Brad DeLong's Semi-Daily Journal (2004)

It also use real GDP without saying so. Not a big deal, but it would be nice to say you used real GDP when doing so.

Not to mention that (among the other follies) it is folly to pretend that an administration would only affect the economy after Inauguration.

Electing a lunatic to public office, or one who openly deceives about fiscal policy would not help confidence in the economy. Negative impacts could be seen after election day in November...or even earlier in the year as the candidate appeared to be a potential winner.

Here's the point Shultz was making:

"President Clinton inherited prosperity; President Clinton bequeathed recession."

And that is absolutely correct. And it shouldn't have been too difficult to find, as short as the piece was.

I would just like to point out that, in furtherance of the "my golly is The Eleven-Year-Old whip smart" meme on the ESP thread below, The Eleven-Year-Old is here noted in passing as having *read* both the online and print editions of an op-ed on GDP.

Patrick R. Sullivan:

Except that the statement "President Clinton inherited prosperity; President Clinton bequeathed recession" is false. The recession began after Bush took office.

The only point of the chart was to say -- with smoke and mirrors, and contrary to all evidence and memory -- that Clinton was bad for the economy and Bush has been good.

As Jon Stewart said in another context, It's like they think we're retarded.

epistemology, sullivan's (and schultz's) point is not so much false as meaningless.

"Inherited prosperity:" when was the last president who didn't "inherit prosperity." We live in a very prosperous land; i suppose you could make an argument that FDR didn't inherit prosperity, but certainly no president since then has inherited anything but prosperity.

What Schultz doesn't want to say is something more honest, like: Clinton inherited an economy in the early stages of recovery from a vicious recession, and the least you can say about him is that, for 8 years, he didn't screw it up.

"Bequeathed recession:" Well, in the broad sense that the business cycle hasn't been outlawed yet, of course after the longest peacetime expansion in history, there was bound to be a recession. I said to friends in 2000 that i had trouble understanding why Bush or Gore wanted to be president, since there was bound to be a recession.

What Schultz doesn't want to say is: After the longest peacetime expansion in history, and after 7 rate hikes by the Fed, it was pretty reasonable to assume that a recession would show up sooner and not later, but it turned out to be the mildest recession (from a GDP standpoint) in postwar history, which might have something to do with the solid investment-led foundation of the expansion that Clinton, at a minimum, didn't screw up. Certainly we didn't end up with a recession because of a public policy error.

In short, the them of the article is completely bogus, and Schultz has now sacrificed some of his reputation for publishing such tripe....

There is an even more obvious problem with this graph. As Matthew alluded, the graph represents the first derivative of growth. Points on the graph above the zero axis indicate economic growth. Points below the zero axis indicate economic contraction. The gray bars representing recessions should be shifted to the right to cover the negative points on the GDP graph. This would comport more closely with the NBER dates for the recession.

It would be interesting to have Shultz apply his freshman calculus to generate the second derivative and see what additional misleading conclusions he can draw.

Of course I meant to say "first derivative of GDP."

"Nevertheless, I think George Shultz needs a better staff"

They published a misleading op-ed.

What makes you think that was a *mistake*?

This is great spin in that it takes average or poor data and describes it as great and counts on the ignorance of the press and public to get away with it.

Shultz talks about this being a good economic recovery, but what he does not let you know is that these two are the weakest recoveries on record going back as far as the NBER has collected the data.

For example in the first two years of these two cycles real GDP increased 5.7%. But in the previous 7 post WW II recoveries real GDP increased 11.7% in the first two years.
So shultz leaves the impression that these two recoveries were great, when they were only about half of a normal recovery.

Moreover, note that in the last four years of the Clinton term real GDP was over 4% for four consecutive years. That is the first time in history that the US has achieved 4 consecutive years of over 4% real GDP growth.

My comment that real GDP growth exceed 4% for 4 years under Clinton overlooked that we had 4 years of over 4%growth during WW II.

But this was still the only time the US had 4 consecutive years of over 4% growth in peacetime.

I can't figure out how Shultz times the recession with that last gray bar. I can't get it whether the def is when growth rate starts to decline or groth goes negative.

The real sin of the piece is to pack *all* the argument into the idea that the economy has momentum. It certainly does, but countercyclical and changes in fiscal policy will change the strength and force of the momentum, and those are the responsibility of the administration in power.

So... I suppose we are supposed to look at that graphic and impute all the bad we see after the Bush admin came to power to BAD MOMENTUM from Clinton, and everything good to the titanic struggles of Bushco against the BAD MO of Clinton. What is this BAD MO? Well we don't need to explain. We'll just read the graph and impute what we need to make Clinton look bad and Bush look good. That is exactly what the MO is, and nothing more. A bald fudge factor. In other words, nothing at all.

And of course, Spencer is correct, you cannot look at any post-war, or probably any recorded-using-modern-techniques, previous recession and make Bush I or Bush II look good. That is why the graph has to start where it does.

And how does the employment situation look good by any standard?

Totally bogus, mindless argument... almost theological (in the worst sense of the word). its that BAD MO! That Clinton BAD MO gonna rise out the depths of hell and getcha!

