Worst economy since Herbert Hoover?

Great Debates
21

[QUOTE=jshore]
It is a little strange to compare an average growth rate over ten year periods to the growth rate over a period cherry-picked because the economy has done well over that particular interval of time. At the very least, one should compare the growth rate of those decades to the not-yet-complete 2000 decade. After all, if I cherry-pick the best 3 year period from the decades of the 1980s or 1990s, I am betting I get a considerably higher number than 3.5%.

At any rate, a big difference is that during the 1990s, we not only had good economic growth but we used this growth to start to get out of debt. By contrast, the time since Bush took over has been a time as trying to generate economic growth by maxing out our national credit card. I don’t think that anyone disputes that deficit spending has a stimulative effect on the economy (at least as long as fed policies and the like keep interest rates low).

Another big difference is that the economic gains of the 1990s were much more evenly distributed, with the poor and middle class gaining considerable ground too. By contrast, the vast majority of gains since 2000 have gone to a very small minority of wealthiest Americans.

I’m skeptical of this “trillion dollar hit” claim. Sure, I imagine that 9/11 and what followed had some negative impacts on GDP…but I imagine it had positive effects too. Remember that GDP is an imperfect measure and, as such, things like disasters and wars can inflate it as money gets spent rebuilding or manufacturing weapons and so forth.
[/QUOTE]

Where do I start?

There is no “cherry-picking” here at all. I think that’s one term that liberals like to use to discredit results that don’t fit their theories. In any event when this decade started Clinton was president, and he stayed president for another year and 20 days. Now if there was something magical about the inauguration that always had impacts on the economy, I’d say let’s look at the numbers since 1/20/2001. But that’s not the way it works. So Will (and others) chooses to start counting when the Bush tax cuts went into effect. Sounds fair to me. Same as you could look at the results after the Clinton/Rubin capital gains tax cut.

As for “the vast majority of gains since 2000 have gone to a very small minority of wealthiest Americans” let’s have some numbers please. Are you saying that 99% of the gains went to 1% of the fat cats? That would be something! And we could debate it. I think your use of extreme terms here is another debating trick. I saw a lawyer on one of the news shows recently comlaining about the government’s increased ability to wiretap terrorists. He said something like “For a minute increase in security we’lll turn into a complete police state.”

So, you’re skeptical of the trillion dollar hit. I’m not. I don’t have the time on my hands tonight but maybe in a few days, if no one else posts it, I’ll be glad to find some economic stats reminding you of how awful the economy was from 9/11/01 till the Bush tax cuts has some time to take effect. As for rebuilding…well don’t get me started. But thanks to all the governmental meddling there exists today a gigantic monument to Al Qaeda in lower Manhattan.

22

Rich-poor gap gaining attention - CSMonitor.com Another Liberal witha an axe to grind,Alan Grennspan.

23

[QUOTE=gonzomax]
Rich-poor gap gaining attention - CSMonitor.com Another Liberal witha an axe to grind,Alan Grennspan.
[/QUOTE]
Well, the “income disparity” argument doesn’t really have any bearing on whether or not the economy as a whole is doing well. But since you brought it up, it sure looks like Greenspan hit on a Democratic talking point (in response to a Democrat’s question). But that kind of wears off if you read past the first few paragraphs.

So the income disparity is not the result of Bush’s tax cuts? Bummer, I guess. Why, it’s almost as if this isn’t Bush’s fault at all. It’s almost as if this problem existed even before Bush came into office.

I’m not a big fan of executives voting themselves huge bonuses, but I’m even less excited about the idea of mandatory income redistribution. Especially since the system that we’ve got appears to be constantly improving most people’s standard of living, and lives in general.

24

[QUOTE=Plan B]
“Since the Bush tax cuts went into effect in 2003, the economic growth rate (3.5 percent) has been better than the average for the 1980s (3.1) and '90s (3.3) . Today’s unemployment rate (4.6 percent) is lower than the average for the '90s (5.8) - lower, in fact, than the average for the last 40 years (6.0).”
[/QUOTE]
Which Bush tax cut? Haven’t there been three, and why aren’t we therefore including 2001, 2002, etc?

