Vinod's Blog
Random musings from a libertarian, tech geek...
Saturday, March 13, 2004 - 09:15 AM Permanent link for Don't Blame / Credit Bush with Jobs
Don't Blame / Credit Bush with Jobs

A pair of recent articles dissect Bush's economic record.    First, an excellent, admirably non-partisan article by Noam Scheiber  dissecting the job loss claim (Noam, it should be noted, is no friend of the administration).   Bush isn't to blame - if anything he's actually over extended himself trying to prevent more losses.   And there's nothing Kerry could do better.

...Listening to Kerry, you almost get the impression that George W. Bush spends his waking hours personally scrolling through corporate payrolls looking for vulnerable people to throw out of work. By this logic, all you'd need was a president more sympathetic to the plight of the common man and you could instantly reverse the American economy's recent hemorrhaging of jobs. Alas, it's not so simple. As incompetent as Bush may be at managing the economy, he deserves little if any responsibility for the millions of jobs lost during his term. Nor is there much Kerry or any other Democrat could have done to reverse the trend had they been in office instead.

...Call it cosmic justice for the Florida recount, or a genetic predisposition toward economic bad luck. But, whatever you call it, you have to acknowledge that the deck was pretty much stacked against Bush on the jobs issue from the day he entered office

...None of which should be interpreted as a vindication of the administration's economic agenda. Even though the Bush tax cuts have succeeded at stimulating the economy, they've done so at enormous (and largely unnecessary) long-term cost. The large deficits created by such K-Street goodies as a cut in the tax on dividend income and the (longer-term) lowering of top marginal income tax rates, will almost certainly drive up interest rates once the economy sees a few quarters of growth.

And, how could I post an econ article on this topic without looking at Arnold Kling's take?

...if a $480 billion deficit makes only a dent in the unemployment rate, then what do we need -- a $2 trillion deficit? The bottom line is that President Bush's critics have no analytical basis for claiming that they could have produced a significantly lower unemployment rate while maintaining any semblance of fiscal responsibility.

...Orthodox Keynesian policy in a recession would be to cut taxes. The Bush Administration has done that. Orthodox policy would be to increase government spending over what had been planned. The Bush Administration has done that, too. When a student hands in an exam that repeats almost exactly what the professor was saying in class, but the student still gets a low grade, then one can only conclude that the professor has something personal against the student.

As a libertarian, I'm saddened that so many in the electorate see not just correlation but instead causality between the government and short run economic performance.  Public choice theory, for example, tells us how often the government hurts rather than helps.   I'm certainly not saying that the government can't do anything or that the Reductio ad Absurdum of no government would create an economic panacea (most of Africa provides the counter datapoint).  The contribution margin in the short term is just pretty darn small.    The long term is a rather different story, of course.

Similar to my post 9/11 report card, I look in hindsight at the number of shocks the Economy has absorbed in the last 4 years and am actually impressed with it's vitality -

  • A 70% collapse in Nasdaq & 30% collapse on the NYSE - the Great Depression was ostensibly preceeded by a smaller drop in stock indexes
  • The cyclical, inevitable recession from absorption of capital & labor overinvestment in the '90s
  • 9/11 induced fear, uncertainty & doubt - In those anxiety-charged days immediately afterwards, I admit that I personally thought a deep depression was inevitable and even attributed the timing as one of Bin Laden's dark motives
  • Wars in Afghanistan and Iraq
  • Accounting scandals attacking our faith in the core information apparatus of corporate America

Once again, I ask you to step into the time machine, and think about where you were shortly after the dotcom bubble burst and what your reaction would be if a crystal ball told you all these trials were still yet to come.  In my book, the fact that we've emerged out of this with only a 5.7% unemployment rate is 90-95% the product of our underlying economy and culture and perhaps 5-10% the product of specific government policies.

UPDATE: Apparently, this issue's got legs in the econ-blogosphere. Mindles Dreck (co-blogging with Jane Galt at Assymetrical Information) extensively quotes an article from Nobel Laureate, Robert Samuelson -

...We are having a ferocious jobs debate, most of it fraudulent. If presidents could easily create jobs, the unemployment rate would rarely exceed 3.5 percent. But all they can usually do is influence the economy through taxes, spending and regulatory decisions -- and hope that job growth follows. In our market system, private employers play the pivotal role. They will add jobs only if: (a) demand justifies new workers; (b) labor costs aren't at unprofitable levels; and (c) they think healthy economic conditions will last. Electing a president based on job creation makes as much sense as selecting a doctor based on palm reading.

...We don't know [what to do]. But what we can know is that policies from a President Gore or Kerry or Edwards wouldn't have improved matters much. Of course, Democrats might have discarded some Bush policies: say, tax cuts for the rich. Still, the main forces shaping the job market would have remained well beyond presidential reach: the boom-bust cycle (President Bill Clinton didn't create the boom, and the bust was unfolding even before Bush's election); weak growth in Europe, Japan and Latin America, which account for almost 40 percent of U.S. exports; and business cautiousness. Protectionism is no panacea. It barely touches job creation; America's trade problem is weak exports as much as strong imports. Even if every offshored service job had somehow been saved, the job picture wouldn't have changed much.

Also, the ever-excellent folks @ Marginal Revolution have a pair of articles skewering Econo-Partisan Paul Krugman and discussing whether Bush can / could do anything to help.

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