October 24, 2003

The Age of Diminished Expectations

Paul Krugman writes about how the Bush administration is trying to lower the bar it needs in order to call its economic policies a success. A very nice column indeed:

Too Low a Bar: ...In September, employment rose for the first time since January, but the increase was only 57,000 jobs. And to have kept up with the population growth since Mr. Bush took office, the economy would have to add not two million, but seven million jobs by next November.

Mr. Bush's employment policies would truly have been a success if he had left the job market no worse than he found it. In fact, even his own Treasury secretary thinks he'll fall five million or so jobs short of that mark.

I know, I know, the usual suspects will roll out the usual explanations. It is, of course, Bill Clinton's fault. (Just for the record, the average rate of job creation during the whole of the Clinton administration was about 225,000 jobs a month. Mr. Clinton presided over the creation of 11 million jobs during each of his two terms.) Or maybe Osama bin Laden did it.

But surely there must be a statute of limitations on these excuses. By the time of the election, Mr. Bush will have had almost four years to deal with the legacy of the technology bubble, and more than three years to deal with the economic fallout from 9/11.

And Congress has given him everything he has wanted in terms of economic policy, even though that has led to a frightening explosion in federal debt: in the current fiscal year the Bush tax cuts will account for almost $300 billion of a deficit expected to top $500 billion. (If that $300 billion had been used to employ workers directly--a new W.P.A., anyone?--it would have created six million jobs.)

Yet Mr. Bush's own Treasury secretary has, in effect, admitted that despite the administration's unimpeded efforts, and all that debt, the job market will still be in poor shape a year from now.

Mr. Bush's handlers have often managed to have small achievements hailed as triumphs by persuading people to set the bar very low. Now his officials are trying to convince the public that if, after several years of dismal performance, they can achieve one year of job creation at a rate below the average rate Bill Clinton achieved over eight years, this will constitute a great economic victory.  

But I do have one complaint. Asking that Bush leave "the job market no worse than he found it" is setting the bar too high by perhaps 2 million jobs or so. It would have been very hard for any set of economic policies to have sustainably kept the economy at the high-pressure state it was in in 2000.

Posted by DeLong at October 24, 2003 12:06 PM | TrackBack

Comments

Krugman has to have an agenda here. This is absurd. There is nothing Republicans, Democrats, the Green Party, Independents or anybody else could have done in creating jobs or at least in slowing down the bleeding. It makes me sick to see everyone up in arms (particularly the Democrats) about the state of the economy and jobs without offering any solutions. Let's see, Democrats would have raised taxes, not given out tax refunds, and tried to keep the budget under control? I would venture a guess that we would be much worse off if that were the case. I would love to see the day when the public rejects the political B.S. that is running rampant. You let a bubble happen to the degree it did over the past decade and you have to pay a price. Bandaids don't work without getting technical here. Maybe Krugman needs to go back and revisit his economics courses.

Posted by: Mike on October 24, 2003 12:22 PM

Krugman has to have an agenda here. This is absurd. There is nothing Republicans, Democrats, the Green Party, Independents or anybody else could have done in creating jobs or at least in slowing down the bleeding. It makes me sick to see everyone up in arms (particularly the Democrats) about the state of the economy and jobs without offering any solutions. Let's see, Democrats would have raised taxes, not given out tax refunds, and tried to keep the budget under control? I would venture a guess that we would be much worse off if that were the case. I would love to see the day when the public rejects the political B.S. that is running rampant. You let a bubble happen to the degree it did over the past decade and you have to pay a price. Bandaids don't work without getting technical here. Maybe Krugman needs to go back and revisit his economics courses.

Posted by: Mike on October 24, 2003 12:24 PM

See, this where Krugman the political hack makes Krugman the economist look bad. Brad's exactly right: Krugman is setting the bar too high. _And Krugman knows it._ He just wants to make Bush look worse.

What Krugman wrote is intellectually dishonest, and it should be condemned. It is _not_ a "very nice column indeed." Lord knows there's enough to really pillory the Bush administration for. This is exactly why I don't like Krugman's NYT columns.

Posted by: Dave on October 24, 2003 12:34 PM

"Asking that Bush leave 'the job market no worse than he found it' is setting the bar too high by perhaps 2 million jobs or so."

