Preface

At times, the economy may seem like a washing machine with economic news sloshing all over the place. Consumer spending is up; the stock market is down. The Federal Reserve is lowering interest rates; Congress is cutting spending. Sometimes it may seem hard to believe anything ties it all together.

In Big Picture Economics: How to Navigate the New Global Economy, we show that there is one thread that holds it all together: context.

Every sector of the economy—the consumer, business, the Federal Reserve, and Congress—all need to look at what's going on around them when they make critical decisions buying new products, building new factories, hiking or lowering interest rates, or setting budget goals.

To help us reach that conclusion, we talked to real people. A truck driver explains how he sees the economy firsthand as he barrels down the highway and how it affects his financial decisions. The manager of a Tex-Mex restaurant chain describes the economics of making tacos and enchiladas in the middle of a recession. An administrative assistant, who had been furloughed, shares her budget-cutting secrets as she watches her paycheck shrink. A former president of the Dallas Fed describes how the central bank makes decisions. And an ex-staffer of a key congressional committee talks about how our politicians make decisions that affect us all.

At the same time as we are talking to real people in Big Picture Economics, we are trying to give a deeper perspective on economics, sometimes known as the Dismal Science. We look at the factors that make up the business cycle, as well as discuss global issues and taxation. We discuss whether a balanced budget is good, bad, or irrelevant. We delve into monetary policy, examining why the Federal Reserve has kept interest rates low for a long time. And we try to give some historical perspective on how we got to where we are.

To illustrate that we are all economists, we talked to the mayor of Tampa, Florida, about how he copes with running a city during a time when tax revenues are falling. One of his economic indicators: are young people out walking their dogs? Yes, he sees it as part of context—an indication more people are living downtown.

The president of Arizona State University considers himself an education architect, redesigning the learning landscape at one of the nation's largest universities. But he also tells us how he had to don an economist's hat once the state legislature made a major cut to his funding.

Indeed, many of the people we talked to opened up about how the Great Recession—the one that began in 2007—influenced them. Yes, there were a lot of belts being tightened, but we also found that tough times stimulate a fair amount of creativity. A restaurant manager decided that he would offer patrons specials they couldn't refuse so people would get used to eating out even when the economy was tanking. A president of the university started online courses that quickly brought in $100 million. A mayor tried to figure out ways to attract the type of business that would keep his daughter from moving away in search of rewarding work.

To better understand context and the corporate mind-set, we explore the inner workings of a huge new semiconductor factory to find out what economic factors made the owner of the factory decide to invest billions of dollars in the middle of the recession. In the same chapter, we also talk to a merger master, who helps corporations decide whether it's a good time to buy or sell assets.

At times, Congress may seem to ignore what is happening in the economy. To get a deeper understanding of how Congress does or does not use context, we talked to a former staffer who worked on a key budget committee. He explained the context around some curious political decisions. In Big Picture Economics, we also look more closely at one of the largest parts of the federal budget—health care. It may sound counterintuitive, but we find that the rate of growth of health care spending is slowing. But a doctor who treats overweight patients every day warns that the drop may be only temporary unless we start to control what we eat.

In the last chapter of the book, we try to look into the future. We opine that one thing is certain: the rate of change is accelerating. In that chapter is a short discussion about the possible future of flying robots. Perhaps they could be used by farmers to examine their crops more closely, said one of their creators. After the chapter was written in late 2013, Jeff Bezos, the chief executive of Amazon.com, told the CBS show 60 Minutes, that he could envision the online retailer making deliveries to customers using what Amazon calls octocopters. Yes, very similar to the flying robots at Hearst. Getting government approval to use them could be a few years away—if it ever comes. But who knows—books may get delivered to your doorstep by an octocopter in the future.

All of this came together for us in a relatively short period of time. One of us is an economist and the other a journalist. In November 2012, over lunch at a mall in suburban Pennsylvania, we started to fill a legal pad with ideas, which eventually became chapters. That set us off on the adventure of writing a book. We can't promise exotic locales, but we found that places such as Saratoga Springs, New York, and Bayonne, New Jersey, offered plenty of surprises in the world of economics. We hope you take the trip with us to discover why context matters in Big Picture Economics.