Brad DeLong's Semi-Daily Journal (2004)

I take it Shoven has no problem with legacy admissions either.

isn't a B+ at Stanford equivalent to a C at any UC campus?

How many otherwise fine universities are burdened with a tower of crankhood smack in the middle of campus, as is Stanford with the Hoover Institute?

Fabio, probably all of them that are paid enough.

I should have gone to Stanford. At Michigan I got really bad grades for astonishing little effort.

Haha, that's pretty silly.
B-plus on the economy??!?
So what's a B-minus? The great depression?
I'm scared of a F!!

What's infuriating about all this business is the fact that the 2001 recession wasn't all that bad really, yet thanks to Dubya's counterproductive tax cuts that did little to stimulate the economy at the expense of a vast increase in federal debt, we're poised on the edge of stagflation with little sign of help in sight. One can only hope that help is indeed on the way. Millions of un- and under-employed workers would like a chance to finally work after being down and out for nearly three years now.

I'm confused. What was the economic "tough hand" that Bush inherited? You will recall, of course, that the 2001 recession began in March of that year and was not "inherited," no matter how much Karl Rove wants it to be.It must have been the budget surpluses and the eight previous years of job expansion. Yeah, that's tough, under any circumstances.

Charles

Were Pushkin to come to Shoven
He doubtless would be Gudunov
(Re[O]negin' on this coven
Of Busheviks)to unsay what he shouldn'of.
But not til Pushkin comes to Shoven.

"A pretty tough hand" = Inheriting Tyrone Willingham's job? If that's what it means then yes, a 6-16 record deserves a passing grade.

I don't get it. If it is W's record one is trying to judge, you want to first discount from your assessment of the economy what you think is due to the Fed's historically low interest rates / loose monetary policy. Then you make up you mind regarding the President's track record using the residual number. This is particularly relevant in this case because the Bushies do not deserve the loose monetary conditions the Fed has offered them: indeed, they have turned budget surpluses into sizeable, historical records in nominal terms, deficits. In other words, if judging GWB's contribution to the state of the business cycle is your honest goal, you include the Fed's leniency in the hand of cards he has been dealt. Doing otherwise is intellectually dishonest. And if you were to really really be straighforward about it, you would also discount the part of the economic "success" of W that is due to his borrowing on future growth via budget deficits.

In fact, the number you want to look at, even though that's not even the whole story here, is: real growth - government deficits. When I do that and I go the BEA, I calculate that GWB has presided over 9% of real growth (overall, not yearly, of course!) since he took office (and I am giving him full credit for 2000 IV) and until the 2nd quarter of this year (using chain-weighted GDP - base 2000.) If I devide this increase in Federal Debt by 2004 II GDP (to compensate for the fact that I am not adjusting the change in federal debt for inflation), I get a 14% increase in US federal debt as a percent of GDP.

9%-14%=-5%. That is, ladies and gents, rougly speaking, the gift of Bushynomics to the United States of America as a percentage of US domestic income. -5% of GDP! Yes, I admit you could do this math slightly more accurately, but don't fool yourself, you're going get the same picture, I believe. If not, well, I'd like to know how. And yes, if there is a gross mistake in my numbers, please also let me know, either here or via email.

The guy from Stanford is right. What is remarkable about the past 4 years is that we did not have a depression.

We had the breaking of the largest financial bubble ever, beginning in March 2000.

We had the largest terrorist attack on American soil.

We had two wars.

We had wide spread financial scandals that enveloped the accounting industry and wall street.

We had several smaller terrorist acts, anthrax and the DC shootings.

We had the SARS epidemic.

We had numerous terrorist alerts.

And through it all, we managed to scrape through with the fastest productivity growth in 50 years, the smallest downturn in real economic growth in 30 years, and the strongest real growth in 20 years as recorded by year-to-year GDP growth in Q1 2004.

Not a bad record given the challenges.

Indeed, it is only due to the President's strong leadership that the earth has not stopped rotating about it's axis and fallen into the sun.

P.S. Pardon my ignorance, but how many times in American history have wars created depressions?

"We had two wars. (...)

Not a bad record given the challenges."

Neither of the two wars were a challenge. One could argue that the first one was a necessity, but they're still entirely within the choice set of the POTUS (taking vorauseilenden Gerhorsam of the Congress as a given).

The interesting thing is that the Bush II recovery and the Bush I recovery were almost identical. But they have been the two weakest recoveries in history. For example,in the first 8 quarters of the 2 Bush recoveries real GDP growth increased 5.7%. By comparison in the prior 7 post WW II recovies real gdp increased 11.6% over the first 8 quarters.

