Americans are usually a sensible lot, but they are simply off their collective rockers when it comes to evaluating the strength of their own economy. All economic indicators prove beyond a shadow of a doubt that the U.S. economy has been in great shape -- easily the best in the world -- throughout the Bush administration, but Americans have overwhelmingly disapproved of Bush's performance in that regard anyway.
My defense of the Bush economy is not a partisan stance, but your mistaken belief that the economy has been in terrible shape for years is. If you examine the relevant numbers, as I have done many times, you'll find that the economy was in similarly great shape during the Clinton years. Got that? The economy was in great shape under Democrat Bill Clinton and under Republican George Bush. There is nothing partisan about taking a look at GDP growth, unemployment, inflation, productivity, etc. and seeing that this is factually the case. But you (if you are like most Americans) are content to let the media do your thinking for you. When you do that, you are forced to make absurd arguments to try to defend the idea that the economy has been selectively terrible under Bush (but not under Clinton). The most absurd argument that I have encountered over the years is the idea that all of the basic economic indicators used to be meaningful (back when Clinton was president), but now they are "cooked statistics" that are designed to cover up the horrible state of the economy under George Bush. Right.
In any case, polls show that Americans are particularly down on the economy now that it has been momentarily shocked by the subprime mortgage crisis:
More grim news greeted the country yesterday when it was announced 80,000 jobs had been lost in March, the third consecutive month of rising unemployment, and a another stark sign that the country is now mired in recession.
The US Federal Reserve chairman Ben Bernanke admitted in testimony on Wednesday that a recession is now possible. He too is behind the curve of public opinion and market sentiment. Some 66 per cent of those polled say the US is already in a recession. The sputtering economy and insecure job market remains the top concern for Americans – 37 per cent, while the war in Iraq most concerns 15 per cent of those polled. This is a complete reversal of earlier surveys, and reflects confidence that violence in Iraq is finally waning, giving the US the opportunity so many are hoping for to finally bring the troops home.
Whereas 66% say that we are already in a recession, only 27% say that we are not.
The most common definition of a recession is this:
A period of general economic decline; specifically, a decline in GDP for two or more consecutive quarters.
The official definition is much more nebulous, but recessions are generally understood to mean a shrinking GDP (not a growing GDP). A point that I have made repeatedly is that we might very well be headed into a recession, but we should wait for the facts to support that dire prediction before we jump to the hasty conclusion that a recession is already upon us. Here are the quarterly GDP figures from the last few years:
As you can see, the first quarter of 2008 came in at the same level of growth as the first quarter (and the last quarter) of 2007, namely, +0.6%. Thus, as of now, we haven't even had a single quarter of negative GDP, much less two. The first quarter figure for this year is a preliminary figure that will be revised in a month or so. Perhaps that revision will show that the economy actually shrank during the first quarter, but let's wait and see, shall we?
The BEA page also shows inflation-adjusted personal income and consumer spending on a monthly basis over the last year. Let's take a look at that:
The last three months show two months in which incomes increased (blue bars) and one month in which it was flat. The same story applies to inflation-adjusted consumer spending (yellow bars). These values did not increase by all that much, but they did not decrease at all. It just doesn't look like the end of the line to me, so I guess I'm not quite ready to repent my sins and jump off a tall building.
I know that you think the numbers don't matter (because "people are hurting"), but if you base your opinions on facts and evidence instead of emotional impressions, this might seem like relevant information as well:
Employers cut payrolls less than expected
U.S. jobs fell by 20,000 in April, unemployment rate dips to 5 percent
WASHINGTON - Employers cut far fewer jobs in April than in recent months and the unemployment rate dropped to 5 percent, a better-than-expected showing that nonetheless still revealed strains in the nation’s crucial labor market.
Do you know the last time France or Germany or Italy had an unemployment rate as low as 5%? It was a long, long time ago.