You are a more generous spirit than I (well, today at least). The economic health of the country, for all its citizens, should be among the priorities of the President, but it hasn't been for this one. The policies he's made and the actions taken in support of economic welfare for only a few Americans deserve our criticism and censure. I understand that President is a hard job, but it is the top job, after all, and we ought to have high expectations of any one who undertakes it. Plus, if you add up all the other things he's left worse than he found them (alliances, education, security, the Middle East, Iraq and Afghanistan), K's position looks measured and restrained. I'd have encouraged the rhetorical equivalent of "a pair of pliers and a blowtorch." (Before moving on to the arbalist, trebuchet and pillory, that is.)

Posted by: consigliere on October 24, 2003 12:34 PM

Mike, I think PK does suggest a solution and a better policy. He says that using $300M to fund a new WPA, rather than to fund tax cuts, would have created 6 million jobs. I think this solution also answers Brad's complaint that PK set the bar too high.

Posted by: joe on October 24, 2003 12:43 PM

$300B, not $300M.

Posted by: joe on October 24, 2003 12:53 PM

Krugman's wording is a bit sloppy, but I don't think he meant it as you said. In context, what he meant is that the number of jobs should be about the same- not that the labor market should be as tight as it was. Given that the 16-64 population will grow about 5 million or so over the 4 year period, this allows for some substantial softening in both the unemployment rate and labor force participation.

Posted by: Atrios on October 24, 2003 12:53 PM

Krugman says that ending four years with the job market where he found it would be truly successful. Seems fair enough. If the situation was reversed, I'm sure the conservative writers would be saying that anything less than the job growth held under the preceding president would be a failure.

Krugman also says that the money Bush sent elsewhere could have produced 6 million jobs. So I don't think the overused "up in arms...about the economy and jobs without offering any solutions" is a fair criticism of this article.

Posted by: Thompson on October 24, 2003 12:54 PM

Krugman's wording is a bit sloppy, but I don't think he meant it as you said. In context, what he meant is that the number of jobs should be about the same- not that the labor market should be as tight as it was. Given that the 16-64 population will grow about 5 million or so over the 4 year period, this allows for some substantial softening in both the unemployment rate and labor force participation.

Posted by: Atrios on October 24, 2003 12:59 PM

By the way, Krugman also gets around today to responding to the preposterous attack that because he's mentioned George Soros and currency crises in the same sentence, he is anti-Semetic:

http://www.wws.princeton.edu/~pkrugman/smearagain.htm

Posted by: P O'Neill on October 24, 2003 12:59 PM

Krugman says that ending four years with the job market where he found it would be truly successful. Seems fair enough. If the situation was reversed, I'm sure the conservative writers would be saying that anything less than the job growth held under the preceding president would be a failure.

Krugman also says that the money Bush sent elsewhere could have produced 6 million jobs. So I don't think the overused "up in arms...about the economy and jobs without offering any solutions" is a fair criticism of this article.

Posted by: Thompson on October 24, 2003 12:59 PM

Krugman's wording is a bit sloppy, but I don't think he meant it as you said. In context, what he meant is that the number of jobs should be about the same- not that the labor market should be as tight as it was. Given that the 16-64 population will grow about 5 million or so over the 4 year period, this allows for some substantial softening in both the unemployment rate and labor force participation.

Posted by: Atrios on October 24, 2003 01:07 PM

Whether our expectations are enough diminished or not, Krugman's main policy point in this column -- that the tax cuts were a colossally bad idea -- is right on target.

I'm also glad to see him raise the point, if only parenthetically, that there is a fairly recent historical precedent for employment stimulus which has been ignored on both sides of the aisle. Which raises the question, "Why are none of the Dem candidates talking about 'a new WPA'?"

I might have missed it, it's been a stern couple of weeks since the last debate, but as I recall, the only candidate's jobs package which broaches the subject of widely increased Federal employment as an economic stimulus is Wes Clark's. And his plan is to hire 20-30 Million more security guards and customs inspectors.

Pardon my dismay, but as a semi-competent computer security guy, I agree with Bruce Schneier's criticisms of the new emphasis on airport baggage checkers; as a private citizen I'm already concerned with this country's swerve towards panopticon -- do we really need 20 million MORE people snooping on the rest of us? It serves no constructive purpose and, as a couple of friends who've found employment in the field have related, it's mind-numbing, spirit-crushing work.

If the tension between the R agenda and the status quo is really an ideological gap between the McKinley-ite "less is more" philosophy and the social programs of Roosevelt's New Deal, is anyone going to stand up and speak out for the WPA?

