Resolved:President Bush's tax cuts have jump started the GDP.

[newcrasher]

http://apnews.myway.com/article/20031030/D7UGHGD02.html

Apparently the GDP is up 7.2% for the 3rd qtr. '03. This beats economists' prediction of 6% and is also the largest jump in GDP since 1984.

The article above credits low short term interest rates as well as the tax cut initiatives of Bush for spurring this rally. Do you agree?

Are there any Bush detractors who are willing to give any credit here? Would giving the Bush tax cuts credit be misplaced?

If goods and services are up so much, how long before the jobs follow?

[DaveX]

It certainly seems like a good sign.

I think the last question you pose is the most pertinent, though. It isn't much of a recovery until the jobs follow.

[John Mace]

I'm a Bush supporter (for the most part), but I wouldn't give the tax cuts that much credit for the improved economy. The size of the tax cuts is mice nuts compared to the overall economy. The business cycle is still in effect, and the gov't can't do much but diddle around at the edges.

It will be interesting to watch the jobs data. If they don't imrove in this economy (7.2% is huge), then we are indeed in a new kind of economy. I'd be very surprised if the economy could continue to improve anywhere near that rate w/o the employment situation getting better. The growth can't all be coming from outsourced jobs or productivity improvements domestically. Can it?

['possum stalker]

Too soon to decide- if the causes can ever be untangled. The issue is confounded by increased military spending in Iraq (up 46%) and increased business spending (up, what, 14-15%?; these figures are from the NYtimes). These %ages are higher than the increase in consumer spending, the main theoretical source of growth from tax cuts.

The rising productivity is what is boosting the GDP.
Jobs will not be created if productivity continues to rise; many of the increases in productivity are due to jobs being sent overseas.
"The total outsourcing (http://www.interesting-people.org/archives/interesting-people/200310/msg00069.html)of business-process jobs by American
companies is expected to grow to $136 billion by 2015, from
$4 billion in 2000, and create 3.3 million jobs, according
to Forrester Research of Cambridge, Mass." So in my opinion, this is going to be another "rentier recovery," as the numbers keep rising, but job creation remains stagnant.

Keeping labor cheap in America is great for Bush's corporate backers, but not so hot for the average resident of, say, Mattoon, IL. (flipping through stack of Wal-Mart stock certificates) Which is too bad.

[newcrasher]

Originally posted by John Mace
I'm a Bush supporter (for the most part), but I wouldn't give the tax cuts that much credit for the improved economy. The size of the tax cuts is mice nuts compared to the overall economy.

You don't think that the tax cuts loosened the pockets of Joe Sixpack a bit, which increased demands for goods and services across the board? It would seem that the tax cuts would act as a catalyst for growth, not the growth in and of itself.

[MrTuffPaws]

newcrasher:

I don't know about you, but me, being a joe sixpack kinda of guy, used the tax refunds for helping to pay of standing debts. My refund did shit for the economy.

[laigle]

Seems to me you could better attribute this spike to unemployment coupled with the economic decline. The economy was in the toilet, now it's starting to come out. The decline allowed for a so-so increase in actual GDP to translate to a large percentage increase. Couple that with the fact that capital has not been reinvested in restoring the jobs and factories cut over the last couple years and there's a very liquid economy. Following this, reinvestment should begin, slowing the growth rate. Unless it's another bubble.

[rjung]

Originally posted by MrTuffPaws
I don't know about you, but me, being a joe sixpack kinda of guy, used the tax refunds for helping to pay of standing debts. My refund did shit for the economy.
Same here -- my refund went into a college fund, and didn't do diddly-squat for the economy. I suspect that the average "Joe Sixpack" refund recipient was in a similar quandry, since the size of the refund wasn't big enough to finance any economy-boosting big-ticket items.

[newcrasher]

Originally posted by MrTuffPaws
newcrasher:

I don't know about you, but me, being a joe sixpack kinda of guy, used the tax refunds for helping to pay of standing debts. My refund did shit for the economy.

I disagree. You received either goods or a service. The fact that you are paying for it now instead of then means the person/company you owed the money to now has capital it did not have before. Capital that it will use to purchase goods and services...

[kwildcat]

Ennnh - wrong answer. Tax cut did bubkis for Joe Sixpack. Local paper is not online, so can't cite, but I'm sure an enterprising google-er can find the report: increases in consumer spending and rise in purchases of durable goods are all within the upper 15% of all wage earners. Porsche sales across the U.S., up 14%, new home starts at record highs. This bump of GDP fueled by consumer spending is driven by rich folks reassured by the fat cats in D.C. that they'll be "taken care of" if they start spending like loons again. If you're not refinancing your $250,000 home, then you're not part of this boom.

This fiscally conservative liberal will give due credit - the bottom of this particular roller-coaster may well have been leveled out by Mr. Greenspan and his Incredible Shrinking Interest Rates. The problem is that this is a short-term spurt only - no way it's sustainable. U.S. consumer spending is built on a house of cards - debt, debt, and more debt, all of it secured by continued foreign investment in U.S. assets. If you aren't in the black within the next 5 years or so, hold on to your socks, 'cause it's all coming down. Dollar devaluation, federal deficits, stalled wages, job flight, and the imminent retirement of an entire generation of wage earners and taxpayers, are all coming home to roost.

[Debaser]

I agree that the refunds and cuts had an impact. More money in peoples pockets means more money spent and this helps the economy.

However, the tax cuts were tiny in proportion to the overall economy. The effect that they had was minimal.

Hell, even if the government could cut taxes so much that it would affect the economy or go the other way and spend so much that they help the economy, I wouldn't want them to do it.

[CyberPundit]

It's important to distinguish between the different parts of the Bush tax cuts. The refunds and child tax credits ,which had broad support probably did have some effect on the economy in the last few quarters. However the most controversial aspects of the Bush tax cuts consist of the deep cuts for the very rich and will largely be phased in later in the decade. These don't contribute to aggregate demand today but they do damage the long-term fiscal outlook which will tend to raise long-term interest rates and hurt long-term growth.

[kwildcat]

If only you were right, CyberPundit - do you really think the tax cuts for the wealthy will be allowed to sunset like they were written? If Congress and the White House retain their present makeup, it is more likely those cuts will be made permanent. Tack on a few billion more to that deficit, boys!

