What he Said

Former president Bill Clinton, speaking at the John F. Kennedy Library, said he "can't find anybody with a straight face" to defend the tax package, whose advocates "compromise the future of our country." Of the Republicans, Clinton said: "When ideological people find themselves in a hole, they ask for a bigger shovel."

AB

Wondering Why Deficits Matter?

Go read CalPundit.

AB

If it walks like a duck, and talks like a duck...

Or more appropriately, if it looks like a recession, and feels like a recession...

If you've been listening to the Bush Administration for nigh on the past year, you might have been led to believe that, while growth is slugging and the job market still contracting, we are "officially" out of the 2001 Recession. According to an article (sub req) today by Jon Hilsenrath on page 1 of the Wall Street Journal, the powers that be when it comes to saying "when" to the start and end of recessions, namely the National Bureau of Economic Research, has yet to officially offer up that closing "when".

In May of last year, Mr. Hall and his colleagues believed the latest recession might be over. Consumers were spending more and economic output was rising. All that the committee members needed to see was a few months of uninterrupted job growth to announce the end of the recession. "It seemed like the timing was imminent," he says.

But Mr. Hall is still waiting. Instead of expanding employment, companies are continuing to shed jobs at a furious pace -- 525,000 nonfarm payroll positions in the past three months alone. Since March 2001, when the recession began, the U.S. economy has lost 2.1 million jobs. The total number of people unemployed -- including discouraged workers who would prefer to work but have stopped looking -- is about 9.2 million. And the number of people who are working part time because they can't find full-time work is 4.8 million, up 46% since 2001, according to the Bureau of Labor Statistics.

In short, the U.S. is experiencing the most protracted job-market downturn since the Great Depression. It has left behind a remarkably broad swath of workers -- from young to old, and from high-school dropouts to the highly educated -- even as the economy has started growing again.

And don't expect things to turn around any time soon. While in past recessions, most employers expected that layoffs would be "temporary" and workers called back when the economy picked back up again, this recession has been markedly different. Manufacturing jobs are continuing their migration to cheaper labor markets, but this time have been followed by high tech jobs as well; Eli Lilly has recently joined this trend and has contracted its IT department to an Indian (as in South Asia) firm. Airlines are permanently downsizing, as are electronics and communications firms. Add to these trends higher worker productivity, and what many economists fear, a jobless recovery, seems more and more likely.

Unfortunately for the Administration, this has been an "equal opportunity" recession, hitting middle and upper income workers as well as the more typically-affected working poor. What should worry Bush&Co. is that this demographic while not only more inclined to complain, is more inclined to vote their now-empty pocketbooks and wallets as well.

But it is a recovery, right? So why haven't the big dogs at the NBER cried "uncle" yet?

At the National Bureau for Economic Research, the enduring job-market weakness has sparked a debate about some very basic economic questions. Like this one: How do you know when a recession ends? Some members, including Robert Gordon, a Northwestern University professor and an expert on productivity trends, believe the recession actually ended a long time ago, because overall output, as measured by indicators such as gross domestic product and national income, have been rising since late 2001. "There clearly was a trough," says Mr. Gordon.

But Mr. Hall, a Stanford University professor, isn't so sure. "I don't want to say that a recession is over if more and more people are unemployed and job growth is negative," he says. For now, he says, he prefers to wait a little longer.

In 1991, the NBER jumped the gun a bit, declaring the 1990-91 recession over just prior to the fall "double-dip", where they were then forced to backpedal. Unfortunately for Bush I, the economy, while growing sluggishly, was in fact expanding, but relatively "jobless". An electorate irritated over having their hopes for an improving economy dashed once, proved skeptical even once the economy in fact began to turn around. Bush Jr. might be wise to refrain from calling for the closing bell on the 1991 Recession until all those ducks are truly in line. Fortunately for the Democratic contenders, Bush has never shown a great deal of impulse control.

(x-posted at Wampum)

Short cuts...

Dwight at PLA dissects the new Republican "Ivory Tower Dreamers" and how much they may cost.