If the problem is nationwide spiralling unemployment, a real stimulus can be applied by embarking on wide-scale infrastructure improvement projects, which increase deficits but create both jobs and useful things for the society. Only the Federal government has the wherewithal to start these programs and the forebearance to wait for the years it takes to bootstrap out of the problem.

Am I missing something?

Posted by: ahpook on October 24, 2003 01:11 PM

To the first Mike who posted:

That was very good. You ought to work for Snow, as a speech writer.

Posted by: Mike R on October 24, 2003 01:13 PM

To the first Mike:

Come on. Give me a break. Democrats have proposed alternatives, but they aren't running the country. There economy stimulus plans didn't go anywhere because they do not control anything.

Posted by: section321 on October 24, 2003 01:22 PM

"I think PK does suggest a solution and a better policy. He says that using $300Bto fund a new WPA, rather than to fund tax cuts, would have created 6 million jobs. I think this solution also answers Brad's complaint that PK set the bar too high."

That is exactly the point! That is what was needed, rather than a trashing of what little progressive tax structure there was.

Posted by: anne on October 24, 2003 01:22 PM

http://www.nytimes.com/2003/10/24/business/24TAX.html

House Republican leaders are nearing agreement on a bill to give nearly $60 billion in additional tax breaks to corporations....

Posted by: anne on October 24, 2003 01:24 PM

The ironic thing about the "Too Low a Bar" column is that Krugman himself has played a small role in lowering that bar. When you continually predict economic apocalypse and disaster, you help make anything that occurs that is a little better than that look good.

Posted by: Joe Blog on October 24, 2003 01:27 PM

Get it folks, the fiscal policy of this Administration has squeezed the middle class and the legacy of deficits we have will increasingly squeeze for years and years. Whether jobs are created or not by the tax cuts was of little importance as long as there was an appearance of concern about jobs. We do not have conservative, but radical fiscal policy that is shifting income and wealth away from the middle class.

Posted by: anne on October 24, 2003 01:29 PM

http://www.cbpp.org/

The Decline of Corporate Income Tax Revenues - 10/24/03

Corporate income tax levels have fallen to historically low levels and are projected to remain at low levels even after the economy recovers. Yet Congress, despite these low corporate receipts and a sharp deterioration in the budget outlook, is considering significant new tax breaks for corporations.

Federal Income Taxes, as a Share of GDP, Drop to Lowest Level Since 1942, According to Final Budget Data; Erosion of income tax base drives other key budget developments - 10/21/03

Posted by: anne on October 24, 2003 01:33 PM

>>It makes me sick to see everyone up in arms (particularly the Democrats) about the state of the economy and jobs without offering any solutions. >>

Short-term stimulus followed by long-term fiscal prudence.

Stimulus - in order of preferability:
Gov't spending designed to create jobs.
Tax cuts to those who are likely to spend

Add free trade (with programs to help those hurt by it), more education (we need more productive workers) and less political pork.

Compare the Bush cut
Little stimulus in short term
Massive deficits in long term

Note steel tariffs, farm subsidies, cutting head start, etc. and political pork as far as the eye can see.

Any other questions?

Posted by: richard on October 24, 2003 01:43 PM

Sorry to interrupt, Richard, but you forgot: "This is your brain on Bush."

Posted by: john c. halasz on October 24, 2003 02:13 PM

We have to understand how poor our fiscal policy has been these 3 years. We have lost about 3.4 million jobs during the Bush years, despite 3 massive tax cuts. We have gained a deficit that will burden us for years. This is the worst fiscal policy trade off in at least 50 years, probably 100.

Posted by: anne on October 24, 2003 02:20 PM

Most of the Dems do have economic plans. The media does not report on them. They only report when Dems say something critical about Iraq. If you want to know what the candidates think, goto their websites. For instance, the Kerry plan is here:

http://www.johnkerry.com/news/releases/pr_2003_0828.html

I understand that Clark will have a plan to promote soon. All the Dem economic plans have some similarities and they all start similar to Kerry's with revenue sharing or funding to prevent layoffs and cutbacks by the states. This is really a no-brainer.

This is not much different than what Krugman and most mainstream economists (not working for Bush) have suggested. If Bush had tried giving money to the states and it did not improve the employment outlook, I think economists like PK would cut him more slack. But Mr. Bush is not even trying. He is not listening to advice from people who know better.

