the lowest unemployment rates for any U.S. president taking office; going back to 1960, only Richard Nixon and George W. Bush enjoyed lower rates before assuming the presidency. But that figure doesn’t tell the entire story. For instance, Trump will have to address the growing number of working-age men who have dropped out of the workforce entirely. In the 1960s, just 2.7 percent of men ages 25 to 54 were outside the labor force; today, it’s 11.5 percent. And wages, while rising, grew just 2.1 percent over the past 12 months, “the lowest figure on record for any November in which a new president was elected.”
“The economy isn’t perfect; it never is,” said Neil Irwin in The New York Times. But with the unemployment rate finally back to where it was just before the financial crisis hit, let’s be glad that the economy has more or less healed “from its trauma of the past nine years.” That doesn’t mean Trump won’t muck everything up, said Chris Matthews in Fortune.com. Right now, a recession doesn’t seem likely, but who knows what will happen if Trump implements some of his more unorthodox economic proposals, like scrapping free-trade deals or levying punishing tariffs on businesses that move jobs out of the U.S. Trump might want to tread lightly. All the data suggest he is “one of the luckier presidentelects in recent memory.”
Fannie and Freddie, free at last?
The New York Times
Independence could be on the horizon for mortgage giants Fannie Mae and Freddie Mac, said Gretchen Morgenson. Steven Mnuchin, President-elect Donald Trump’s Treasury nominee, said last week that he wants “to get Fannie and Freddie out of government ownership.” It’s been more than eight years since the feds took over the companies during the mortgage crisis. The arrangement hasn’t turned out badly; since the government began transferring the firms’ profits to the Treasury in 2012, taxpayers have gotten back $60 billion more than the companies received during the bailouts. Still, it would be good news if Fannie and Freddie were allowed to recapitalize with their own earnings. Small lenders rely on the firms to buy the mortgages they underwrite, and that frees them to make more loans instead of holding them on their books. “When small lenders benefit, borrowers do, too, by having more choices.” Mnuchin hasn’t said how Fannie and Freddie will be prevented from returning to their “swaggering, pre-bailout ways.” But the current arrangement, in which both companies will have zero capital by the end of 2018, is also untenable, because it puts taxpayers on the hook again if the firms begin to falter. Fannie and Freddie are “the last big piece of unfinished business” from the mortgage crisis. It’s time to let them go.
Amazon’s help from taxpayers
Amazon has grown into a retail giant at the expense of thousands of mom-and-pop shops, said Henry Grabar, and it “couldn’t have done it without us.” Consumers may not realize it, but we helped build up the e-commerce behemoth by funding the state and local tax breaks “that have made the company so competitive.” Amazon received $760 million in taxpayer assistance between 2005 and 2014, equal to 17 percent of the company’s global profits during that time. More than half the company’s “fulfillment centers” were built with public subsidies. This approach is nothing new; Amazon has for years aggressively played local governments against one another, striking deals to avoid sales and property taxes and using the enticement of jobs as leverage. And some communities have benefited mightily from Amazon’s presence. But the tax giveaways have also undercut local businesses, which don’t possess the “political influence or employment impact to negotiate such deals.” Brick-and-mortar retailers vacated 135 million square feet of space in 2015 alone, equivalent to roughly 700 big-box stores and 22,000 Main Street shops. For communities, that means fewer jobs, lower tax revenues, and emptier downtowns. Amazon’s success is certainly attributable to its “unrivaled economies of scale.” But all that public aid certainly hasn’t hurt.