PLANK JUNE 14, 2012
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Yesterday I explained why the Fed's new report on family finances from 2007-2010 shouldn't prompt us to stop thinking about income distribution and start thinking about wealth distribution. Today I'm going to focus on something the Fed report has got me thinking about: the Republican-ness of the 2007-2009 recession and the weak recovery that's followed.
By this I do not mean that Republican politicians are to blame for the recession. As it happens, they are--the recession began on President George W. Bush's watch, and it was a consequence of the sort of lax financial regulation that Republicans (including the Reagan-appointed Fed chief, Alan Greenspan) promoted for years and, amazingly, still promoted. Some Democrats deserve blame, too--notably the Clinton-era treasury secretaries Larry Summers and Robert Rubin. But it was Republicans who pushed deregulation hardest, and who most fervently resisted extending regulatory governance to newly-evolving corners of finance. (This latter strategy, which the political scientists Jacob Hacker and Paul Pierson call "drift," has been crucial in reducing regulation generally, because in Washington it is always easier to prevent something from happening than it is to create new policy.)
So yes, go ahead and blame this recession on the GOP. But that's not what I mean when I say that America's struggling to recover from a Republican recession.
So what do I mean? Take a look at this paragraph, on page 11 of the Fed report:
By region, median family incomes in the Northeast and the Midwest were little changed between 2007 and 2010, while the medians in the West and the South decreased substantially. Those changes in medians stand in contrast to what occurred during the period from 2004 to 2007, when median incomes fell in the Northeast and Midwest but increased in the West and South. These income changes by region mirror the regional pattern of home price changes across the two time periods. During the final years of the housing boom, which disproportionately affected the West and South, median incomes were rising in those regions but falling elsewhere. During the subsequent housing bust, which also disproportionately affected those areas, median incomes were falling there but rising elsewhere. Mean incomes declined across all four regions between 2007 and 2010, though the changes were largest for the South and West.
It's well known that the sub-prime housing bust hit the west and the south harder than the rest of the country. But it was news to me that median family income in the northeast and the midwest saw little net change between 2007 and 2009. I would guess that it declined a bit from 2007-2009 and then rebounded in 2010, but the point remains that by President Obama's second year in office the nation's two most reliably Democratic regions weren't much worse off than they'd been in 2007, and were notably better off than they'd been during the Bush years of 2004-2007, when incomes in the northeast and midwest declined. That may help explain why the Democratic base has remained steadfastly loyal to Obama. The recession didn't hit Democrats all that hard.
It's different for the nation's two most reliably Republican regions, the south and the west. These areas prospered during much of Bush's second term (as measured by growth in median income) because housing prices were zooming upward from 2004-2007 (and very possibly into the election year of 2008). Then the south and the west got socked when the housing bubble burst. Median income declined, and as of 2010 it had not recovered. That may help explain why the Republican base loathes President Obama. The recession and slow recovery hit Republicans very hard.
This regional analysis is far from perfect. It doesn't take into account the fact that incomes for rich people, who tend to vote Republican, began rising in 2010, while incomes for non-rich people did not. (The Berkeley economist Emmanuel Saez has calculated that in 2010 93 percent of the economic recovery went to people in the top 1 percent of income distribution.) And of course it's an oversimplification to suggest that the northeast and midwest are entirely Democratic while the south and the west are entirely Republican. Still, I hadn't before considered that the recession was harder on the red states than on the blue ones. That probably will have some impact on the November election.
13 comments
The Republican base hates Obama not for any rational reason, but because Fox-News has been telling them poison to get them to hate Obama. They hate him because he's black, because he's Kenyan, because he's "trying to turn America Socialist", because he's a "tax and spend liberal", because the ACA is "Government takeover of health-care". None of which is actually true -- except he IS black. The Red States have been voting against their own best interests for decades, and that is why they suffered more when the bubble burst. That they brought bad times down on themselves is not going to change their voting patterns -- except perhaps to make them MORE determined to vote Republican.