Brad, What's the graph, or graphs, that NY Times should have printed if it wanted to compare the U.S. economy under Bush I, Clinton, and Bush II?

Would you keep real GDP and the same employment figures? Or some other figures (like per-capita GDP)? Would a shift to "detrended levels" be clear enough?

Maybe push the graph(s) back to include the beginning of Bush I, or go all the way back to Reagan?

Any chance you might publish here what they should have printed (a la the questions Rosenbaum should have asked)?

I had several problems with the analysis. AMong them:

1. Prosperity is an absolute level, but the analysis focuses on changes. Under the current absolute levels, we are not in prosperity.

2. When an analysis of change is made, the law of diminishing returns is germane. That is, it's easier to show growth against a weak period than it is against a strong period. This was ignored. Comaring growth under Bush to growth under Clinton is irrelevant; what's the growth under Bush compared to another post-recession period?

3. Even with the point of #2, the growth rates have been anemic.

I was very disappointed, to say the least.

"when was the last president who didn't 'inherit prosperity.' We live in a very prosperous land..."

Meaning that you've realized I've been right all along, and you're finally going to stop griping about Bush?

Ah me, another Patrick moment!

No, i'm going to complain about Bush's many manifest offenses against good policy, including his tax policies. That we live in a prosperous land doesn't make this the best of all worlds, nor does it mean that Bush has done a good job.

It just means that we live in a prosperous land....

You're all wrong. It's the bad MO, as in bad bad Clinton MOJO. Momentum is a mysterious economic force, the good aligned with moral fiber content and goodness graciousness of all kinds, the bad aligned with liberals and The Clinton: The mysterious ether of bad "momentum" from bad karma of bad bad people do it.

It doesn't really matter what the graph looks like at all. Whatever shape it is, anything bad in Bush II's term was inherited from Clinton. Or don't you GET it? Poor poor Mr. Bush. You could call it "kooties" or "wicked liberal democrat spirit sickness substance" or "evil spirit medicine balls"... whatever...

Even though the Bush people were willing to bank on 20 years of prosperity when they came up with the tax plan, and even though it turns out to have been still the best plan even though they saw a recession coming and everything changed, and even though everything changed again after they realized, post-recession but pre-9/11 that it was the very very mildest recession ever that would soon evaporate into nothing so that their original plan was the best as originally proposed anyway... even though... even though... Now we realize that the whole expansion was Clinton badness, and the 90's prosperity was an unsustainable bubble that produced bad "momentum" In fact, all of the 90s was an evil illusion that mislead people into doubting that this soggy subpar expansion is really the best of all possible worlds, with "solid" recovery right around the next corner.

Why are you even dignifying this contentless opinion piece bauble with an attempt at serious discussion?

We don't need to macro theory, or comprehensible discussion of historical trends based on underlying real economic factors and specific identifiable economic policies. We only need chart out sloppy graphs and attribute anything we don't like to "momentum." All we need to do is dismiss serious economic analysis with an airy R. Samuelson patented "everyone knows economic policies don't do much."

I agree with you put your own version in the Times
Mike

I agree with you put your own version in the Times
Mike

I agree with you put your own version in the Times
Mike

I agree with you put your own version in the Times
Mike

Michael Kinsley:
Do the math: Democratic presidents shine

Michael Kinsley, Los Angeles Times

August 4, 2004 KINSLEY0804

You know how sometimes, when it's really, really hot, you get this urge to crank up the old spreadsheet, download a bunch of numbers from the Web and start crunching away like there's no next fiscal year?

Me neither. But I did spend a bit of the past week watching the Democratic convention on TV, and I needed something to exercise my mind while that was going on.

Convention season is the one time when we pretend that political parties matter. In general, we have accepted the reality that campaigns for national office have become entrepreneurial, united more by shared political consultants than by old-fashioned parties.

So I thought I'd see if there was a difference between the parties that transcended the differences between the candidates. Is one of them, for example, a better steward of the economy? One year won't tell you much, or even one administration. But surely differences will emerge over half a century or so, if they exist.

With that thought, I headed for the Web. Specifically, I went to the charts attached to the President's Economic Report, released in February. There, I downloaded like a madman and then distilled the mess into a few key stats.

The figures I'm using are from 43 years, 1960 through 2002. I didn't choose the years in order to skew the results; these are the years that were available for the categories I wanted to include.

The results are pretty interesting.

Maybe presidents have little power over the economy. And we know that they must fight with Congress over the budget. Still, elections are based on the premise that who you vote for does matter. So let's at least entertain that assumption for a few minutes.

It turns out that Democratic presidents have a much better record than Republicans. They win in a head-to-head comparison in almost every category. (The underlying data can be downloaded at www.gpoaccess.gov/eop/index.html.)

Real growth averaged 4.09 percent in Democratic years, 2.75 percent in Republican years. Unemployment was 6.44 percent, on average, under Republican presidents, and 5.33 percent under Democrats.

The federal government spent more under Republicans than Democrats (20.87 percent of the gross domestic product, compared with 19.58 percent), and that remains true even if you exclude defense (13.76 percent for the Democrats, 14.97 percent for the Republicans).

