OPINION:
Americans are down on the economy and believe the country is headed in the wrong direction. Yet the metrics of economic health are good, and our friends and rivals in Europe and Asia face more troubling prospects.
In the fourth quarter, gross domestic product growth was 3.4%. Another good performance is likely for the first quarter of this year. Unemployment is below 4%, and inflation has moderated.
Yet President Biden gets bad marks for the economy, and consumer sentiment remains well below pre-pandemic levels. After the president inherited an economy shut down and reeling from global supply chain disruptions, real wages have been rising since last May, wages are about even with inflation on Mr. Biden’s watch, and real incomes are now to continue growing.
The problem is that hope has too often been disappointing.
America was built on the convictions of immigrants and go-getters that they could get ahead by following basic prescriptions: Get a good education, learn a trade, buy a home and invest, and put faith in a democratic government to solve problems and maintain public order.
Over the last 30 years, college costs have rocketed even more rapidly than health care costs and overall inflation, and universities too often deliver indoctrination instead of education.
About one-quarter of students drop out in the first year, and one-third of recent graduates end up in jobs that don’t require a degree. Employers complain that too many graduates are inadequately prepared for the workplace.
In this century, home prices are up more than 300%. And with student debt burdening so many young Americans, millennials and Generation Zers suffer from money dysmorphia.
Americans can’t be blamed if they harbor an apprehension that civilization is breaking down. Abroad, we have witnessed the debacle in Afghanistan, the Russian invasion of Ukraine, and the mess in the Gaza Strip and around the Red Sea. At home, we cope with homelessness and crime in major cities and immigrants flooding across our southern border illegally.
Meanwhile, Congress is too fractious to act, and the president is widely seen as too old — lacking the mental acuity and energy to grasp and act on these problems. Voters sense that others in the administration and Congress are pulling the strings.
The media do little to raise spirits.
A Brookings Institution study analyzed movements in the San Francisco Federal Reserve’s index of daily news sentiment against data for unemployment, inflation, GDP growth and stock market performance.
The study found major newspapers have been more negative in their assessments in recent years than in the past under comparable economic conditions. With the internet and hand-held computers, we are drinking news from a fire hose of this negative narrative.
Yet the future offers great opportunity.
Artificial intelligence is about to make Americans much more prosperous. It’s the postindustrial analog to the mechanization of agriculture and the moving assembly line, which permitted farmers and factory workers to grow food and manufacture goods more efficiently. But those also forced many farmers and workers to move and find new employment.
The wealth created by those gains permitted Americans to keep their children in school through high school, build our great universities, and educate and support scientists to pursue the research that gave us modern computers, the miracles of contemporary medicine and now AI.
The temptation has always been to resist and regulate, but a new, more prosperous age will emerge from the chaos.
Goldman Sachs estimates that AI could increase annual GDP growth by 1.5 percentage points over a decade.
Elon Musk’s Neuralink implant and Apple’s Vision Pro are precursors of a synergism between humans and computers. This will enable us to access the cloud, web and AI engines almost as quickly as we can think.
The ultimate devices won’t look like Apple’s Vision Pro, but more a combination of Neuralink’s brain implant and Google Glass that will permit an enhanced reality with many apps superimposed in our field of vision. Those will permit the synchronized application of apps to draft white-collar products, such as an insurance adjuster’s repair estimate or an industrial site selector’s report, almost as quickly as we can think.
This will be the next wave after AI’s initial boost to productivity runs its course.
The Congressional Budget Office has issued some dire predictions about a ballooning national debt over the next decade as the population ages and expenditures on Social Security, Medicare and other entitlements outpace economic growth — pegged at about 2% — and annual budget deficits rise to more than 6% of GDP.
Properly focused government spending, however, could pull the economy forward, keep demand hot enough to redeploy workers displaced by AI, establish new industries and generate more tax revenue.
The critical question becomes, will politicians bet on the future, or simply spread benefits around to buy votes?
The promise of the future is too good to abandon hope.
• Peter Morici is an economist and emeritus business professor at the University of Maryland, and a national columnist.
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