Just a little pruning here and there.
May 19, 2003 2:11 PM   Subscribe

How does President George W. Bush compare with other presidents on job creation? - Not too well: neck and neck with Herbert Hoover. However the underlying economic pathology, "The Clinton boom....built on three unsustainable bubbles", preceded GW Bush's administration [although the current slump is surely exacerbated by the GW Bush deficits, tax cuts and wars], argues this economist who predicted the recent stock market crash and who now predicts an end to the "high dollar" and real estate bubbles.
posted by troutfishing (24 comments total)
Why the hell do we continue the fiction that presidents create jobs, anyway? Clinton may have presided over an economic bubble, but he didn't create it. The bubble was already bursting before Dubyuh even took office.
posted by alumshubby at 2:21 PM on May 19, 2003

There's a pretzel stuck in my Hoover!
posted by Ignatius J. Reilly at 2:32 PM on May 19, 2003

"although the current slump is surely exacerbated by the GW Bush deficits, tax cuts and wars"

Can you provide some evidence for this? Isn't the combination of the 9/11 business interruption, the implicit security tax, an oil price spike, and the natural cyclical contraction following an historically long boom enough to explain these job losses? In fact, there is a pretty good argument that the impact on employment is a lot less severe than it could be. As I argued on another thread a few days ago...

"The civilian employment/population ratio for March 2003 was 62.4%. That number has been mostly static for the last year, but more significantly, it is just below the 63.2% level at the 1990 economic peak, and well above the 1983 (57.1%) and 1975 (55.8%) recession troughs. Employment to population hovered in the mid to high 50%s from the end of WWII to the mid 60s and has increased steadily since then...primarily as more women entered the work force.

The economy works in cycles...booms followed by recessions. During recessions unemployment goes up. All the political mumbo-jumbo in the world won't change that."

(on preview as alumshabby says) Presidents don't create or destroy jobs...they only preside over periods of job creation or destruction, at best, providing the window dressing.
posted by cyclopz at 2:40 PM on May 19, 2003

Has anyone compared George Bush with other presidents on 'working for the weekend'?
posted by UncleFes at 2:45 PM on May 19, 2003

UncleFes, everybody's working for the weekend.
posted by mr_crash_davis at 2:59 PM on May 19, 2003

how about dubya takes a no new jobs - no reelection pledge? now that he rammed his sham job creation tax breaks through congress.
posted by specialk420 at 2:59 PM on May 19, 2003

job creation is a fucking myth. how is it measured? i have worked for local governments for 23 years. i watch them pass out tax break after tax break on the promise (wholly unsubstantiated, never measured, never checked) of new jobs. most of the figures are lies, since most of the new equipment on which taxes are forgiven is used to automate and reduce jobs rather than boost employment business people NEVER cut prices, raise pay or increase employment based on reduced taxes. sorry, the vast majority of jobs i have seen created in the last several years all come with funny hats and the imperative to bray "ya wan' fries widdat?"
posted by quonsar at 3:33 PM on May 19, 2003

Cyclopz - I made those assertions to draw in resident Mefi experts (such as yourself).

However - are you arguing that there is no relation between presidential adminstration economic policies and employment or economic performance? If so, why have economic policies in the first place? Why bother with tax cuts or redistribution in federal spending? What would be the point (except to reward one's benefactor class)? On the micro level, in the short term, I agree with you. In the long term, however, I strongly disagree.

Let me pose this question to you: given that the GINI index has been increasing since 1968-70 (towards an ever more unequal distribution of wealth in the US) are GW Bush policies which strongly promote the trend (tax cuts heavily weighted towards the wealthiest Americans) insignificant?

Or, given that military spending is just about the least efficient way of spending Federal dollars for job creation (spending on education is, I have read, the most efficient at job creation, and social programs tend also to be far more effective at job creation than military spending.) than shifting federal dollars from social programs to military spending - as I believe the Bush adminstration and the Republ;ican controlled Congress has done - results in a net loss of jobs.

Do you feel that huge federal deficits are desireable? You mention the post 9-11 "security tax", but much of the DOD spending increases are not about spending on Anti-terrorism measures: they are mostly pork barrel spending larded out while the current political climate allows it.

Are deficits desirable? They may now be unavoidable to an extent (given the current "bust time" shrinkage of federal tax receipts), but the current deficits seem to be partly the result of an almost willfully enthusiastic spending orgy. Don't forget that this spending is financed - a lot of it by parties growing perhaps a bit skeptical of the American proclivity for living beyond our means. In the long term, deficit spending will tend to undercut economic growth for the simple reason (one of many reasons) that Federal deficit spending sucks money from the overall investment pool - less investment money for the private sector. And sooner or later, the huge yearly US balance of trade deficit with the rest of the World will undercut the US standard of living.

