Larry Mishel is an unhappy camper:
Posted by DeLong at April 29, 2004 07:54 AM | TrackBack | | Other weblogs commenting on this postAmerican Prospect Online - ViewWeb: ...What has caught me off guard, I must admit, is the clever -- some might even say deceitful -- ways the Bush administration argues that the current economy is great.
But before investigating some of its outrageous claims about the economy, let's do a quick reality check. Where are we? The economy went into recession as George W. Bush took office, so it would be unfair and inaccurate to blame the initial downturn on the current administration. The Bush policies, however, have been flawed because they were never intended to generate jobs or growth in the short-term; they were always about cutting government revenue and shifting the tax burden away from income from investments (from the few) and onto income from labor (that's most of us). A decent set of policies -- enacting one-time tax cuts aimed at lower- and middle-income families, building roads and bridges, renovating schools, providing aid to the states, offering improved unemployment insurance -- could have yielded a much better situation [employment] today....
What did happen? There were continuous and record-breaking employment losses for roughly two and a half years, followed by some modest job gains starting last September. Oh, there was one very good month for job growth, this last March. After three years, though, the economy has lost 2.6 million private-sector jobs and created about 600,000 government jobs for a net loss of 2 million.... What's more, inflation-adjusted wages are flat, at best, and are eroding for many workers. When jobs are short, it is inevitable that weekly and hourly wages grow more slowly as employers take advantage of the situation.... Poor job performance and wage stagnation add up to very little growth in overall wage and salary income -- what most of us live on. With fast productivity and minimal growth in wages and employment, you get big profits. This is exactly what's occurred. Even Alan Greenspan noted this recently, saying: "Most of the recent increases in productivity have been reflected in a sharp rise in the pre-tax profits of nonfinancial corporation … . The increase in real hourly compensation was quite modest over that period. The consequence was a marked fall in the ratio of employee compensation to gross nonfinancial corporate income to a very low level by the standards of the past three decades."
So, how does an administration tiptoe through these tulips? Very selectively.... Consider this point in a new ad, titled "Working to Keep America Working," which hypes the Bush administration's record: "Unemployment rate after Bill Clinton's third year, 5.6%. Unemployment rate after G.W. Bush's third year, 5.6%." True, but isn't it gutsy to say this seeing as the unemployment rate was about 4 percent when Bush was elected (therefore it rose 1.6 percentage points to 5.6 percent) and was 7.5 percent when Clinton was elected (therefore it fell almost 2 percentage points to 5.6 percent)?
Here's another quote from the ad: "US Economic Growth: 'Strongest in Nearly 20 years' (CNN, October, 2003)." This sounds impressive, and it is -- for the one-quarter of growth last summer to which CNN, in late October, was referring! Somehow overlooked is the fact that the economy has grown more slowly (3.5-percent annual rate) in the first 11 quarters of this expansion than in those of the prior eight expansions (5.7-percent annual rate).
Another part of the ad makes it seem as if poverty has been reduced by the current administration: "Poverty in Clinton's years, 10.5%; Poverty in G.W. Bush's years, 9.5%." You would never know that the poverty rate was 8.7 percent in Clinton's last year (2000) and rose to 9.6 percent in 2002 (the latest year of available data). In contrast, poverty was 11.9 percent in 1992 when Clinton was first elected and fell to 8.7 percent, a drop of more than 2 percentage points....
Consider another claim from a White House "Fact Sheet": "Without the President's tax relief, by the end of last year real GDP would have been more than 3 percent lower and the unemployment rate would have been more than 1 percentage point higher, with more than 2 million fewer Americans working." Whoops, we can't actually evaluate this claim because the Treasury Department study it is based on has never been made public. Nevertheless, this claim suggests that without the Bush tax cuts, the employment decline since early 2001 would have been 4 million, an amazingly steep and unbelievable decline....
"Very selectively.... Consider this point in a new ad, titled "Working to Keep America Working," which hypes the Bush administration's record: "Unemployment rate after Bill Clinton's third year, 5.6%. Unemployment rate after G.W. Bush's third year, 5.6%." True, but isn't it gutsy to say this seeing as the unemployment rate was about 4 percent when Bush was elected (therefore it rose 1.6 percentage points to 5.6 percent) and was 7.5 percent when Clinton was elected (therefore it fell almost 2 percentage points to 5.6 percent)?"
Mishel is your typical lefty "economist" picking and choosing his data points to construct a partisan argument rather than forwarding the understanding of the underlying reality.
To me, the above quote illustrates his incompetence by taking no account of the inherent time delay between economic causes and effects as well as ignoring other significant economic inputs (911, internet bubble, the increasingly global market for labor), that don't support his prejudices.
Adrian the common-sense economist
"Picking and choosing, Adrian"/ That's exactly what the Bush campaign has done, and Larry M is merely pointing it out.
Have you no self-respect, Adrian, to prostitute yourself for these liars? They lie, obvious, easy-to-disprove lies, and you swear that those lies are the truth. You need to work on your self-image, bub.
"Just because you are on their side, that doesn't mean they are on your side".
