Here’s why the economy didn’t help Democrats

1. James Pethokoukis

The US job market is healing. The 214,000 net new jobs created in October mean the economy has produced 200,000 or more new net jobs for nine-straight months, the longest such streak since 1995. And the 1.4%-point decline in the unemployment rate over the past year is the fastest such decline since the early 1980s, according to JPMorgan.



So good news on the job front, not that it seemed to help Democrats. Voters were in a bad mood. According to midterm exit polls, 65% said the country was “seriously” off track, 79% were “very” (38%) or “somewhat” (41%) worried about the economy’s direction over the next year, and 70% said the economy was “not so good” or “poor.”
Here’s the problem, as IHS Global Insight put it: “‘Jobs’ isn’t really this issue.  It’s ‘good’ jobs, and improved pay for those already punching the clock.” Wage growth is barely beating inflation. Although job growth has picked up, there remains, according to IHS, “a bias toward creating lower-paid jobs [with] nearly one new job in eight created in the past year  … in the leisure and hospitality sector.” Real median household income — at least as measured by the US Commerce Department in the above chart — is lower today than in 2007. American workers are living “secular stagnation.”
In a 2013 Wired magazine interview, business guru Clayton Christensen offered his take why the recovery has been so bad for the 99.9%:

It looks like the economy is emerging from the recession in an exciting way, but we’re not creating more jobs or income for the average person. And in all humility, I think I articulated a simple model that explains why. The bad actors are business school professors like me who have been teaching people what I call the Doctrine of New Finance. We’ve encouraged managers to measure profitability based on a return on net assets, or return on capital employed. That encourages companies to liberate their capital, so they invest in efficiency innovations, which means they can make more money with fewer resources.
But what the economy ultimately needs are empowering innovations—like the Model T, the transistor radio. Empowering innovations require long-term investments, which tie up capital for years and years. So companies are using capital to create more capital, and consequently the world is awash in capital but the innovations we need to advance aren’t there. …  
I believe solutions exist. The government can’t dictate, “Oh, that’s an empowering innovation and that’s not.” But what government can do is create tax rates that transform what I call migratory capital into productive capital. Migratory capital flows to investments that will maximize the speed with which it can then be withdrawn, which plays to the doctrine of new finance. Productive capital wants to stay on the job and not go truant after 366 days. .. The idea would be to peg a tax rate to the length of time the capital is deployed. The longer the capital is invested, the lower rate it’s taxed at, until it gradually approaches zero and maybe goes negative.

Yeah, tax rates still matter. And Christensen has also since suggested that executive pay structure may be playing a role. To that, I will add the alarming decline in high-impact entrepreneurship, which means less innovation for the economy and less competition for incumbents. So is anyone in Washington offering an agenda to directly deal with these problems?