[CyberPundit]

You seem to have misunderstood me; I didn't say anything about the sunsets. I just said the cuts will be phased in later which will damage the long-term fiscal outlook.

[Beagle]

I agree that the real test is whether jobs follow. Obviously, people spending money (tax cuts) should lead to job growth.

As I've said on many occasions, I'm not sure if globalization is helping less developed countries or starting a race to the bottom in terms of political rights, human rights, and labor standards. If China is the new template, we can't compete without some changes I'd rather die than see.

As for the deficit, it's shrinking.

['possum stalker]

originally posted by Beagle
As for the deficit, it's shrinking.

('possum does spit-take as his ten-gallon hat spins above his head)

It may be that projected future deficits are shrinking due to today's new numbers, but I don't believe anyone has calc.'d it yet. The OBM numbers are ~made-up, anyway.

Believe you me, the deficit grows every day. If you can find a ref. that honestly shows the deficit shrinking in any meaninful way, I will eat my hat. And its a big hat.

[Beagle]

Dude(ette?), I'm just suggesting that if government spending does not go up any more, given the apparent numbers, the deficit should be shrinking.

I heard the other day that the projected numbers suggest it is going down. If it is proven wrong later, then it's wrong, and so is my suggestion.

I agree that financial numbers have become highly politicized. All I can do is wait.

[ElvisL1ves]

"As for the deficit, it's shrinking."

That's supposed to be good news? We had surpluses as recently as 3 years ago, remember?

As for the rest of it, whose "economy" are we talking about, even assuming it's really growing? That of the MNC's who've been exporting wealth-creating jobs for years, or the bulk of the people? Jobs have been lost constantly under this Administration and its policies, and they're the first since Hoover to have failed us so spectacularly. The recession officially ended 2 years ago according to Bush's Treasury - the increase in jobs should have started to show by now, wouldn't ya think? Right, Sam?

[Beagle]

Fake surpluses based no projections.

[Beagle]

From the dyslexic dempratemtp.

Crimeny, NOBODY knows the future. Sure, I called the Marlins in six. If they won the series, I had a one in four shot.

The surpluses went straight to hell when the Twin Towers fell down. Some things require a lot of money. "You cannot be a superpower on the cheap."

If Disney World is struck by a squadron of B-52s tomorrow on a "routine training mission" gone awry, what happens to our deficit? That's the situation we face now in foreign policy.

[theretsof]

"Lets not start sucking each others dicks yet"*



*The Wolf

[John Mace]

Originally posted by newcrasher
You don't think that the tax cuts loosened the pockets of Joe Sixpack a bit, which increased demands for goods and services across the board? It would seem that the tax cuts would act as a catalyst for growth, not the growth in and of itself.

Could be. The economy is such a complex beast, I'm very skeptical of anyone touting a driect cause/effect for any one factor. More money in the hands of consumers is good-- I don't doubt that. Can a few hundred bucks to "Joe Sixpack" induce a 7.2% spike in the GDP? If only it were that simple.

[Rashak Mani]

I'm a little miffed by the:

"The economy grew at a scorching 7.2 percent annual rate in the third quarter".

So in the third quarter specifically the GDP grew the equivalent of what would be 7.2 if this was kept for a whole year or the GDP gained until now this year 7.2 growth ?

What will the annual average be ?

[jshore]

Well, I am glad that most people here aren't willing to give GW credit for the sunrise. I am willing to admit GW's policies must of had some stimulative effect...Hell, with all the money he has injected into the economy by running up the deficit with tax cuts and a spending binge, what is amazing is how little effect it seems to have had so far. (Alan Greenspan has kept interest rates very low so the negative effects of the deficit causing higher interest rates, to the extent it does, hasn't come in yet.) As people like Krugman have pointed out, GW seems to have gotten about the minimum bang of stimulus for the maximum buck of deficit increase by giving the tax cuts primarily to the rich who don't tend to spend the extra money as much as the middle class and poor would.

It is easy to stimulate your own economy by just going out and spending a lot of money on your credit card. The problem comes when it is time for you to pay your bill!

[John Mace]

Originally posted by Rashak Mani
So in the third quarter specifically the GDP grew the equivalent of what would be 7.2 if this was kept for a whole year...
yes
... or the GDP gained until now this year 7.2 growth ?
no

What will the annual average be ?
Won't know until the end of the year. Then it won't be an average, it'll be an annual rate.

[Rashak Mani]

Would this be a repressed demand of sorts ? Sudden return of confidence by consumers ? (sorry if I get the economic terms wrong... studied economics in portuguese)

[rjung]

Hypothetical question: Is the media playing up this one report (emphasis on the one) in an attempt to boost investor confidence, and thus really get the economy rolling again?

[Rashak Mani]

rjung, yes I think its what their are doing...

[John Mace]

Originally posted by Rashak Mani
Would this be a repressed demand of sorts ? Sudden return of confidence by consumers ? (sorry if I get the economic terms wrong... studied economics in portuguese)

Could be. But the latest numbers reflect a big increase in business spending, too. You need to dig beneath the surface of what is usually reported in the popular press to get at what's really going on, if that's even possible.

[Sam Stone]

The economy grew at an annualized rate of 7.2%, measured over the quarter.

That means in the last quarter, GDP increased by a total of 1.8%.

GDP is roughly 10 trillion dollars, so that means an increase of about 180 billion dollars. Bush's tax cut over that quarter was what, 45 billion or something? With all those refund cheques that went out over the summer? That's not chicken feed, and it probably has a fair impact on that number.

Also, most analysts feel that a good chunk of that growth was consumer driven, which in turn was fueled by mortgage refinancings and the tax cut.

This also means that this level of growth is probably not sustainable. And in fact, analysts are still predicting growth in the next quarter to be around 4-5%. Still, if it comes in at that level, that will mean that economic growth for 2003 will come in at close to 5%, which is a pretty good number.

I'd also like to point out that an increase in GDP of 180 billion dollars should bring an additional 30 or 40 billion dollars in government revenue, so expect the deficit numbers to be revised slightly downwards after this.