The question is what did the two bush recoveries have in common that made them only acheive half the growth in a normal historic recovery.

I would suggest voodoo economics.

Anyone got any other suggestions for why these two economic recoveries were so unusually weak.

Remember it has to explain both recoveries.

Spencer

Excellent question.... but if voodoo economics is to blame then the Bush 1 recovery would have been strong and the Reagan recovery in 1982-84 would have been weak. After all, it was Bush 1 who responded to the recession by breaking his 'read my lips' promise and raised taxes. No voodoo there.

Bush 1 recovery was weak because the tax increases stripped out consumer purchasing power. It was a classic Hoover move.

Bush 2 recovery was stronger than Bush 1 but still weaker when compared to past recoveries. There are several reasons for this.

One, the recession itself was mild and as such there was not the pent up demand that drove past recoveries.

Two, there has been a structural change in the economy, away from goods and towards services that also makes the economy less cyclical.

Three, investment in information technology has made control of inventories much improved, again producing a less cyclical, less boom and bust economy.

Four, there has been a boom in productivity that has resulted in weaker employment growth than in past recoveries taking away one of the self reinforcing mechanisms that made past recoveries stronger.

None of these reasons has anything to do with who is president and will likely continue for some time to come.

"We had wide spread financial scandals that enveloped the accounting industry and wall street."

I wonder. When will conservatives begin to argue that Gulf War II is a relative success given that the Administration has had to work with contractors like Halliburton?

Kuas,

I am afraid there is no pardon for ignorance.

In the past when war recquired the full economic commitment of a nation, wars in the short run did create a boom in economic activity, only when the war eneded did the negative economic effects take hold.

Today, the wars we have seen have no such grand stimulative effect because they require such a small share of national wealth to wage.

The negative effects of both the Afghan and the Iraq wars should be obvious even to someone who acknowledges his ignorance.

Look at the rise in the price of oil, reduced confidence in government, uncertainty and the broader existential threat poised by terrorists who have unlike other threats we have faced as a nation, shown an ability to kill Americans in large numbers on American soil. And in each of these you will see a drag on real economic growth.

karltio, you managed to ramble on for quite some time without answering my question.

And this is an interesting statement: "terrorists who have unlike other threats we have faced as a nation, shown an ability to kill Americans in large numbers on American soil"

How quickly we forget little things like the Cold War. Of course back then we had vast oceans to protect us from nuclear missile attacks, so it's not a fair comparison.

The guy from Stanford is wrong. Bush gave the wrong tax cuts. Giving money back to poorer wage earners would have stimulated demand, and we'd be a lot further along now. A tax cut disproportionate to the wealthy puts the economy on a much slower track, because consumption isn't increased proportionally, and investment isn't necessary when capacity is underutilized. Result: what we have now, astounding household debt. There are other factors, sure. But this was callous. Bush gets an F.

Kuas

I didn't ramble and I did answer your question. The answer is, for a second time, the world has changed in ways that make historical comparisons less than meaningful.

As to the cold war, vast oceans were no protection. What protected us was we had deterrence. The Soviets feared nuclear annihilation as much as we did.

What 9/11 taught some of us is that we have no deterrence against our current enemy. We lost that deterrence over 30 years of appeasement and failure to respond to open acts of war.

Lee A.

The problem with giving income tax relief to the 'poorest' workers is that they don't pay income taxes to begin with. The bottom 60% of the income distribution only account for 3% of the total federal income tax liability. You could have cut their taxes to zero and still not had much of an impact at all.

Here is the CBO data on it:

http://www.cbo.gov/showdoc.cfm?index=5324&sequence=0#table1B

"The bottom 60% of the income distribution only account for 3% of the total federal income tax liability. You could have cut their taxes to zero and still not had much of an impact at all."

Doesn't this mean that you could have exempted 60% of the working population of all federal income tax liabilities by cutting federal income tax revenues by 3%? Are we supposed to believe that this would not have stimulated the economy given how high a marginal propensity to consume these workers are supposed to have?

Brad, you misspelled STANFURD.

Well, we could say give it to the bottom EIGHTY Percent, whose upper income limit is around $70,000 per year. Or I know!: Lower their Payrollll taxes, and make the Upper-quint (everybody over say, $87,900?) slowly repay THEIR take of the Social Security surplus, in total, from Greenspan ‘83 to-date!

"You could have cut their taxes to zero and still not had much of an impact at all."

