Did you actually read the editorial in question, Sam?
Krugman doesn’t predict “doom” by any stretch of the imagination, the thrust of his argument is that a “boom” that is evidenced primarily by corporate profit may be a delightful prospect for the investing class, but has little to offer the sorts of people who have to worry about buying shoes for thier children.
That’s just his latest spin, elucidator. First, he predicted that the recession would get deeper. Then, when the recovery started, he was predicting a ‘double dip’ recession. When that didn’t happen, he predicted a jobless recovery. Now that jobs are being created, he’s going back to the old partisan fall-back position of class warfare. Sure, there’s a recovery, but it won’t be for YOU.
The man spins faster than Nancy Kerrigan on crack.
Tell you what you do. Sam. You get me a list of professional economists who have correctly predicted what the economy would do, consistently, over the last say, twenty years.
Not the guys who end up saying “Well, that would have happened, were it not for unforseeable circumstances.” Just the ones who applied known economic principles, applied in an orthodox and accepted fashion, and have consistently been correct.
As well, there may be an economic theory that proves positively that narrowing your revenue stream while simultaneously squandering avalanches of money on military adventures and, God help us, “nation-building” (like playing Civ III, but with real money…your money…)…that such as this amounts to a splendid plan for recovery.
I become even more suspicious when I reflect that timeless principles have become remarkably flexible, that the same white men in suits who screamed themselves hoarse in porcine rage at the horror…the horror…of deficit spending… the same stern disciples of fiscal restraint…
Well, they sing quite a different tune of late, do they not?
Correction: YOU spin faster than Nancy Kerrigan on crack. So now it’s just all unknowable, huh? Might as well just flip a coin.
Tell you what: I’ll bet you right now that FY2004 shows overall growth of greater than 4%, and that unemployment is at 5.8% or below. Since you think it’s impossible to predict, I’ll even throw you a vig and pay you $60 to your $50 if I’m wrong. Deal?
Canadian dollars, or real money?
The tone of your recent posts has taken on a shrill element of ad hominem. I’m not interested in being your own personal Betty Noyer, Sam, I’d rather press wildflowers. So knock it off, OK?
I’m going to have to ask you to give a cite on that number of $350 billion / 2.5 because I don’t see where you can be getting it. Wasn’t the 1st tax cut alone something like $1.6 trillion over 10 years (and that not even counting interest on the new debt)? You divide that out and you get a bigger number than what you claim (although perhaps it was $1.4 trillion which would get down to your number). But, that is not accounting for the fact that the whole thing was heavily back-loaded so that the amount it costs per year upon full implementation is much larger than the amount you get by doing the division of the total over the initial 10 year period.
Anyway, I admit that Atcheson’s wording is bad because he seems to suggest that the $350 billion per year is already occurring (although his first reference to $350 billion doesn’t make it clear if it is per year or a cumulative number since Bush got into office). However, claiming that the tax cuts only add $350 billion / 2.5 per year isn’t accurate either without specifying that this is an average over 10 years and not a number for the cuts once fully implemented (plus excludes interest on the debt and may not include the second tax cut).
5.8% or below…Isn’t it 5.9% now? Boy, Sam, you really go out on a limb don’t you? That probably wouldn’t even be enough to make Bush the first Pres since Hoover to oversee a net decline in the number of jobs during his term in office.
Hmm, you do realize your actions belie your words, Sam? I’d rather watch what you do than what you say, and I’ll take that 25% withdrawal from the US stock market as an endorsement of the view that this recovery is being bought by policies that are unsustainable in any medium or long-term time horizon. A sustainable recovery, as I’m sure you’re aware, would feature a rising dollar as the US becomes a more attractive investment destination, after all, both for individual investors and for companies looking to invest directly into the economy.
Although the Bank of Japan will probably buy that rising dollar for us. This morning’s FT says they’re ready to spend the equivalent of the US current account deficit to intervene in the currency markets. Another easily sustainable policy, eh? Not that Bush could give a crap, long as he gets re-elected. Which pretty much defines the problem at hand.
I’d be delighted to, Sam, m’boy.
You probably noticed a prominent theme in my post that you were responding to - the gap between how well business is doing, and how well people are doing. A ‘recovery’ don’t mean jack if it just helps out the people who can live off their dividend income, unless you’re one of them.
The figures you cite in no way contradict that story: the ‘economy’ is doing great. You only have two numbers that pertain to people: unemployment and consumer confidence. In the postwar United States, 6% unemployment has generally been considered bad, not good, although the Reagan-Bush era somewhat forced us to get used to ongoing unemployment rates in that neighborhood. Here’s a little chart for you, showing US unemployment rates over the past decade.
One drawback of the Department of Labor’s definition of unemployment is that it doesn’t include people who have given up even looking for work. Fortunately, they’ve got what I regard as a more pertinent stat: the civilian labor force participation rate.
In November, the CLFPR was 66.3%, just up from its bottoming-out (we hope) at 66.1% in September and October.
Besides this year, the last time the CLFPR was this low: 1993.
