February 20, 2004

Let's Get George W. Bush a Copy of the 2004 Economic Report of the President!

Let's get George W. Bush a copy of the 2004 Economic Report of the President!

IHT: Bush backs off a jobs forecast: "Bush said Wednesday that the economy was growing and getting stronger, and he cited figures showing that the economy has created 366,000 jobs since last summer.

If we got him a copy, he could read p. 94: "Because the labor force is constantly expanding, employment must be growing moderately just to keep the unemployment rate steady. For example, if the labor force is growing at the same rate as the population (about 1 percent per year), employment would have to rise 110,000 a month just to keep the unemployment rate stable, and larger job gains would be necessary (and are expected) to induce a downward trend in the unemployment rate."

And then he could divide 366,000 jobs since last summer by five months, and discover that it is 72,000 jobs per month--which is less than 110,000.

Posted by DeLong at February 20, 2004 03:39 PM | TrackBack | | Other weblogs commenting on this post
Comments

"And then he could divide 366,000 jobs since last summer by five months, and discover that it is 72,000 jobs per month--which is less than 110,000."

Even though President Bush is not a statistician?

Posted by: WarBlogTHIS on February 20, 2004 04:10 PM

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This Administration will be outsourced to the Democrats soon. But what a mess they will leave behind. They literally vandalized sound public policy.

Posted by: ch2 on February 20, 2004 04:12 PM

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This weeks' Economist has a similarly upbeat story about the employment situation ("The great hollowing-out myth", Feb 19th 2004). Quote:

"Between 1980 and 2002, America's population grew by 23.9%. The number of employed Americans, on the other hand, grew by 37.4%. Today, 138.6m Americans are in work, a near-record, both in absolute terms and as a proportion of the population (see chart)."

The odd part is that the chart shows a precipitous dip in employment as percentage of population from ca. 2000-04, one that dwarves the dip during Bush senior's tenure. So a near-record yes, but only because it is near the record set at the end of Clinton II.

But I guess if you ask them, they'll tell you they aren't number crunchers either.

Link:
http://www.economist.com/agenda/displayStory.cfm?story_id=2454530

Posted by: ogmb on February 20, 2004 04:17 PM

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If Bush did the math, of course, he would stumble upon the real stumper: Even though the job growth was only 72,000/mo, nevertheless the unemployment rate has dropped. Sure, different surveys and all, but -- how come?

Posted by: joe on February 20, 2004 04:21 PM

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The jobs problem even goes beyond that...the transformation from a manufacturing to a service economy means that, even if employment were exactly keeping up with the rise in the work force, the total amount of money being paid per job would still be declining; people may be employed, but they're working for less money. And if they're working for less money, the only way to sustain a constant rate of consumer spending is...you know it...expansion of credit. Which means that any uptick in interest rates now would be a disaster. Which is why now would be a good time to have a balanced budget.

In other words, we're in a really freakin' risky economic situation.

And the unemployment rate itself is the single most politicized piece of data that any administration puts out. You can't even compare the unemployment rate to what it was 5 years ago, because they've recomputed how they calculate it, by excluding some groups at some times and other groups at other times. They don't count people on disability, or underemployed, or people who stopped looking for work. By excluding these people, both parties get something to brag about; the Clinton people can say they had the lowest unemployment in history, while the Bush people can say that the recession wasn't that deep, when in reality both are missing several percentage points that were coutned only a decade earlier.

http://balta.blogspot.com

Posted by: Balta on February 20, 2004 04:25 PM

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If this story (NY Times via Houston Chron) is to be believed, the trend from manufacturing to service is about to be reversed:

http://www.chron.com/cs/CDA/ssistory.mpl/business/2411774

"Is cooking a hamburger patty and inserting the meat, lettuce and ketchup inside a bun a manufacturing job, like assembling automobiles?

That question is posed in the new Economic Report of the President, a thick annual compendium of observations and statistics on the health of the U.S. economy.