I'm not saying that we are not heading into a recession. Instead, I'm saying that you are quite wrong to think that we are already there. You can't predict the future, and your intuitions about the current state of the economy today are simply not informative. Those predictions and intuitions tell us more about your personal psychology than they do about the state of the economy. The relevant numbers tell us about the state of the economy, and they don't yet show the catastrophic implosion that mainstream media reporters have trained your gullible mind to uncritically accept as a given.
8 comments:
Something I'm confused about: If we lost 20K jobs, how did unemployment drop? Probably a silly question, but I'm a simpleton when it comes to this stuff.
Thanks.
The negative reporting has less to do with the economy and more to do with the blind hatred of George Bush by all things leftish.
You will be amazed at the instantaneous transformation of the economy at the next election of a Democrat. Of course, if McCain is elected President we will be condemned for eternity (or at lesat four years) to the same dark visions of doom an gloom and BUUUSSHH!
Freeven,
The number doesn't matter so much as how it's compared with other areas and various other projections.
While it may be 20k now, it could have been 40k or 50k last quarter ago.
That reduction would mean prices drop.
My prices I mean numbers. I'm rather scatterbrained at times
Freeven,
The number doesn't matter so much as how it's compared with other areas and various other projections.
While it may be 20k now, it could have been 40k or 50k last quarter ago.
This doesn't make sense to me. The 20K is reported as an absolute: the number of jobs lost during the period. If we lost jobs, shouldn't the jobless rate have gone up instead of down, as reported?
freeven-
The jobless rate (or unemployment rate) is primarily a function of two numbers: the number of people unemployed and the number of people in the labor force. The number of people unemployed generally only counts those who are actively looking for work--if someone decides to go back to school, or be a stay-at-home parent, or just stops looking for work then they're no longer counted as unemployed. Likewise, the number of people in the workforce changes as people graduate from school, retire, etc.
So to partially answer your question, it's possible for 20K jobs to be lost but due to fewer people looking for work and/or the total workforce growing, the unemployment rate could decline.
Your selective facts leave me to inform your readers...
http://www.cbpp.org/8-25-04tax.htm
and
By David Cay Johnston, Reuters
Published: WEDNESDAY, APRIL 5, 2006
The first data to document the effect of President George W. Bush's tax cuts for investment income show that they have significantly lowered the tax burden on the richest Americans, reducing taxes on incomes of more than $10 million by $500,000, on average.
An analysis of U.S. Internal Revenue Service data by The New York Times found that the benefit of the lower taxes on investments was far more concentrated on the very wealthiest Americans than the benefits of Bush's two previous tax cuts, on wages and other noninvestment income.
When Congress cut investment taxes three years ago, it was clear that the highest-income Americans would gain the most, because they have the most money in investments. But the amounts have not been known. As Congress debates whether to make the Bush tax cuts permanent, The Times analyzed IRSfigures for 2003, the latest available and the first that reflect the tax cuts for income from dividends and from the sale of stock and other assets, known as capital gains.
The analysis found:
Among U.S. taxpayers with incomes greater than $10 million, the amount by which their investment tax bill was reduced averaged about $500,000 in 2003, and total tax savings, which include the two Bush tax cuts on compensation, nearly doubled to slightly more than $1 million.These taxpayers, whose average income was $26 million, paid about the same share of their income in income taxes as those making $200,000 to $500,000 because of the lowered rates on investment income.
Americans with annual incomes of $1 million or more reaped 43 percent of all the savings on investment taxes in 2003. The savings for these taxpayers averaged about $41,400 each. By comparison, Americans who made less than $1 million in 2003 received less than 10 percent of the savings from the first two Bush tax cuts, though that share is expected to grow in the coming years.
The savings from the investment tax cuts are expected to be larger in subsequent years because of gains in the stock market.