Lessee, what else do we have? In 2002, the average unemployment rate was 5.8%, reflecting 8.4 million people unemployed. In addition, we had 1.4 million who had looked for work in the past year, wanted to work and were available to work, but had given up looking. (I’m ignoring about 3.2 million people here who either wanted a job but hadn’t looked for one in over a year, or wanted one but weren’t available to work at the time of the survey.) Plus 4.2 million people who were working part time because they couldn’t find full-time work. So unless that’s gotten a bit better since 2002 (and is there any reason to think it has?) the unemployment rate reflects only about 3/5 of persons unemployed or underemployed because of the economy.
In addition, the unemployed are taking it on the chin a lot more than in previous recessions:
That’s from a June cite, but those who’d exhausted their benefits and are still unemployed, have still exhausted their benefits.
Or you can read this bit from the Dallas Fed:
And that’s not even accounting for the fact that the labor force grows (in fits and starts) by 100,000 or so each month. So it’s not like we’re back to the same place when we’ve regained those 2.7 million jobs.
And I won’t even bother with your comparison between the US and European/Canadian unemployment rates. You guys have a safety net, including stuff like universal health care and undoubtedly more extensive unemployment benefits than we do, so the burdens of being unemployed or underemployed here are much greater than in Canada or Europe.
But just in case I haven’t convinced you yet, here’s some more statistics from Washington Post op-ed writer Harold Meyerson:
Yup, nothing but good news for the American working man and woman.
Thanks for that informative post, RTFirefly. Some very interesting statistics indeed. It also suggests (although I won’t say it conclusively proves) that government policies really do make a difference, i.e., if you design a stimulus package to help the wealthy “investor class” (rather than the working class), the gains really do accrue mainly to these folks.
jshore: Atcheson’s thesis is that the recovery right now is because of the stimulative effect of tax cuts. he then claims that the tax cut is 350 billion a year. In fact, the most widely reported number I’ve seen for the size of the tax cut this year is 125 billion.
Here’s a chart from Taxfoundation.orgwhich says that if the Bush tax cuts were all combined, the yearly cut right now would be 188 billion. But as you say, much of the tax cut is ‘back loaded’.
In any event, I hope you’ll agree that using 350 billion a year, for the purposes of saying that the recovery is not real but ‘borrowed’, is highly dishonest. Even if that number were true, growth of 5% would represent GDP growth of about 550 billion dollars. A 350 billion tax cut could not even result in growth of 350 billion, because not all of the cut is seen as economic growth. But in fact, up until this point, the Bush tax cut is less than 100 billion per year (125 next year). As I said, the op-ed Tejota cited is a piece of garbage.
Hey, elucidator was making the claim that the future economy can not be predicted. If that’s the case, then the ‘fair’ bet would be for one side to bet the economy will be better than current, and the other side that it will be worse. I even threw him a fudge factor by offering a 20% vig plus a baseline economy that is slightly better than it is now. More than fair, given his position.
My personal opinion is that unemployment will be down somewhere below 5.7%, and the economy will grow at an average rate of around 5% - both very healthy numbers. The caveat would be a major terrorist attack throwing a wrench into the works.
Pantom said:
Actually, as I understand it the growth in the current account deficit is BECAUSE U.S. GDP growth is outstripping the world. Yes, eventually the gap should close as foreign investment seeks the strongest economy, but that suggests that its a trailing indicator. But I’ll admit that my understanding of the international financial markets is not as solid as I’d like, so I’m not really in a position to judge. As for my 25% withdrawal, there are other reasons I’m doing it - mainly because I want to move it into my tax-sheltered RRSP, and I’m over my foreign contribution limit for that.
RTFirefly: You’re just repeating the Democratic fallback position, which is that the recovery isn’t ‘real’ unless unemployment is at some magically low number.
It’s not reasonable to suggest that the low point of the last decade’s jobless numbers as the benchmark for determining if a recovery is real. We all know that there was a huge investment bubble going on in the 90’s (the trough on your chart), and the unemployment levels of that time were unrealistic and unsustainable. In fact, the trough in unemployment represented the lowest level in three decades.
Until the 90’s tech bubble, the unemployment levels we see today were considered to be close to ‘full employment’. If unemployment hits 5.5% next year as many economists are predicting, I would think that that is very close to being ‘full employment’. Maybe you could knock another few tenths off before you’d start seeing inflationary wage pressure, but not much more. In any event, the U.S. has one of the lowest unemployment rates in the entire world already. From my Canadian perpective, hearing you guys talk about 5.8% unemployment as an economic disaster is just bizarre.
And once again, I have to point out that jobs and wage increases are a TRAILING indicator. Since the economy really only began to pick up steam in the last year, I would fully expect the situation we have now. But if the economy creates the expected net 1 million jobs next year, bringing the unemployment rate to 5.5%, then you’re going to see wage increases next year.
Besides, as you pointed out, one measure of how well the ‘average’ person is doing is consumer confidence, and it’s sitting at 91.7% right now. Another indicator will be the Christmas shopping season. Any bets as to how those numbers will look when they come out?
