Why Don’t We Feel Better?

“Why does 40% of the U. S. population think that we are in a recession when the economy is clicking along fine but flying low?” Economist Stephen Happel, from Arizona State University asked the Federal Home Loan Bank of Des Moines Conference at The Lake of Ozarks. I was there, following him on the program. Happel, born and raised in Quincy, IL was a Keynesian economist when he was at the University of Missouri and Duke, but became more of a Friedman, Free-Market, economist the more he studied. He calls his adopted state of Arizona a free market mecca, “There is no place on earth that is more free market than Arizona.”

“Every reputable economist knows that the tax cuts of 2003 are one of the main drivers of our current economy. We had ten straight quarters of greater than 3% growth, which is unprecedented in modern history. It fell to 1.7% in the fourth quarter of 2005 because of Katrina, but rebounded to 5.3% in the first quarter of this year.”

Happel is a strong believer in the power of demographic trends. “The young people in their 20s and the age bracket from 45 to 55 are both huge in size and in spending patterns that will drive this economy for many years in the future.”

He broke down his analysis of demographic groups into five:

1. The Bob Hope generation, with 52 million people, was the generation that grew up in the depression. Money was their key driver.

2. The Sinatra, Elvis & James Dean generation, with only 47 million was the silo generation that grew up during the cold war. They worked hard and saved.

3. The Baby Boomers at 76 million was brought up on “Leave it to Beaver” and is very self-confident, are high achievers and love to spend.

4. Generation X with 59 million are the latch-key kids. Over ½ of them living through a divorce. “Bevis & Butthead” was their favorite show.

5. The Rainbow Generation at 74 million is almost as large as the Baby Boomers. They are the least racist group in U. S. history, have an incredible amount of self esteem, crave fame and need to be coddled. Seventy percent admire their parents, especially their mothers. They want to make money and give back to society.

The one storm cloud that Happel saw on the horizon was the rhetoric toward protectionism and the erecting of trade barriers. “The worst guy in America today is Senator Charles Schumer, with his talk of a 27% tariff on Chinese goods.”
Happel was a down-to-earth economist who was able to turn a dry subject into an interesting talk. Others on the program that I didn’t get to see because I was on my way to talk in Okoboji, IA (my topic tomorrow), were Ben Stein and Bill Kurtis.

The Federal Home Loan Bank is doing similar conferences in Sioux Falls, SD on August 8 & 9 and in Minneapolis on November 1 & 2. Click here for a copy of the program and for free registration.