Enter your photo in the Ultimate Fan contest by midnight to win a suite night at a Salem Red Sox game and a chance at a trip to Fenway Park.
There are no eternal facts as there are no absolute truths.
What’s on your mind today?
View our commenting policy and standards | Commenting FAQ | Report a problem
Unemployment creeps up to 8.3% from 8.2% last month!
That makes 41 months with unemployment above 8%. The Obama non-recovery marches on.
163K jobs created in July, more than expected, but the job creation for June was adjusted downward from 80K to 64K. At this rate it will take 3 years just to get back to the job level that existed before the recession began.
In July 155K workers quit seeking employment and the actual number of Americans working fell by 195K. The real unemployment rate is 15%.
“We tried our plan and it works…” the words of Obama on June 23rd! Talk about being out of touch!
July employment #.s:
Unemployment up to 8.3%
Real unemployment up to 15%
June jobs added revised down to 64,000
The unemployment rates went up even with another 163,000 people leaving (giving up looking) the work force.
Improving employment rates are lagging indicators. As just about all other economic data remains negative, these #’s have little (if any) chance to improve before Nov. Look for continued attacks on Romney as it remains (increasingly) impossible for Obama to run on his record.
The Dems are getting desperate!
Harry Reid made the baseless claim that Romney did not pay taxes for 10 years. Reid acknowledged that he did not know who the informant was and could not verify the claim himself.
If Reid is implying Romney is illegally evading taxes which is a crime, he should show proof. Reid should either put up or shut up.
Reid is engaging in McCarthyism by insinuating something without proof and demanding that the accused disprove it.
“Have you no sense of decency, sir?”
As usual, cheering for bad news! How predictable. Is this really the new normal in “patriotism”? Those are “real Americans” you are talking about and that might not be so bad if Romney offered any kind of solution, but putting more on our backs so less is on his is not going to cut it, and blaming Obama for this mess is so very dishonest. Do you two even know we have a Congress?
Obama is running on his record, with Bush’s economy!
Good question John R, the “birthers” are “engaging in McCarthyism by insinuating something without proof and demanding that the accused disprove it”.
“Have you no sense of decency, sir?” I agree!
To #1 (John R) and #2 (Jim Lucas): The July jobs report is the second least accurate of all monthly reports. http://economix.blogs.nytimes.com/2012/08/02/beware-the-jobs-report-of-july/
I suspect that they’ve overestimated job growth at 163,000 jobs created, but when they’re adding and subtracting large numbers to come up with a small delta, it’s hard to know for certain.
Japan-style lost decade, anyone? http://economywatch.nbcnews.com/_news/2012/08/01/13054652-economy-may-be-permanently-stuck-in-slow-growth-mode?lite
@1 John R., I suspect you’re still laying blame in the wrong place. It sounds to me like capitalism is failing us.
As an aside, here’s a cute cartoon to explain macroeconomics. It also illustrates why I say any discussion of the economy needs to focus more on the material exchange of goods and services and why I don’t care if how much money is printed but why I care about the distribution of that money.
Back in 2010, Obama favored the extension of the Bush tax cuts, saying growth was too slow! The GDP then was 2.6%.
Now Obama wants to raise taxes. The current GDP is 1.5%!
What is the difference? Back in 2010 the midterm elections were coming up and Obama could see the “hand writing on the wall” (KJV Daniel Ch. 5).
This time Obama is trying to firm up his base for the Nov. election.
With Obama it’s all about getting re-elected
#3 Not only that John R., but he made his (admittedly) unsubstantiated claims as Senate leader, from the well of the Senate.
“The word’s out that he hasn’t paid any taxes for 10 years,” Reid said. “Let him prove that he has paid taxes, because he hasn’t.”
‘”I’m nor certain” it’s true.’
#8, JohnR, are you just now figuring that out? That is the objective of ANY American politician in the Modern Age; Obama is no different.
The system is broken; that much has been obvious for a long time. What, exactly, to do about it is the real question and the subject of much debate. There are no easy answers.