Hmmm. One wonders why you chose the timeframe you did. Go back to that graph and set the timeframe as 1980-2003 and the picture looks a whole lot different. (I couldn’t get the url to work when I tried to link directly to the 1980-2003 graph, but it’s easy to change once you’re on the BLS web page.)
Thus is my point illustrated beyond my feeble eloquence: that solid, irrefutable economic-science evidence can be brought to bear that conclusively prove entirely opposite conclusions. It would be as if water, at sea level, boiled sometimes at 212 degree F., sometimes 190, sometimes it froze.
A science that can prove anything one wants isn’t a science.
I chose ‘postwar’ because for my entire life, 1945 has been the most frequently used demarcation between ‘times not like our own’ and ‘times like our own’. Neither the Depression nor the WWII years are a good yardstick to compare with any ‘normal’ times, and together, they create a 16-year gap that would be a natural demarcation, even if they weren’t preceded by the era of flappers and bathtub gin and followed by that of the Cold War and the atom bomb.
I played around with a number of them, thanks. (I don’t think you can link to a particular choice of years, other than the 1993-2003 preset.) Like I said, the Reagan era inured us to the previously unpalatable notion that 6% unemployment was ‘good’. When unemployment rises all the way to 10.8%, that’s what happens.
Actually, luc, if you approach the figures with a little respect, you can extract some decent info.
Taking RTFirefly at his word and doing “postwar”, and collecting the rate from the earliest date possible, 1948 to the present, and the average is around 5.64% while the mode is 5.6%, mode being half above and half below, which is frequently a better measure of the average.
If you omit 1981-1992, the Reagan/Bush era, the average falls to 5.23%, but the mode stays at 5.6%.
So above 5.6% and you can basically say the labor market’s in recession, and below and it’s not. See? Nothing to it.
No, I’m saying something considerably more complicated than that. But thanks for providing the strawman version.
I agree.
I agree that we’ll never see national numbers under 4% more than as a flicker in the stats; 4% has long been pegged as the essential equivalent of full employment, since in a free-market economy, there will always be a certain number of people transitioning between jobs. And I wouldn’t dream of claiming that, in order to say we’re ‘in a recovery’, we have to attain boom-level unemployment rates.
By whom? Like I said, 4% was the number I’d heard from childhood, or as close to it as I started reading subversive publications such as Time and the Wall Street Journal where such things were discussed.
So you’re saying that, right now, the US is within a few tenths of a percent of ‘full employment’??
Please, Lord, if I can have just one wish for one Presidential faux pas, let Bush claim that. I’d just love to see him look that out of touch. That might cost him the election right there, the way his daddy never recovered from his encounter with the grocery-store scanner.
We never experienced inflationary wage pressure in the late 1990s, even when unemployment dropped to 3.8%. Why it won’t happen if unemployment gets to that level in the next boom is really the topic for a whole 'nother thread. (But the quick explanation is, there’s a lot of money sloshing around at the top.)
I think I took a brief run at why the two aren’t directly comparable.
And in my lifetime, they’ve been trailing by longer and longer intervals. The recovery from the Bush I recession was known well into the 1990s as the ‘jobless recovery’. The economists say that so far, this recovery is even more jobless than that one.
I certainly hope so. But I wouldn’t bet either way, yet.
Since you didn’t provide a link, and I quite honestly can’t remember, please refresh my recollection about the consumer confidence index. The 91.7% is of what, and how good/bad is that?
Q: Are the unemployment rates comparably defined for each year shown? I know that what constitutes “unemployment” for purposes of the statistic has been adjusted on more than one occasion. And don’t forget that the numbers reflect different things for different eras anyway. For instance, female participation in the labor market has increased dramatically since the beginning of the data, while the number of farm jobs not included in the statistic has plummeted. I have no idea what that means for comparative purposes, but just be aware that they’re not as comparable as some might think.
Well, hell, if we are supposed to consider an unemployment rate that is not far from its high for this recent recession(*) as being perfectly fine and dandy, then what differentiates a recession from a non-recession? We might as well just define the whole recession away. So, who cares if the economy didn’t grow for a while? It grew like gangbusters in the 1990s and if you average over the period from, say, 1994 to 2003, I’m sure it grew at a reasonably healthy average rate over that period.
(*) Note: looking at the Bureau of Labor Statistics graph that the peak of about 6.4% was just a fairly short blip and the jobless rate now is pretty much at the average level it was during these past few years of recession. Technically speaking, when we reached that 6.4% peak, I don’t think we were even defined as being in recession anymore by the offical definition. [Does anyone remember when the recession “officially” ended.]
You’re right. There are significant demographic shifts that have to be taken into account, women in the workforce being a major change. And 'luci’s point is well taken, too (why do you think it’s called the “dismal science”?). And that’s why you are better off looking at things like Consumer Confidence, or “What % approve of the president’s handling of the economy”. That latter statistic is meaningless, in my mind, as a measure of what the economy is actually doing, but it tells you something about how people plan to vote.