The latest edition, sent to Congress last week, questions whether fast-food restaurants should continue to be counted as part of the service sector or should instead be reclassified as manufacturers. No answers were offered."

Haven't found the passage yet, but will report when I do.

Posted by: ogmb on February 20, 2004 04:40 PM

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OK, here it is, chapter 2:

=============
Box 2-2: What Is Manufacturing?

The value of the output of the U.S. manufacturing sector as defined in official U.S. statistics is larger than the economies of all but a handful of other countries. The definition of a manufactured product, however, is not straightforward. When a
fast-food restaurant sells a hamburger, for example, is it providing a "service" or is it combining inputs to "manufacture" a product?
(...)
Sometimes, seemingly subtle differences can determine whether an industry is classified as manufacturing. For example, mixing water and concentrate to produce soft drinks is classified as manufacturing. However, if that activity is performed at a snack bar, it is considered a service.
=============

So working in a plant vs. working in a snack bar is a "subtle" difference?


Posted by: ogmb on February 20, 2004 04:50 PM

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Okay, I was pretty disgusted by the "burger manufacturing" excerpt. But seeing it in context, it's not so outlandish. Nobody's suggesting that Subway's "sandwich artists" are soon to be lumped in the same class as River Rouge wage-slaves. It's just a topic-setter.

But I wouldn't put it past them.

Posted by: Grumpy on February 20, 2004 05:48 PM

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But Shrub doesn't read and can't do numbers. More Kool-Aid please

Posted by: Palolo lolo on February 20, 2004 06:34 PM

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Maybe you could send him statistics on the number of taxpayers who received no tax cut?

http://www.whitehouse.gov/news/releases/2004/02/20040219-4.html

Posted by: bakho on February 20, 2004 06:57 PM

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"And if they're working for less money, the only way to sustain a constant rate of consumer spending is...you know it...expansion of credit. Which means that any uptick in interest rates now would be a disaster."

Indeed, and it's not like consumer credit is written off when the economy peaks out of a recession. Of course, good economic times make it easier to pay off both public and private debts. But both inevitably at the expense of future consumption. And good times usually come with increased interest rates, which mean that both the government and households will have to spend a higher proportion of their revenues on interest payments. Really, getting in debt is not a good thing. It is sometimes a necessary evil. It can sometimes be considered optimal given some strong preference for the present as well as high hopes for the future.

But the problem is, again, that the babyboomer's retirement is around the corner. Right now, I would rather see the American consumer save for these days... I am afraid we are headed full speed for a desatrous giant social experiment, and it seems only a few academics seem to give a damn. Add to this recipie a worrisome proctionist wave and military commitments as far as the eye can see, and it becomes an act of faith to be optimistic about the economy.

The only reason for optimism I can see right now, is that productivity increases should start to pay-off for the median consumer as well at some point... I hope it will also have an impact on the cost of prescription drugs...

Posted by: Jean-Philippe Stijns on February 20, 2004 07:15 PM

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The banks with which I have credit cards have begun sending me interest rate increases. Bad sign! Either they are anticipating the Fed, or just seeing what the market will bear, but this is bad news for me, and the economy. Who cares about small tax increases, when any interest rate increase costs me tons more!

Posted by: tjallen on February 21, 2004 01:03 AM

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Pushing Spaghetti Uphill In World War IV

[from Lacy Hunt, of Hoisington Asset Management, from John Mauldin's, 'Barbarians at the Fed']

“Dr. Hunt, points out that M2 and M3 contracted in the fourth quarter at the fastest rates since the end of World War II (6.8% for M3), and that it’s even more alarming that the six-month change in M3 hovers close to zero, since sustained stagnation in the aggregates ‘foreshadows slower economic growth.’ In fact, Dr. Hunt adds, ‘while the drop in the Ms may be a reaction to the rise in real interest rates in the second half of ’03, it may also be an early sign that the Fed is now ‘pushing on a string’ in the words of Keynes. Which would mean that demand for credit is falling because there is already too much debt and borrowers are uncomfortable with this much leverage—thereby raising the specter of debt deflation.

