Ny Times Columnist and Princeton Economics Professor Paul Krugman says the economy is getting worse, despite all the optimism.
Fox News Business Director Neil Cavuto says the economy is getting better, despite all the pessimism
It’s noteworthy that these two experts not only disagree about the direction of the economy, they also disagree about what their colleagues believe. Two questions for debate:
My impression is it’s just kind of… sitting there. It’s certainly not getting smaller. It’s just very stagnant, and I don’t see it booming again anytime soon. I think the disagreement among people is a sign of that. Everyone thinks the economy always has to be either booming or collapsing, probably because that makes for better headlines and sells more papers/gets more viewers. But sometimes the economy is just kind of… there. Like it is now.
Also, Neil Cavuto is not an expert. He’s a reporter. Plus, he works for a 24-hour cable news channel. Ick.
Princeton Economics Professor vs Fox news.
How is this even a debate?
Princeton economics professor turned hack political scribe, who gets caught in major errors almost daily.
Krugman is an excellent economist, but when he strays from the technical aspects of his specialty into political punditry, he has shown himself to be a misleading, partisan idiot.
Trying to spin a rise in growth, or a reduction of jobless claims as ‘getting worse more slowly’ is a perfect example. An improvement is an improvement. The fact is, a lot of economists are projecting 4% growth next year, which is damned good considering all of the hits the economy has taken and the ongoing spending restraint due to fears of terrorism, and reduced consumer confidence for the same reasons.
Anyone who is trying to be an objective observer would have to say that yes, the economy is doing better, and the forecast is for it to do better still. But Krugman can’t admit that, because his hatred for George Bush trumps his own objective judgement.
Regarding the second, question, the Dow Jones Industrial Average gives one picture of the concensus. It went up from 7500 to 9300 between March, 2003 and June, 2003. Presumably this rise was due to our perceived success in Iraq. For the last two months, it has been flat. The Nasdaq showed a similar pattern, except that it reached a peak in July, and declined a bit since then.
ISTM that although Krugman and Cavuto were both predicting the state of the economy, Krugman was focusing on employment, while Cavuto was presumably focusing more on the stock market. Maybe they’re both right.
Are you better off now than you were four years ago?
No, it’s not a trite (and historical) question. Very few people think/act in the big picture. It’s almost always personal. They will gauge the economy by whether they have a job or not, the price of everyday items, how the wars in Afghanistan, Iraq and terrorism impact upon them, etc.
At some point many will look outward and compare personal stories, listen to their leaders and judge accordingly.
FWIW, the economy is vacillating. There is no leadership for the greater good. Partisan politics contiues to hold the roost.
Well, from what I see, the economy is getting better - slowly. It doesn’t look good compared to the boom years of the '90’s , but it is growing.
December, d’you happen to know whether Cavuto is giving his own analysis or depending on sources (other than Commerce stats)? From the info. given, he’s a highly experienced business news reporter, and probably capable of doing some analysis, but I’d like to see the views of a professional economist.
Secondly, one annoying (and probably misleading) bit of juggery-pokery in his analysis is comparing July to June. When I was doing industry trend forecasts, I was taught to always compare a month to that same month in previous years, because there are recognized biases in any economic statistics set that recur on an annual cycle. (An obvious example – consumer goods spending is always higher in December than in November, thanks to Christmas.)
Don’t know.
Makes sense to me. Also, a single month doesn’t mean much. We sometimes see an individual month’s economic statistics re-stated, due to some correction or adjustment.
Tough to say whether we’re going up or down.
Yes, the market is up, but the DJIA is one of the lesser useful items in predicting economic trends.
With unemployment still up and corporate capital expenditures still low I’d say that the private sector is being pretty conservative about things taking off again.
Toss in an added element: NPR’s Marketplace reporting that members of BOD and Corporate Officers have been selling their corporate holdings like hotcakes and that just reinforces the ‘maybe it’s not so good’ feeling.
On the other hand, if consumer spending keeps up we could still bootstrap our way out of it.
In short, it’s too early (or undecided) to indicate whether we’re going up, going down, or flatlining.
Stay in treasury notes until the trend solidifies. But I’m the conservative sort.