It is either uninformed or unfair to claim that the Dems do not have a plan or that PK has no plan or to pretend that PK has not suggested a better policy. THEY HAVE. This president chooses to ignore them, the press chooses to ignore them and people who watch Fox News don't know that the people criticizing Bush fiscal policy have actually formulated an alternative policy that addresses the shortcomings of the Bush fiscal policy. The TV is too busy with Arnold's groping, Kobe, etc. to bother disussing policy that can affect whether or not we have a job next year. The recommendations are out there in black and white for all to see. They have been there for years in some cases.

If your car mechanic tells you the oil is low and you don't bother to add oil, then should the mechanic give you a break if your engine seizes? Or is the mechanic going to criticize you for ignoring his advice?

The economists tell Mr. Bush that the states are contributing to unemployment by cutting projects and jobs due to loss of revenue. The economists tell Mr. Bush that giving money to the states will stem the job loss. Mr. Bush blows them off. An obvious tool to combat unemployment is staring Mr. Bush in the face and he won't use it. His fiscal policy is pathetic. He could do a few simple things and have a much better record. But he doesn't do them. Should we cheer if the economy has lost one million jobs instead of 3 million? Or should we elect someone else that will take the obvious steps to address the employment problem?

Posted by: bakho on October 24, 2003 02:41 PM

The key to a robust economy really -is- jobs. Those labor/man-hours need to be leveraged in a productive sense. So first step, create jobs. Hire teachers, day care workers, police, security (remember that terrorism threat??) . Build schools and national infrastructure. Stop wasting money in Iraq when it could be invested here. Admit Iraq was a bigger issue than we thought, let the international community have power and take over. Increase taxes on gas to disincentivise these purely wasteful SUVs. Make the rich pay their fair share. Eliminate those tax cuts on the wealthy in their entirety. Finally, make education much more available to adults so they can move to service-oriented and technical jobs more easily as labor is arbitraged overseas. Let the dollar fall. Let interest rates go up. Slowly increase disincentives on individuals to wastefully consume and continue to take on dangerous levels of debt. Increase incentives to save.

Most Americans don't realize how terribly bad things have gotten with the debt levels and the fiscal situation of government. Americans are fat, lazy, and horribly undereducated. The only way back is to start dealing with these issues one by one. We'd better start moving in the right direction at least, or the aggregate standard of living in America will simply decay away right in front of our eyes.

Posted by: Paul Olivetti on October 24, 2003 03:10 PM

mike has already taken his deserved share of criticism, but dave is completely off base too.

Of all the many things to criticize Bush for, presiding over the least stimulative budget deficit imaginable, accompanied by creating a structural deficit, and accompanied by the sheer lack of relationship between Bush fiscal policies and job creation, is the most glaring.

Brad, in fact, sets the bar too low. Expecting a president to deliver a fiscal policy in a large, powerful economy like that of the United States whose goal is to meet the hippocratic oath - "first, do no harm" - is de minimus.

Posted by: howard on October 24, 2003 03:22 PM

Why not create a sort of Quantum-Hedge-Fund and speculate on a depreciation of the currency?(Black is white and white is black?)
P.S.:I want more money!

Posted by: Bernadette on October 24, 2003 03:38 PM

Why not create a sort of "Quantum-Hedge-Fund" and speculate on a depreciation of the currency?

Posted by: Bernadette on October 24, 2003 04:13 PM

Brad has to set the bar that way, otherwise he might have to look at all of the assumptions he makes about globalization and our flow of jobs offshore.

Personally, I think econ professors that always defend globalization, should, as a matter of principle, always reject any offers of tenure.

Posted by: anonymouse on October 24, 2003 10:08 PM

"But I do have one complaint. Asking that Bush leave "the job market no worse than he found it" is setting the bar too high by perhaps 2 million jobs or so. It would have been very hard for any set of economic policies to have sustainably kept the economy at the high-pressure state it was in in 2000."

{BUI}You just wished that right-wigners were as fair and balanced. Still, I am unclear about what Prof. DeLong means because as PK bluntly puts it, with the Great Tax Cuts, you could have just hired security managers all over US habors and GWB could have still outdo Clinton, right?

It just seems like it's just so much borrowing on our future income that I have a very hard time thinking that _given what he's spent_ he couldn't at least keep the labor market where he got it... {/BUI}

Posted by: Jean-Philippe on October 24, 2003 11:26 PM

"But I do have one complaint. Asking that Bush leave 'the job market no worse than he found it' is setting the bar too high by perhaps 2 million jobs or so."
~~

Very true. And I'm pleasantly surprised to read it here, since "the worst job market in 30 years / 50 years / since Hoover" meme, which I've read here before, depends on declaring it worst *relative* to an unsustainable bubble peak. Compared to the average job market of the last 30 years, the current market with its 6.1% unemployment rate is just modestly below average.