“What’s more, advised Dr. Hunt, don’t breathe easy because M3 rebounded in January, apparently growing at close to an 11% annual rate—because an accounting change (FASB’s FIN 46, which basically makes banks consolidate the assets and liabilities of special purpose entities) is messing up the comparability of the money supply stats. It’s not something the Fed has been advertising, Dr. Hunt says. He had to notice a footnote in the stats, and Ried Thunberg’s Bill Jordan had to chase down Fed officials for a clarification of some muddy reporting, but when all is said and done, this pair of gimlet-eyed Fed watchers reports that rather than rebounding sharply in January, M3 was essentially flat, or maybe up 1%. Not a bullish portent.”

But The Fed under Bush (if presidents have any affect on that secret and private Fed anyway) has so backed us into a corner, fiscally speaking, there is no exit strategy. Just as in Iraq, it was a whole lot easier to drop into rock bottom interest rates and deficit spending and massive trade imbalance than it will be to claw our way back out again.

Rather than thinking of our current economy as a car made nitro-fuel injected, where all you have to do is step on the gas, it might be better to think of our economy as a car at the top of the Rockies, engine shot, running in neutral and the brakes faded off to 1%, rocketing faster and faster down the hill, out of control. Will we ever get to the bottom? Oh, most assuredly!

Look at what Andy Xie says in Mauldin's newsletter: "“Macroeconomic policies should aim for stable growth rather than "full" employment, in my view. The integration of global labor forces through outsourcing makes the former difficult to attain. Too much stimulus only inflames asset markets, shortening and amplifying economic cycles. Thus, macro policy should aim at capping credit growth and fiscal deficits."

“The sustainability of globalization depends critically on whether the West is willing to embrace structural flexibility as the main tool for absorbing adjustment, rather than relying solely on stimulus. If the West continues to look to macro stimulus to solve economic problems, I believe it will lead to more bubbles that could eventually end with a major crash, a prolonged recession, and possibly trade protectionism that would derail globalization.”

"[and Mauldin's recap:] What Xie seems to be suggesting is that we allow the unemployment rate to rise because the global labor arbitrage makes full employment difficult if not impossible, and that by using massive amounts of stimulus, we create another bubble. Thus, the US should tolerate jobs leaving our shores and adjust slowly over time."

Xie is right about bubbles, but patently absurd about labor. There is no global labor arbitrage. There is only 1st world high-tech labor vers 3rd world high-tech labor, then there is 3rd world wage slavery. A unit-cost of one is up to 100x's the unit-cost of the other. WalMartization of labor does not "adjust slowly over time", it runs away like a forest fire. There is no "stable growth" in labor arbitrage when foreign outsourced labor units are selling for $2.50 a DAY, only bankrupcy for the 1st world laborers. Who are these free-loading corporations with a US beachhead and foreign workers, enjoying our feast!? If a child kidnapper was white slave trading to some sheik, would we call it 'structural flexibility'? When there are 100,000,000 Chinese manufacturing will-work-for-food's, and possibly 1,000,000 Indian high-tech wage-slaver's, what we are talking about is World War IV, not laissez faire arbitrage!

The better alternative is to turn massive deficit spending inwards and away from Defense, with its abyssmal productivity (how much, really, is a Star Wars system worth, that wastes a couple $T, that can't be exported, and that creates a permanent maintenance and support blackhole?). Invest instead in public works. They may be wasteful, compared to private construction financed by tax incentives, but not nearly as wasteful as Defense. Besides, the nation, especially the East Coast, is crumbling fast. We need a complete quadruple bypass.

