During the boom years of the Bush presidency - remember them- - economic growth was an especially unreliable indicator of how most Americans were doing.
The numbers were impressive, but the gains were lopsided, benefiting executives and investors far more than hourly workers and salaried employees. Because the growth was fueled by reckless lending and borrowing, it created an illusion of wealth even as many Americans lost ground.
The strange and painful disconnect was evident again in recent weeks.
The government reported that the economy grew at a surprising 3.
3 percent in the second quarter, while productivity (the measure of how much workers accomplish per hour) soared. Unfortunately, those bounces did not mean a rebound in the lives of most Americans.
Growth rose, but so did unemployment. Productivity surged, but wages fell. Fixing that disconnect is the central economic challenge for the next president.
Increased exports were responsible for last spring’s strong economic growth numbers. But selling more abroad has not led to more manufacturing jobs or working-class pay raises at home.
One reason, as The Times’s Louis Uchitelle reported, is that manufactured goods accounted for an unusually low share of export gains in the first half of 2008, while commodities like corn and scrap metal accounted for an unusually high share. Worse yet, exports are likely to fall as the economies of Europe and Japan slow.
American consumers also helped drive recent growth, spending nearly $100 billion in government-provided stimulus payments. That was only a temporary lift. A true rebound cannot occur until the economy stabilizes. For that, oil prices have to settle at or below their recent levels; housing prices have to bottom out; and emerging economies, like China, have to avoid recession, thus propping up global growth.
Washington has little influence over those factors. But the government can try to stop things from getting much worse, helping to set the stage for a rebound. Congress will likely have to provide another round of stimulus - which should center on bolstered food stamps and grants to state and local governments. It may also have to provide more foreclosure relief.
That’s the easy part. Once the economy stabilizes, the creative and controversial work must begin to build an economy in which all Americans have a shot at sharing in the growth.
Senator Barack Obama has addressed the issue conceptually, rejecting the “you’re on your own” ethos of the Bush years. He has put forth prescriptions, including specific plans to create jobs with public-works investments, and he supports legislation that would make it easier for employees to form unions.
It’s well established that publicworks spending yields a big economic bang for every buck and that unions lead to better pay. The politics are difficult. First, Americans must agree that government has a useful role to play in the economy, a notion that has been disparaged for decades. Big employers with powerful friends on Capitol Hill - Wal-Mart comes immediately to mind - can be expected to fight any attempts to foster unions.
Senator John McCain has also pledged to address the struggles of working Americans. Both candidates say their energy plans will create jobs.
But Mr. McCain emphasizes more high-end tax cuts as the main engine for new jobs. Tax cuts are always politically popular. As job generators, however, they are a loser strategy, especially now. The Bush era, with its huge tax cuts, has the worst job-creation record of any post-World War II economic cycle.
America needs more jobs and American workers need a raise. Mr. Obama should sharpen his promising ideas. Mr. McCain has yet to address the real economy’s real problems head on.