And this is actually a fairly broad-based recovery. Consumer spending is up. Jobless claims are down (and still well below the magic 400,000 level which indicates job creation is greater than job losses), business spending is WAY up, and purchases of American goods by foreigners is also up. That last is especially good news for the job market.

And maybe the most important indicator for growth for the next quarter - inventories are way down, and are now at one of the lowest levels as a percentage of sales than they've been in a long time. This would suggest an increase in manufacturing activity in the next quarter, which should be good for job creation.

Certainly Bush's tax cuts weren't solely responsible for the increase, but they may have pushed growth up by a percentage point or two.

['possum stalker]

Sam: An excellent overview. Perhaps you could expand on it a bit.
What about the above claims of a 'porsche recovery'? Will continued increases in productivity mean more growth without jobs?

[Rashak Mani]

Something else is fueling this... are the asians sending all their dollars to the US again ?

[Beagle]

I hope the right wing biased mass media really spins this out of proportion to what it is. It is good news, right? All economic data must be analyzed carefully. But a spike in GDP is hard to knock, IMO, unless the next quarter really disappoints. Numbers games can be fickle.

I do not think the tax cuts are responsible for the economic rebound. They are one tiny piece of the whole puzzle. One might as well thank the credit card companies for bombarding us with promotional offers, since college, when we had near zip for income, remember? Thanks. Let's not forget the American convenience store, without which nothing could be accomplished conveniently.

I think the cuts are regressive. They should be targeted directly at me. Moreover, I think that stronger economic growth tends to follow long periods of slow growth or recession in the United States as a rule.

One more thing, close the SUV tax loophole. 6,000 pounds and you get a discount? Someone get Johnny Cochran to properly express my outrage.

[John Mace]

Originally posted by Rashak Mani
Something else is fueling this... are the asians sending all their dollars to the US again ?

How could they be, what with all that anti-US sentiment out there.:)

Why do you think that "something else" must be fueling this? It's just one quarter, and very unlikely to be repeated. The US has seen very slow growth for quite some time. It doesn't seem like anything other than the normal business cycle is needed as an explanation. Now, if we saw several quarters in a row with growth like that, then we might want to look for unusual inputs.

[minty green]

Originally posted by rjung
Same here -- my refund went into a college fund, and didn't do diddly-squat for the economy. Then you shoulda been in the top tax bracket like me and the rest of the badasses driving this expansion. I spent my tax cut on fast cars, fast women, and hundred dollar bills. There's 1.2% growth for ya right there!

[pantom]

Boy, even with all our partisan blinkers on (yours truly is a Democrat), this was a fantastic report.
Let's recap, from cbsmarketwatch.com:


The first estimate of real gross domestic product was considerably stronger than the 6 percent consensus forecast...The growth rate is a testament to the power of monetary and fiscal stimulus to boost final demand. Final sales of domestic product grew 7.8 percent, the best in 25 years. Real disposable income increased 7.2 percent...Real GDP is adjusted for price charges. In current dollars, nominal GDP increased 9 percent to $11.04 trillion...Growth was balanced in the quarter, with strong contributions from consumers and businesses, spending and investment. Government spending and net exports also added to growth. The only negative forces were inventory accumulation and investments in business structures...The nation continued to run a large trade deficit with foreign economies. But the gap shrank in the third quarter, so net exports added about 0.8 percentage points to growth. Exports rose 9.3 percent while imports increased 0.1 percent.


Given that inventories continue to be run down, I'd say that strong growth in GDP is sustainable through the next couple of quarters, because those inventories have to be rebuilt at some point.
The only cloud in this silver lining is in this apparently good number:


Led by strong auto sales, purchases of durable goods rose 26.9 percent, the best in 15 years.


The problem with this is that durable goods are precisely that, durable. The above performance is not likely to be repeated any time soon.
I posted this in a different thread before, and I'll post it again. The path to economic stimulus is straightforward and known, and this Administration has followed the textbook to a tee. The things to do are:

1 - Run a deficit.
2 - Lower interest rates.
3 - Devalue the currency.

All three have been and are continuing to be done. The strong sales numbers are a result of 1 and 2, while the strong performance of exports is a result of number 3.
As for the lack of jobs, there's outsourcing, galloping health costs, and productivity to blame.
Putting on my partisan blinkers, Bush's goose is still cooked if he can't figure out a way to get some job creation going. There's a lot of angry, unemployed and underemployed people out there, and they remember that this is what it also felt like under Bush I, when it comes to jobs. For a lot of voters out there, the thought is that the acorn didn't fall far from the tree.
Finally, the current account deficit is still a problem. If the strong growth turns out to be sustainable it might lessen due to a shrinking trade gap and stronger foreign direct investment, which would finance the remainder in a way that actually strengthens the long-term capacity of the economy to grow. But that kind of progress remains to be seen.

[Duckster]

So where are the jobs?

[telesis2001]

Hypothetical question: Could positive GDP numbers like this artificially boost consumer confidence in time for the holiday spending season?

[Really Not All That Bright]

Originally posted by Beagle
Dude(ette?), I'm just suggesting that if government spending does not go up any more, given the apparent numbers, the deficit should be shrinking.

I heard the other day that the projected numbers suggest it is going down. If it is proven wrong later, then it's wrong, and so is my suggestion.

I agree that financial numbers have become highly politicized. All I can do is wait.

Assuming that the tax base is again increasing, and spending remains static, then yes, the deficit would be shrinking.

However, spending WILL increase, especially given the war that Dubya was nice enough to start for us. More importantly, once the larger chunks of Bush's tax cuts kick in, net taxes will end up pretty much where they were this time last year.

That's assuming that 1.8% growth this quarter (7.2% is a projection, not the actual increase) continues for at least a year.

[Rashak Mani]

Hhmm... its the EXPORTS then ! Of course. Dollar is weak... exports go up... imports stay the same. That helps the US industry. Why did it take so long to affect thou. The dollar has been falling for quite a while.

With low interest rates and devalued currency... won't we see a bit of extra inflation ? Especially since many of the consumers are fueling their buying with credit ?

[flonks]

It might be the increased defense budget. With all the spending on defense, there is lots of job creation in this sector which creates consumer spending. Some kind of "unvolontary New Deal".