Posted by: Chuck Nolan on April 29, 2004 08:53 AMChuck, Adrian doesn't even have a prostitute's self-respect. He does this for free. He's a Bush Groupie.
Posted by: Barry on April 29, 2004 09:05 AMMishel is unhappy and Bush papers over failed economic policies with smoke and mirrors. Public pronouncements have little effect on the way people experience the economy and therefore their voting patterns.
Better reading is Kuttner's suggestions for how to fix jobs.
http://www.boston.com/news/globe/editorial_opinion/oped/articles/2004/04/28/remedy_to_outsourcing_better_us_jobs/
Posted by: bakho on April 29, 2004 09:10 AMYeah, I'm gonna have to second bakho. This is campaign ad stuff - conventional lies in a conventional location. It's the business of turning a vague possibility into an absolute certainty in order to justify war that is the problem. It is claiming black is white in the process of everyday governance that is the problem. It is telling medicare budget specialists and environmental scientists that objective, accurate, unbiased efforts to inform the public and the congress are unwelcome that is the problem.
Posted by: K Harris on April 29, 2004 09:38 AMJust a point of clarification. The "ad" that Mishel cites is actually just a shockwave file put together by a "private citizen". No connection at all to the Bush Campaign. I don't remember the exact location of the file, but I recall that it's easy to find through google.
Posted by: Rob on April 29, 2004 09:45 AMMy God, is there not a single lefty "economist" out there, who can make a proper analysis taking into account the DELAY between causes and effects and the shocks of the internet bubble, 911 and the globalization of the job market?
Again, I seem to only attract Junior College graduates who are merely capable of insulting those with whom they disagree.
WHERE ARE THE LEFTIES WITH BRAINS?
Adrian
Posted by: Adrian Spidle on April 29, 2004 11:24 AMTo say unemployment is lower under Bush than it was under Clinton was bad enough but to claim that poverty is declining too? They expect the public to believe this? I would not even expect Fox News to report such nonsense but then again ...
Posted by: Harold McClure on April 29, 2004 11:31 AMThe deceptive stuff coming out is just normal political PR. You don't really blame the Bush people (whether official or not) for putting the best face on things. Adrian is just being Adrian -- it's in his blood. He's wired that way.
What **is** culpable is the failure of the media to call foul on this kind of stuff. The Ignatius Neutrality Doctrine states that if the facts support one side of an argument, the nonpartisan professional journalist must avoid stating the facts. (There are other reasons too: careerism and the hope for future plum jobs, high society groupthink, and direct intervention by management.)
And frankly, you have to wonder about the "Republican grownups" who know better. I've been saying for months that they'll decide the election, but I have no confidence that they won't end up actively supporting the worst and most fraudulent President in American histor -- even though they know better. I really believe that the future of the country is in their hands, and that they will be the ones to blame if Bush is reelected.
Posted by: Zizka on April 29, 2004 11:34 AMAdrian - I'm curious as to your view of lag times. Are you saying that the boom in the late 1990's was caused by the 1981 tax cut too? Incidentally, re-read the EPI piece. It did not blame the 2001 recession on Bush policies, but I have never heard anyone suggest a 3-year lag between a tax cut (as in the 2001 tax cut) and the economy. Have you?
Posted by: Harold McClure on April 29, 2004 11:34 AMI do not think that a leftist economist with brains would knowingly engage in dialogue with Adrian. He's not a guy to argue with or insult either -- more in the "avoid eye contact" category. He knows how it is possible to fuel your car with water instead of gasoline, you know.
Posted by: Zizka on April 29, 2004 11:40 AM"Adrian - I'm curious as to your view of lag times. Are you saying that the boom in the late 1990's was caused by the 1981 tax cut too? ... I have never heard anyone suggest a 3-year lag between a tax cut (as in the 2001 tax cut) and the economy. Have you?
Posted by Harold McClure"
At last, an intelligent lefty on this board. THANK YOU for a great question.
I see fluctuations in complex systems such as economies, in a simplified way, as a sine wave fluctuating around a trend line. Since tax cuts definitely increase the slope of our economy's trend line, then my answer is YES... a significant portion of the 90s boom was caused by the 1981 tax cut and the economic momentum it ignited. Please note the Reagan-Bush1 years were very prosperous also.
Much of the recent sine wave portion is really noise resulting from various one time shocks like 911 combined with trend line slope changing conditions like the war on terror, the internet bubble and the globalization of the job market.
ALMOST NONE OF THIS IS BUSH OR CLINTON'S FAULT and most of the nostrums I hear you lefties pushing for would actually make things worse.
Adrian the common-sense economist
Posted by: Adrian Spidle on April 29, 2004 11:52 AMYes Adrian-- and when the red soxs win the world series you will tell me it was because of the Reagan tax cuts.
Posted by: spencer on April 29, 2004 12:32 PMAdrian, don't assume without proof that anyone here is responding to you or reading your posts. You unfortunately have a right to post here, but we at least have the right to page down. If you have something important to tell us, use a different name.
Posted by: Zizka on April 29, 2004 01:07 PMSine wave? No, business cycles are too irregular to be fit with any reasonable-looking periodic function, and there's actually an embarrassment of riches when it comes to finding shocks that can explain business cycles.