#6 Correct Brian, which is why I did not mention new jobs added in July. This # has been revised every month for I think 40+ months (trying to find a solid # here, perhaps you can help). It seems to me with such routine adjustment, the actual parameters are better known, but the original # is put out as temporary window dressing.
Just read the Tax Policy Center’s report on Romney’s proposed tax plan. The plan calls for tax INCREASES for 95% of Americans. The uppermost income levels, however, see their taxes cut. All in all, $360b in lost revenue in 2015. His plan will shift $86b in tax burden from those making over $200k/yr to those making less. Basically, the vast majority get to pay higher taxes so the upper income levels can have a tax cut. Yeah, go team Romney indeed…http://www.taxpolicycenter.org/UploadedPDF/1001628-Base-Broadening-Tax-Reform.pdf
And now his campaign in crying foul and attempting to claim that the TPC is “biased”. Never mind that they called the TPC an objective third-party back in November to attack Gov. Perry. http://livewire.talkingpointsmemo.com/entries/romney-camp-cited-same-think-tank-they-now
For those interested in something a little less vitriolic, an oldie but a goodie:
What Is Economics?
“Many people think that economics is a matter of opinions. Economics is not a study of opinions. Economics is a science, and as a science it deals with eternal laws — laws that men are not able to change — laws that remain constant. If we want to improve our own satisfactions in life, we must improve our ability to know and use these laws of economics so as to attain more of the things we want. So, if the civilized world is to survive, people must learn more about this science of human action.
…Ludwig Mises, called his great book “Human Action”. He reduces economic science to two words: men act. From these two words he builds the whole science of economics. He points out that purposes direct all conscious human actions. We are not dealing here with the functions of the body that are performed without conscious guidance. We are dealing with the attempts of men to achieve the things they seek in life. This is what we are assembled here to learn a little bit more about.
In every act throughout our whole lifetime, we are always exchanging something we have for something we prefer. We may be exchanging our time, our energy, our money, or some other scarce good for what we want, but every one of our actions is an exchange — an exchange of something we have for something we prefer. We must learn to improve our actions if we are to get more of the things that we want in life.”
Need to correct my #2. 350,000 people dropped out of the work force, not 163,000. This reflects even worse on the increase in unemloyment rate(s).
#4 – “Obama is running on his record, with Bush’s economy!”
Oh, if only Obama would run on his record. It’d guarantee he’d be out of a job.
And at what point does the terrible economy becomes Obama’s?
Wait…that was a stupid question. Everyone knows it never will!
#7 Scott, “….why I don’t care if how much money is printed but why I care about the distribution of that money.”
Scott, are you suggesting the key to prosperity is to simply print more money, and pass it around (to whomever)?
The question is how long does Obama have to be in office before it will become his economy? He said he had the answers to fix it in 2008. So far that has just been another lie. If we amend the Constitution and give him 3 or 4 terms, will he eventually have to take responsibility for anything, or will it remain Bush’s fault no matter how long he holds office?
#13 – An interesting read. Thanks for the link!
7/16 – why not send everyone a file and a printer so they can just print their own money? Better yet, why not just declare gravel as the official currency? Better still, why not do without any medium of exchange completely and allow everyone to get what he wants?
#15 – I wish Obama would do more to highlight his record as President. Contrary to the GOP talking points, he’s done a lot of great things despite having to work with an gridlocked Congress thanks to the unprecedented levels of GOP obstruction and partisanship. http://obamaachievements.org/list
Planning to kick off the weekend by enjoying a cold beer? Seems Obama now wants your beer money!
7 – re cartoon – Scott, on an island without risk-takers (a socialist paradise, in other words) that’s what would happen…it’s not reality.
On a free market island…
…The fisherman would find some way of contriving a means to catch more fish (a net, say) than a simple hand-to-mouth existence requires. He would take this risk (having no guarantee it would work) for several reasons – saving for the “bad-fishing” days, for example, or trading the extra fish to the hut contractor for a storage shed for his extra fish and his net, or trading the extra fish for a few extra water coconuts so he can fish longer in the hot tropical sun.