That's only an idea, I have no cite to back it up.

If it's true, it's on credit.

[Rashak Mani]

I read "the economist" webpage and they say its fueled on credit by the consumers who didn't have nice tax cuts. Still they are willing to borrow on the cheap interest rates.

[Beagle]

dutchboy208, I'll bet this does not feel like Fall to you. Play golf? Ekana is a nice course, but I think they renamed it after receivership, or something.

Let me emphasize again, financial projections are just projections. If Bush has to spend more on "The Great Experiment in Iraqi Democracy" -- spend it. There is no Plan B.

Furthermore, the tax cut is regressive. And, equally true, I would like it targeted at me. I'm not backing down an inch. ;)

[China Guy]

Keep it simple. An one quarter economic change (is this q/q or y/y comparison), doesn't mean jack squat. One has to look for a sustained improvement and there are so many variables that one quarter is statistically and economically meaningless. Now this may be the first of many quarters that show growth, but not a call that can be definitively made at this point. One quarter change is not statistically or economically meaningful, but that doesn't stop headlines and WAGS.

Get back to Joe Sixpack and basics. He doesn't give a flying anything about the economy. He cares about job creation, and job creation usually lags the economy by a long time. Bush the senior confused the economy with job creation, I'm thinking that Bush the junior is doing the same dang thing. If someone cynical were to look at economic cycles, impact of fiscal policy like tax cuts, and the expectation that petroleum prices would drop dramatically as soon as that Saddam regeim change came about, then you would expect that the election year should show a decent economic uptick. Maybe a cynic would think this was driven by someone looking at re-election. However, that pesky job creation that an awful lot of voters are concerned with most likely isn't going to kick in until after the election.

[elucidator]

Don't know how relevent this is. But I've heard it remarked that a considerable portion of the spendable dough getting spread around on the consumer market is due to people cashing in on mortgage refinancing. I was working in this area as a drudge. A temp drudge. About 6-10 weeks ago, we were working feverishly, overtime anytime, 1600 units per day, grind grind grind.

Last couple weeks, been around 300, tops. So, if its true that re-fi money was a big portion of the loose cash running around the economy, well, adios to that. Plus, of course, that refund money is long gone.

Now, I am not much of an economist. What kind of science is it when everyone is always "stunned" and "shocked"? But it seems to me that if these two factors are crucial, then the party's already over even as they open the champagne.

[China Guy]

elucidator, interesting ancedotal evidence. No surprise as this is exactly what Greenspan intended when he drove down rates. Get people to refinance and the liquidity would spend the US out of a recession (or at least limit the pain). Wages shrunk, employment shrunk, but give home owners a cash boost via refinancing. That $10-20-50k cash in hand did a lot more to boost spending on big ticket consumer items than a couple hundred dollar tax rebate.

[newcrasher]

But doesnt the Fed Chairman serve at the pleasure of the President?

Clinton got credit for the fantastic economy that was a result of the dotcom boom, and GW is cleaning up the market correction from the bust. But Bill got credit for the boom, even though he had little to nothing to do with it, and GW should get credit if and when we pull the economy into rosier times.

[capacitor]

There are still 2 problems with this :

1. Distrust of corporations, almost on par with distrust of government,
and
2. Lack of Job creation.

If Bush doesn't cut red tape regarding small and new business, and is still lax as he is in punishing criminal corporate behaviour, he could be one economic scandal away from being finished.

[elucidator]

Originally posted by newcrasher
... and GW should get credit if and when we pull the economy into rosier times.

That would be justice, which is rightly reserved for the worthy.

[Magiver]

Originally posted by rjung
Same here -- my refund went into a college fund, and didn't do diddly-squat for the economy. I suspect that the average "Joe Sixpack" refund recipient was in a similar quandry, since the size of the refund wasn't big enough to finance any economy-boosting big-ticket items.

I disagree because I haven't seen any signs that personal debt ratios have changed. That would imply that the money made it's way into the market.

It is my personal opinion that the GNP fluctuates exponentially in relation to the availability of money. If the cost of money increases than money will be pulled from the market to retire debt. If the cost of money decreases than money will be invested through credit which requires an inflow of dollars into the economy. Money is literally created by the banking system which has to borrow it from the Feds.

Reducing taxes should have a positive affect on the economy if it coincides with low interest rates. If you are trying to encourage personal debt reduction you would reduce taxes but increase interest rates. Bush did what any President would do, Dem or Rep.

[Early Out]

Originally posted by newcrasher
But doesnt the Fed Chairman serve at the pleasure of the President? Not quite. Each Governor is nominated by the President, confirmed by the Senate, and then serves a 14-year term. The Chairman is selected from among the Governors for a 4-year term - again, nominated by the President, and confirmed by the Senate. If the President is not happy with what the Fed Chairman is doing, there's not much he can do about it until his term is up, at which time he can choose not to nominate him again. But even then, the Fed Chairman would return to being one of the Governors.

From the Federal Reserve website: (http://www.federalreserve.gov/faq.htm#bog)
How are members of the Board selected, and what are the conditions of the term of office?

The seven members of the Board of Governors of the Federal Reserve System are nominated by the President of the United States and confirmed by the U.S. Senate.

One term begins every two years on February 1 of even-numbered years. A member who serves a full term may not be reappointed. A member who completes an unexpired portion of a vacated term may be reappointed to a full fourteen-year term. All terms end on their statutory date regardless of the date on which the member is sworn into office.

The Chairman and the Vice Chairman of the Board are chosen by the President from among the sitting Governors and are confirmed by the Senate. They serve a term of four years and may be reappointed as Chairman or Vice Chairman until their terms as Governors expire. A member's term on the Board is not affected by his or her status as Chairman or Vice Chairman. Governors can also be appointed as Chairman or Vice Chairman to a term that ends after their terms as Governor expire.

