Why you should care
Because the stars are aligning for a new economic and political era in America. And the future looks a lot like 1993.
Hillary Clinton should thank Barack Obama for beating her in 2008. Every day.
Not only does the former first lady and U.S. Secretary of State appear as well-positioned as any candidate to capture the presidency in 2016, but her arrival in the Oval Office could well coincide with tailwinds that the U.S. economy has not seen since, well, the last time a Clinton occupied the White House.
Are we getting ahead of ourselves? Absolutely. A lot can happen in three years, but there’s one scenario for 2017 that should be staring all would-be prognosticators in the face: The very real possibility of another Clinton economic boom like the U.S. experienced in the 1990s.
Here are five key economic and political trends that should leave Camp Clinton giddy — and the GOP scared out of its mind — when it comes to the next presidential election.
No. 1: The U.S. Energy Explosion
The U.S. rode its abundant natural resources, particularly oil, to global prominence during the 19th century, and it seems primed to do so again. This time the new growth in oil and shale gas production, made possible by hydraulic “fracking” and other new, non-conventional drilling strategies, means that the U.S. is “well on its way to realizing the American dream” of energy independence, according to the International Energy Agency. The IEA predicts that the U.S. will be the world’s top oil producer by 2015, peaking around 2025 at 12 million barrels a day.
The IEA predicts that the U.S. will be the world’s top oil producer by 2015.
The fact that much of the technology and know-how behind shale gas production also resides in the U.S. means that countless upstream and downstream jobs could be generated as well. According to a recent analysis by Citigroup’s economic research unit, the U.S. energy boom should support between 2.2 to 3.6 million new jobs by 2020.
And the oil and gas boom is just the start, according to Charles Morris, who correctly predicted the 1990s boom, and whose latest book, Comeback: America’s New Economic Boom, makes the case for another sea change in the U.S. economy.
“The collateral job creation is even more important, and it’s just getting underway,” Morris argues, citing several major U.S. industries, including aluminum, chemicals, steel and paper, in which energy is a significant cost component. The American Chemistry Council, for example, estimates that the expected reduction in fuel costs in coming years will generate close to 1.2 million new jobs across eight energy-intensive industries (not including the energy sector itself).
As Morris tells OZY, there are many things that could deflate the economic benefits of an energy explosion, from poor management at drilling sites to methane emissions to over-exporting, but the opportunity is exceptionally real — especially when other emerging trends are factored in, most notably the rebirth of the American manufacturing sector.
Source: David McNew/Getty
No. 2: The American Manufacturing Renaissance
The growth in U.S. energy output comes on top of an increasingly revitalized manufacturing base as a result of, among other things, the increased “reshoring” of previously outsourced jobs. As a recent report from the Boston Consulting Group (BCG) documents, China’s cost advantages are quickly being eroded by rising wages, land prices, corruption and shipping costs, making U.S. labor more competitive and prompting companies from Apple to Toyota to return operations to the U.S.
The U.S. already makes about 20 percent of the world’s goods (roughly on par with China). “Now it will make more,” says Joel Kurtzman, former editor of the Harvard Business Review and author of Unleashing the Second American Century, “as businesses move to the United States to take advantage of abundant energy and capital and tap into our vast reserves of intelligence and creativity.”
States such as Alabama, Tennessee and South Carolina, hit hardest by layoffs and spare capacity during the recent recession, are quickly becoming the prime targets for a renewed manufacturing sector. BCG estimates that the reshoring trend and increased exports could trim $100 billion from the U.S. trade deficit. And, as U.S growth levels return to 3 to 3.5 percent in coming years and new tax revenues stream in, “trade and budget deficits will shrink in real terms,” says Morris, “and cease to dominate the political discourse.”
Unemployment should also continue to drop. When Bill Clinton took office in 1993, the unemployment rate was 7.4 percent (higher than today’s 6.7 percent), but thanks to an economy growing at 3.5 to 4 percent, the jobless rate sank to 3.9 percent. Hillary Clinton, or whoever wins in 2016, could inherit a similar trajectory.
No. 3: Capital and Millennials Come Off the Sidelines
The recent economic recession benched at least two major U.S. economic heavyweights for the past five or so years: the accumulated capital held by U.S. corporations and banks, and the pent-up consumer demand of the millennial generation.
U.S. companies produce between 30 to 40 percent of the world’s goods, and a lot of the money earned from their overseas operations stays offshore for tax reasons. “Our corporations are sitting on an extraordinary amount of cash, cash that is just waiting to be deployed,” says Kurtzman.
In his book, Kurtzman estimates that U.S. corporations are holding about $4 trillion in spare cash and says that when you combine that with the approximately $1.8 trillion that the Federal Reserve says is being held by banks as “excess banking reserves,” you are talking about almost $6 trillion on the sidelines, roughly the size of Japan’s entire economy.