Prof. Krugman gives us the Hoover campaign rhetoric:

"Bear in mind that the payroll employment figure right now is down 2.6 million compared with what it was when George W. Bush took office. So Mr. Snow is predicting that his boss will be the first occupant of the White House since Herbert Hoover... " etc., etc.

OK. So out of curiosity I just ran a 22-year trend line in payroll employment growth from 1973 (before the '74 recession) to 1995. Then carrying it forward from there one finds that during the 1998 to 2000 "bubble" years payroll employment suddenly rocketed up over trend to a top of 2.7 million above trend.

What happened? Well, we may remember that in 1996 Prof. Krugman chastised -- in his usual tactful and modest manner -- the "four per centers" who argued for trying to achieve 4% annual GDP growth on the strength of the new productivity gains.

Well, actually he ridiculed them for their ignorance in not realizing the obvious fact that 4% average growth for five years would reduce the unemployment rate to only 1.5%, which was clearly impossible so such growth was impossible -- pooh poohing their lame claims about productivity gains making any difference.

Then he lectured them that if they couldn't master even such simple economic models as he just used to prove that five years of 4% growth was impossible, "you shouldn't use big words ... you may sound impressive and sophisticated but you will have no idea what you are talking about. And that, my friends, is the irritating truth."
http://www.economicclub.org/Pages/archive/fulltext/arch-krugman.htm

Immediately after which the US economy experienced five years of 4% average growth with the unemployment rate never dropping below 4%.

So what was Prof K's error that his simple model overlooked? That the boom would create extraordinary offers for labor that would attract into the job market people normally not interested in work. During the same period in which payroll zoomed up 2.7 million over trend, the percentage of civilians in the workforce similarly zoomed. (One may remember stories in the business press from those days about people being recruited into jobs by being told they could bring their pets to work, retirees being recruited back to work from Florida, and so on). With the increased work force the zoom up in employment didn't reduce the unemployment rate as his simple model expected.

Then the boom ended, the civilian work force participation rate returned to the long-term norm, people took their pets home and returned to Florida, and those 2.7 million jobs went away.

And it is the loss of those 2 million+ unsustainable bubble-years jobs that Krugman and other Democrats will use to try to "Hooverize" Dubya during the coming year. Although using the same logic I could say my own "worst income years ever" were the years after I won the lottery -- because never had my income fallen so far! And it hasn't recovered yet! Just as if one could win the lottery every year.

And I really don't see how Krugman can give Clinton the credit for creating all those jobs in the first place, as he seems to want to do in this piece, without also giving Clinton credit for the "bubble" that created them too -- and for the downside of the bubble as well.

A much more realistic picture of the current employment situation is in light of the 30-year long-term trend. By that measure employment has been flat since 2000, neither rising nor falling significantly, with as Prof. DeLong fairly notes the loss of the unsustainable 2 million+ jobs disregarded.

In his 1996 piece Prof. K. said that the minimum sustainable long-term rate of unemployment was probably 5.5%-6%. About that he might well have been right. Even now that he accepts news of the productivity gains, it's not clear what effect they will have on that, if any significant one at all.

In any event, being that Prof. K himself noted that the historical optimum unemployment rate was about 6%, for him or anyone else to say that today's job market with a 6.1% rate is the worst in 30 years (look at 1982 or 1991) is ridiculous -- and to say "since Hoover" is ludicrous.

And yes, that includes considering the "discouraged workers" who have dropped out of the labor force as measured by the labor force participation rate. Just look at the data.
http://research.stlouisfed.org/fred2/series/CIVPART/12/Max

Posted by: Jim Glass on October 24, 2003 11:33 PM

1. Everyone has an agenda, not just Krugman (duh).

2. The point that the administration is lowering expectations regarding job creation is a valid observation. Its a pre-election tactic, and a Krugman called them on it.

3. Anytime a salesman uses a specific fact in their pitch -- and you buy the product -- and that fact either turns out to be false (or subsequently gets altered in a some way) the buyers of that product/service will get perturbed.

4. The tax cuts were "sold" as a job creating plan. The war was "sold" as a way to get rid of Saddam's WMD.

The pattern here is that the public has little patience for salesman who over-promise and under-deliver. It appears the WH polls are starting to suffer because the public is developing a bad case of "buyer's remorse."

