January 12, 2004

Edmund Andrews Says Bush Seeks Jobs

Edmund Andrews writes in the New York Times:

News Analysis: Bush Seeks Ways to Create Jobs, and Fast: The stage had been set to celebrate the revival of jobs. With a phalanx of women entrepreneurs at his side and a billboard covered with the word "Jobs!" behind him, President Bush proclaimed his confidence about the economy here on Friday. But he made only passing reference to the latest news about employment.

The reason was clear: Friday's report on unemployment in December was much weaker than either the administration or most independent economists had predicted. Job creation was virtually nil, and the unemployment rate declined only because the labor force shrank by 309,000 workers. Many of those were people who had simply become too discouraged to keep looking for work. The problem confronting Mr. Bush is that there is little he can do between now and the elections except wait and hope that the employment picture improves. And the administration is not likely to get much more help from the Federal Reserve, which has already reduced short-term interest rates to just 1 percent.

"In terms of big levers to pull, they don't have anything," said Pierre Ellis, a senior economist at Decision Economics, a forecasting company.... Both the White House and the Fed are confronted by a recovery unlike any other in modern history. Economic growth has been soaring for months, corporate profits have shot up and the stock market has regained much of its old ebullience. Yet job creation has been slower than in almost any previous recovery, and wage growth has slowed to a crawl. That appears to reflect another big new element that lies entirely outside the president's control: the enormous increases in productivity, which have made it possible for companies to squeeze more output from each worker.

"The evidence is powerful that we can have 4 or 5 percent growth without hiring much," said John Makin, a senior economist at the American Enterprise Institute. Mr. Makin has long been among the more pessimistic economic forecasters, but the employment and wage data on Friday came in far worse than even he had expected. "I was stunned, quite frankly," he said. It is not unusual for presidents to undertake actions to straighten out the economy and then do little but hope and pray they work - and in time. Jimmy Carter appointed Paul A. Volcker as chairman of the Fed, and he increased interest rates to stem inflation. The first President Bush reluctantly raised taxes to deal with a ballooning budget deficit. In each case, those actions helped the economy recover, but not in time to earn Mr. Carter or Mr. Bush a second term...

The most puzzling thing about Andrews's story is that Andrews appears to have no memory at all. A year ago--remember--the administration was having an internal debate over economic policy. And the administration decided to use the concern about employment as fuel to pass a dividend tax cut--not a tax cut that would get lots of money to those likely to spend it and so boost employment, but a tax cut that would enrich the well-off five, ten, twenty years from now.

The thinking inside the administration was (i) we want to tilt the distribution of wealth in favor of the rich this way, (ii) the current worries about unemployment give us an opportunity to do so if we claim that the dividend tax cut is really a jobs program, and (iii) employment will probably recover on its own anyway so we really don't need an actual jobs program.

That was the administration's thinking: pass the dividend tax cut rather than a real stimulus program and bet that job growth would accelerate on its own. It was a risky bet to make. They made it. They now appear to have crapped out.

Why isn't this backstory worth including in the article?

Posted by DeLong at January 12, 2004 11:58 AM | TrackBack

Comments

If wishes were horses...

Brad, you know as well as anybody, news is news and dverything else is discretionary. You are asking this guy to step beyond the reporting of news and into "analysis". He doesn't have to. His story is gonna get published, with or without.

He also avoids getting put on the "liberal media" list, which is probably where you are really going, but the first thing to get straight is the culture, the ground rules. He doesn't have to. It isn't his job, necessarily. His story is the event. He covered the event.

Now, if a former Treasury officials with crackerjack credentials as an economist were to pen an editorial, making the points that you make, that might get published. Worth a try.

Posted by: K Harris on January 12, 2004 12:51 PM

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Do you have a source for this interpretation of the administration's actions?

Posted by: neil on January 12, 2004 01:01 PM

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That infamous Krugman basher Don Luskin has a different objection to this article:

HOW "OPINION" BECOMES "NEWS" The New York Times repeats Krugman's lies as news.

From today's business section:

"Friday's report on unemployment in December was much weaker than either the administration or most independent economists had predicted. Job creation was virtually nil, and the unemployment rate declined only because the labor force shrank by 309,000 workers. Many of those were people who had simply become too discouraged to keep looking for work."

From the Department of Labor -- the source of the statistics employment discussed in the article -- the number of discouraged workers in each of the last three months:

October: 462 thousand
November: 457 thousand
December: 433 thousand

Lie, error, call it what you will. Yes, the "the labor force shrank by 309,000 workers." But to attribute this to "people who had simply become too discouraged to keep looking for work" is flat-out wrong. The number of such people shrank in December, and thus acted to mitigate the shrinkage of the labor force, not to explain it -- yet the Times gets so specific about it as to say it explains "many" of the people who left the labor force.

Calling Dr. Okrent... Dr. Okrent... Dr. Okrent to surgery... immediately!

Correction [11:33 pm]: In the original posting, the discouraged worker figures above in thousands were given as being in millions. This editing error has no impact on the cogency of my point.

Update [1/11/2004]... Thanks to all of you on the email alert list who noticed this error and pointed it out. I'm really gratified that so many people read so carefully. But then again, you guys would, wouldn't you!


http://www.poorandstupid.com/2004_01_04_chronArchive.asp#107376902047186040

But anyway, I agree with K Harris.

Posted by: Brian on January 12, 2004 01:08 PM

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We can still hit that Feb. 2003 forecast of 3.6 million new jobs per year for 2 years - assuming we see employment growth equal to 625 thousand jobs per month for the next 12 months. And right on cue, the NRO has some optimistic forecast from a guest oped. But wait - this optimistic forecast is about half this size. Then again, I think I know how the CEA came up with their Feb. 2003 'estimate': take employment as of Dec. 2000 (before Bush took office) and assume it grows 1% per year for 4 years (never mind the fact that employment grew in 2000 by 1.5% and that was supposed to be the beginning of a recession). Am I suggesting pure politics in CEA forecasting? Does anyone else have a less cynical explanation?

Posted by: Harold McClure on January 12, 2004 01:19 PM

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But all the wall street economists are telling us that the tax rebates from the dividend tax cut is going to be what fuels the economy in the first half of 2004. Of course that have been forcasting a strong recovery since before the economic peak--
that they missed.

Posted by: spencer on January 12, 2004 01:28 PM

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Neil, there isn't a direct source for Brad's comment, but there is plenty of indirect sourcing.

Indirect source 1: the arguments for the dividend tax cut were all about the long-term benefits;

indirect source 2: creating jobs through direct stimulus is a well-understood phenomenon. Whether Bush knows it or not, his economics people do. Since they didn't include any actual stimulative measures in their "stimulus" package, we can assume that they made a choice not to.

Put these two together, and you draw the likely conclusion that prof delong has drawn....

Posted by: howard on January 12, 2004 02:18 PM

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The Bush administration's policies are impoverishing American citizenry. (Now don't tell me multinationals count for US "citizenry". Multinationals are today's equivalent of yesteryear's absent landlords! I mean every body has recently witnessed how much "American" IBM is!)

The Bush administration policies appear to be aimed at turning America to a third world country, except that this one has a modern government and the world's biggest and best equipped army -- all in the service of multinationals! (I have a hunch that the Rebuplicans very much love the dual structure of the Indian society -- extreme poverty for millions on one hand and nuclear capacity on the the other hand -- and they'd probably love to see a dual structure emerging in US too, even though of a different kind.)

Under the Bush administration, America is moving away from government by the people for the people.

And the Dems are just sitting on their hands!

Posted by: bulent on January 12, 2004 02:59 PM

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