[pantom]

Magiver: Except he's done it with remarkable, actually stupendous, incompetence.
Think about this (we're going to assume for the purposes of this post that that 7.2% number is for real. Note that jobless claims are running in a pattern of negative revisions in 7 out of 8 weeks, (http://www.gold-eagle.com/editorials_03/clawar102703.html) a pattern noted, for those who need mainstream press confirmation, by Paul Krugman in today's New York Times. (http://www.nytimes.com/2003/10/31/opinion/31KRUG.html) (see this quote: "for the last month there's been a peculiar pattern: each week, headlines declare that new claims fell from the previous week; a week later, the past week's number is revised upward, and the apparent decline disappears."): this quintessential bumbling fool has managed, as the aforesaid Krugman noted today, the truly hard trick of running a massive fiscal deficit and still managing to have a net loss of jobs for three years running. Let me be clear: by this time, it's his fault. He's been in power long enough, and he's had a Republican Congress at his back the entire time. If he can't get jobs created under these circumstances, he is flat incapable of doing it.

[Evil Captor]

Oh, I don't think the word is incapable. I think the word is uninterested. He would surely be OK with job creation so long as it went with his plan of makng things good for corporations and their shareholders, but it's not his main goal.

[Apos]

Same here -- my refund went into a college fund, and didn't do diddly-squat for the economy.

There is nothing you can do with money that makes it not do diddly squat for the economy. If you put that money into the bank, do you really think that money affects nothing? Even if you set it on fire (the same as NEVER spending it) it affects the economy. (Bonus points: how?)

Bush shouldn't get the credit for an improving economy, but much more importantly: he never should have gotten the credit for a poor economy either.

[Magiver]

Originally posted by pantom
Magiver: Except he's done it with remarkable, actually stupendous, incompetence.
Think about this (we're going to assume for the purposes of this post that that 7.2% number is for real. Note that jobless claims are running in a pattern of negative revisions in 7 out of 8 weeks, (http://www.gold-eagle.com/editorials_03/clawar102703.html) a pattern noted, for those who need mainstream press confirmation, by Paul Krugman in today's New York Times. (http://www.nytimes.com/2003/10/31/opinion/31KRUG.html) (see this quote: "for the last month there's been a peculiar pattern: each week, headlines declare that new claims fell from the previous week; a week later, the past week's number is revised upward, and the apparent decline disappears."): this quintessential bumbling fool has managed, as the aforesaid Krugman noted today, the truly hard trick of running a massive fiscal deficit and still managing to have a net loss of jobs for three years running. Let me be clear: by this time, it's his fault. He's been in power long enough, and he's had a Republican Congress at his back the entire time. If he can't get jobs created under these circumstances, he is flat incapable of doing it.

Paul Krugman's articles are political in nature and are always written to be hostile to Republican polititians. If you wish to use him for purposes of discussion then I bid you good day.

[pantom]

At this time, first of all, that'd be good night, Magiver. Secondly, for the pattern of the job claims numbers, I cited a right and a left wing source, which I should think would be enough. As for the massiveness of the fiscal deficits, we have this:the debt to the penny (http://www.publicdebt.treas.gov/opd/opdpenny.htm), which, if you do the math, shows that in the first 30 days of this fiscal year, the total deficit was 77 billion dollars, or about two and a half billion dollars a day. I think that qualifies as massive.
And not a single job created. If you don't like incompetent, how's this: shameful. Truly shameful.

[Scylla]

Tax cuts are an economic stimulus. There's no ands ifs or buts about that.

The economy is cyclical in nature, and tax cuts are just one form of stimulus that was used.

Would the economy have recovered as fast without the tax cuts?

Probably they had an effect.

Would it have recovered without them?

Probably.

[jshore]

I don't think anyone doubts that tax cuts and increased spending cause short term stimulus. However, over the long term you gotta pay t he piper.

Also, not all tax cuts are created equal and, as Krugman, William Gale (who Krugman quotes in his column), and others have pointed out, Bush managed to implement tax cuts in a way that maximized the negative effects on the deficit while minimizing the stimulative effects.

At any rate, I agree with those who say Bush shouldn't be blamed for the dot-com bust and attendant recession. However, he should be blamed for implementing policies that didn't do very much to help get us out of it while at the same time showering the rich with tax breaks and completely screwing the budget for years to come!

[newcrasher]

Does anyone think that this news, which leads most economists to think the economy is on its way to being robust again, is the beginning of a liberal retreat that sounds something like this:

Yeah the GDP is up, but where are the jobs?

(then jobs recover)

Sure jobs are up, but how about wages?

(then wages recover)

OK wages are strong, but interest rates can't stay low forever?

etc ad nauseum...

Are the liberals unable to acknowledge positive economic indicators? To have a chance in 2004 will they have to continue to look for the the grey clouds in any good news?

[Sam Stone]

The last part, if the recovery is robust:

"Corporations are raping us - their profits are obscene!"

"It's a rich person's recovery! The rich are getting richer, and the poor aren't."

"The recovery would have been even stronger if it hadn't been for Bush's tax cuts for the rich."

There will be a renewed focus on 'excessive' corporate profits. CEO salaries will rise again, and that will kick off a new round of class warfare.

The Republicans would come up with reasons to bash the president as well if it were a Democrat. Hell, it's an election year next year, and nine people are trying to be President. They need to come up with reasons. It's a natural thing.

[BrainGlutton]

Posted by Sam Stone:

. . . and that will kick off a new round of class warfare.


From your lips!

[Evil Captor]

Oh, "class warfare." That's where the middle and lower classes make some kind of response other than "thank you sir, may I have another?" for the economic reaming the Pubbies are giving them. In a fistfight it would be called "hitting back."

[pantom]

It's also a polite way of calling a person a communist. I truly hate hearing that garbage all the time. As if standing up for your interests is somehow wrong.
Anyway, newcrasher, dream on. I see by the calendar that the election in 2004 will be on Nov 2, which means the last employment report before the election will be the September report. That means there's only 11 more reports, including one for the month just past coming out next Friday. We already know that this 7% spurt produced no new net jobs in the last quarter. In order to avoid the headline next Nov 1 of being the first Prez since Hoover to lose jobs, net, during his term, he's going to have to push this economy into overdrive. (For comparison Carter, who was considered somewhat less than competent by most in matters economic, created 11 million jobs net during his four years. Bush should be so lucky.)
There's a lot of things Bush will be able to run on next year, including the tax cut, because people do like to have their taxes cut, but the economy isn't going to be one of them.
He can argue the tax cut on a lot of other grounds, but on economic grounds only his core constituency will be with him. If the core were enough to get him elected, we'd have Republican presidents all the time.