As I noted in my post, the Bush administration did not create the bubble economy. It inherited it. But this does not mean that the GW Bush Adm. economic policies have been beneficial. I do believe they have made the economic slump worse.

Meanwhile, the "The civilian employment/population ratio" numbers you cite say nothing about shifts in the types of employment or of possible declines in wages . Those numbers can obscure an enourmous, glacial shift towards low wage, unskilled labour without benefits - a "Wal-Martization" of the labour force. Like the GINI index, the civilian employment/population ratio can easily be the same between the US and Ethiopia. In fact, the GINI's of the US and Ethiopia are roughly the same. But there are an awful lot more trash pickers and rag dealers in Ethiopia than in the US.

However, the correlation between Democratic presidential administrations and good economic peformance (discussed on this Mefi thread) makes me wonder. I'm not sure it's as simple as the hypothesis that the Democratic Administrations are actually responsible. But the pattern has such deep historical roots that I'm intrigued as to the mechanism. I suspect that it's part of a deep underlying oscillatory pattern in shifts of the national mood which are coupled to longer term economic cycles, in which the "Boom time" Democratic years must be followed by "Bust time" Republican administrations (all booms must end, even as all rocks tossed straight up in the air must crash on our heads) but that both parties play an equal part in the cycle.
posted by troutfishing at 4:00 PM on May 19, 2003

It's true, presidents don't have so much power they can magically create or destroy jobs.

But I think it's pretty clear that economic policy makes a difference. If it doesn't, why would Republicans have stood for a balanced budget for all these years? I mean, it's all the same in the end, right?

And while I'm being sarcastic: Since presidents have nothing to do with anything, I'm sure no one will give Bush credit when the economy booms again.
posted by jragon at 4:28 PM on May 19, 2003

It's pretty well established that, contrary to FOX/FR fulmination, Democrats have a better economic record than Republicans on many different scorecards: higher GDP growth, lower unemployment, lower inflation, lower federal spending growth (even only counting non-Defense), lower deficits ... In particular reference the Slate article which was discussed previously. The important thing to keep in mind, for those who like performance-based models for the presidency, is that no party has a lock on economic genius or immunity from folly. It's also pretty clear that, whatever the merits of the argument that the president does or does not affect the economy, the electorate tends to hold him responsible either way.
posted by dhartung at 5:06 PM on May 19, 2003

I wonder where these stats came from. I'd like to see a graph over the years crediting each president with jobs gained/lost. Something so that you could see who was in office during and before an upturn or downturn.
posted by klaruz at 5:19 PM on May 19, 2003

I have no doubt that in principle an administration can contribute to building a strong economy over time; I also don't doubt that it requires long-term commitment to an internally-consistent set of intelligent policies. I doubt very much it can be done with ten-word sound bites given in front of message backdrops while squandering the nation's wealth with both hands.
posted by George_Spiggott at 5:39 PM on May 19, 2003

Troutfishing...first of all...too many damn questions at once. I'll give short answers and if you want to pick those apart, we can.

1)I don't actually mean to argue that economic policy has no impact, but that there are so many variables that impact employment that tying job creation/destruction to a single president's policies is very difficult. It is equally as silly for the president to argue that his dividend tax cut will create x number of jobs as it is for an opponent to say that his earlier tax cut (or whatever) cost x number of jobs.

2)I'm not sure GINI/wealth distribution is part of this argument (although I know its a particular favorite of yours). If you cut everyones income taxes by an equal percentage, everybody gets a benefit, but the guys who are paying the most will get the most benefit. If you tinker with taxes on things like capital gains and dividends, most of the beneficiaries are at the wealthy end of the scale. But those tax changes have other goals that impact risk decision making and may (big caveat) do more to help improve economic health than an income tax cut which might give Joe Sixpack an extra couple hundred bucks.

BTW the greatest expansion of wealth inequality since 1968 took place during Clinton's presidency...the stock market collapse will actually make GWB's GINI numbers look pretty good until some of his tax cuts start to bite.

3)Way too much to cover here...my personal conservative libertarian slant is that we should do things to reduce all spending, but its hard to buy votes with that philosophy so I'll never get elected.

4)By "security tax," I don't mean federal security spending. I mean the new security related costs of doing business in the post 911 world. The way we do business has changed enormously and there is a material marginal cost. Assuming we never face anything of the magnitude of those attacks again, it may take a full business cycle to incorporate those costs into an economic growth model, and that's a damn big assumption.