The hut contractor would continue to maintain the fisherman’s and coconut harvester’s huts even on the off-fishing (or off-coconut) days (a risk to him, the hut contractor) in return for more fish or coconuts so HE could provide huts that do a better job than the straw huts at keeping the inhabitants dry during monsoon season, and so HE could work longer hours in the hot tropical sun.
The coconut harvester would work with the fisherman to effect a trade; one of the fisherman’s nifty nets for more coconuts so HE could harvest even more coconuts, and effect other trades – a storage bin from the contractor, perhaps, or expand his business to include palm fronds (from the coconut trees) for the island’s inhabitants to use as fans. He and the contractor would also establish a joint venture to incorporate palm fronds into the building materials in order to keep monsoons out of the huts.
In all of this, production of fish, huts and coconuts (i.e., goods with value) increases, to the point that they are so abundant that it costs fewer fish for a hut expansion, fewer coconuts for more fish, fewer storage huts for more coconuts. At some point a common medium of exchange will evolve, something with intrinsic value of its own. Such is the free market.
Now, in a planned statist economy such as the US is devolving to, a State government would come in, nationalize the fishing, hut building, and coconut industries, and mandate a seven-hour work-day. The State would impose price controls – a strict “one fish for one coconut, ten fish or ten coconuts for one hut” rule, so there trading and risk-taking are effectively penalized. The State would prohibit excess production, and ration goods during “bad” fishing and coconut harvesting days. The State would implement a welfare plan for those out of work. In time, the coconut harvester would realize he doesn’t need to work to get his fish, or his hut so he doesn’t. He gets paid to sit on his rear, just as your cartoon shows.
@16 Jim, close….but not just whomever. As you know, I’m convinced capitalism is like a pyramid that sucks money from the lower classes and pumps it to the top. If you want capitalism to work, there has to be money at the base to work it’s way up. Right now, the money is “stuck” at the top.
You can either take the money from the top and redistribute it to the bottom OR you can print more money and distribute it to the bottom. They both work.
Long term though, I’m not sure it’s sustainable. One can imagine a far future scenario where the entire world is automated and just one person controls/monitors/runs everything like the captain and humans in that movie Wall-e. If no one but that one person is “working”, no one but that one person will have money to make purchases. How do we decide who gets what then? At this point, markets break down.
@22 89Hoo, it’s just a cartoon. You’re putting too much effort into the rebuttal.
23 – how about a currency with some value, and a banking system that does not permit banksters to use your money to inflate the currency?
24 – should I have used pictures, Scott? I guarantee the artist put in more effort than I did.
@25 currency with real value would be too restrictive. Then to pay for something you’ve got to physically move it from here to there. It’s still subject to hoarding, etc.
@26 89Hoo, although the effort to create the artwork may have been substantial, it’s a relatively simple idea/point. In terms of making a point, you put in way more effort than him/her.
One more time on my #2. The correct (I think!) correct # of those leaving the work force is 150,000. The # has been hard to find, for what it’s worth, the 163 was my error, the 350 I heard on CNN, the correct figure (now being confirmed other news outlets) I heard on FOX. My aplogies for the errors.
27 – seriously? Scott, you need to understand how money works. The restrictive supply means the purchasing power is greater, which means you need to carry less of it around. That’s why there was actually price deflation in the 1800s in the US, when we used gold and silver.
And from a logistics standpoint, debit cards and paper are still options…they would just represent money that had value, like the old silver certs.
You start just handing out meaningless pieces of paper, you wind up requiring people to push wheelbarrows of cash around, and THAT is a physical logistics issue. Look at any country with hyperinflation…look at Weimar Germany
28 – perhaps if he had applied more effort, it would not have been so stupid.
Let’s revisit some aspects/questions/assertions reference Chick-fil-A, fast-food, restaurants/ (Wal-Mart), etc., in context of July’s increase in unemploymant.
