ON THE ECONOMY: IT’S TIME TO BRING BACK THE MISERY INDEX
By Guest Column Bruce Yandle:
Mercatus Center Distinquished Adjunct Professor of Economics, Dean Emeritus of the Clemson College of Business and Behavioral Sciences
The economy is now officially expanding. Economic growth is higher than when we took the leap off the Great Recession cliff. Still, there is high unemployment and plenty of other things bugging the typical family. People are holding down several jobs when they can find them and are pinching pennies to pay for $4.00 a gallon gasoline. With what seems to be more than enough misery to go around, it’s time to take another look at economist Arthur Okun’s “Misery Index.”
Okun invented his index in the 1970s when inflation and unemployment rates were headed to the heavens. He added the two together and generated a quick way to check the health of the economy.
With the current 8.3 percent unemployment rate and Consumer Price Index inflation running 2.9 percent a year, we seem to be headed in a miserable direction. In the 1970s the index hovered above 21 percent, and although it’s nowhere near that high today, there are other factors contributing to our misery that should be considered.
Consider the boomerang kids, the offspring who leave college and can’t find a job. In January, the unemployment rate for those 20-year-olds stood at 13.3 percent, and as of 2011, some 9.3 million of these young people were living at home. There’s a lot of misery buried in those numbers.
Then there is the tough housing market. Couples split so that one spouse could take a job in another city to make ends meet, while the rest of the family waits to sell the house. Unfortunately, this waiting period is longer than it has been in decades. According to the most recent census, the moving rate is at its lowest level since 1948.
Even though the economy is slowly improving, it’s clear things are still pretty tough for lots of people right now. As presidential candidates vie for public support, voters should consider the candidate who will move the Misery Index down instead of up. This candidate should:
- Show a clear understanding that real jobs, the kind that can endure, are generated by firms that are satisfying needs that people are willing to pay for, and not from temporary government programs and tax gimmicks that create a flash in the pan.
- Indicate an appreciation for the fact that too much money chasing too few goods is the root cause of disappearing purchasing power, and that someone needs to watch the Federal Reserve as they open and close the money valves.
- Show some real awareness of what Americans go through every day: grocery shopping on a limited budget, paying $4.00 a gallon for a week’s commute, and dealing with the tax bite from filling out those dreaded forms in April.
Not only will paying attention to these factors help the economy, they will help improve our everyday lives.
INSIGHTS: DRILL BABY DRILL
While gasoline prices continue to rise, John Dunham recently paid a visit to a client in Colorado to get a crash course in oil wells, natural gas and America’s ongoing energy crisis. Actually, as John learned, there would be no energy crisis if the Government would allow American producers to tap into the abundance of energy resources available.
Earlier this year, the Obama Administration denied a permit for the 1,700 mile-long Keystone XL oil pipeline that would stretch from Canada’s oil fields in Alberta to the U.S’s Gulf States. North Dakota, the “Saudi Arabia of the Midwest” is sitting on billions of barrels of oil. The oil is currently being primarily transported by rail, which is expensive. North Dakota and neighboring Montana would benefit from the pipeline as a more cost-effective and efficient method of shipping oil to refineries on the Gulf Coast. Unfortunately, the Federal Government caved to environmentalists’ pressure and missed this opportunity to address America’s energy needs.
Another missed opportunity is natural gas, which is in great supply and available for drilling in various regions of the country. No infrastructure is in place to convert vehicles and power plants nor is there a way to readily distribute natural gas in large parts of the country. There is an abundance of gas at the wellhead but only limited demand.
Ultimately there are four factors that impact the development of energy resources. They are: technology, infrastructure, price and regulation. Energy companies have made great strides in the area of technology with the ability now to drill both vertically and horizontally. Prices are set in the market and generally high prices for oil have encouraged production across America, including marginal fields in states like Colorado and Kansas that have been brought back to life. Lack of infrastructure and over regulation remain the two biggest barriers to America’s energy needs.