Put the brakes on government and defense outsourcing, one, that saves the good jobs, then cut all the Star Wars - Hypersonic Space Plane crap, the International Space Station fiasco, the Moon-to-Mars hogtrough, and put those $T's into a program to retrofit or replace or upgrade the nation's bridges, oil & gas pipelines, rail, sewer and water distribution lines. Just our arteries. Forget about the overbuilt roads, overbuilt buildings, plenty good treatment plants, that can come out of State budgets, once people have decent trades jobs and are buying houses and paying taxes.

And put a 0.1% transaction tax on stocks, funds and bonds. That cuts international computer day-trading out and stabilize the US economy. Otherwise, things are going to get more and more choppy until the bottom falls out of the bucket.

Then gradually put on the brakes with higher interest rates, using 3% as the maximum allowable housing increase. (Think of how easy Greenspan's job really is, with perfectly transparent stock market & real estate price reports!)

1) Outlaw All Government Foreign Outsourcing, including Its Contractors; Pause H-1B Program
2) Cut All Defense Spending on Science Fiction (Star Wars) and War Policy Fantasy (AF 2025)
3) Put Those Savings in Instituting US Public Works on Arterials, Bridges, Pipelines, Rails
4) Institute a 0.1% Transaction Tax on Every Stock, Fund and Bond Trade, and Cut Margins
5) Gradually Increase the Prime to Compete with Euro & Yen Basket, Holding Housing at +3%

It's as if we all of us were on Apollo 13, heading for the moon in 2000, when boom, there's a hole in the WTC, and suddenly the moon seems very far away, and getting back to earth seems even that much farther.

Only the Fed and the Bush Administration are saying, "Apollo 13, we are studying solar flares, and trying to get the moon and planets into conjunction. Just hang in there, as soon as we decipher Jupiter's Red Spot, we'll move the heavens and the earth and burn all our treasure in a big pile so you can find your way back."

Here all we wanted was fiscal conservatism, cutting out fraud and porkbarrel, and a shot at some decent jobs! Does it take an MBA from Harvard to figure that out? Of course, I'm assuming they all aren't just traitors, holding 250,000,000 Americans hostage while they play at world trade and labor arbitrage and currencies. I've always been more partial to incompetence than conspiracy theory, but that's scarey either way, eh?

Our alternative is a Central American nightmare of government plutocrats, oligarchs and peasant campasenos, the guts of the middle class ripped out and spread across the village square for the vultures to feed on, and a massive disinflation on everything, to where you'd be forced, as I heard one old DustBowler shrug, "We had to work like hell to make a (single) dollar, then struggle hard to find somewhere's to invest that dollar so's we'd make sure to earn another one."

China is the lynchpin. They have pegged their currency to ours, stuck tight as a tick, while at the same time they're pouring their assets and their reserves into Australian real estate and commodities, hedging the decline of the US dollar by buying rising AU dollar instruments. It's a wicked three-way pump handle, pouring a Niagara of US treasure inexorably and irreversably across the Pacific.

Well, I'll close with an anecdote. When I went to San Francisco in 1996 to see ComDex, my taxi driver was studying Java programming at night school. There was high-tech gold rush fever in the air! Today, 8 years later, my peers are taking night jobs anywhere they can, hedging against imminent loss of their careers. All you have to do is give people a green light and a road ahead. The rest will take care of itself.

Rock the vote, or play with your noodle. Everyone out into the trenches and back to work.

Posted by: Madame Zhiu on February 21, 2004 01:54 AM

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According to sock puppet Paul Gigot, last week was to have been the one in which the agenda for the second term was to have been laid out. The fact that this did not happen suggests WH disarray or panic to me, or possible an indication that none exists. When he finally gets around to presenting his plans for SS privatization, I hope this site and others come down on him like a ton of bricks.

Posted by: Bob H on February 21, 2004 07:09 AM

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> nevertheless the unemployment rate has dropped. Sure, different surveys and all, but -- how come?