The difference between the standard UE # and the “real” UE # reflects those underemployed. Many of those underemployed do find work in the retail/hospitality markets. Instead of appreciating that at least those jobs exist, some wish to blame the “joints”.
The “blame” for such underemployment lies in the failed economic & social policies of Obama & co.
Better jobs will emerge when there is once again confidence in the future for business, and consumers. The mantra that busineses are holding back expansion, investment & hiring to harm Obama politically is absurd.
Businesses want nothing more than to grow, increase marginal income & therefore hire.
31 – there is nothing wrong with a job in a fast food “joint”…without those jobs, un- and low-skilled workers would have fewer options. Working a drive-through does not require a medical degree, or an engineering degree (although someone with a rhetoric degree may be underqualified), and that’s the reason they don’t pay the same wages as do doctors and engineers, or even mechanics and hairdressers. It requires someone with the ability to pull a soda spigot, read a dollar on a computer screen and count out change (and often even that is automated). It is, in short, a PERFECT job for someone still gaining skills to work at a job that requires more skills (doctor, engineer, etc.), or for someone who just wants to get out of the house a few hours a week and appreciates a little extra scratch.
If a Burger King owner had to pay anymore than $8-10 an hour for an unskilled worker, he’d either have to charge more for the Whopper (to the point where no one would buy it) or he’d have to shut his doors. I know the egalitarian crowd would crow about that wouldn’t be a big loss, and about how it’s crap food anyway, but…
…those jobs fill a market need.
Put differently, the engineer-to-be, the future doctor cannot find jobs as engineers and doctors because – and this is important – THEY AREN’T ENGINEERS AND DOCTORS, they don’t have doctor and engineer skills…and they won’t be engineers and doctors until they finish their training. They have a need then, to find work that will pay them for work for which they are skilled…which is pulling spigots and counting change. They don’t expect to make a living or a career out of it, they expect to earn something while they finish their training, which will lead to – hopefully – a job using their doctor and engineer skills.
Now, the sad truth is that there are those that cannot find work other than at a fast-food joint (for which the left would punish, I suppose, by banishing fast food jobs). The solution is NOT to force the employers to pay them 20 dollars an hour (and thereby shut their doors), but to nourish an economic and fiscal environment that will allow other employers to hire and train them, and that will allow their money to go further.
@30 89Hoo, money acts in numerous ways depending on the circumstances. But in all cases, money “hides” what is going on behind the scenes which is production, consumption, and exchange of real physical goods and services.
Going home. Good weekend.
“Hoo you don’t have to tell me. I was a Burger King franchise owner/operator for ten years.
Every aspect from locating & developing locations to daily operations (and there’s lot in between). Four units from 1980-1989, Wythville, Marion, Radford (Fairlawn) & Christiansburg.
Actually Chuck and Michael, the question is not “how long does Obama have to be in office before it will become his economy”. The question is when will Congress actually work with him on any plan for success and I think we already know the answer to that one. Yes, he did say “he had the answers to fix it in 2008″ and then he met the worst Congress in our lifetime. When people put politics above governance there is not a lot of room for fixing much.
For instance On January 26, 2010 the Conrad-Gregg bipartisan resolution to create the “debt commission”. John McCain and Mitch McConnell were among those speaking in favor of the proposal and it had substantial bipartisan support. Yet the resolution was voted down. It did not get the magic “super majority”, McCain and McConnell both voted against it. Why? Bottom line, because Obama supported it and it had the potential to bring him some political credit.
The Washington Post ran this line from Fred Hiatt: “No single vote by any single senator could possibly illustrate everything that is wrong with Washington today. No single vote could embody the full cynicism and cowardice of our political elite at its worst, or explain by itself why problems do not get solved.
But here’s one that comes close.“.
So when Obama actually is in control of this economy and the policies he is supporting, THEN he will be “to blame” for whatever betides.
Until you face the truth it is all just noise.
If wages were raised as they should be, organically through good business acumen, fighting to legislate a “minimum wage” would not be an issue. Sadly, billion dollar profitable industries and businesses still “rely” on keeping the wages they pay low and thereby they add to the cost of safety nets, the instability in the economy and the erosion of security for millions of families. If they are not forced to pay better, they won’t and do not kid yourselves, we ALWAYS pick up that slack. Yet another reason no business is successful solely on its own.