[Sam Stone]

Man, you Americans are spoiled. You talk about the jobless situation as if 6% worst disaster to befall an economy. That's nothing. Canadians aren't whining about our job losses, and we're sitting at 8%. Under a Liberal government. It wasn't that long ago that 5% or so was seen as 'full employment'.

The average unemployment for the entire Euro zone is 8%. It's 9.8% in France. It's over 10% in Germany. In fact, the U.S. has one of the lowest unemployment rates among developed countries. Japan's is only slightly lower at 5.6%.

If next November the jobless rate is at 5.8%, the economy is growing at 5% per year, wages are up, taxes are down, and the deficit starts even a slow decline, the Democrats won't have a thing to run on. Yelling about jobs works when A) jobs are being lost, because that frightens people, or B) You're talking to union members or the Democratic working class base. As an issue in a national election, I predict it just won't gain any traction.

For the Democrats to be able to run on the economy, you're going to need, A) a double-dip recession (very unlikely at this point), B) a spiralling deficit (entirely possible unless Bush gets his act together real soon on the spending front), or C) a completely jobless recovery, with unemployment at or higher than the levels today.

I think those things are unlikely. The recovery so far has been relatively jobless because it's been driven by sales of high inventories and productivity gains from variable cost cutbacks among businesses (for instance, GE is showing good cash flows, but it was almost all achieved on the cost side - cutting or freezing salaries, eliminating optional flying, etc).

But now that businesses have cut to the bone, and inventories are low, the only way to fuel growth is by increasing business investment and ramping up manufacturing. That creates jobs. It may even create them at a very rapid pace. And once the jobless numbers fall another percentage point or so, the additional demand for workers will result in rising salaries.

The Democrats need the economy to crash again, or they need a disaster in the Middle East. If they get neither of those things, Bush is going to win re-election easily.

[newcrasher]

Originally posted by pantom
(For comparison Carter, who was considered somewhat less than competent by most in matters economic, created 11 million jobs net during his four years. Bush should be so lucky.)

Can you tell me just how Jimmy Carter created these jobs?

You illustrate my point above well. Libs will HAVE to look for the dark clouds, and cannot celebrate this economic rebound with the rest of the country.

['possum stalker]

"There has been a growing fraction of less-skilled men who would have been counted among the unemployed thirty years ago who have simply withdrawn from the labor force," says Topel.
-from an online publication of the University of Chicago Grad School of Business (http://gsbwww.uchicago.edu/news/capideas/win03/unemployment.html)

Unemployment rates in other countries also come closer to reflecting "joblessness rates" because elgibility is wider and benefits last longer. So it's not really statistically valid to compare different countries' rates head-to-head.

Again, you have ignored productivity gains due to mechanization and foreign outsourcing, which will allow increased production without (domestic) job growth.

[rjung]

"It is easier for a camel to pass through the eye of a needle than for a rich man to enter heaven."
--Jesus Christ, practicing class warfare :rolleyes:

[Rashak Mani]

Guys... guys... just remember that Bush only needs a perceived better economy... not a really better economy to win.

[pantom]

Actually, the economy is only one of many issues. This is going to be a very complex election year.
But on this issue, to say that the advance in the GDP precurses enough of a rise in employment to offset the past three years in the voters' minds is, well, risible. As was observed on one of the investment shows on Fox this morning, there's three people in the whole country who care about GDP. That's not enough to elect a president.
The headline over this President on Nov 1 is going to be that he was the first President since Hoover to preside over a job loss. The deficit in jobs as of the last report was 2,574,000. To break even, 234,000 jobs a month are going to have to be generated. Don't hold your breath. (Even if he somehow manages to pull this off, what's he gonna do? Stand on some carrier deck with a big banner that says "Read my lips. No new jobs!" Honestly, get a grip.)
No one I know of is changing jobs, for the simple reason that everyone knows no one is hiring. I used to get calls all the time from headhunters; now, it's been at least a year since I got a call. I'm not alone in this experience.
Some of the things that have happened, like outsourcing, are things that are far beyond the power of the President to change. Other things, like the rapid advance in health costs, are within his power to change, but of course won't be. As for the tax cuts, yes the stimulus has finally kicked in. Three years too late.
newcrasher, your side might very well win the election, but it won't be on a straight up or down vote on the economy.
As to the question of how Carter created those jobs, he didn't of course. He just didn't do anything remarkably stupid. The American economy will generate jobs all by itself if the President just sits on his ass and doesn't do anything dumb. Right smack in the middle of the time the economy should have been rebounding, Bush invaded Iraq on what to most objective observers (this would be those who agree with me, natch) would say were trumped up charges, thereby placing an entirely unnecessary burden on the economy at exactly the wrong time.

[Rashak Mani]

Just to add to pantom... the kind of military costs the US has in Iraq aren't the types that help too much the US economy either. Its a lot about maintenance of the troops and other "simple" stuff. No tomahawks or new jets. At least I imagine that the gain to the US economy thru the military machine isn't much. So those billions aren't fueling growth back "home".

[Brutus]

Originally posted by Rashak Mani
Just to add to pantom... the kind of military costs the US has in Iraq aren't the types that help too much the US economy either. Its a lot about maintenance of the troops and other "simple" stuff. No tomahawks or new jets. At least I imagine that the gain to the US economy thru the military machine isn't much. So those billions aren't fueling growth back "home".

MRE's, at least some of them, are packaged here in Michigan. Tank treads are made in Lima, Ohio. Uniforms are made somewhere in the USA. Etc. The parts for mere maintenace and other 'simple' stuff have to come from somewhere, and that somewhere is overwhelmingly America. The Appropriations Committee sees to that.

[Rashak Mani]

Still its not much of a economy booster... at least from what a good chunck of the $87 billion seemed to be.

[Sam Stone]

Actually, the economy is only one of many issues. This is going to be a very complex election year.
But on this issue, to say that the advance in the GDP precurses enough of a rise in employment to offset the past three years in the voters' minds is, well, risible. As was observed on one of the investment shows on Fox this morning, there's three people in the whole country who care about GDP. That's not enough to elect a president.