What else? Inflation was lower under Democratic presidents (3.81 percent on average, compared with 4.85 percent). And annual deficits took more than twice as much of GDP under Republicans than Democrats (2.74 percent of GDP versus 1.21 percent).

Republicans won by a nose on government revenue (i.e., taxes), taking 18.12 percent of GDP, compared with 18.39 percent. That, of course, is why they lost on the size of the deficit.

Personal income per capita was also a bit higher in Republican years ($16,061 in year-2000 dollars) than in Democratic ones ($15,565). But that is because more of the Republican years came later, when the country was more prosperous already.

There will be many objections to all this, some of them valid. For example, a president can't fairly be held responsible for the economy from the day he takes office. So let's give them all a year. That is, let's allocate each year to the party that controlled the White House the year before.

Guess what? The numbers change, but the bottom-line tally is exactly the same: higher growth, lower unemployment, lower government spending, lower inflation and so on under the Democrats. Lower taxes under the Republicans.

But maybe we are taking too long a view. The Republican Party considers itself born again in 1981, when Ronald Reagan became president. That's when Republicans got serious about cutting taxes, reducing the size of government and making the country prosperous.

Allegedly.

But doing all the same calculations for the years 1982 through 2002, and giving each president's policies a year to take effect, changes only one result: The Democrats pull ahead of the Republicans on per capita personal income.

As they say in the brokerage ads, past results are no guarantee of future performance.

Leaving aside the bad graphics, the main point, that the economy has never been in bad shape under Mr. Bush is correct. The problem with Mr Bush policy has never been the economy. The economy has been good. However, in spite of the good economy, Mr Bush is running huge structural deficits. This graph suggests that economic growth is not about to fix the revenue shortfall generated by the Bush fiscal policy.

A missing question is how much bang is the deficit producing and could a smaller deficit be used in a more efficient manner to support the same level of economic activity? If the answer to this question is not "yes" then we are in serious trouble.

The problem with Mr Bush policy is jobs- the loss of them. Mr. Bush has not taken the standard fiscal steps that would have improved the unemployment situation. While the economy has been expanding for 3 years, jobs have only increased (then only slightly) since last August. A 1% increase in jobs barely produces enough jobs to keep up with the labor force and does nothing to reverse the Bush job loss recovery. In this, the graph is misleading. The zero point should be where job growth matches labor growth. Otherwise, job growth could be positive and we still could be increasing unemployment.

I am not sure that this article and graph will convince anyone other than the economic writers at NRO. Schtick like this annoys voters who understand the true jobs situation.

Brad,

I'm a Democrat who has always thought Schultz to be an honorable guy. That said, I think that, considering the foul odor of what he shoveled onto the Times Op-Ed page, you were quite kind when you said "I think George Shultz needs a better staff."

I can't beleive how much spin I'm reading here.

The graphs show that the economy started to tank well before Clinton left office.

A more interesting topic of discussion would be "how culpable was Clinton for the magnitude of the tech crash". It was obviously coming and he did nothing to prevent it. Presumably hoping that it would hold off for long enough to reach the elections.

Folks should take a look at this document from the folks at BEA. They dance around the issue somewhat, but acknowledge that increased outsourcing can result in overstated GDP. Maybe this is why we've "turned the corner!"

http://www.bea.doc.gov/bea/dn/GDP_outsourcing.pdf

I comment on the Shultz article on my blog:

http://theangryliberal.blogspot.com/

RonB, Friday's pitiful job numbers for July (coupled with the downwardly revised figures for May and June) hammer home a reality which Schultz tried to disguise as "prosperity." We are not in prosperity, and Schultz didn't need Friday's figures to see it.

Much of the remainder of the discussion has to do with the methodology of the calculations he used; you can learn from it.

By plotting the derivative of employment and GDP instead of totals, Shultz hopes to fool stupid people. If Shultz had graphed total GDP or total employment (i.e., the things that really count in people's lives), the Clinton years would have been going through the roof, and jobs only start to drop well into the middle of 2001. (Clue: don't look at the slope, look at the level.) Three and a half years into Bush II, GW has yet to have a single month as good as Clinton's average.

It is natural for people to look at Shultz's graph and focus on the slope, rather than the level. That is obviously the mislead that Shultz is hoping for. The slope is the second derivative of the total GDP and employment, and it certainly correct that it has some meaning, but it is hardly the most important thing. No one would argue that the economy had a bad year in 1995 just because the slope was down. Bush would kill for a year like 1995. Finally, since the graph fools the reader into focusing on the second derivative, Shultz should stop talking about momentum. The total has momentum, the change has momentum, but the 2nd derivative has little. Consider 1995 versus 2000. If you think the 2nd derivative has momentum, didn't Clinton hand himself in 1996 a much worse situation than he handed Bush for 2001. Nonsense to both, of course.

Other aspects of the graph are dishonest. The BS household data was put in to make the Bush years look better than the more accurate Establishment data. The recession is shown as beginning at the beginning of 2001 rather than March.