We need the “cheap” goods because that is ALL the low wage workers can afford. Walmart et al have made themselves a self fulfilling prophesy and some are so anti regulation that they cannot see the truth even in black and white.
If those low wage workers cannot afford health care, housing, food etc, where do you believe it is going to come from?
Why can a billion dollar business like McDonald’s, Wal-Mart, or others NOT pay better wages? Because they don’t WANT to.
“A significant body of academic research has found that raising the minimum wage does not result in job losses even during hard economic times. There are at least five different academic studies focusing on increases to the minimum wage—including increases ranging from 7 percent to 12.3 percent made during periods of high unemployment—that find an increase in the minimum wage has no significant effect on employment levels. The results are likely because the boost in demand and reduction in turnover provided by a minimum wage counteracts the higher wage costs.
Similarly, a simple analysis of increases to the minimum wage on the state level, even during periods of state unemployment rates above 8 percent, shows that the minimum wage does not kill jobs. Indeed the states in our simple analysis had job growth slightly above the national average. [...]
All the studies came to the same conclusion—that raising the minimum wage had no effect on employment.”
Something I have not seen addressed here or in the media is the grassroots phenomenon manifested from this Chick-fil-A situation.
If I were a left, “progressive”, “liberal”, democrat, especially any directly involved in the Obama re-election effort, I would be very concerned.
The scope, rapidity & clarity of the response was amazing. Obviously Americans are paying attention, and are not “ignorant” to the issues as some have suggested.
#20 If Obama and his handlers thought they really had anything to highlight…they would. The fact is they can’t…there’s nothing to highlight. How quickly you forget that Obama had majorities in bothe the House and Senate during his first two years in office. The smartest man to ever hold the office said he should be a one term president if he couldn’t solve our country’s problems in 4 years. Two thoughts on that: #1 Who am I to stand in his way? I will help him fulfill his prophesy in September. #2 If he is the smartest man to ever hold the office, shouldn’t he have known he couldn’t do it? Sounds like a “shovel ready” statement to me.
Sandi: The figures are the figures, like them, or not. The first two years of the smartest President ever, he was working with a DEMOCRAT CONGRESS. One half of his term was with an absolute majority, and the remainder with a Democrat majority in the Senate. Who, exactly, is responsible for his ineptness, if not him? Oh, I forget, nobody builds a failure by himself. His supporters have been behind him all the way. Remember when we thought he was saying “elect me for change you can count on”? What he actually said was “elect me and you’ll have to go on counting your change.” The smartest President ever is now saying “What I did the first four years didn’t work. Elect me and I’ll do the same thing on an ever bigger scale.” Please give us a firm date on which Obama will start being responsible for his presidency. It would appear to me that the job of the presidency was “shovel ready” in 2009, but Mr. Obama wasn’t.
What does that, that money “hides” production, consumption, exhange? Would you elaborate?
Oh Really Jim Lucas? “The “blame” for such underemployment lies in the failed economic & social policies of Obama & co.”
Funny, those jobs have been leaving and people have been underemployed a lot longer than Barack Obama has been a known entity.
“If this labor force trend were the result of the recession then we could hope for an employment recovery in the near future. However, it turns out that the declining labor force participation rate is not a new phenomenon caused by the recession or financial crisis. As the above graph shows, the rate of individuals in the job market has been declining for over a decade.
…Not only has the labor force been in decline since 1992 (as the chart above shows), but according to Stork and Watson the trend in annual employment growth has been falling since 1965!”
Searching Bear, there was never enough of a “majority” to have “control” and in this divisive “super majority” or die Congress, the Dems did not have it and to say so is not honest perspective.
The numbers prove that this will be the long slow slog many predicted and unless we allow some new bubble to distract from the truth, this is the “new normal” and nothing Obama or Romney can do will sway the economy for several years. Despite the right wing fantasy that the moment an election happens it is all someone’s “fault” that is not the reality. The lags will tell on anyone with the integrity to look at reality.