25

[QUOTE=Plan B]

There is no “cherry-picking” here at all. I think that’s one term that liberals like to use to discredit results that don’t fit their theories. In any event when this decade started Clinton was president, and he stayed president for another year and 20 days. Now if there was something magical about the inauguration that always had impacts on the economy, I’d say let’s look at the numbers since 1/20/2001. But that’s not the way it works. So Will (and others) chooses to start counting when the Bush tax cuts went into effect. Sounds fair to me. Same as you could look at the results after the Clinton/Rubin capital gains tax cut.
[/QUOTE]

Look, this isn’t rocket science here. The economy goes in cycles. When you look at the average rate of growth over a period long enough to include roughly a full cycle (i.e., including a recession), the average growth rate is going to be lower than if you choose a time period that is shorter and picked to correspond to a recovery phase of the economy. It is really as simple as that.

And, as DMC noted, Will et al. don’t start when the first tax cuts went into effect but only when the last round of tax cuts went into effect. That conveniently gets them by the recession and a quite anemic phase of the economic recovery.

26

[QUOTE=Voyager ]

If the unemployment rate were really that low, we’d expect to see upward pressure on wages, which is just not happening. So I have my doubts. I’m not saying anyone is cooking the books - just that there may be a lot of people who have given up.

[/quote]

Outsourcing has put some downward pressure on wages. Rising housing and health care costs have also put some downward pressure on real wages too (IOW, you may make more, but it buys less).

27

[QUOTE=jshore]
Look, this isn’t rocket science here. The economy goes in cycles. When you look at the average rate of growth over a period long enough to include roughly a full cycle (i.e., including a recession), the average growth rate is going to be lower than if you choose a time period that is shorter and picked to correspond to a recovery phase of the economy. It is really as simple as that.

[/QUOTE]

As a concrete example, using figures from the Bureau of Economic Analysis, one finds that the three year period of 1996-1999 had an average real GDP growth of 4.4%. That’s the best 3-year period from the 1990s although you still beat the 3.5% figure if you choose the 3-year periods of 1994-1997, 1995-1998, and 1997-2000. Even during the 1970s, not generally remembered as an economic glory period, there were 3-year periods of >3.5% annual real GDP growth: 1970-1973, 1975-1978, and 1976-1979.

So, yes, over the last 3-years we have had good GDP growth, but certainly nothing unprecedented during previous economic cycles. Furthermore, this economic growth has been much less equally shared than during other periods. And, the cost of the “economic stimulus” that has presumably contributed to this growth to some degree has been enormous.

28

If the economy is growing and you are on the receiving end it is good. Assuming you dont care about your fellow Anmericans. But when the money goes straight to the very wealthy the rest of the country suffers. The unemployment rate is so innaccurate that it is meaningless. Check the want ads now and 7 years ago .
In the Detroit area our help wanted section was huge. There were usually 10 pages of engineering jobs. Now if one or 2 ads are there its a lot. The entire want ad section is 10% of the old days.
Because of a crackdown on immigration some farmers are complaining about not getting help. If they raise their rates the people will come. That would show the upward push on wages you describe.
Economics is not rocket science. Rocket science is predictable and mathematics works there. The economy is a vague pretend science. A new expert
comes out every year.

29

Eh. This recovery is unremarkable. Not great, but not terrible either.
As for cherry-picking the last three years, well, that’s obvious political posturing, unless you’re a convinced right-wing ideologue, in which case, good luck understanding the real world.
There is one area where the economy has done very well for not just the past three, but the past ten years, and that’s productivity. If you take that, put it on a year-over-year basis, and measure, the performance since 1996 has been almost comparable to pre-1977, to wit:



1947-1977

-2 to -1	8
-1 to 0 	13
 0 to 1 	24
 1 to 2 	32
 2 to 3 	38
 3 to 4 	40
 4 to 5 	21