So let me get this straight - what the voters are going to care about is not the direction of the economy, but whether or not more jobs have been created than lost over the course of the entire four years? That sounds ridiculous to me. You're just spewing DNC talking points - there's no evidence that I know of that the average person thinks that unemployment is the defining issue of the election, or even an important one, save for that it is indicative of the general state of the economy. People understand that there was a recession, and that there is a war on. The Democrats like to go on about how this is the first president to have a net job loss since Hoover and all that, but this is also the 20th century, and the world is a very different place than it was. No one blames Bush for 9/11 (outside of the nutbar left), and people understand that the U.S. took a huge economic blow on that day, stalling out a modest recovery. These have been tough years, and very little if any of the blame lands with the President for the economy's state.

if unemployment is going down on election day, no one but Democratic core voters is going to care how many jobs were lost two or three years ago. They're going to care about how many are created in the next four years. And even then it's not clear to me how big an issue 6% unemployment ever was - I think the constant harping on it by Democrats trying to be elected keeps the issue in the forefont, but do the voters care?

[Duckster]

So I ask again, where are the jobs?

Anyone who is looking for working and not finding it is left out of the loop. It makes no difference where the economy is really expanding at a 7.2% annual rate or note. At the end of the day, without a job, without income to support oneself, all the statements made mean nothing.

Yes, I am being simplistic. Yes, a growing economy should mean opportunities for finding a job are better. However, when will this happen? For those out of work, with unemployment gone, if not savings as well, any talk that jobs will happen three months, six months or nine months down the road, means diddly squat to paying bills now. How many are literally on the street because they have no money? How many are shunned by potential employers because they are not merely out of work, but out of a home as well?

It's great to talk macro-economics, with flipcharts and grandiose plans for the economy. Ordinary people do not act nor think that way. They talk about looking for work now, interviewing for a job now, getting a job now, paying bills now, etc., and not some potential down the road.

[pantom]

I have no freakin' idea what the DNC talking points are. The bit about Hoover's been all over the place, and probably is a DNC talking point by now; if it isn't they're not doing their job. As to the importance of jobs, I read about this years ago in that flaming left wing rag, Barron's. They contended that there was a relationship between how employment was doing about a year before the election and whether or not the incumbent party did well in the Presidential election the next year, on the entirely reasonable assumption that the job market is the thing that counts the most to most voters. Simple common sense, really. (see Duckster's post.) I tried this myself, and figured out the following: prior to the 1976 election, this rule was meaningless. Starting with that election, and continuing down to the present day, it worked in every election since then until the 2000 election, which Bush won by a nose despite an unemployment rate that was gently trending lower going into the election (although it was a disputed election, so some people might contend that the rule did actually work in 2000.)
My own theory is that it worked between 1976 and 1996 because that period was a period of unusually high unemployment in comparison to the 50s and 60s, and of course no major wars. The rate in 2000 was comparable to the rates that held during the 50s and 60s, so the economy receded as an issue because things were so good, so enough people felt it was safe to change horses to put Bush in the White House.
They're not so good now, so I think the state of the job market is going to be a strong issue next year. Not the defining issue, but an important one, and given that you could contend the rule worked even in 2000, you can be sure Rove is not relaxing when he thinks about this.

[jshore]

Originally posted by Sam Stone
The Democrats like to go on about how this is the first president to have a net job loss since Hoover and all that, but this is also the 20th century, and the world is a very different place than it was.

Actually, it is the 21st century...Although this Freudian slip may explain some of the confusion you conservatives are having! ;)


No one blames Bush for 9/11 (outside of the nutbar left), and people understand that the U.S. took a huge economic blow on that day, stalling out a modest recovery.

While 9/11 certainly had a short term negative impact, it is not clear how one can blame it for the economy 2 years later. Particularly since, as noted, it has caused a spending binge that at least partially offsets the negative impact. (I would tend to side with Brutus more in the argument about whether defense spending stimulates the economy. It may not be the most effective stimulus but certainly it is a pretty significant one.)


if unemployment is going down on election day, no one but Democratic core voters is going to care how many jobs were lost two or three years ago. They're going to care about how many are created in the next four years.

Well, when my company hires people they use a process predicated on the idea that the best way to predict how someone will act in the future is how they have acted in the past in similar situations. What the Dems have to point out is that instead of grappling with the real economic issues, what this President did is just re-packaged his tax-cuts-for-the-wealthy as a stimulus package. I mean, it was so freakin' blatant! Remember how the tax cuts were originally predicated on the idea that the surplus should be given back to the taxpayers. It had practically nothing to do with stimulus back then. One should always get suspicious when the proposed solution is the same no matrer what the problem is!

[Evil Captor]

Sam's right -- wealthy shareholders will care about the economy overall, but won't care about unemployment at all. But that's as far as his "rightness" goes.

Most people who hold jobs will care about joblessness because that relates directly not only to their chances of finding a job, but to how nasty their job gets. Employers know that in a tight economy they can get away with about anything, and they do.

My suspicion is that if joblessness doesn't go away by 2004, we can look for election-related hi-jinks ranging from shady stuff to the downright illegal from the Repubs that will make 2000 look like the most honest and forthright election ever held.

[John Mace]

Originally posted by Evil Captor
Sam's right -- wealthy shareholders will care about the economy overall, but won't care about unemployment at all. But that's as far as his "rightness" goes.

Most people who hold jobs will care about joblessness because that relates directly not only to their chances of finding a job, but to how nasty their job gets. Employers know that in a tight economy they can get away with about anything, and they do.
"Most" people? Got any evidence to back that up, or is it just speculation?

My suspicion is that if joblessness doesn't go away by 2004, we can look for election-related hi-jinks ranging from shady stuff to the downright illegal from the Repubs that will make 2000 look like the most honest and forthright election ever held. [/B]

"Joblessness" won't "go away'? What does that mean? If you mean that the unemploywment rate won't go down, then there's really no need to speculate. We'll have numbers at the appropriate time to clarify the situation. I'll keep my eyes and ears open for "shady stuff", especially from the Pubs. Those guys are just so "shady"!