Parse the points as you like, they bear little resemblance to reality.
#36 This Congress was elected in 2010 to stop what voters perceice(d) as the destructive Obama policies. You can like that or not, but it’s true & it’s what they’ve done.
#37 “If wages were raised as they should be, organically through good business acumen, fighting to legislate a “minimum wage” would not be an issue.”
Ms. Saunders, regardless of “organically” (?) or your perception of business “acumen”, the labor market is a market like any other. Markets are not perfect, nor ever as free as might be, but government intrusion rarely helps to improve such.
#38 It is impossible to say what the employment situation would have been reference something that did not happen. I am not a fan of shooting the messenger, but the type of analysis here, especially as noted above, is highly subjective. Your references are also.
#43 The problem is not a fall in the labor force. The problem is the lack of available jobs for the labor force. This is why the employment situation now is the worst since such records have been kept.
Yes, I can see the superiority of your references.
#44 “The numbers prove that this will be the long slow slog many predicted and unless we allow some new bubble to distract from the truth, this is the “new normal” and nothing Obama or Romney can do will sway the economy for several years.”
Please share “the numbers”. (Not an unrelared PBS piece). Please define “the truth” & the “this”, which is the ‘”new normal”‘. Thank you.
No, Ms. Saunders I am not nit-picking or parsing. You use extremely vague terms here to proport to make a point. That present policies are not at fault & that changes in such policies will make no difference. Please, support this. Thank you.
Just think, if, God forbid, Obama should win a second term and his continued policies of higher taxes, more spending, more regulation, and more entitlements throws the country back into another recession, he can still claim he inherited a miserable economy!
Yes Jim Lucas, you are both “nit-picking” and “parsing” because that is what you do. I am as capable as anyone who posts here of expressing my opinions and responses and your deliberate campaign to discredit me while offering nothing but your own disdain, is getting ridiculous.
How about you show us “the numbers” that prove me wrong? How about you provide sources for your comments? How about you provide sources for your opinion? In other words, how about you refute what I say and stop demanding that I defend it against your say?
I think you do need to start thinking about what an Obama victory means because Romney seems hell bent on delivering that event.
#52 I do provide sources & numbers. And, I answer questions about my posts when asked.
Sometimes the responses to me are not particuarly polite or civil. Some even post completely unrelated items in attempts to smear those with whom they disagree. I think most people here see through these, either by merit and/or motive.
I don’t hide behind excuses like; “bogus”, “nit-picking”, “contortional”, etc.
AS long as you post assertions, claims & assusations that IMO lack merit and/or substantiation, if it’s a subject important to me, expect them to be challenged.
You may have noticed, I have had numerous back & forths with many on this blog. Sometimes we agree, sometimes not. We, however, for the most part support our points & answer each others’ questions.
AS was not meant to be upper case…..should read, As. Thanks.
Oh for goodness sake:
Still, we must steel ourselves to the fact that this is, and will remain, a long, slow slog, and there are no magic bullets
A Long, Slow Slog Back to Normal
Hammond Expects `Long, Slow Slog’ for Stocks, Investors
Do you require more support of my contention?
44 – Sandi, I meant to respond to this last week, got sidetracked on other things:
“The numbers prove that this will be the long slow slog many predicted and unless we allow some new bubble to distract from the truth, this is the “new normal” and nothing Obama or Romney can do will sway the economy for several years.”