Here’s some news articles about the economy ‘slowly getting worse’ according to Krugman:
From the Detroit News:
Here’s the sole piece of minor bad news Krugman used to paint his negative portrait:
So, economists said the economy is growing even faster than they thought it was a month ago, and the forecast for growth is for it to be restored to levels almost as high as it was before 9/11. That’s BIG news. Oh, and jobless claims are also falling, but this month they’re saying they’re not falling quite as fast as they predicted a month ago.
So Krugman spins this into, “the economy is getting WORSE, more slowly” and turns this data into an exercise in Bush bashing. The man is hopelessly biased, to the point where he’s starting to become a self-parody.
Here’s another interesting article:
Dollar May Gain as U.S. Economic Growth Outpaces Europe, Japan
The dollar may rise in Asia on trader expectations an employment report will add to evidence the U.S. economy is growing faster than Europe or Japan.
…
Filings for U.S. jobless benefits held below 400,000 for a fourth week, a report today will probably show, according to a Bloomberg News survey. Claims below that level signal rising demand for workers, economists say.
[/quote]
This is GREAT news for George Bush. Not only can he point to a rapidly improving economy, but the data indicates that the U.S. is improving faster than just about anywhere else, DESPITE the fact that the U.S. took the biggest economic hit on 9/11, and is bearing the brunt of the cost of the war on terror. Now, whether it’s true or not, Bush can plausibly take that data and use it as evidence that his economic program is working. He can say, 'Where would our economy be if we hadn’t passed the Bush tax cut? Well, look at Europe and Japan. Despite all our current disadvantages in the war on terror, our economy is doing better than theirs. Our programs are working."
And you know, he may be right. Many economists are saying that part of the increase in growth is directly due to the Bush tax cuts. All those cheques went out a month or two ago, and if past patterns hold about half of it will get spent. This is a classic Keynesian stimulus. Some estimates are that about .5% of growth is directly attributable to that stimulus.
Now of course there is a downside to that - the money is borrowed money. It’ll have to be paid back. That’s the problem with Keynesianism - at some point you have to pay the piper, and the American public shows little willingness to ever want to pay it back.
But still, Krugman is an idiot.
Asking whether the economy is improving or not is somewhat like asking if the weather is improving or not-- it depends on where you are. If we are going to look at the economy as a whole, then we have to look at only the broad indicators and ignore local variations. So, these are the indicators that should be a reasonable guage of people’s perception:
#3 is a bit tricky since the official data tends to ignore people who have been unemployed for a long period of time.
From a purely academic standpoint, you porbably only need to look at #1. From a political standpoint, 2-4 are probably the key measures. From the data I’ve seen, it looks like #1 is improving, if slowly. #2 looks pretty healthy (low and staying that way). #3 doesn’t look too great, and is probably getting somewhat worse. I havene’t seen data on #4. Anecdotal info seems to imply that it’s not improving much, if at all.
Also, it should be noted that #1 is a real time indicator, #2 is generally a leading indicator, and #3 and #4 are generally lagging indicators.
So, from an academic standpoint, I’d say “the economy” is improving. From a political standpoint (most peoples subjective perception), I’d say it’s maybe slightly up to flat.
And for the workers too, right? You meant to mention them, I assume.
**
I’m with you, chief. There’s just no point in trying to have a dialog with someone whose every thought is tainted by partisanship.
We are getting worse. We have less jobs, and we are producing less. That means a declining economy.
If you dont include the increase in the number of government jobs, our employment of people doing real jobs is even less.
Furthermore, millions of americans are now UNder-employed, we have IT people flipping burgers at mcdonalds, even those who have jobs are not contributing like they were before.
If you factor in sales of products from american companines that use more and more foreign labor(outourcing) or foreign parts(japanese car engines or computer components), then our manufacturing is even worse than is being reported.
Producing real goods, and having real productive jobs are what makes a good economy, declines in either or both, is bad news.
Lastly, a healthy economy has a surplus in both its balance of trade, and in its federal spending - we have neither.
Few presidents get re-elected when the economy goes from healthy to unhealthy during their first term.
Yeah…But, it was about the worst Keynesian stimulus for the buck that you could possibly get because only a fraction of the bucks went to those likely to spend them.
That’s not a problem with Keynesian stimulus; it is a problem with showering largely the rich with tax cuts that produce big deficits out as far as the eye can see!