1977-1995

-2 to -1	3
-1 to 0 	10
 0 to 1 	18
 1 to 2 	19
 2 to 3 	15
 3 to 4 	8
 4 to 5 	4

1996 to the present

-2 to -1	0
-1 to 0 	0
 0 to 1 	0
 1 to 2 	4
 2 to 3 	21
 3 to 4 	12
 4 to 5 	5

It’s hard to realize just how remarkable the period since 1996 has been. We went through an amazing stretch from the latter half of 1997 through the latter half of 2004 when there wasn’t a single quarter when the year-over-year number fell below +2%. That period encompassed the dot.com bubble, the 2001 recession, including the 9/11 attack, and the initial recovery from that recession. As you can see just from a glance at the last table, NO number has been reported below +1% for the past 10 years.
It was as if someone flipped a switch when 1996 began, and the economy changed completely since then. I have my ideas as to what it was, but it wasn’t Dubya, obviously. Might’ve been something Clinton did, but I don’t think so.
Point being, the Bush tax cuts haven’t performed any weird miracles like the above on any front I can find, which means the debate ought to center around whether they’re good or bad as public policy, since as economic policy their value is nil, and they quite obviously had no effect on the government’s propensity to spend.
Which means they were obviously meant to redistribute income upwards (for some reason, that seems OK with folks who claim to be against income redistribution), so then the question becomes whether they were good, bad, or indifferent on that front.

Productivity numbers from the St Louis Fed.

30

“Worst since Hoover” Carter came close with the prime rate hitting 21.5% in December, 1980 and inflation going over 10%. Unemployment went as high as 9%.

31

[QUOTE=kniz]
“Worst since Hoover” Carter came close with the prime rate hitting 21.5% in December, 1980 and inflation going over 10%. Unemployment went as high as 9%.
[/QUOTE]

Excellent point, I hadn’t even thought about Carter recently, for obvious reasons. Getting back to the OP, Kerry is saying that this economy is worse that the 1979 economy. No one has come close to saying he’s right about that. But I’m patient…

32

I am emphatically not an economist - so this is a question, not an affirmation.

Isn’t the war in Iraq alone enough to put a rosy glow on US economic growth ?

What percentage of GNP is made up of war expenditure ?

33

[QUOTE=Plan B]
Excellent point, I hadn’t even thought about Carter recently, for obvious reasons. Getting back to the OP, Kerry is saying that this economy is worse that the 1979 economy. No one has come close to saying he’s right about that. But I’m patient…
[/QUOTE]
I’m not skilled in economics but I hear there are some holes. As to unemployment, for example, maybe a better measure would be workers’ income per 100,000 workers. I’ve read that high pay jobs have been replaced by low pay jobs so the total income of workers is falling relative to the economy as measured by corporate profits, or corporate executive incomes.

The worldwide economy has put US workers in competition with those in Bangladesh, China, et al, and I wonder who will be the customers of the businesses when our standard of living for working people equals that in those countries.

34

[QUOTE=Themenin]
I am emphatically not an economist - so this is a question, not an affirmation.

Isn’t the war in Iraq alone enough to put a rosy glow on US economic growth ?

What percentage of GNP is made up of war expenditure ?
[/QUOTE]

There is a common misconception that war is good for business. It’s not. Ask any of your friends who work in the financial markets. Fear of war always drives the stock market down.

35

[QUOTE=David Simmons]
I’m not skilled in economics but I hear there are some holes. As to unemployment, for example, maybe a better measure would be workers’ income per 100,000 workers. I’ve read that high pay jobs have been replaced by low pay jobs so the total income of workers is falling relative to the economy as measured by corporate profits, or corporate executive incomes.

The worldwide economy has put US workers in competition with those in Bangladesh, China, et al, and I wonder who will be the customers of the businesses when our standard of living for working people equals that in those countries.
[/QUOTE]

American workers are doing great. Go to the link to the George Will article, cited in post #7. He addresses this very question.

And outsourcing has been going on in both directions for forever. And it’s been adding to oour prosperity forever.

36

[QUOTE=Plan B]
There is a common misconception that war is good for business. It’s not. Ask any of your friends who work in the financial markets. Fear of war always drives the stock market down.
[/QUOTE]
It’s complicated. Govt spending, particularly deficit spending, has a short term positive effect on the economy. Given a choice however,you are generally better off spending on non-military things. The multipler for defense spending is less than that for spending on doemestic infrastructure such as roads and bridges, education, research, etc.