Congratulations! You almost sound like an Austrian economist. It is the Keynesians, one of whom – a particular darling of the left and neocon alike – who write for the New York Times, advocates just that: continual artificial booms (read: malinvestment spurred by inflationary monetary policy), in order to keep the masses stupid and happy. This was Krugman in 2002 (he hasn’t changed his tune):
“The basic point is that the recession of 2001 wasn’t a typical postwar slump, brought on when an inflation-fighting Fed raises interest rates and easily ended by a snapback in housing and consumer spending when the Fed brings rates back down again. This was a prewar-style recession, a morning after brought on by irrational exuberance. To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble.“
…and he prescribes the same thing for Europe:
“What could turn this dangerous situation around? The answer is fairly clear: policy makers would have to (a) do something to bring southern Europe’s borrowing costs down and (b) give Europe’s debtors the same kind of opportunity to export their way out of trouble that Germany received during the good years — that is, create a boom in Germany that mirrors the boom in southern Europe between 1999 and 2007. (And yes, that would mean a temporary rise in German inflation.) The trouble is that Europe’s policy makers seem reluctant to do (a) and completely unwilling to do (b).”
Sure, all the booms have led, inevitably, to busts and recessions (as the immutable laws of economics dictate)…so let’s do it again!
To YOUR credit, Sandi, you are seeing right through it, as merely a means to distract from the truth.
To #56 (89Hoo): There have been various debates on this blog concerning the origins of the housing crisis. I’ve always believed in multiple culprits, but had never thought of including Krugman. Your link from 2002 adds him to the very top of my list.
Who the hell explicitly calls for a bubble? It’s insane. The post-bubble crashes inevitably happen, and they’re always ugly.
Sandi may be correct in her assertion that we’ve reached a “new normal”. If she’s right, it’s a powerful argument that all stimulus actions should halt. After all, even Keynesian economic theory states that boosted government spending is only supposed to be done in times of recession. Not during normal times.
I, on the other hand, believe there’s still one experiment left to try: reduced deficits. Deficits were very low during the Clinton years, and we saw good economic growth. They jumped up to $500 billion/year under Bush, and growth dropped. They’ve jumped to $1200 billion/year under Obama, and growth is almost non-existent. Perhaps if the federal government weren’t vacuuming up every single spare dollar out there, more business investment would be happening. [And from a standpoint of avoiding a Greek-style "borrowing crisis" and being more fair to future generations, we really need to cut deficits anyway.]
57. Brian – You are not placing your theory on much if all you are looking at the Clinton, Bush, and Obama years. First of all Clinton had the technology Boom which accounted a huge productivity increase, GWB had the 911 crisis which even a drop in taxes and increased spending barely made it through, and Obama has had the worst world wide recession since 1934. Pretty difficult to compare. Add in that the causes of the downsturns were totally different.
There is no question that the US needs to decrease spending in relation to GDP. The problem is how. There are many options, but which ones will work and which ones will make them worse. While I believe in a moderate approach of monetary policy to stimulate and cuts and tax increases; others believe in drastic approaches one way or the other.
Accordingly, as there is no history or academia with a solution that fits all the facts of this scenario, I have to place my faith in the Fed and Treasury, and experts that have got us this far along in a turnaround. To change policies at such a crucial time, when there are no sure fire actions, seems stupid to me.
57 – Brian, yes, we need to quit spending, we need to reduce deficits, and we need to do it now. I absolutely agree, in spite of what fraudulent “economists” such as Krugman (and he’s not alone) may propose.
First of all 89Hoo, I think you misinterpreted Krugman in that first link, or maybe you just did not turn to page 2. He was saying that was what someone ELSE has said, then he went on to say:
“Judging by Mr. Greenspan’s remarkably cheerful recent testimony, he still thinks he can pull that off. But the Fed chairman’s crystal ball has been cloudy lately; remember how he urged Congress to cut taxes to head off the risk of excessive budget surpluses? And a sober look at recent data is not encouraging.
On the surface, the sharp drop in the economy’s growth, from 5 percent in the first quarter to 1 percent in the second, is disheartening. Under the surface, it’s quite a lot worse. Even in the first quarter, investment and consumer spending were sluggish; most of the growth came as businesses stopped running down their inventories. In the second quarter, inventories were the whole story: final demand actually fell. And lately straws in the wind that often give advance warning of changes in official statistics, like mall traffic, have been blowing the wrong way.
Despite the bad news, most commentators, like Mr. Greenspan, remain optimistic. Should you be reassured?”