5. Lastly, all Presidents get dealt an economic hand they have little control over. What is significant is how they play that hand.

The relevant question is NOT: Did the bubble pop/market crash; It is instead: Did the administration policies make the situation better/worse/no effect?

The answer to that is probably worth about 60% of the 2004 election . . .

Posted by: Barry Ritholtz on October 25, 2003 04:51 AM

It is very nice to see liberals slamming Krugman for intellectual dishonesty. It is good to know that many people put honesty above partisan bias. Well done.

But I disagree with those who claim that Bush's fiscal stimulus packages -- and his economic policies more generally -- have necessarily softened the downturn in demand, which we agree was inevitable.

Regarding fiscal policy, I think it is important to recognize that the initial rounds of stimulus were systematically offset by monetary policy, which was less easy than it otherwise might have been. For example, in the spring of 2002, the Fed reacted to the strong demand growth of Q401 and upturn in production during Q102 by making noises about renormalizing interest rates. This took term interest rates higher and, at least arguably, prevented the initial fiscal pulse from generating a self-reinforcing growth dynamic.

We can quibble about the details, but the logic here is pretty straightforward. When the Fed is not facing a zero bound constraint, the outlook for nominal demand growth over any horizon extending beyond a year or so is invariant to the state of fiscal policy, as a first approximation.

Unfortunately, we have recently found ourselves in the position where the zero bound constraint is relevant. However, fiscal policy has no room to provide short run stimulus and is, indeed, a source of pessimism about the long run. It is fashionable (and I guess correct) to dismiss Ricardian Equivalence as theoretical mumbo jumbo. But the notion that nobody reacts at all to the fiscal outlook is also a piece of theory, just a very bad one. Surely, there is a reason that every Democratic candidate for president is proposing tax hikes. Surely these guys are tapping into something that is in the air. I would say that the air is not good, that it has damaged employment growth and that we can blame George W Bush for it.

I think we can also blame Bush for failing to show leadership on trade liberalization, although the Dems take at least 50% of the blame for this one. His indifference to the California energy crisis was based on a misunderstanding and was damaging, as Krugman has documented. And I have a strong sense that the corporate governance issue has weighed on both investor and business confidence, although I must admit that I cannot make up my mind whether the problem here is under-reaction (as at the SEC) or over-reaction, as in Sarbanes-Oxley.

My point is that three years of bad economic performance are not just bad luck. Nor are they just the lagged effects of Clinton policies, which are now blamed, bizarrely, for having created a bubble. (Gee, things were so great under Clinton that people got far too optimistic. Shame on him!!!!)

No, Bush owns some of this. Perhaps not as much as Krugman points out. But I don't think it is right to allow the president to claim innocence of 3 years worth of data. If we do, he might stretch it to 8.

Posted by: Gerard MacDonell on October 25, 2003 05:55 AM

Add on to my original comments:

I guess I came across as Republicanesque but that is not the case. The current administrations actions have been horrible to say the least. My issue with a "Democratic" strategy is this unique environment is that, for one, if they gave tax cuts to the poor/middle class they would spend it, NOT save it. In my opinion this would possibly lead these classes to continue to increase debt burdens. This would not help long term as it would continue the "spend faster than it comes in" mentality. We are already, as a country, savings starved and this would only prolong the spending psychology. I think we all agree here that our country has some serious, huge, structural problems that aren't going to go away with simple by-the-book recessionary stimulus actions whether it is a Left or Right idea. More money and more debt where ever it is dispersed inevitable ends horribly. I am afraid without structural reform this will end in a way no one wants to witness.

Posted by: Mike on October 25, 2003 07:40 AM

In terms setting the bar too high, hasn't the standard of "no fewer jobs at the end of one's term than at the beginning" been successfully met by every president after Hoover?

That's be: FDR, Truman, Eisenhower, JFK, LBJ, Nixon, Ford, Carter, Reagan, Bush I and Clinton.

Uh, (counting...) that'd be 11 presidents. In a row.

Posted by: Barry on October 25, 2003 08:19 AM

RE: Democratic versus Republican economic plans.

One interpretation for the recent resignation of Karl Rove is that a critical mass of staff within the White House objected to the dominance of politics over policy. The word coming out of the White House - seldom with attribution while Rove was still in residence - was that the Bush administration not only had no policy, but no committment to policy of any ideology and no administrative infrastructure to develop and/or implement. In other words there was a black hole where policy was supposed to be formulated. All White House efforts were directed to the political arm of governing.

