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Economist: Don't worry, 'we live in very good times'

Economist Christopher Thornberg told a local chamber of commerce forum Monday that the wrong issues are far too often debated in the public square, while larger problems are ignored.

Speaking before a luncheon gathering of The Chamber of Medford/Jackson County, the director of the Business Center for Economic Forecasting at the University of California-Riverside rattled off a lengthy list of present strengths in the economy, ranging from real income growth to business investment.

"There is nothing wrong, folks," Thornberg suggested. "We live in very good times."

Thornberg, a founding partner of Beacon Economics in Los Angeles, warned, however, there are issues to be addressed before those good times end. Among them, growing wealth inequality, under-funded pensions, health care costs and stressed state and local budgets.

"These are incredibly important things we as a nation need to start confronting right now while we have the time and place to do so," he said. "In the short run, we're fine. But we've got to start looking down the road a bit, which means getting out of this preposterous political gridlock we're seeing in D.C., where political conversations are not being dominated by logical analysis and data, but rather by firebrands on the two wings of both parties."

Instead of dealing with real problems, he argued, "we sit around inventing fake problems and coming up with solutions that don't do anybody any good."

When it comes to real household income, he said, there are policy arguments over data that is wrong. For the IRS, the data is based on gross-adjusted household income, which doesn't include health care, pension payments or government benefits. When those components are added in, income is substantially higher than it was in 2000.

"It's a problem that doesn't exist," he said.

Thornberg said the notion that millennials will become the first generation in U.S. history to do worse than their parents financially is false.

"What is better today in ways we don't capture in economic statistics from 20 to 25 years ago?" he queried. "The answer is pretty much everything."

Communications, medical care, pharmaceuticals, information, the environment, and entertainment options are far greater.

"When I was a kid, there were four television stations and no VCR — nothing," Thornberg said. "In Rochester, New York, when there was nothing on TV, we went outside and let the mosquitoes bite us, because we had nothing else to do. Today, we're overwhelmed with entertainment options — you couldn't possibly have enough time in the year to watch everything available to you on a daily basis."

Shopping and food quality are immensely improved.

"When I was kid, we had strawberries three weeks a year in the market," he said. "Now we have the temerity to walk into the market and pick up a strawberry and go, 'Well that doesn't look very good.' It's November, you shouldn't even have a strawberry."

He said tax reform and tax cuts are not the same.

Ronald Reagan was a genius who was not for cutting taxes, but for reforming taxes, Thornberg said. "Look at the numbers. He barely cut taxes."

"We're taxing parts of the economy too much that we should be taxing less," he said. "And we're taxing big hunks of the economy way less than we should; and that's now how you should do it."

Often the wrong questions are debated, he said.

"Obamacare was not health care reform, it was health care insurance reform. All the debates, all the arguments we're having in health care is who is going to pay?"

The U.S. spends $9,400 per person annually on heath care, far more than France and Japan, where the care is of similar quality.

"It has to do with doctors, administration, lawsuits and a whole variety of issues," Thornberg said.  "And none of those are being discussed. Instead, we sit around screaming about who is going to pay the bill, as opposed to talking about true reform."

With the onslaught of baby boomers heading for Medicare, the costs are staggering.

During the next 20 years there will be 50 million more Americans,  of which 31 million will be 65-plus, he said.  "The U.S. will  go from 47 million people retired to 78 million.

"That's going to take the the Medicare share of the federal budget from 18.7 percent today to 41 percent by 2035," Thornberg said. "That has to compete with defense, Social Security, infrastructure and research and development, and all the other things the federal government is going to do. You've got to figure this out before you start talking about cutting taxes."

— Reach reporter Greg Stiles at 541-776-4463 or business@mailtribune.com. Follow him on Twitter at www.twitter.com/GregMTBusiness, on Facebook at www.facebook.com/greg.stiles.31.

Christopher Thornberg