That does NOT sound like he is endorsing the bubble game, only acknowledging that the Fed is playing it.
It is further and better explained here as well:
“So what happens if the housing bubble bursts? It will be the same thing all over again, unless the Fed can find something to take its place. And it’s hard to imagine what that might be. After all, the Fed’s ability to manage the economy mainly comes from its ability to create booms and busts in the housing market. If housing enters a post-bubble slump, what’s left?
Mr. Roach believes that the Fed’s apparent success after 2001 was an illusion, that it simply piled up trouble for the future. I hope he’s wrong. But the Fed does seem to be running out of bubbles.”
And here as well:
I just do not read Krugman as advocating bubbles, certainly not as a prescriptive for the economy.
Of course, as is pointed out here so often, I am no economic knowledge powerhouse. So here is his own words on the subject:
Sandi, I don’t see where you refuted anything I said…Krugman clearly endorsed a housing bubble, in the first link (yes, he charitably gave credit to Paul McCulley of Pimco (whoever he is)), but it was an endorsement of the notion, not a rejection. And he was bemoaning Greeenspan and the Fed’s inability to make recovery happen any other way…basically painting himself into the corner of endorsing the need for a bubble.
I wrote the above before reading your final link, Sandi…and Krugman himself confirms it:
“…I wasn’t calling for a bubble — I was talking about the limits to the Fed’s powers, saying that the only way Greenspan could achieve recovery would be if he were able to create a new bubble…”
Syllogistically…since Krugman thinks the Fed needs to take action to achieve recovery and manage the economy…and since the Fed lacks any ability outside of a bubble to achieve what Krugman would consider any sort of ‘ecovery’…it’s a call for a bubble, no matter how hard he tries to cover his tracks with 20/20 hindsight. Said bubble is to be fueled, of course, with inflationary monetary policy (a self-realizing policy, by the way, to which he confesses support outright). And of course, Bush (and later Obama) went right along with the inflationary policies, and we had the housing bubble to follow on the dot-com bubble…what’s next?
No thought is given to keeping the Fed out of the economy, of course, even with Krugman’s hindsight. He should read some history.
61. 89hoo – Amen, no thought should be given to keeping the fed out of the economy. History has shown that the fed is necessary to help keep the economy going. The fed saved us from years of deflation in 2008 and in 2001. Thank Heavens we established the Federal Reserve.
62 – however did we survive all that growth in the 1800s and early 1900s, before the Fed, with all those dastardly low prices, strong currency, and high GDP?
I simply don’t believe that is what Krugman said, or what he meant. That the Fed backed themselves into a corner with interest rates only able to go negative and monetary supply unable to be used as a conductor, does leave them with little “control” which is what he was lamenting, but I do not feel Krugman was “advocating” for a bubble by mentioning that was their only real hope. It only prolonged the problem, as expected and as I believe he intoned.
Krugman haters are gonna hate, but I disagree!
I believe he understands the Fed and what it should do.
“The Federal Reserve has a dual mandate: price stability and maximum employment. It normally tries to meet these goals by moving short-term interest rates, which it can do by adding to or subtracting from bank reserves. If the economy is weak and inflation is low, the Fed cuts rates; this makes borrowing attractive, stimulates private spending and, if all goes well, leads to economic recovery. If the economy is strong and inflation is a threat, the Fed raises rates; this discourages borrowing and spending, and the economy cools off.”
64 – Krugman, to be fair, probably does not recognize that one of the major causes of bubbles – whether dot-com, housing, education, what have you – is the excess of worthless money (that people don’t recognize as worthless until it’s too late) brought about by the inflationary monetary policies he advocates. I’ll concede he may not be necessarily intentionally advocating a bubble (in spite of his own words, but let us propose that someone else wrote them in his name), but that he is advocating conditions that will lead – inevitably – to a bubble. Put differently, he just may not know what the hell he is talking about.
Name is required
A valid email is required (email@example.com)
Comment is required
Your email address will not be published.All fields are required to comment.
Wed, 22 May 2013 13:19:25 +0000