- AllanL5
June 14, 2012 at 2:34pm
Thanks, Mr. Noah, for putting these pieces together. But I blame Republicans for the recession because I believe only government (and not free market capitalism) can fulfill the responsibility of creating safe markets; and safe markets are important to economic activity (e.g., when is the last time you went back to a restaurant that gave you food poisoning -- and ask Tylenol what they lost in revenue when their product was considered unsafe). Republicans had 6 years of control to manage this country and maintain safe markets before it blew up.
- Nusholtz
June 14, 2012 at 2:55pm
"That probably will have some impact on the November election." And the next category 5 hurricane probably will have some impact on the areas it hits. Two points. First, I vividly recall commentary and discussion immediately after Reagan's election that the nation's economic growth would be centered in the South and West. And so it was. Obama's policies, by design I would say, have changed that, and folks down here aren't so dumb that they don't recognize it. Second, down here foreclosures continue unabated throughout the region. On top of that, I have previously described the economic lethargy that now exists in the Tampa Bay area, an enormous turnaround from the boom years that began in the 1980s and continued through most of the aughts. Tampa most definitely is not America's Next Great City (it's motto in those boom years). Here's what's frustrating for Obama supporters: most folks down here refuse to make a connection between the financial collapse that occurred on GWB's watch and the lesser depression that followed. Sure, it's human nature to believe what we want to believe. And sure, they watch Fox News down here. But I would argue that there has not been a consistent narrative to connect the two. And after almost four years it may be too late for the narrative; indeed, at this late hour it could reasonably be interpreted as a lame attempt to blame others. Now we have Noah's regional income statistics, which provide confirmation for the folks down here that Obama has favored other regions at their expense. I'm hoping that category 5 hurricane doesn't hit us.
- rayward
June 14, 2012 at 3:05pm
It really is unfair to bludgeon Mr. Noah with the Category 5 comment. That analogy is way over-the-top, anyway. It likely will have some impact, as he writes, but people don't always vote their best economic interests, or perhaps, they don't even know what those interests are sometimes. I run the risk here of being called an elitist, or maybe even a Marxist (false consciousness). Oh well.
- liberalref
June 14, 2012 at 3:39pm
How exactly have Obama's policies favored other regions?
- Pnaut
June 14, 2012 at 3:46pm
I think the difference is probably more strongly correlated to good governing and policy than actual political affiliation.
- GSpinks
June 14, 2012 at 4:15pm
"Sure, it's human nature to believe what we want to believe. And sure, they watch Fox News down here. But I would argue that there has not been a consistent narrative to connect the two. And after almost four years it may be too late for the narrative; indeed, at this late hour it could reasonably be interpreted as a lame attempt to blame others." Agreed. Obama should've been blaming others from day one. But that wouldn't have jived with his whole post-partisan schtick. OTOH, aside from Florida--and I don't discount Florida's electoral importance--Obama never had a chance in the Deep South. Virginia is another state where the recession hasn't been too bad, mainly due the VA economy's heavy reliance on federal govt spending, esp. military spending, which hasn't declined. The largest employer in VA is the federal government, and the largest PRIVATE employer is Newport News Shipbuilding which has a single paying customer which is, you guessed it, the federal government. (How ironic is it that Eric Cantor hails from the Old Dominion?) I'm predicting that Obama again wins in VA but that he cannot repeat his success in North Carolina. If that pans out many would attribute the difference to all the suburban professionals in VA's DC burbs, but I reckon Raleigh-Durham-Chapel Hill is quite similar demographically to NoVa and just as populated and the real difference may be exactly what Noah is pointing out here: differential impact of the recession.
- AaronW
June 14, 2012 at 4:17pm
Noah is being his usual modest self. His research is more revealing that his modest "some impact" suggests. Down here the fall has been far, the duration endless, and the impact extending beyond the pocket book.