Atrios has been following the Leave Poor Kids Behind (literally) tax cut deficit increase fiasco. More here as well.

Turns out Kevin Drum at CalPundit was on the case too last night, and credits our own AngryBear for pointing out the political tit-for-tat game Congressional Republicans are playing.

Over at Wampum's new home, I take a look at the latest run of weekly jobless claims.

Brad at A Taxing Blog has the scoop on continuing problems with Proposition 13 in California, tax incentives that Kansas offered Boeing to sweeten a relo deal, and the possible unconstitutionality of the Ohio House Democrats plan to increase the state's minimum net corporate income tax.

Moderately Positive Outlook?

CNN has a story, "Mañana economics: Economists keep saying the sun will come out tomorrow ... and tomorrow ... and tomorrow." Here's the outlook:

GDP actually grew just 2.4 percent in 2002. When surveyed at the start of 2002, forecasters predicted 3.5 percent growth in 2003. Lately, they've cut their forecast for the year to 2.2 percent. Now, they're expecting 3.6 percent GDP growth in 2004.

The improved projections are attributed to the tax cuts (which are in fact somewhat stimulative, though that stimulus may come at the expense of long run investment, as government borrowing to finance deficits pushes interest rates up and crowds out private investment), low interest rates (which have done a lot to keep consumer spending up--mortgages and cars--but haven't similarly stimulated business investment), the falling dollar (good for exporters; bad for domestic firms that buy a lot of inputs from abroad), rising consumer confidence, and a rising stock market.

2.2% growth is basically ok, closer to recession than to boom, but basically neither. It would take growth rates somewhat above 3% to reverse the unemployment increases that we've seen over the last two years.

But not all the news is rosy: using the administration's own numbers (from the CEA), the tax plan is projected to destroy jobs from 2005-2007. Why? Well it's billed as creating 700,000 new jobs in total, while creating 1.4 million in 2003-2004 alone. So to total up to 700,000, that many jobs have to vanish after 2004! That's rather convenient, given the election cycle.

And some of the news is outrageous:

A last-minute revision by House and Senate leaders in the tax bill that President Bush signed today will prevent millions of minimum-wage families from receiving the increased child credit that is in the measure, say Congressional officials and outside groups.

The $400 checks that these families will not get were a big part selling this plan, a way to avoid the "sellout to the wealthy" label. The group that does not benefit includes those making $10,500 to $26,625, meaning that many of these families, likely the majority, do in fact earn enough to pay income taxes, and therefore would benefit from the child credit even if it is not fully refundable (it isn't).

I'm sure we'll hear that this was an inadvertent slip (right now, the House is blaming the Senate's $350b "limit"), but inadvertent slips tell a lot about the priorities of those making the slips.

AB

UPDATE: The numbers about job growth and loss before and after 2003-2004 in the CNN story are based on a mistake Max Sawicky made, where that mistake basically amounts to believing the president's Council of Economic Advisors February 2003 report. You see, crazy Max thought that by a "creating a job", the CEA meant "one person working for one year who would not be working under the baseline scenario for that year", when it turns out that the CEA meant something different. Max explains the details here. I suppose the WSJ editorial page can just blame it on Clinton for confusing us all about what "is" means. I should emphasize that even under the CEA's interpretations, it remains very front-loaded, meaning the majority of job gains--such as they are--accrue bye the end of 2004.

X-posted at Angry Bear.

Yikes

Is Teddy, in the post immediately before this one, being serious? I hope not. As far as the Greens go, I'll go with what Dave Talbot said (click here for a free and lengthy excerpt). I pretty much lay a good chunk of the blame for everything that's happened since 2000 at Nader's doorstep. As TBogg said, "It's gotta be the hemp. I blame it on the hemp.....". And does anyone still remotely believe there's no real difference between Republicans and Democrats? And for the "it's gotta get worse before it gets better" crowd, how much worse do you want it to get? Is the state of affairs today creating a goundswell of Green support, or the possibility of Republican control of all three branches of government for as far as the eye can see? I think the latter.

AB