Simple, really. Thousands of people have dropped out of the unemployment stats by being classed as 'no longer actively seeking work': that is, reporting to the local employment office, and informing the state of applications, interviews and verifiable job contacts. If you've spent months looking, and don't find anything, then it's very easy to become a 'discouraged worker': in part because it's easy to get into a situation where you can no longer *afford* to be actively seeking work in the manner that the survey demands.

http://www.indystar.com/articles/1/118133-9351-031.html

'People like Grimes help explain why unemployment rates are trickling lower despite the lingering effects of a now-ended recession. The U.S. Department of Labor has reported that more workers have dropped out of the labor market than at any time in nearly a decade. In December alone, the Labor Department reported, the number of "discouraged," or workers who have stopped seeking jobs, grew by 310,000.'

Posted by: ahem on February 21, 2004 09:06 AM

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Isn't it the case that the WH economic advisers, with their Ivy League credentials and Goldman Sachs partnerships, have just allowed themselves to be used as window-dressing and utterers of meaningless incantations for fiscal policies that Dick Cheney decided on in early 2001?

But the result of this is that they could not tell Bush that the form of stimulus chosen was an inefficient means of creating jobs? And so Bush will share his Father's fate, having screwed himself.

Posted by: Bob H on February 21, 2004 09:13 AM

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Greenspan Breaks Wind on Job Losses

http://www.usatoday.com/money/economy/fed/2004-02-20-greenspan-jobs_x.htm?csp=26

WASHINGTON (AP) — Federal Reserve Chairman Alan Greenspan warned on Friday that "protectionist cures" being advanced to deal with the country's job insecurities would make the situation worse.

(does he have any *proof* of that conjecture?)

Entering the politically charged debate over U.S. service jobs being shipped overseas, Greenspan said that it was a lack of adequate educational training rather "outsourcing" which posed the greatest threat to future American prosperity.

Greenspan, without referring directly to the political campaign or the individual candidates, said that the current anxiety about losing jobs to other countries is not new. There were fears about losing jobs to low-wage Japan in the 1950s and 1960s and to low-wage Mexico in the 1990s and more recently to low-wage China, he said.

However, Greenspan also said the recent migration of service sector jobs, such as employees working in telephone call centers, to India is a new phenomenon. But he cautioned that any answer that involved erecting trade barriers in this country would be wrong.

"The protectionist cures being advanced to address these hardships will make matters worse rather than better," he said. "Protectionism will do little to create jobs and if foreigners retaliate, we will surely lose jobs."

Greenspan in his remarks also defended, without mentioning him by name, fellow economist N. Gregory Mankiw.

Mankiw, the chairman of the president's Council of Economic Advisers, came under fire last week for saying that the outsourcing of U.S. service jobs was just another way of doing international trade.

Mankiw later apologized for remarks he said were misinterpreted and did not exhibit the proper amount of concern for the pain caused to laid-off U.S. workers.

"Technology and, more recently, competition from abroad have risen to a point at which demand for the lowest skilled workers in developed countries is diminishing, placing pressure on their wages," Greenspan said. "These workers will need to be equipped with the skills to compete effectively for the new jobs that our economy will create."

===========

Further proof that macroeconomics is irrelevant.
Let's look at a simple proof. Boeing and AirBus compete head-to-head in commercial aviation. Slowly, inexorably, AirBus is winning the sales wars. Americans cry foul, claiming that AirBus is state-subsidized. Of course, that's not the true story. Boeing is also massively subsidized, both at the state and federal level.

But competition and America's corporate playbook on it suggests this 'strategy': export materials and manufacturing jobs overseas. Buy machine parts and components, even entirely airplane assemblies from foreign firms. Recently Boeing has taken Fiorina's Next Step, outsourcing their aerospace designers to Russia, tele-commuting former AeroFlot designers into the country on the wings of the Internet!