Think about the shocks that coincided with the 2001 recession--I'd put monetary shocks (Fed tightening in 2000), smallish productivity shocks (9/11, oil prices jumping around), and fiscal policy shocks (permanent increase in gov't spending, and somewhat volatile taxes) at the top of my list, in that order. Of all those things, Bush can only influence the third. I think that he's let fiscal policy get out of control, but blaming the dynamics of the business cycle on the president shows a willingness to ignore much more important factors.
Also, of course, when an economy is at 3.9% unemployment (late 2000) it responds to shocks differently from one at 6% (late 2003). If unemployment has nowhere to go but up (as it does at 3.9%), is it a surprise when it does? Good shocks can't drive unemployment much lower, but bad shocks can drive it way up from there. At 6% (or 5.6%) improvement is much easier to come by. And improving from 7% to 5.6% is easier still.
Granted, there's much still to be understood about how shocks are transmitted through employment. But blaming Bush for an economy going back to more usual behavior is not reasonable. I'd give him a C- grade on fiscal policy (too bloated and volatile) but this has nothing to do with employment numbers.
Posted by: Chris on April 29, 2004 01:14 PMChris, Spencer, and Ziska: Thanks so much. I was tempted to reply with something less polite than your well articulated posts but I think you did a very admirable job there. Sine waves and increased slopes? Slope of what? Especially since real GDP growth was rather low from 1981 to the mid-1990's on average.
Posted by: Harold McClure on April 29, 2004 01:23 PM"Think about the shocks that coincided with the 2001 recession--I'd put monetary shocks (Fed tightening in 2000), smallish productivity shocks (9/11, oil prices jumping around), and fiscal policy shocks (permanent increase in gov't spending, and somewhat volatile taxes) at the top of my list, in that order. Of all those things...
Posted by Chris"
Good point, Chris. But what about momentum? How do you measure the amount of economic momentum heading up or down and the relative value of the various shocks you mentioned?
It seems to me that one of the main functions of recessions is to periodically take momentum out of the economy to prevent overheating. From my own business experience I knew that, in 2000, labor demand was pushing salaries to levels that were unsustainable in any reasonable business model.
Now this was pretty great then, but I believe the price we paid, later, in lost jobs and employability was too high a price to pay.
I disagree that there is no "reasonable-looking periodic function" to the business cycle. You just have to make the period of the cycle a variable that is determined by fiscal and monetary policies as well as any shocks that show up.
I believe, that if you measure economic momentum, that you would find that the depth of the 2001 recession was greatly enhanced by the fact that Clinton didn't "take" a recession in the mid nineties which would have taken momentum out of the economy allowing for a much milder recession in 2001.
I believe that properly managing economic momentum properly calls for a recession every four or five years.
I also believe that this is way too important a job to leave it up to partisans of either stripe.
Adrian
Posted by: Adrian Spidle on April 29, 2004 01:50 PM"Adrian, don't assume without proof that anyone here is responding to you or reading your posts. You unfortunately have a right to post here, but we at least have the right to page down. If you have something important to tell us, use a different name."
Half the posts in this thread are responding to Adrian. How can you not see the absurdity in writing a post directed at Adrian saying that no one is writing posts directed at Adrian?
Posted by: Xavier on April 29, 2004 01:50 PMThe Prospect article deceitfully implies that the "Working to Keep America Working" advertisement is evidence of "the Bush Administration's ... outrageous claims".
bzzzt, wrong. That advertisement was put together by some random guy with a flash authoring package and a cox.net account.
Posted by: am on April 29, 2004 05:57 PMXavier -- Adrien responds to posts not directed to him as though they were. No absurdity.
Posted by: Zizka on April 29, 2004 07:09 PMFELLOW COMMENTERS: Let me say one word: "Flamebait". It is up to everybody's own judgement to evaluate how seriously or facetiously a post is meant, and whether and how to respond.
I find it far easier, in most cases, to track economic fluctuations via Fed policy and energy prices than most other measures. Energy prices seem to go up every time a Texas oil politician hits the White House or a Middle East oil producer is humiliated in battle or is in conflict with the US.
The value of a taxcut is high when you take 10% off a top rate of 50%, but taking 10% off a top rate of, say, 20%, could cause economic damage. Yet those using the tax cut mantra see it as a panacea no matter how many cuts are done.
Tax cuts stimulate, but often not as foretold.
Posted by: Kevin Hayden on April 30, 2004 12:16 AMI should add that my economics expertise is very thin on theory. I just call them as they feel in the day to day.
Posted by: Kevin Hayden on April 30, 2004 12:18 AMKevin H,
The pattern you recognize in oil prices may be the result of another pattern. Westerners in the Treasury seat seem to have a preference for a weak currency, Eastern establishment types for a stronger one. Check the Clinton record. A Texan at Treasury meant a dollar drop, while his New York replacement pushed the dollar up. The O'Neill/Snow combination is hard to put a geographic label on (O'Neill spent much time in Washington), but then the Texas connection comes in. All else equal, a falling dollar will mean rising oil prices.
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