37

[QUOTE=Plan B]
American workers are doing great. Go to the link to the George Will article, cited in post #7. He addresses this very question.

And outsourcing has been going on in both directions for forever. And it’s been adding to oour prosperity forever.
[/QUOTE]
I can’t cite and statistics because I’m not really sure of what statistics to cite. However, when the only people Will cites are from the American Enterprise Institute, I’m not a bit surprised that the claim is that workers are doing great.

I’m curious about your statement that outsourcing on the scale that we are seeing now has been going on forever.

Will’s statement

that over time the economy is self-correcting might be true but the delay is long and people live and die now, not in some self-corrected future.

38

[QUOTE=Cheesesteak]
First off, it’s a debate, not a pitting.

Second, Blaster Master, Voyager and AQA all mentioned the Great Depression in their responses to the OP. If today’s economy was obviously not being compared to the Great Depression in any way, then none of them would have felt compelled to mention the Depression. That is proof that some English speakers would interpret it as a comparison.

Third, as was mentioned, the Depression didn’t end when Hoover left office, it was in full swing for years after that point, so a comparison to the Depression is entirely consistent with the most literal possible meaning of his quote. If he didn’t mean to compare it with the Depression, he should have taken a history lesson and picked a date after the Depression ended as his comparison point.
[/QUOTE]
I’d like to make a snarky riposte, but those are good points.

39

Waging an extremely expensive war while having a series of tax cuts ,is good economic polict in what economic theory? Thee huge defecits put us in financial risk. We are beholden to forign markets keeping this mess floating. It will end somewhere some time. Take the money and run is not a stabile system.
The potential is ruin.

40

I’m no fan of deficits, but by historical standards today’s deficit isn’t that big. It’s now projected to come in at 250 billion dollars for FY2006, way down from the earlier estimate of 318 billion. Why? Because government revenues are soaring.

So how does that stack up against historical averages? Have a look at this Deficit graph, in 1996 dollars. 250 billion in 2006 dollars is something like 220 billion in 1996 dollars. It’s been over 400 billion, and many times over 300 billion.

But a more critical number is the deficit as a percentage of GDP. Have a look at this chart: Deficit as % of GDP. The 40 year historical average for the deficit has been 2.3% of GDP. The current deficit is something like 1.9% of GDP, well under the historical average for the modern era. More importantly, the deficit is continuing to fall, while the economy is still growing at over 3%. So as a percentage of GDP, the deficit is dropping fast.

Look, I know Democrats pretty much have to say that the economy is horrible right now. What are they going to do, say it’s great? But we all know they are lying through their teeth. There is no way in hell you can spin 3.5% growth, 6 million new jobs in 3 years, surging revenues, low inflation, unemployment near historical lows, the stock market at record highs, and low interest rates as anything other than great.

It’s true that wages are stagnant on the lower end, but the reality is a lot more complex than a mere number. One of the reason wages are stagnant is because of competition from immigrants, both legal and illegal. They compete for jobs mainly at the lower end. But it’s also true that the standard of living for the lower classes is improving, because they are getting improved benefits, and the goods that make up a large chunk of their disposable income are actually deflating. Food, consumer electronics, and thanks to Wal-Mart, household staples, drugs, clothing, books, toys, and just about anything else they sell. Wal-Mart alone is responsible for knocking several percentage points off the inflation rate, and all that savings goes straight to the poor and lower middle class.

I’ll give you guys points for trying, through. It takes a lot of chutzpah to criticize the economy for having too many jobs available and too low an unemployement rate. Especially after liberal bitched about joblessness for the first few years of Bush’s presidency.

This is not to give Bush credit for all of it, or even the majority of it. But there is no question that we are in a very good economy right now. My business pays very close attention to the economy, and our internal financial guys think we’re doing awesome. And we set records in the last quarter for performance. And unlike governments, corporations don’t blow sunshine up their asses and try to fool themselves - the numbers are important because they dictate what we can expect to sell, and therefore what we can afford to produce. Our hard-nosed green eyeshade types see a very good near future, and an excellent current economy.