This is Krugman’s whole point, as expressed in the last sentence of his column. Bush has managed the trick of minimizing the amount of stimulus while maximizing the negative budgetary impact! Not a bad feat if you want to try to hamstring the federal government over the long term. But, not exactly wise economic policy.
I don’t understand this distinction. I would say if you want to be utterly simplistic then you only look at #1; if you actually care about how economic performance is in terms of the lives of real people (and especially not just those at the top) then #2-4 are very important. It’s not just that they are important “politically”; it is that they are what is important to people’s lives which I kind of thought economics was supposed to be about!
Why don’t we look into why the unemployment rate is dropping? It isn’t because we are gaining jobs because we are still losing them even if it is at a lesser rate than it was. The unemployment rate went down from 6.4 to 6.2 even as we lost 40,000 jobs.
People have just given up on even trying to look for work.
2.5 million jobs have been lost while Bush has been in office. If Bush can regain those jobs(when it looks like we are still losing them) he can avoid being the first president since Herbert Hoover to have a negative job growth rate.
Unemployment Claims Are Falling
This does not always mean more people are working. This does not mean that the economy is getting better.
The truth is employment edged down.
In the current case, it means only that the number of people transitioning from “Looking for work” to “Given up – no longer looking” is greater than the number of people transitioning from “Employed” to “Looking for work”.
This is because the unemployment percentage only counts people that are actively “Looking for work”, not the number of people who need a job and would hire on if offered one.
In addition, a 6% unemployment rate does not mean that 94% of all adults are employed.
Read this US government report for further explanation. The first paragraph says it all:
Note the other caveat: All the employment statistics you see on the news and in the editorials exclude farm employees. So if they hire or lay off a half million people at the beginning or end of a harvest, it doesn’t count. Also, if the agricultural sector spins off millions of people as they mechanize, that doesn’t show up either.
Why would you presume that the increase in the Dow was due to our “perceived success” in Iraq? Isn’t it vastly more likely that it was due to the passage of a cut in the dividend tax? Wasn’t it predicted that stocks would rise roughly 10%, and then we would see an increase in corporate and consumer spending? I think we’ve seen the first part happen, now what about the second and third?
I think that in these circumstances, using the Dow as an indicator of the state of the economy is particularly foolhardy. I suspect more people with the ability to do so decided to take advantage of the dividend tax cut, rather than the Dow telling us something about a real improvement in the overall economy.
This debate just goes to show how partisans can spin economic data to make political points.
If the economy grows at 3.6-4% next year, jobs will follow. As has been said repeatedly, job creation is a TRAILING indicator.
I just attended a financial quarterly meeting at my company, which is one of the largest in the world. Our economists forecast excellent growth next year. That doesn’t mean we hire THIS year, because our balance sheets are still tight, and the focus is therefore on cost control. However, we have exceeded our annual forecasts so far for the first two quarters this year. So now the bean counters are starting to think about the kinds of investments we need to leverage that growth.
If we meet our numbers for the year, and the forecast is for greater improvement next year, then I think you’ll see significant investment activity in the first two quarters next year. That’s the way this stuff works.
As for current job performance, two things stand out - one, the total number of unemployment claims is below the ‘magic’ 400,000 threshold, and has been for two quarters now. As the economist in t he article said, that number tends to indicate not just that people are giving up, but that employment activity is increasing. The other important thing is the overall jobless rate, which has just fallen below 6%. Anyone who thinks that’s a bad number is crazy - it wasn’t that long ago that that was considered to be close to ‘full’ employment, and it’s lower than the historical average.
So the partisans can’t spin the overall number, so instead they focus on the number of jobs lost, and how it’s record amounts. And that’s true, but not surprising, because the fall if from an employment rate that was clearly unsustainable, and due to a major economic bubble.
But this is what the economy is expected to look like next year:
GDP Growth: 3.6%
Unemployment: ~5.5%
Interest rates: ~2-3%
Inflation: ~1%
Historically, those are FANTASTIC numbers. Much better than average. Given the war on terror, the collapse of a tech bubble, a trillion dollars in capital wiped out on 9/11 and its aftermath, to have an economy with numbers anywhere near those above would have to be considered remarkable.
Compare those numbers to the recessions of 1991 or 1980 to see just how bad recessions can get. Hell, compare them to any time other than the massive bubble of the late 1980’s, and they look pretty good.