Brad DeLong's Semi-Daily Journal (2004)

The joker in the pack is the depressed demand for labor caused by the huge over-hand in low-wage imports from China. We've never had to deal with that before.

The joker in the pack is the depressed demand for labor caused by the huge over-hang in low-wage imports from China. We've never had to deal with that before.

The joker is an Administration that could have used a Keynesian-New Deal stimulus to spur economic growth and employment, but knowingly chose far less effectual tax cuts. Paul Krugman is precisely right.

Paul Krugman -

NYTimes
3/09/04

"What you see in this chart is the signature of a corrupted policy process, in which political propaganda takes the place of professional analysis."

Surely!

What do you expect from a crooked, you know, lying group of people?

Paul Krugman is a genius!"Rethink(ing) International Trade" and focus on the "New Trade Theory", u'll see...that's art

Return to trend? Well, it is true that if you take employment as of Dec. 2000 and assume trend growth, it'd be near 137-138 million. And if you took real GDP in 2001Q4 and assumed trend growth, real GDP for 2004 would be quite high. But does anyone seriously think either will return to trend in this sense. Isn't this the whole point? Now we all wish we were about to hit full employment tomorrow but ...

I seem to recall that Greg Mankiw was unavailable to comment on the forecast the day it was produced. That would seem to confirm that he knew it was bogus and not just out-dated. He wasn't inclined to lie for his masters.

If they are not corrupt, they are incompetent. There is no way to spin that report to make anyone involved look good.

You know, this is just part of a long trend by the Baby Bush administration. I worked as part of a student group to analyze the ethics of the Baby Bush/ENRON energy policy when it came out. I was stumped by much of what it contained. It too, was not internally consistent, in fact, the numbers made very little sense (they cited gallons for oil production, but switched to 'barrels' for spoil rates, as one example). But it was another member of the the team, Mohan, who shined the light on the most obvious problem with the report (his contribution was to look at the ecomonics of the report). They did not cite a single source for any of the information!!! Nada. Zero. Zilch. I've never seen a policy document that did not try to establish its credibility by citing sources.

The only thing close to a cite was below some of the graphs, which basically said what organization made the graph. No date. No publication. No context. Just a DOE, or a IEA, but nothing you could track back to read the original document.

I became so incensed by this, that I've spent the past couple of years trying to develop a consistent frame work for what establishes 'credibility'. So far, I can not find a consistent metric for measuring credibility, or what actually establishes something as a 'credible' source. I thought at first, that I would find some answers in journals on governance, policy, risk communication, information theory, economics, etc.

I'm still working on it...

The answer may well wind up being that a credible source is a source that restates what you already believe : (

Who you choose to regard as credible is based on your judgement. And your judgement should take into account their past history. And of all the things that matter the most is simply this: have they predicted events correctly more often than chance? Krugman seems to have. Therefore I tend to take him seriously - he's been right often enough that not believing him is unwise.

As for Alex - well Alex, Krugman's been consistently closer to right than Bush's CEA when it comes to labor force stats. I think he has more credibility than them - or you. And why, exactly, would the NEA think that the trend was going to return to the 90's boom trendline? No, I think they're dishonest.

Interesting. Didn't know I had a credibility problem, especially since I my statements above can be summed up in two points:

1) The Bush Cheney Energy Policy document contained no citations for verification. A point easily verifiable w/ a quick google.
2) That I could find no consistent metric for establishing credibility across disciplines.

Since the only transaction here is the transfer of these two points of info, and there is no profit motive on my part, I find reponse interesting.

Nicely argued. How is research to be done with no source references? There is still much that needs to be made clearer about regional energy price swings from 2000 till now.

Two quick reactions. (1) Doesn't Tabarrok mean the "peculiar nature of this" RECOVERY? (2) Is the stock market also going to revert to the trend between '95 and '00. 'Cause I'd sure love to start getting 30% returns on indexed mutual funds again.

Not sure if (2) is fair. I'd have to see the chart prior to '95. But I think (1) goes beyond a pedantic correction. That recession a few years ago--whenever that happened exactly--it may have been peculiar, but I think we're discussing the peculiar nature of the long Bush "recovery".

The recession was short and shallow, and ended in November 2001. The recovery has been fine for corporations and poor for workers. The economy is growing nicely, productivity is growing nicely, so are corporate earnings. There is very little general inflation and interest rates are low. Stock, real estate, and commodity prices have been rising nicely. What is missing is rapid job creation, and reasonable wage and benefit increases.

What Paul Krugman has so convincingly shown is the extent to which Administration policy is dictated by political considerations beyond all else. Astonishingly, there seems no exception.

Actualy, what is missing is the economic growth. Most of the "growth" has been in the areas of real estate, medical care, and military spending. Real estate's contribution to the GDP is a net loss, since higher real estate prices mean less money to finance demand (partially offset by the ability to leverage second mortgages against the now-higher value, but that boost to demand is about gone as families have exhausted their ability to borrow). Medical and military spending both are concentrated amongst a small cadre of highly-paid professionals of the investor class, who are not going to increase their spending greatly (especially the military contract workers, who know that as soon as their contract is out, they're likely on the street again... they're saving money like crazy).

The rest of the economy is so utterly stagnant that you can't call it a "recovery" in anything other than your most fond pipe dreams. The only thing growing is productivity, and that's mostly because workers are being outsourced and the remaining workers forced to work longer hours under the threat of being outsourced themselves, work that shows up as part of the GDP but the Indian component results in no additional net demand in the United States (since they're in India, doh!).

As long as demand remains static, there will not be any jobs recovery. Companies have a fudiciary duty to their stockholders to employ the minimum number of workers needed to meet demand for their products and services. Without a growth in demand, there will be no growth in jobs. This is especially true since the only real growth in demand, from looking at the 2003 Comprehensive Revision of the National Income and Product Accounts report, is in computer hardware, mostly because companies spent virtually nothing on computer gear over the past three years and now must replace the falling-apart gear from failed computer companies with supported gear from currently-in-business computer companies. This is not going to result in significant jobs growth because a) the computer industry has significant overcapacity and b) most computer gear is manufactured and assembled overseas, and even those assembled in the United States are assembled using mostly overseas parts (of the gear that I'm designing at work, less than 10% of the components are made in America... the CPU is German, the motherboard is Taiwanese, the hard drives are Japanese, the case is Korean, it's assembled in Mexico, etc.).

In short, unless economic policy changes to favor demand rather than investment, there will be no jobs growth. Bush's tax cuts, which are aimed almost solely at the investment class, are useless at creating demand because members of the investment class will simply invest the money. Which would be fine and dandy if there were a shortage of capacity to meet demand, but due to today's situation of overcapacity, is utterly inappropriate.

Let me also mention the "job multiplier" -- each local corporate office with people in it who are creating products will create demand in the local service economy, construction, building maintenance, cleaning, catering, employees using local restaurants, etc. So each X local production jobs created/destroyed will be matched by Y local service jobs created/destroyed (or by people in those jobs earning more/less or working under better/worse conditions).

The economy is stagnant because Big Business rules the lobby-machine, which in turn determines government policy. Small Business creates jobs, not Big Business. Sooner or later, the Small Business organizations are going to figure this out and then we'll break the liar's logjam.

"The recession was short and shallow, and ended in November 2001."

No, they changed the definition of Recession to make it end in November of 2001.