5)Calling deficits "huge" is using statistical trickery. In dollar terms it's the biggest ever, but as a percentage of GDP it's nowhere close. Borrowing to make investments that have a return is desirable (the defense buildup that in theory helped bring about the fall of the Soviet Union as a leftist irritating example)...once again, we could argue all day about whether the investments being made now are worth the risks of borrowing. The second thing deficits do is force fiscal discipline on lawmakers who otherwise have none. Last thought...a primary argument against federal deficits was the "crowding out theory" that federal borrowing competed with other borrowing to artificially raise interest rates...with long treasuries trading near 4%, no one is making that argument anymore. Tell me why deficits are inherently bad...

6)You believe they haven't been beneficial...I'll reserve judgement. As you note, the biggest albatross around the administration's neck is the boom that came before.

7)"Like the GINI index, the civilian employment/population ratio can easily be the same between the US and Ethiopia"

This is absolutely true, but if you drop a graph of GDP or disposable income on top of employment/population for both countries you will see the difference. I'm not going to argue that the nature of the US workforce hasn't changed. But the economic growth we experienced in the 90s was in part a result of that long term change from labor intensive manufacturing to high (and sometimes not-so-high) value added services.

8)I didn't read the whole thread, but couldn't I just as easily argue that the republicans fixed the last democrats mess and did things to set up the good market runs and the democrats wrecked em for the next guy? Much better correlation between economic growth and stock market moves than between the party in power and either of the other two statistics.

I just don't see any argument that this administration's deficits or tax cuts have had any bearing on our current employment picture. The late war almost certainly has.
posted by cyclopz at 5:50 PM on May 19, 2003

Cyclopz, personally I don't think deficits are inherently bad, but I think our total debt is bad. Something like 1/3 of our taxes goes to financing the debt. I guess I don't understand the Libertarian view on this, but isn't fiscal responsibility a part of it?

As far as "Joe Sixpack getting a few hundred bucks". That's what G.W. Bush ran on, and we all got our 300 bucks which was supposed to stimulate the economy. He is also claiming that these tax cuts are supposed to stimulate job growth. If you don't think it has any bearing on the employment picture, then you ought to bring it up with Mr Bush and CO.
posted by Eekacat at 6:42 PM on May 19, 2003

Are you fiscally irresponsible because you have a mortgage?

I think if you read the whole thing, you'd see that I said exactly that...he can't do any one thing to make a material difference. The combination of many influences over long periods impact economic growth and employment. I'm not saying the guy's doing the right things...I'm just saying its wrong to blame every piece of bad economic news on this administration as if they are casting evil spells on the economy.
posted by cyclopz at 7:20 PM on May 19, 2003

Interesting POV about the housing and dollar bubbles. Thanks
posted by scarabic at 7:37 PM on May 19, 2003

The National Debt is hardly comparable to a mortgage. My mortgage is secured by a piece of real property, which is an actual asset that hopefully increases in value as such. The national Debt is secured by what? The word of the federal government that they will pay it? The National Debt is more like credit card debt, and we are creating more debt to pay off that debt. To me that is fiscally irresponsible. Do you get a new credit card to pay off an old one? There are some strong arguments for deficit spending in difficult economic times, that it is an "investment" into the future of the economy so to speak to be rewarded in better economic times. Our only reward has been a larger national debt (which as a percentage of GDP is larger than it has ever been), and a larger government at the cost of a larger tax burden. What proposals are there to reign in spending? To fix the medical care system which is the fastest growing part of the National budget? Approximately 1/3 of the budget is servicing debt, 1/3 is in entitlements, and 1/3 is discretionary spending (which includes defense).

I did read your whole "thing", and I think you miss my point. I tend to agree with you that no one single item can really make a difference, but an economic policy as whole does make a difference. Mr Bush himself is claiming his policies are for stimulating job and economic growth. That is how he his selling his agenda. As far as blaming him, he is the HMFIC, and he has a favorable congress. It can suck to be on the top. Just ask his dad.
posted by Eekacat at 7:56 PM on May 19, 2003

I see this going on in my own neck of Brooklyn, where the faded metal placard of the old neighborhood development association (run by the folks who sell you beer and cigarettes, and candy to the kids) are being outshone by the designer blazons of the new neighborhood redevelopment (read: gentrification) association, which is sponsored by Citibank (settled predatory lending lawsuit, 9-2002) and Corcoran.com (owned by dot-com omnipresence Cendant, who settled a $3.1 book-cooking shareholder suit in 2000 ...

