October is National Economic Education Month and, according to the U.S. Federal Reserve, it was “designed to help all students understand how everyday economic decisions and policies affect their lives, their families and their world.”
The University of Delaware’s Center for Economic Education and Entrepreneurship (CEEE) gave Delaware K-12 teachers an opportunity to deepen that understanding so that they might have more effective and lasting conversations with their students. It recently hosted “The State of the Economy,” a professional learning session led by retired UD Professor of Economics James Butkiewicz, winner of the CEEE’s James B. O’Neill Award for Excellence in Economic Education and Entrepreneurship.
Butkiewicz gave an interactive lecture on the current state of the economy, where it is heading and what problems need to be addressed. More than 25 teachers attended to gain a better understanding of how to educate students on the latest trends and the economic impact in an election year.
“This is probably one of the most popular sessions we offer every year,” said CEEE’s Assistant Director Scott Bacon.
“This insight will aid the educators who attended, giving them relevant economic education topics to pass on to their students. This will help teachers develop their students into more informed citizens.”
The state of the economy is a timely topic, especially with the upcoming presidential election. The economic situation plays a large part in voting as each candidate has policies regarding economic topics such as inflation rates and rising prices.
Current State of the Economy
“Overall, the economy appears to be healthy but there are some concerns about late payments – including rising delinquency on credit card and consumer loans,” said Butkiewicz.
He broke down for teachers in attendance where the economy is at this point in time, explaining that federal policy cuts to interest rates are a result of declining inflation and the health of the labor market.
Butkiewicz presented many different graphs showing the latest economic trends, including the effective federal funds rate, 10-year real interest rate, and the yield curve.
“The Federal Reserve had increased their target rate in an attempt to reduce inflation, but recently made a 0.5% cut to try to control the economy without killing expansion,” Butkiewicz said. “Interest rates may need to decrease even more in order to achieve this.”
Positive Trends Ahead
Taking a deeper look at the overall economy, Butkiewicz expressed there are also many positive signs for the state of the U.S. economy. “The labor market appears strong, the unemployment rate remains low, real wages and personal income are growing, real Gross Domestic Product (GDP) is healthy, and consumption and investment appear to be stable,” he said. GDP reports the value of all goods and services produced in the country over a particular period of time.
Many of these factors have been on an upward trend as the economy continues to recover from the effects of the pandemic.
Butkiewicz explained more specific effects of inflation on the economy and the two measures of prices: the Consumer Price Index (CPI) and Personal Consumption Expenditures (PCE). Both are price indexes that measure changes in the cost of goods and services. The CPI is the cost of a basket of goods and services purchased bu=y urban consumers, while the PCE is a broader measure of the prices paid by all consumers for goods and services. “Falling inflation means prices stop rising as fast. A fall in the level of prices, deflation, generally occurs during a recession or depression.” He explained that the CPI tends to be higher than PCE.
He also gave examples of various prices that have increased over the years, and expressed that “prices generally do not go down; this is a result of inflation.” He illustrated this using the rising prices of gas, housing, cars and clothing.”All of these prices are on an upward trend and have only increased over the years. These prices are expected to continue to increase as time goes on.”
The Impact of the Presidential Election
Butkiewicz also addressed the country’s debt as a large economic concern. “Over the past four years, debt per capita (calculated by dividing the total debt of a government by its total population) has increased from $70,069 to $103,358; it is worse than ever and there are no signs of improvement.” To exemplify this, he explained that federal spending is up and federal revenue is down. Additionally, he pointed out that government debt interest payments now exceed its defense budget, and entitlements are continuing to grow.
Taking a closer look at federal spending, Butkiewicz depicted income security, healthcare and defense spending as a percentage of GDP. Recently, there has been more spending on healthcare and income security, and a decrease in defense spending. The congressional committee reported that “the United States faces its most serious threats in a military sense since 1945.” Many are concerned about the low level of defense budget, as well as the technology the military is equipped with.
With the nation’s debt being of concern, it is important to examine how that will be affected after a new president is elected. Butkiewicz compared both Kamala Harris and Donald Trump’s economic proposals, and how each might impact the United States’ budget. He analyzed how much more projected debt each plan could add, and what that means for the economy. He also discussed voter and economists’ response to the candidates’ plans.
Trends in the economy can change based on the current president. Butkiewicz looked at market trends, debt and GDP throughout the years. He was able to relate these trends back to the president at the time, and their fiscal policy while they were in office. As different presidents come into office, these numbers can fluctuate as a result of their policies.
Educators who were present had the opportunity to ask questions about all the data and topics presented– both throughout the presentation as well as at its conclusion. Some inquired about the ability of the yield curve to predict recessions, the correlation between political party and debt, and how tariffs act as a regressive tax. Butkiewicz was able to further explain how to predict recessions, the effect of tariffs, and political beliefs on debt and how they vary between political parties.
Millard West High School teacher Melissa Schram, who has a Master of Arts in Economics and Entrepreneurship for Educators (MAEEE) from Lerner and has studied under Butkiewicz reflected on the presentation. “I will use this information to inform my students of the current state of the economy and how the policies proposed by the candidates will impact citizens. There is always a little more interest during a presidential election year. Some of my students can vote for the first time this November. It is vital that they understand the importance of, not only voting, being informed voters,” Schram said.
Even with her background in economics education, Schram believes that she still left the presentation better informed and prepared to educate her students.