This might actually be the best suggestion ever. We just need to raise the taxes for the highest quintile by 3.6% (that's 3.6%, not 3.6 percentage points) and save billions on collection and enforcement costs. Or, if we just take the Top 1%, we would have to ask only 8.7% (again % not %pt) more from Bill Gates & Co. and could scrap a big part of the IRS operation. Sweet.

And given the rich don't pay taxes anyway, everybody wins.

karlito, the idea that the world has changed in ways that makes historical comparison less than meaningful is...how shall i put this? i know.

Less than meaningful.

The world changes every day; the challenges we face are always comples; overstating the problems of the present because we know how the problems of the past worked out is not a sign of knowledge of history....

Poor prez- 'inherited a..tough hand', 'had' two wars, 'had' multiple terrorist alerts. So ok, the economy was a short straw, and none of what's 'happened' to America has anything to do with Bush.

But he says 'bring 'em on', he's so unwavering and tough, and that we're "turning the corner"? Hmmmm...I know, maybe once he gets 'round the bend can someone convince him to keep on goin'- leave us in peace for the next couple a years? Since it doesn't really (shrug) matter who's president?

Karlito -

The problem with giving tax breaks to the wealthy is that (a) it creates virtually no stimulative effect, as the propensities of the wealthy to save and to import are significantly larger than those of folks in lower income brackets, and (b) they will not, as the supply-side morons like to argue, generate more than enough income through additional work to pay for the tax cut (a point elegantly made by Austan Goolsbee of the University of Chicago, looking at 6 decades of tax changes and their effects on high income taxpayers).

Let's not forget the traditional reference to Leyland Stanford Junior College. Hehehe.

Why pile on?

Although my experience as an undergraduate at Stanford was back in the 80s, and things might have changed since then, it's true that the grading had aspects of leniancy. Incompletes could be dropped from the transcript any time before graduation. Classes could be dropped on the day of finals. Etc.

Yet despite the lack of emphasis on grades, it has been demonstrated many times that Stanford students are much harder working than Cal students. Why is this so? For most students at Stanford, these grading practices allow the freedom to work like demons under their own motivation. Stanford students almost never talk about grades, which I think is a very good thing. The atmosphere of freedom helps intellectual curiosity to flourish and keeps the suicide rate low.

Although my experience as an undergraduate at Stanford was back in the 80s, and things might have changed since then, it's true that the grading had aspects of leniancy. Incompletes could be dropped from the transcript any time before graduation. Classes could be dropped on the day of finals. Etc.

Yet despite the lack of emphasis on grades, it has been demonstrated many times that Stanford students are much harder working than Cal students. Why is this so? For most students at Stanford, these grading practices allow the freedom to work like demons under their own motivation. Stanford students almost never talk about grades, which I think is a very good thing. The atmosphere of freedom helps intellectual curiosity to flourish and keeps the suicide rate low.

Although my experience as an undergraduate at Stanford was back in the 80s, and things might have changed since then, it's true that the grading had aspects of leniancy. Incompletes could be dropped from the transcript any time before graduation. Classes could be dropped on the day of finals. Etc.

Yet despite the lack of emphasis on grades, it has been demonstrated many times that Stanford students are much harder working than Cal students. Why is this so? For most students at Stanford, these grading practices allow the freedom to work like demons under their own motivation. Stanford students almost never talk about grades, which I think is a very good thing. The atmosphere of freedom helps intellectual curiosity to flourish and keeps the suicide rate low.

"Stanford students almost never talk about grades, which I think is a very good thing. The atmosphere of freedom helps intellectual curiosity to flourish and keeps the suicide rate low."

Not a bad argument, to be fair. If you need grades to keep yourself motivated in grad school, you're probably in the wrong place to begin with. Unfortunately, I don't think this argument can be applied to admistrations. They do seem to need very painful incentives to do what's good for their country, and still...

Hey! I only clicked once! That's not fair!

Hey! I only clicked once! That's not fair!

Hey! I only clicked once! That's not fair!

Snarking Stanford based on the comments of a Hoover Institute Fellow is, um, opportunistic bordering on silly. The HI is 1) practically an independent entity and 2) as different from the campus as a whole as President Bush is from former Senator Wellstone. It's like taking something Bill Frist says in passing about the role of government and assume that Russ Feingold holds the same opinion because they're both in the Senate.

Snarking Stanford based on the comments of a Hoover Institute Fellow is, um, opportunistic bordering on silly. The HI is 1) practically an independent entity and 2) as different from the campus as a whole as President Bush is from former Senator Wellstone. It's like taking something Bill Frist says in passing about the role of government and assume that Russ Feingold holds the same opinion because they're both in the Senate.