They're not alone. MicroSoft works the temporary employee "independent consultant" WalMartization angle to the maximum allowed by US law. All the remainder of new jobs demand they teleport over to HITEC City, Hyderabad, and MicroSoft India.
http://www.microsoft.com/india/indiadev/

Now comes Chairman Greenspan and breaks wind over this great sucking sound we've been hearing.

Just where are we supposed to find re-education, this magic curricula, that will make a former American IT or aerospace worker 4x more productive, dollar for dollar, that their outsourced counterpart in Russia or India?

Is that like Chairman Mao's "re-education" in his Little Red Book? Heed the party line?

Does CG suggest our technology graduates are in some ways intellectually *inferior*!? Is he that arrogant!? Has he ever *talked* with a former Boeing aerospace designer with 25 years at the company, 707 to 777, or traded e-mails with a former MicroSoft code-breaker who has steadily continually raising the bar ever since Win 3.0?

Has CG gone senile, or psycophant?

Does he not also understand the mechanisms of spin-off? Where every high-tech job lost to the Russians or Indians or Chinese is really *ten* jobs lost in US support service subcontractors?
Where does he think those Washington machinists, some of the best machinists in the world(!), are going to find retraining to make them 100x more productive than their $0.35/hour counterparts?

The man is mad! An apologist for a bankrupt philosophy of laissez faire and social darwinism that destroyed England at the advent of the industrial revolution, populating America and Australia with millions of "non-competitors". Except today there are no frontiers left, no place to move to, nowhere to hide.

"Learn, or die," says Pontius Greenspan.

There is simply no justification, moral or otherwise, for exporting government funded or government service jobs overseas. None. Zero. Our tax dollars they rip from our meager life savings are meant to promote all *our* welfare, not the welfare of Fiorina or Condit or Gates and their international investors and bankers.

To espouse that US job protectionism will somehow retard global trade is more than dyspathy, it's a non-starter. It fails the litmus test of reality, of Occum's Razor.

True reality, Occum would say, is the simplest. This foreign worker outsourcing thing is just another grab by US elites at massive profits. The MicroSoft'ing of high-tech, just as they WalMartize'd all our manufacturing jobs, and Internet-Bubble'd all our life savings to their offshore banks and overseas currency hedge funds. http://www.worldoffshorebanks.com/

You pick the slogan. Greenspan and the Bush Administration have shown their true colors. Your job is less important than their free trade, than their will to rape your future. http://www.krusch.com/articles/84Slogans.pdf

Here's my favorite:
"Any job worth doing, is worth doing overseas."

And a closing word from the original Chairman.

"Classes struggle, some classes triumph, others are eliminated. Such is history, such is tlhe history of civilization for thousands of years. To interpret history from this viewpoint is historical materialism; standing in opposition to this viewpoint is historical idealism."

"Cast Away Illusions, Prepare for Struggle",
Mao Tse-tung, (August 14, 1949), Selected Works, Vol. IV, p. 428.

Where would you like to go today?

Posted by: Tully Longford on February 21, 2004 09:32 AM

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Hate to bring it up, but it's 73,200 isn't it?

Sincerely,

Your friendly local nit-picker.

Posted by: Bernard Yomtov on February 21, 2004 10:47 AM

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 Bush Says Economic Program Will Create 2.6 Jobs, Not 2.6 Million

A typo in a report released by the White House to Congress mistakenly claimed that Bush's economic program will create 2.6 million jobs.

  “I knew something was wrong when I saw the final copy of the report because our best estimate is that my massive tax cuts will create 2.6 jobs by the end of the year.” Bush told reporters in the oval office.

http://bobsfridge.com/skew.htm

Posted by: bakho on February 21, 2004 08:30 PM

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NOTHING MORE THAN A THEORETICAL DISCUSSION BY AN ECONOMIST

Treasury Secretary John Snow and other top Republican leaders have been walking on eggshells around the politically volatile jobs number in recent days. Even Gregory Mankiw, who as chairman of the CEA was responsible for the report that included the figure, no longer was willing to stand behind it less than 10 days after its publication. "We don't have a projection today,” he said in an interview with Reuters Wednesday. “It will be months before we sit down and go through that exercise again.” Bush himself, when asked about the job projection, stayed away from the details, saying only, "I think the economy's growing, and I think it's going to get stronger.” But Marc Racicot, chairman of Bush’s re-election campaign, dismissed the projection as nothing more than a “theoretical discussion by an economist” — even though it was  contained in a White House report that is submitted to Congress and required by law.