RE: Bakho's description of Democratic economic plans.

All well and good. I like plans and I simply adore policy but - as the libertarians are so fond of pointing out - the facts are an obstacle. Consider the recent performance of the State of California. The dot.com bubble introduced big money into the State General Fund - billions of dollars increase in corporate tax revenues. What did the Democrats in the legislature under the leadership of a Democratic governor do with the windfall? Common sense would suggest that it be applied to short-term investments. The State however used the new money to fund long-term investments in health care and education. What happened two years later when the bubble burst? Not only was the State stuck with over-extended financial obligations they could no longer fund but - in addition - they apparently botched the electric deregulation process by freeing the wholesale markets while leaving the retail markets capped. The retail suppliers went bankrupt. Whose fault was that? Good question. Now back to the plan ...

Posted by: Skeptical on October 25, 2003 09:15 AM

"It is very nice to see liberals slamming Krugman for intellectual dishonesty. It is good to know that many people put honesty above partisan bias. Well done."

Trash. There is no intellectual dishonesty in Paul Krugman, only in the vicious trashers who are so afraid of truth because it interfers with a radical right agenda.

Posted by: jd on October 25, 2003 09:26 AM

The Way We Were:

http://www.hollandsentinel.com/stories/061499/new_workers.html

--------quote---------
Companies get creative to find workers

By MAGGIE JACKSON
AP business writer

The Chamber of Commerce chief in Grand Forks, N.D., is excited about a new source of potential workers -- Kosovo refugees.

A North Carolina store manager doesn't dare dismiss his tardy clerks -- replacements are too hard to find.

[snip]

The Minnesota High Tech Association is now looking for technology workers in prisons, the National Guard and a program for impoverished senior citizens. The association hopes to identify potential employees, then teach them high-tech skills.

Then there are the refugees.

Grand Forks wants to do good while easing its 2 percent jobless rate. The city hopes to bring in 30 Kosovo refugee families over the next year, says Bob Gustafson, Chamber of Commerce president.

About 65 city leaders met last week at the Holiday Inn to firm up the plan to offer the refugees jobs at the local airplane manufacturer, hospital, university and potato processing company, and train them if needed.

[snip]

In the last year, machinery company ACR Industries in suburban Detroit started giving $500 bonuses to workers who bring in new employees, plus $1,500 more if the recruits stay a year. It's rehired retirees, spent $2,000 on an elaborate Help Wanted sign out front, listed job openings on its delivery trucks and set up at job fairs for the first time.

Companies that can beat the crunch with ingenuity and innovation will almost certainly emerge stronger in the new, faster-moving economy. But some are worried they won't survive that long.

Chris Haddock, assistant manager of the Belk department store in Winston-Salem, said employees are getting disrespectful and tardy because they know they can get another job any time.


Copyright 1998. The Holland Sentinel.
-----------endquote---------



Posted by: Patrick R. Sullivan on October 25, 2003 12:08 PM

Ah, a glimpse back at our long national nightmare of peace and prosperity.

Posted by: Barruy on October 25, 2003 02:57 PM

> Skeptical: One interpretation for the recent resignation of Karl Rove is that a critical mass of staff within the White House objected to the dominance of politics over policy [...]

Uh, what? Is this a comment from the Alternate Reality that bled over into this one, or some really obtuse point about the Way It Oughtta Be?

Posted by: ahpook on October 25, 2003 09:48 PM

We all know that keeping 3.9% unemployment might be an unrealistic objective, without causing accelerating inflation, BUT...

Leaving aside matters of happenstance and fate, what's the last president to have done a worse job than George W. Bush? George H. W. Bush was also unlucky, as was Jimmy Carter, Gerald Ford, and, in the beginning of his administration, Ronald Reagan. What president has done less to help and more to harm the economy than George W. Bush?

Frankly, this administration calls anything a success, which is to be expected, I suppose. The worse part, though, is that in addition to pretending everything is okay, it really seems to *believe* it. It doesn't change with a changing environment; there are no negative feedbacks for failure, only positive feedbacks that make them say, "we didn't go far enough! The economy was in bad shape, we cut taxes, it's still in bad shape, so therefore our tax cuts mustn't have gone far enough!" Reconstruction in Iraq is going more slowly now than it did under the impoverished and corrupt government of Saddam Hussein in 1991 after the first gulf war, so what does the administration do? It says, "things are going great! Saddam's out of the presidential palace, infrastructure is being restored, and in large parts of the country (i.e. in the parts that never supported Saddam to begin with) things are reasonably peaceful!" If this were mere rhetoric, it wouldn't be so disturbing: every administration wants to say everything's going according to plan, but this administration not only says it, but won't send any reinforcements, won't appeal for international aid. Wolfowitz almost gets murdered by Iraqi terrorists, and what does he say in response? Basically, that everything is fine, that people who expected law and order are being unrealistic in their standards.

