The collapse of Lehman Brothers 10 years ago today began the financial crisis that crippled and even killed for some the American dream as we had known it. Donald Trump might be starting to change that, at least for Americans who aren’t determined to remain in our bluest and priciest cities.
Overall an estimated nine million jobs and nearly $20 trillion in household wealth were lost. Job levels finally recovered but most of those who suffered from the Great Recession—and particularly current and former middle-income homeowners—did not see their wealth restored when the economy turned around.
Perhaps worst of all, the recession undermined our traditional belief in a better day ahead. Just one in five Americans is confident that life for today’s children will turn out better than it did for their parents, according to a 2014 survey conducted by NBC News and the Wall Street Journal. Nearly three in five Americans expect today’s children to be worse off, according to a 2017 Pew survey.
Some of this pain was self-inflicted, to be sure, as buyers seeking to catch up and get ahead of the market—they thought prices would just keep rising—drove up the home-ownership rate with dodgy loans many could not afford to repay. After approaching 70 percent, the rate is now back in the 63-to-65-percent range of the quarter-century preceding the housing bubble.
But there are two key reasons that most Americans still haven’t recovered their wealth or position from a decade earlier, and that most young adults find themselves starting the race far behind: slow wage growth across the nation and increasingly unaffordable housing prices in the most expensive, and often most desired markets.
Wages for working and middle-class people, at least until this year, have stagnated. Overall, only upper-income households have recovered financially from the Great Recession, while the vast majority of middle-income and lower-income households have yet to recover their pre-recession wealth, according to Pew.
In the meantime, housings costs have kept climbing, driven by conscious but misguided policies, particularly in coastal states, that have restricted new building. National Association of Realtors second-quarter data shows median house prices in many deep blue enclaves areas have shot past their 2008 bubble peaks. In Portland, Seattle and San Francisco, prices are up 30 percent over the decade. In Denver, prices are up more than 80 percent. They have risen 60 percent in San Jose, where the median price for houses is now a staggering $1.4 million.
Although [Obama] could reasonably claim he took the economy “out the ditch” the Republicans had sent it into, Obama’s recovery was arguably the most unequal in American history, with 95 percent of all gains through 2013 going to the top one percent. Silicon Valley, Hollywood, and Wall Street prospered and cheered on the president as ultra-low interest rates and a massive fiscal stimulus buoyed capital markets and inflated venture capital pools.
Just as they did in 2010 and 2014, the urban and coastal dominated media are failing to register changing opinions elsewhere. Convinced that we are on our way to a “green” urban future, progressives still have not recognized that many industrial workers, suburban homeowners, small business people, and others didn’t want to emulate the urban elites but to get away from them in suburbia.
Herein lies the true secret of Trumpism. Many Americans did not want to see the continued erosion of industries that offered decent wages to middle and working-class people. Trump promised to reverse this, and, to date, his policies have ignited broad-based domestic growth in an otherwise struggling global economy. Small business, for example, now enjoys the highest confidence level on record.
For now, at least, the economy of Middle America is making a major comeback, a sharp contrast to the period right after the housing bust. Industrial employment reversed declines that were hitting at the end of the Obama years, growing by 327,000 jobs over the past year, the best performance since 1995. The sector has reported the strongest output in August in fourteen years. Retailers, home-builders, business service firmsare all hiring, and, for the first time, in over a decade, wages for the lower half of the labor force are actually rising and even the long-term unemployed are returning to the workforce.
Perhaps most important, Trump may have shifted the geography of economic growth. The share of growth now taking place in non-metropolitan area America has increased fourfold. The most recent data from the Bureau of Economic Analysis shows that state GDP growth is highest in Washington state, but most of the other leaders are in the Intermountain West (Utah, Colorado and Wyoming), states in the middle of the country (Iowa and South Dakota) and Texas. New York and California aren’t leaders in either category.
Much of this comes growth from a revived industrial and energy sector. Meanwhile the states of the Resistance, New York and California, are now experiencing increasing domestic out-migration. The rate of population growth in California is among the country’s lowest—less than half that of Texas.