http://msnbc.msn.com/id/4332721/

Posted by: bakho on February 21, 2004 09:36 PM

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Here's a little ditty about grousing among the rightwing faithful:

Reuters
Gaffes by Bush economic team worry conservatives
Saturday February 21, 2:40 pm ET
By Caren Bohan


WASHINGTON, Feb 21 (Reuters) - More than a year after President George W. Bush revamped his economic team, none of the current players has emerged as a leading spokesman on the economy and conservatives are fretting over a series of election-year gaffes.


The lack of a clear economic voice was underscored last week when officials were forced to back off a jobs forecast unveiled in the Feb. 9 Economic Report of the President.

The forecast called for average job growth of more than 300,000 jobs a month this year -- a figure that exceeds most private forecasts and prompted a slew of Democratic criticism.

Treasury Secretary John Snow, touring the hard-hit Pacific Northwest, was the first to pull away from the figures. White House spokesman Scott McClellan followed suit.

That forced Council of Economic Advisers Chairman Gregory Mankiw, lead author of the report, to row back, even though he had defended the numbers in a Capitol Hill hearing.

Mankiw was already in hot water for remarks that seemed to show approval of the outsourcing of jobs to cheaper labor markets overseas -- a sensitive issue at a time when the factory sector is hemorrhaging jobs.

The controversies had many conservatives cringing over what they saw as public-relations missteps with the economic report, a collaboration of officials from across the economic team.

"The question is, are they wrong or are they just not communicating it effectively? I would suggest it's just more a case of not communicating it effectively," said a Republican congressional aide, who asked not to be identified. "It's easy to throw stones," but the aide wondered why officials did not sit down ahead to vet "the sensitive aspects" of the report.

Democrats, seeing the report as a potential gold mine of ammunition, have also pounced on an academic discussion of whether fast-food jobs should be considered manufacturing jobs rather than service jobs as they are now labeled.

The flap comes as Bush's poll numbers are already slumping amid concerns about the economy and the adminstration's justifications for invading Iraq.

HANGING MANKIW OUT TO DRY

Many Republicans thought a major shake-up of the economic team was unlikely in an election year because it might make matters worse for Bush.

In December 2002, Bush fired Treasury Secretary Paul O'Neill and National Economic Council head Lawrence Lindsey.

CEA chief Glenn Hubbard left the administration last year and was replaced by Mankiw, a relatively unknown figure until the recent furor.

Stephen Moore, head of conservative Club for Growth, gave Snow high marks and said he would like to see him emerge as more of an economic spokesman.

However, he harkened back to the 1990s and commended former Clinton adviser Gene Sperling for his deftness in both politics and economics and said the Bush administration could use someone with those skills.

Moore was sympathetic to Mankiw's plight.

He and other Republicans felt White House officials made the fuss over the forecast worse by backing away from it. Sticking to their guns, they said, would have conveyed an upbeat view that might have helped Bush.

"I think the White House is really hanging Mankiw out to dry on this," Moore said.

Several Federal Reserve officials have also come to the defense of Mankiw on outsourcing.

"These days it has become politically incorrect to say certain things -- even if everyone recognizes them to be correct," said Dallas Fed President Robert McTeer. "Outsourcing has become the third rail of economics."

Political analyst Larry Sabato said Mankiw's comment was typical of the split between professional economists and those skilled in politics. "Economists tend to be blunt-speaking and they say exactly what they think even if it's impolitic, and this was horribly impolitic," he said.


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