Yes, people who expect competence must have an axe to grind.

Look, when Hillary Clinton botched health care reform, did Brad later write "poor Hillary! People held her to unrealistic standards," or did he say "She ****ed up, and wouldn't pull out once she was in over her head. She should never be president."

We see incomptence in the Bush White House, and we are expected to be forgiving, though. After all, it's a tough job.

I think that the Bush administration, combined with reporters who view Bush as a fool, have unwittingly conspired to tell us to hold Bush to lower standards than most presidents.

We have, indeed, misunderestimated Bush. We have to stop, but we can't until we stop believing John Snow when he tells us that achieving a minor recovery in employment after three years of stagnation and decline, is a triumph of economic policy.

Posted by: Julian Elson on October 25, 2003 11:17 PM

WHY are all of you -- DeLong, Krugman, Krugman critics, all of you.... using static measures rather than dynamic ones? You emphasise unemployment/employment rather than rate of job creation...

"Asking that Bush leave 'the job market no worse than he found it' is setting the bar too high by perhaps 2 million jobs or so."

This morning Daniel Gross applied the

http://www.nytimes.com/2003/10/26/business/yourmoney/26view.html?amp;ei=5062&en=7b7e48e961e4f5ae&partner=GOOGLE&ex=1067745600&pagewanted=print&position=

150,000 payrolls-add GROWTH statistic

"If payrolls add 150,000 jobs in a month - a figure not recorded since May 2000 - economists say that will be a sign that the economy is in serious job-creation mode."

where earlier DeLong had wisely linked related commentary to the 100,000 payrolls-add MINIMUM SUSTAINABILITY statistic...

If any of you know as much about economics expectations theory as you portend, then your own standards are sufficiently high to realise the dynamic measures ARE a key part of expections and standards-setting.

Tax incentive for small business to hire ["new" payroll rather than simply incremental payroll] is something both Dems and Republicans have essentially ignored, and if all of you devoted half the time to advertising payroll-adds and new payroll prescriptions that you do to intramural economics chest-beating, you could all provide worthy prescriptive signal for Bush and Congress!!!

Posted by: Faith Witryol on October 26, 2003 10:22 AM

WHY are all of you -- DeLong, Krugman, Krugman critics, all of you.... using static measures rather than dynamic ones? You emphasise unemployment/employment rather than rate of job creation...

"Asking that Bush leave 'the job market no worse than he found it' is setting the bar too high by perhaps 2 million jobs or so."

This morning Daniel Gross applied the

http://www.nytimes.com/2003/10/26/business/yourmoney/26view.html?amp;ei=5062&en=7b7e48e961e4f5ae&partner=GOOGLE&ex=1067745600&pagewanted=print&position=

150,000 payrolls-add GROWTH statistic

"If payrolls add 150,000 jobs in a month - a figure not recorded since May 2000 - economists say that will be a sign that the economy is in serious job-creation mode."

where earlier DeLong had wisely linked related commentary to the 100,000 payrolls-add MINIMUM SUSTAINABILITY statistic...

If any of you know as much about economics expectations theory as you portend, then your own standards are sufficiently high to realise the dynamic measures ARE a key part of expections and standards-setting.

Tax incentive for small business to hire ["new" payroll rather than simply incremental payroll] is something both Dems and Republicans have essentially ignored, and if all of you devoted half the time to advertising payroll-adds and new payroll prescriptions that you do to intramural economics chest-beating, you could all provide worthy prescriptive signal for Bush and Congress!!!

Posted by: Faith Witryol on October 26, 2003 10:25 AM


The average unpemployment rate (arithmetic average of monthly data) during the Clinton years: 5.64%. The average unemployment rate since Bush took over: 5.06%.

The most recent deficit as a percentage of GDP has not reached the level it did during the worst of Clinton's tenure.

And spare me the talk that Clinton had to deal with problems created by Bush Sr.--for if so, then Bush Jr. has to deal with problems created by Clinton.

I think I agree with Jim Glass.

Posted by: maciej on October 27, 2003 07:22 AM
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