America's economy is in most respects stronger than it has been in years. So why are so many Americans pessimistic about it?
Consider some key indicators: Real disposable personal income has grown by over 12 percent since the end of 2000. The U.S. Department of Labor recently reported that more than 200,000 new jobs were created in July, and two million over the past year. Over the past two decades, we've produced twice as many new jobs as Europe and Japan combined.
More Americans have jobs today than at any other time in history, and our unemployment rate of 5 percent is one of the lowest of all developed nations, lower than the averages of the 1970s, 80s and 90s.
Over the past 24 months, 3.5 million Americans have found work, which is the equivalent of a new job for every worker in the entire state of Indiana. Demonstrating our national resilience and flexibility in the face of change, we have replaced every single job that was lost in the dot-com bust with a new job, often in a new industry.
Not that this transition has been easy. In the past four years, as President Bush has noted, our economy has been through a lot: a stock market decline, a recession, corporate scandals, an attack on our homeland, and the demands of an ongoing war on terror.
Change has come particularly hard for older workers in blue-collar industries facing tough global competition. But those jobs are being replaced by information technology and service positions, which means safer, less strenuous work and better pay. And that same global competition provides more products, more choices and better quality to consumers.
Moreover, broad growth in the overall economy has fueled particular gains among disadvantaged minorities. A recent census study found blacks, Hispanics and women starting businesses at rates far above the national average.
According to preliminary estimates from the most recent "Survey of Business Owners," the number of black-owned businesses grew by 45 percent between 1997 and 2002. Hispanic-owned businesses jumped 31 percent over the same timeframe and women-owned businesses were up by 20 percent.
Some have pointed to a modest decline in the participation of women in the labor force as a reason for concern, but labor economist Diana Furchtgott-Roth of the Hudson Institute has found that it is mostly a reflection of good economic times and rising incomes.
Median family income is now above $52,000 a year, leaving more families able to live comfortably with one spouse working rather than two and allowing more mothers the option of staying home with their children. ("Ironically," as the Wall Street Journal notes, "for years critics of the U.S. economy have complained that Americans are 'overworked' and that 'it now takes two incomes to produce the living standard that once required just a working father.' To the U.S. bashers, it is a sign of decline if more people are working, and it is just as bad if fewer people are working.")
The key to economic recovery in the early part of the new century was Congress's passage of President Bush's tax cuts - the largest tax relief in a generation.
To keep the expansion rolling, a number of additional public policy reforms are necessary. Continued regulatory reform will free small businesses, the most dynamic engine of the economy, to grow and hire. The Death Tax, perhaps the biggest threat to small companies because it can force liquidation when a founder dies, must be repealed (as has happened in countries like Sweden and Russia) or at least scaled back significantly.
Still, as the Washington Post recently put it, "the latest data... show the economy picking up steam." So why does poll after poll show Americans to be so financially glum? Fear of a collapse in real estate values - the so-called "housing bubble" - has been a mainstay of the business pages for several years now, but the market seems to have stabilized nationally, and as long as the population keeps growing, people will need homes.
The Federal Reserve has been raising interest rates, but mortgages and car loans are still remarkably cheap by historical standards. Could it be the news media's coverage, which tends to emphasize the negative? Partisan attacks on the President, from those who have a vested interest in talking the economy down? Or perhaps lingering anxiety over the attacks of Sept. 11, 2001 and the ongoing war on terrorism?
None of these factors really explains the disconnect between the true state of the U.S. economy and the perception of the population. Whatever the reason, it would be tragic to let a lack of economic self-confidence become a self-fulfilling prophecy.