— oh, and corporate sponsor of Gawker, too, by the way: the miraculous, commentless blogvertorial, as seen in the fashion section of the NY Times. "New York State of Blog," indeed).

Meanwhile, Citiwatch.org has disappeared. It's not even for sale.

Cendant strikes me as a poster child for the analysis you cite. How has it managed to recover from an Enron-like stock crash (for Enron-like reasons) to be buying up properties in a New York City employment scenario in which a lot of property owners are having to dip into their equity, risking foreclosure — that most lucrative of transactions involving both a lender and a realtor, who naturally would never collude.

I don't have all the facts, of course. These are hard to come by. I see from a cursory examination at Yahoo! Finance, for example, that Cendant's stock quotes start fresh in 2001. A little investment bank magic? Anyone know exactly why?

The top Google result for "cendant +stockholder +lawsuit" is "CENDANT REPORTS BETTER THAN EXPECTED FOURTH QUARTER 2000 RESULTS." Substitute "shareholder" and you get the company's press release on the appeal, also from 2000.

So those easy-going, work-as-play dot-commers are now our landlords. Why am I not sleeping easier?
posted by hairyeyeball at 8:58 PM on May 19, 2003

Typo post: That's somewhere between $2.85 and $3.1 billion simoleons on that Cendant settlement reached by court order, over protests of plaintiffs in August 2001, having to do with accounting rules for off-balance-sheet activities. (Source: SEC)
posted by hairyeyeball at 9:04 PM on May 19, 2003

The federal debt is exactly comparable to a mortgage and the concept of "full faith and credit" based on the government's ability to levy taxes is analogous to the property securing your mortgage. In fact, lenders have more faith in the federal government's ability to repay than they do in your ability to repay as evidenced by the 100 basis point or so rate premium between 30 year treasuries and conventional 30 year mortgages. Just like the value of your home, lenders expect the US economy to grow over time to allow the government to pepay those debts. The government is not "borrowing on a new credit card to pay of an old one"...it is buying a bigger house.

As I said above, I'm not convinced that we need the bigger house or that this is the way to buy it, but deficit borrowing is not inherently bad and I'm willing to give the administration the benefit of the doubt.

"Our only reward has been a larger national debt (which as a percentage of GDP is larger than it has ever been)"

This statement is false...federal debt as a percentage of GDP was approximately 34% at the end of last year. After WWII that percentage was more than 100% and as recently as 1995 was nearly 50%.
posted by cyclopz at 6:32 AM on May 20, 2003

Cyclopz - yes, a lot of questions. I really wasn't expecting you to answer all of them - most have no clear answer. I'm not blaming every bit of bad news on the GW Bush administration though. I'm just appalled at this administration's response to the economic situation it inherited.

Here is one overall response I have (to your thoughtfull replies to my unanswerable questions): I keep hammering away at the GINI issue because it sounds authoritative but more importantly because it describes a major and mostly overlooked phenomenon in US society - namely, the rise of a new neo-aristocratic class. Even as the 3 bubbles of the stock market, housing, and the overly strong dollar were not GW Bush's fault, the increase in income inequality under Clinton was not clearly of his making either. Most Americans benefited during the boom/bubble Clinton years. But the top 10% did much, much better, the top 1% better still. And the loosening of accounting rules which fueled the stock market bubble was a truly bipartisan Congressional affair while Clinton himself actually pushed for (and signed) redistributive tax legislation which increased taxes on the rich (otherwise the GINI numbers would have been worse).

In contrast, the GW Bush Administration is quite aggressively redistributing income - upwards. Given the tough economic times, is this really appropriate? The claim - a wilted and pitifull cliche by now - is that this will spur job creation. But the imperative of the rich is no different from that of any class: to maximize financial benefit. If I had a hundred million to invest in job creation, where would I put it? I'd be a fool to not build a plant in Bangladesh, Thailand or China where labour is cheap (with one or two domestic US administrative jobs created, I suppose). And the top 1% of Americans (in the wealth pyramid) are, many would argue, more "world citizens" now than US citizens. Their interests are not specifically aligned with those of Joe and Jane Sixpack or with the interests of the financially sinking US majority. The allegiance of the wealthiest Americans lies probably as much with other people like themselves - that is, with the wealthy elites of the world.

I did misinterpret your "security tax" point. I agree that that is a real economic "tax" which can't be pinned in the Bush administration. But there are corresponding benefits which might be overlooked - if it's costlier to buy from abroad, this should increase domestic purchases of US products. And, in the same vein, tighter restrictions on immigration have supported employment of US citizens in some sectors (such as in IT).