The Times showed the new numbers to people on various sides of the debate over tax cuts. Stephen Entin, president of the Institute for Research on Taxation, a Washington organization, and other supporters of the cuts said they did not go far enough because the more money the wealthiest Americans have to invest, the more would go to investments that produce jobs. For investment income, he said, "the proper tax rate would be zero."
Opponents say the cuts are too generous to those who already have plenty. Representative Charles Rangel of New York, the senior Democrat on the House Ways and Means Committee, when told of the new figures, said that "these tax cuts are beyond irresponsible" when "we're in a war, we haven't fixed Social Security or Medicare, we've got record deficits."
Because of the tax cuts, even the merely rich, making hundreds of thousands of dollars a year, are falling behind the very wealthiest, particularly because another levy, the alternative minimum tax, now costs many of them thousands and even tens of thousands of dollars a year in lost deductions.
About 3.5 million U.S. taxpayers filing their returns for last year are being hit by the alternative tax. But that figure will balloon this year to at least 19 million taxpayers, making as little as about $30,000, unless Congress restores a law that limited its effects until now, according to the Tax Policy Center in Washington, a joint project of the Brookings Institution and the Urban Institute whose estimates the White House has declared reasonable.
The analysis was based on estimates by The Times for higher-income Americans, then confirmed by a computer model developed by Citizens for Tax Justice, which asserts that the tax system unfairly favors the rich. Thegroup is part of a nonprofit research organization financed primarily by the Ford, Rockefeller and 21 other foundations as well as labor unions. Its estimates are considered reliable by advocates on differing sides of the tax debate.
The analyses show that more than 70percent of the tax savings on investment income went to the top 2 percent, about 2.6 million U.S. taxpayers.
By contrast, few taxpayers with modest incomes benefited because most of them who own stocks hold them in retirement accounts, which are not eligible for the investment income tax cuts.
Those making less than $50,000saved an average of $10 more because of the investment tax cuts, for a total of $435 in total income tax cuts, according to the computer model.
During last week's debate on whether to restore limits on the alternative minimum tax or make permanent the cuts in investment income taxes, House leaders chose as their spokesman Representative Dave Camp, a Republican from Michigan. He said Republicans favor continuing investment tax cuts because that will help more people and will especially benefit those making less than $100,000.
"Nearly 60 percent of the taxpayers with incomes less than $100,000 had income from capital gains and dividends," he said on the House floor.
But IRS data show that among the 90 percent of all U.S. taxpayers who made less than $100,000, dividend tax reductions benefited just one in seven and capital gains reductions one in 20.
Camp, who had said in an interview that his figures were correct, said Monday through a spokesman that he had been misinformed by the staff of the House Ways and Means Committee. But his office said he supported making the investment tax cuts permanent because "cutting these rates is good policy and good for our economy."
Bush, in his budget proposal, urged Congress to make permanent the reduced taxes on investment income. He also proposed limiting the effects of the alternative minimum tax through next year, saying a permanent solution "is best addressed within the context of fundamental tax reform."
The Congressional Budget Office estimated that making the investment tax cuts permanent would cost the government $197 billion over 10 years. But advocates of eliminating taxes on investments say there would be no cost to the government because lowering taxes on such income encourages more investment, which should lead to more and higher-paying jobs. Taxes on wages from those jobs should more than offset the tax savings to investors, said Entin, an advocate of eliminating taxes on most investment income as a way of promoting economic growth.
However, the Congressional Research Service, an arm of Congress that analyzes issues, concluded in a January report that lower taxes on investment income might translate into lower savings because people need fewer investments to earn the same after-tax income. In another report, the research service showed how lower taxes on investment income can encourage investment outside the United States, creating jobs, but not for Americans.
The Center on Budget and Policy Priorities, which advocates for the poor, and several mainstream policy research organizations said the investment tax cuts would have insignificant positive effects and might even damage long-term economic growth by contributing to soaring budget deficits.
In an era of budget deficits, "the net effect is a wash or may even be negative," said Robert Greenstein, the center director.
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