- rayward
June 14, 2012 at 4:29pm
So Republican voters in the south and west blame Obama for their economic problems? And they intend to vote for Romney, who is basically another G.W. Bush on economics? And, as rayward says, they don't make a connection between the the Crash of '08 under Bush and today's near-depression? These poor fools aren't even worth talking about, let alone writing about. As soon as they started listening to Rush Limbaugh and watching Fox News their political IQ's went down about 30 points. Actually, I don't believe all these things. There will be some Republicans in the south and west who will vote for Obama, simply because they don't like the radical party that the GOP has become. Maybe they see that anything extreme in politics, including drastic deregulation of the economy, is bad for America. Sometimes the fiscal health of a voter is not the only determinant of a vote.
- magboy47.
June 15, 2012 at 1:06am
Overall, I like the new Plank format. But perhaps in trying to please the must-post-more-often! crowd, great essays like this and the one on wealth vaporize into the memory hole way too fast. Maybe a tiered Plank (er, a Ladder?) or something to allow certain posts to stay visible longer (and build a conversation)?
- Wonderland
June 15, 2012 at 12:46pm
Well, well. I guess the Republican citizens have finally started getting a taste of their very deserved medicines. Noah missed connecting the dots when looking at the falling incomes and more severe impacts of the recession on the South and West. Identify the states most reliant on government largesse in relation to their tax contributions and we see those areas are....the South and the West. So when you have profligate GOP blessed government spending coupled with Bush policies that heavily promoted home ownership, deregulation of extraction industries, and bank-financed bubbles in areas that by and large have marginal contributions to the overall GDP of the country and take more than they give it's easy to see why those certain regions would see a more dramatic contraction when the Federal dollars start to dry up. Red States heavily reliant upon government subsidies for state funding, education, energy and agriculture are witnessing the fruits of their labors first hand. By supporting the GOP/TP candidates that push for austerity and Government funding shrinkage, these areas then see a self-fulfilling prophecy whereby the government spending dries up, which depresses the local economy which means private sector companies doing business with the government suffer which means more depressed economic data which then prompts the GOP to claim it's the government spending that is causing the problem whereby they then contract spending further which then continues the death spiral. Down in here in Louisiana, as red a state as you can get when the only blue spot on the map is the greater New Orleans area, the economy had more or less stalled. Were it not for the huge amount of FEMA recovery dollars, Louisiana would have been in much worse condition than it is. The only two bright spots in LA were Baton Rouge and New Orleans, which had the lowest drops in unemployment and both which have the highest concentrations of educated workforces for the state, more entrepreneurial start-ups and investment dollars - both Federal and private. BR though will see a decline as the State cuts, NO will stabilize and as the "Hollywood of the South" will see the movie industry continue to grow and prosper as the city diversifies its economy. I suspect the sudden rise and decline of the South will further galvanize the GOP party as their economic decline is neither halted or recovers quickly and the past economic gains will take a long, long time to recover while the blue states will continue to recover more quickly and generate the greatest growth. As they always do. As much as the GOP likes to think the private sector and government sectors can be easily decoupled and survive on their own, we can clearly see through the failure of the GOP experiment that separating the siamese twins results in the slow death spiral of both entities. I think a lot of voters misunderstand how thoroughly intertwined the private and public sectors are these days.
- singlspeed
June 15, 2012 at 12:50pm
Frankly, talking about regional disparities is a way to reveal that you're clueless about data. The biggest Southern state, Texas, is reliably Republican and has done relatively well in the Great Recession. The biggest Western state, California, is reliably Democratic and has done disastrously. Western Plains states, also reliably Republican, have done well due to energy and agriculture booms. Saying "the recession was harder on the red states rather than the blue ones" based on data that don't say anything like that is the kind of evidence-free analysis I could use less of.
- polcereal
June 15, 2012 at 1:18pm
" I think a lot of voters misunderstand how thoroughly intertwined the private and public sectors are these days." singlespeed, The only way America can survive in the 21st Century is to intertwine government, business, and employees completely in the national interest, like Germany does. But Republicans think that's a formula from Hell. I'm glad I'll be gone by the time the Republican formula does us in. Voters don't understand a lot about economics. That's why the GOP is still as strong as it is.
- magboy47.
June 15, 2012 at 6:24pm