One very simple reason that Federal deficits are inherently bad is this: the proportion of the Federal budget devoted to servicing the National Debt has been rising for decades. It's now at about 1/3 of the yearly budget (as Eekacat notes). Because we simply keep adding, always adding to the National Debt (and never reducing it), servicing this debt will eventually come to demand 50% of the yearly budget, then 60%, and so on.

Eventually, the majority of our federal taxes will go towards debt service, while the federal government as we understand it will shrivel to insignificance (except as a tax collection agency): no more Medicare, no more National Defense, no more highway contruction, no more NASA, no more....(fill in the blank) . Do you run your finances in this way? Somehow, I doubt it.

I believe you concerning the debt/GDP ratio - the high post WW2 GDP/debt ratio would suggest that the US actually paid down the debt. Is this true? It would have to be.

I agree that debt is not inherently bad. But here's another thing to consider: in light of the huge balance of trade deficit the US has with the rest of the World, the US is becoming more and more indebted to foreign financial interests. Is this good? And are the causes of current federal deficit spending - among them pork barrel military spending and large tax cuts for the richest Americans - wise? Wouldn't deficit spending in areas known for high levels of job creation per federal dollar spent - education, for example - be the best places to spend federal (deficit) dollars?
posted by troutfishing at 7:28 AM on May 20, 2003

Dont know if you will even bother to get back to this thread as I am late responding, but I will answer anyway. o^)

Although I think our politics are fairly far apart, I have found this to be one of the more constructive conversations I have had on this often frustrating discussion board. I salute your thoughtful comments and questions.

Now let's start from the bottom up...

High trade deficits are neither good nor bad with a few caveats...the deficit is comprised of a mix of public and private debt and a great deal of it is short term in nature...things like accounts payable, banker's acceptances (sort of like a letter of credit relating to trade), and factor finance. Some of it is long term like loans from foreign banks and insurance companies...and a fair chunk of it is foreign ownership of US treasuries. It is good in the sense that we want the rest of the worlds economies to grow too. It is true that we run some risks in being directly and indirectly indebted to other sovereign states, but the majority of that debt is held by and well diversified across a group of countries that are long time allies and trading partners. As net lenders to us they have a vested interest in maintaining those good relationships. The biggest exception is China and our trade relationship with the Chinese should continue to be a source of concern for a number of reasons.

It is true that we repaid the post WWII debt...since 1995 the ratio has come down exclusively as a result of GDP growth since we have had only miniscule surpluses to work with.

Your argument about debt service taking over the entire federal budget ignores one important thing...tax revenues grow at least as fast as GDP. As long as total debt to GDP stays relatively constant, debt service as a percentage of the budget will also stay constant. It is only when debt/GDP begins to grow materially that debt service increases its hold on the budget. the other bonus is the rate at which we (the federal treasury) are borrowing and refinancing. We are now borrowing long term at rates very close to the historical growth rate of GDP for the first time in decades. That makes it much easier to grow out of the debt. Think about your mortgage...if the value of your house increases at a greater annual rate than your financing cost...you make money.

The "cost" (whatever that means) of the tax cut in question is $350-$400 billion over ten years. GDP is projected to be $140 trillion over the the same ten year period. Thats about a quarter of one percent...

I'm a free trader...anything that artificially increases the costs of goods to the ultimate consumers is bad...

I don't have much argument with your "world citizens" paragraph except that I'd call the phrase "financially sinking majority" hyperbole. In a recession, the majority will do worse. When the economy recovers, a majority of those who did worse will do better.

I am also generally in agreement with your first paragraph.

So there...hope you come back to read it.
posted by cyclopz at 2:01 PM on May 21, 2003

cyclopz - I sure did, thanks. Because you spent so much time responding, I'll have to read it a few times to absorb your comments before I can make a sensible reply [I'm too tired now to think straight].
posted by troutfishing at 9:54 PM on May 21, 2003

On review, I realize that I didn't really address your last point regarding spending. I don't know if the administration actually believes that their programs have anything to do with job creation or spends any time thinking about the impact of where spending goes. As I mentioned at some point earlier in the thread, tax cuts/deficits do something that otherwise seems impossible. They force discipline on congressional spenders. Use my wife as an example...if I put my bonus check in the checking account, and there is a larger than normal amount of money there, she might spend it without giving much thought. If I take a pay cut and the checking account is running at lower than normal levels and/or I have to borrow a little on my home equity loan to pay for a new furnace, she becomes more frugal and we eat lots of mac and cheese.

The problem I see is that the administration is not exercising enough fiscal restraint to have the moral authority to demand the same from Congress.
posted by cyclopz at 10:10 AM on May 22, 2003

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