Source: Gallery Stock
But even that, he insists, is “peanuts compared to where the real money lies, jangling around at the bottom of our purses and pockets.” And, as the economy improves, that money is going to pour out of the pockets of younger Americans — the 20- and 30-somethings who have been delaying buying homes, getting married and more during the financial crisis.
As promising as the future looks for the U.S. economy, it may even be rosier for 2008 Democratic also-ran Hillary Clinton.
Households headed by younger Americans have also been paying down their debts — which have declined an average of 23.7 percent since 2007 — and they are eager to catch up. According to one recent survey, 85 percent of millennials plan to buy a home someday, and 49 percent expect to do so in the next two years.
America’s younger households and shelved capital won’t come off the sidelines all at once, but an energy and manufacturing-fueled resurgence in the U.S. economy could unleash a critical mass of both into the U.S. marketplace — and when that happens, watch out.
No. 4: This Time, Hillary Really Is the Inevitable Nominee
As promising as the future looks for the U.S. economy, it may be even rosier for 2008 Democratic also-ran Hillary Clinton. Just ask Pharrell.
Billed as the party’s “inevitable” candidate for president in 2008, Clinton’s aura of invincibility, and her campaign, ultimately went down in a blaze of infighting, cost overruns and mismanagement. This time around, Clinton enjoys most of the same advantages she carried in 2007: a large potential donor base, influence over Democratic Party fund-raising and get-out-the-vote operations and a strong early fund-raising push and campaign infrastructure despite the fact that she has not even declared her candidacy (the super PAC Ready for Hillary raised nearly $4 million in 2013). Plus, with Secretary of State added to her CV, she’s an even more daunting candidate.
The early numbers also appear to stack the deck for Clinton.
And Clinton will not confront many of the liabilities she faced in 2008: She won’t be hamstrung by her position on Iraq, nor will she likely have to square off with an opponent in the primary as formidable as Barack Obama (though Elizabeth Warren could prove a tough adversary). And as the Ghosts of Clinton Scandals Past recede further in the American memory bank, any attempt by the GOP to resurrect such ancient sins could prove more destructive to that party than to Clinton.
The early numbers also appear to stack the deck for Clinton. According to recent polls by Rasmussen, she enjoys the support of 70 percent of likely Democratic voters and leads the second-most popular candidate nationally, Jeb Bush, 47 to 33 percent.
Source: John Rudoff/Corbis
As 2008 proved, there’s no such thing as a “sure thing” when it comes to elections, but it’s hard to recall an environment more favorable to a single candidate than the present one is for Clinton. And she is fortunate in that her ascendance coincides with the ever-descending odds that any GOP nominee can win the White House.
No. 5: The White House Is Turning Blue
“I think Republicans will not win again in my lifetime for the presidency unless they become a new GOP, a new Republican Party,” Kentucky senator and presidential hopeful Rand Paul claimed in an interview with Glenn Beck in February. Or as David Axelrod, Obama’s former chief political strategist, recently observed from the other side of the aisle: “The Republican Party today is, at its core, a mostly Southern, white, old, evangelical party” and is therefore “incapable of winning a general election for president.”
And the numbers support the many challenges facing the current GOP as it tries to win the White House in 2016. In what Public Opinion Strategies, a Republican polling firm, labels “The Big Blue Wall,” the Democrats essentially will start the 2016 election with 242 of the 270 electoral votes needed to win the presidency based on the tally of the 18 states that have gone blue the last six elections in a row. Put another way, as Marc Ambinder observes in The Week, even if the GOP nominee wins all five of the key swing states (Ohio, Virginia, Michigan, Wisconsin and Pennsylvania), “he or she will need at least eight more electoral votes.”
It is by no means too late for the GOP to figure out how to run that electoral gauntlet. And the prize at the end is well worth winning: A resurgent U.S. economy would mean that whoever occupies the White House come 2017 could benefit from a cushion of growth and prosperity that will dampen chatter about deficits and debt and return the discussion to longer-term goals — spending on social programs, for example, or cutting taxes.
And, as the U.S. becomes less and less dependent on foreign oil, the 45th president may have an unprecedented opportunity to adjust the terms of the country’s relationship to the Middle East, and perhaps the region itself.
In short, the next presidency has the makings of a truly landmark one — offering a rare chance to make history, precisely the sort of chance that some think Bill Clinton squandered in the 1990s. And what are the odds that the person who gets handed the keys to the country, and seizes that opportunity, will be the one person best-suited to learn from the mistakes of the last president to have such a historic opportunity — or the one person most likely to be doomed to repeat them?
Higher than you might think.
This OZY encore was originally published on April 12, 2014.