[Sam Stone]

Sure, unemployment is important because of the secondary effects it has - primarily wage stagnation. The other reason is because rising unemployment makes people worried about their own jobs even if they are employed. That's why unemployment becomes an issue for the wider population, even if it only represents about 6% of the population.

But the important thing to note is that it's not the absolute number that's important - it's the trend. When unemployment is falling and jobs are being created, people feel better about the direction of the economy. They feel more secure in their own jobs. It's only when people are losing their jobs around you that you feel like the economy is in trouble.

So I repeat: If unemployment is at 5.8% and falling, then unemployment will have no traction in the election. No one outside of partisan Democrats is going to care whether the number of new jobs reaches some magic 4-year cumulative figure and erases the job losses from the first half of the term.

And here's the other important number: The Dow. The Baby Boom generation is heavily invested in the stock market. They're getting up there in years, and have significant retirement investments outside of their 401(k)'s. If the Dow is over 10,000 at election time, the Democrats are in trouble (and it could be over 11,000 and reaching new highs).

Right now, all the trends are moving the President's way, except possibly in Iraq (and it's too chaotic there to really know how it's going to shake out in a year). If Iraq stabilizes, the Dow is over 10,000, there are no new major terrorist attacks on U.S. soil, unemployment is lower and falling... Bush gets re-elected in a landslide.

[pantom]

Common sense, John Mace. It's been my experience and that of all my co-workers that things at my place of employment get worse every year since the bubble ended, in terms of both raises and benefits, for the simple reason that management knows they can get away with it. My department has had absolutely stellar years these past couple of years, but it's effect on our compensation relative to other departments, or other companies within the corporation (it's a big conglomerate) has been mediocre at best. My take-home has been decreasing these past couple of years, as the cost of my health insurance rises faster than the raises I get, which is one of the reasons I think this is so important. Everyone is feeling the pinch from rising health costs.
Sam, you're thinking Bush will pull a few Hail Mary passes here in the fourth quarter to tie the game, unemployment wise, and that on that basis the country will decide that Bush is a better quarterback - not just as good but better.
Also, note that the stock market is substantially lower than when he took office as well. If it's trending lower again by election time, which is a 50-50 tossup, more or less, well, it ain't gonna give him an advantage over and above what he would naturally have with the investing class anyway.
So, to sum up:

1 - He can't run on jobs because the absolute best he can do is hope to go into Election Day even on this one. This figure, contrary to your "magic number" hypothesis, is used repeatedly and constantly in Presidential elections. Be sure that if this "magic number" isn't reached, the Democrats are going to pummel him on this, regardless of which way the job market is trending at that time. (Just for the record, it's still trending higher by any reasonable measure as I write this. So the trend has to reverse for what you write to even begin to be true.) It will be effective too. Count on it.
2 - Ditto for the stock market, unless it has a truly stellar year next year. (I've never heard anyone use this in an election, though. No one figures the Prez has anything to do with the level of the stock market.)
3 - He certainly can't run on fiscal responsibility. Once again, he'll be pummeled on this one. I'm not sure it'll be effective, but it'll be there.
4 - Health costs continue to rise apace, and Bush has no plan I know of to address this. There is the proposal for a prescription drug plan for seniors, but that does nothing to help either workers or employers. Once again, look for Bush to be beaten bloody on this issue.

He can run on:

1 - The tax cuts themselves.
2 - The strong housing market, which has helped his natural base a lot. But like the stock market, I can't recall ever hearing this brought up in an election contest. But if there's a way to convert this into votes, Rove will find it.
3 - Strong rises in wages. For some reason, wages are moving up nicely overall, according to a recent story in The Times. If that proves to be a trend, this will be a definite wind to Bush's back, and certainly something he can use against the Democrats.

[Evil Captor]

Originally posted by John Mace
"Most" people? Got any evidence to back that up, or is it just speculation?

You whooshing me or what, John? I'll assume not. Let's put on our thinking caps. Do most people in America work for others or work for themselves? I don't have the exact numbers, I'm sure there's an approximation out there somewhere if you're interested, but frankly, the notion that most people are self-employed or own a business as their primary way of making money is so ridic ... er, counter-intuitive, that I'll let YOU look it up.

Your other approach is to claim that people who are employed aren't at all concerned about the loss of their job, their prospects for finding work elsewhere if their jobs suck, their bosses' ability to pile shit on them because they know there's nothing out there, or job losses among family and friends.

This, too, makes no sense. Of COURSE people care about such things. It's part of being human and employed.

If you have some other point to make, make it.

"Joblessness" won't "go away'? What does that mean? If you mean that the unemploywment rate won't go down, then there's really no need to speculate. We'll have numbers at the appropriate time to clarify the situation.

Boy, you really pounded the heck out of THAT straw man! Way to go!

I'll keep my eyes and ears open for "shady stuff", especially from the Pubs. Those guys are just so "shady"!

The ones who run the Bush admin and the NRC certainly are. Good to hear you admit it.

[Sam Stone]

2 - Ditto for the stock market, unless it has a truly stellar year next year. (I've never heard anyone use this in an election, though. No one figures the Prez has anything to do with the level of the stock market.)


It's not that anyone is giving the prez credit here - it's just that when people are heavily invested in the market, they feel much better about the economy when their stocks are up. And there's the 'wealth effect' - when people see their portfolios go up $20,000, they may decide that they can afford to buy things they otherwise wouldn't - and they can also leverage their stocks.


3 - He certainly can't run on fiscal responsibility. Once again, he'll be pummeled on this one. I'm not sure it'll be effective, but it'll be there.


I agree completely here. Bush is vulnerable on the 'stewardship' angle - fiscal responsibility and some other domestic policies in particular. But again, I think these issues will have fairly low traction compared to security, the war in Iraq, and the overall economy. Those are the big three.

But man, it's really early to even be predicting issues, let alone winners and losers. Anything could happen in the next year. A major setback or victory in Iraq, a flare-up in North Korea, a major terrorist attack in the U.S... Any of these things could completely rewrite the calculus of the next election.

[Evil Captor]

Sure, anything could rewrite the calculus for next year's election, but if you wait for all potential factors to come in, you haven't really made a prediction, have you?