Spin the Payrolls

By PAUL KRUGMAN

 

Published: August 10, 2004

 

When Friday's dismal job report was released, traders in the Chicago pit began chanting, "Kerry, Kerry." But apologists for President Bush's economic policies are frantically spinning the bad news. Here's a guide to their techniques.

 

First, they talk about recent increases in the number of jobs, not the fact that payroll employment is still far below its previous peak, and even further below anything one could call full employment. Because job growth has finally turned positive, some economists (who probably know better) claim that prosperity has returned - and some partisans have even claimed that we have the best economy in 20 years.

 

But job growth, by itself, says nothing about prosperity: growth can be higher in a bad year than a good year, if the bad year follows a terrible year while the good year follows another good year. I've drawn a chart of job growth for the 1930's; there was rapid nonfarm job growth (8.1 percent) in 1934, a year of mass unemployment and widespread misery - but that year was slightly less terrible than 1933.

 

So have we returned to prosperity? No: jobs are harder to find, by any measure, than they were at any point during Bill Clinton's second term. The job situation might have improved somewhat in the past year, but it's still not good.

 

Second, the apologists give numbers without context. President Bush boasts about 1.5 million new jobs over the past 11 months. Yet this was barely enough to keep up with population growth, and it's worse than any 11-month stretch during the Clinton years.

 

Third, they cherry-pick any good numbers they can find.

 

The shocking news that the economy added only 32,000 jobs in July comes from payroll data. Experts say what Alan Greenspan said in February: "Everything we've looked at suggests that it's the payroll data which are the series which you have to follow." Another measure of employment, from the household survey, fluctuates erratically; for example, it fell by 265,000 in February, a result nobody believes. Yet because July's household number was good, suddenly administration officials were telling reporters to look at that number, not the more reliable payroll data.

 

By the way, over the longer term all the available data tell the same story: the job situation deteriorated drastically between early 2001 and the summer of 2003, and has, at best, improved modestly since then.

 

Fourth, apologists try to shift the blame. Officials often claim, falsely, that the 2001 recession began under Bill Clinton, or at least that it was somehow his fault. But even if you attribute the eight-month recession that began in March 2001 to Mr. Clinton - a very dubious proposition - job loss during the recession wasn't exceptionally severe. The reason the employment picture looks so bad now is the unprecedented weakness of job growth in the subsequent recovery.

 

Nor is it plausible to continue attributing poor economic performance to terrorism, three years after 9/11. Bear in mind that in the 2002 Economic Report of the President, the administration's own economists predicted full recovery by 2004, with payroll employment rising to 138 million, 7 million more than the actual number.

 

Finally, many apologists have returned to that old standby: the claim that presidents don't control the economy. But that's not what the administration said when selling its tax policies. Last year's tax cut was officially named the Jobs and Growth Tax Relief Reconciliation Act of 2003 - and administration economists provided a glowing projection of the job growth that would follow the bill's passage. That projection has, needless to say, proved to be wildly overoptimistic.

 

What we've just seen is as clear a test of trickledown economics as we're ever likely to get. Twice, in 2001 and in 2003, the administration insisted that a tax cut heavily tilted toward the affluent was just what the economy needed. Officials brushed aside pleas to give relief instead to lower- and middle-income families, who would be more likely to spend the money, and to cash-strapped state and local governments. Given the actual results - huge deficits, but minimal job growth - don't you wish the administration had listened to that advice?

 

Oh, and on a nonpolitical note: even before Friday's grim report on jobs, I was puzzled by Mr. Greenspan's eagerness to start raising interest rates. Now I don't understand his policy at all.

Two tidbits Id like to comment on:

 

Third, they cherry-pick any good numbers they can find.

 

The shocking news that the economy added only 32,000 jobs in July comes from payroll data. Experts say what Alan Greenspan said in February: "Everything we've looked at suggests that it's the payroll data which are the series which you have to follow." Another measure of employment, from the household survey, fluctuates erratically; for example, it fell by 265,000 in February, a result nobody believes. Yet because July's household number was good, suddenly administration officials were telling reporters to look at that number, not the more reliable payroll data.

 

 

I remember when Greenspan said that, the administration was all over it because the household numbers were bad and the payroll numbers were good. Could this be political flip-flopping? Will the conservatives throw flip flops at Bush!? Now that the payroll numbers are bad, Chow is all over the frikkin household numbers.

 

 

Second:

 

 

Finally, many apologists have returned to that old standby: the claim that presidents don't control the economy. But that's not what the administration said when selling its tax policies. Last year's tax cut was officially named the Jobs and Growth Tax Relief Reconciliation Act of 2003 - and administration economists provided a glowing projection of the job growth that would follow the bill's passage. That projection has, needless to say, proved to be wildly overoptimistic.

 

What we've just seen is as clear a test of trickledown economics as we're ever likely to get. Twice, in 2001 and in 2003, the administration insisted that a tax cut heavily tilted toward the affluent was just what the economy needed. Officials brushed aside pleas to give relief instead to lower- and middle-income families, who would be more likely to spend the money, and to cash-strapped state and local governments. Given the actual results - huge deficits, but minimal job growth - don't you wish the administration had listened to that advice?

 

 

Will the trickle downers concede this? Doubt it. Im sure good economies are always the result of Republican stewardship and bad ones are Democratic ones. No evidence..they just are! :thumbup

Um, when did restating the thesis become proof of the thesis? He is saying the results of having the wealthy spend their money hasnt had the effect Bush argues. You know, the multiplier?

 

 

There are so many inconsistencies with trickdown theory.

 

-During late term tax cuts of the Regean Bush terms, mainly the years around 1991, GDP growth went to negative levels.

 

-Two of the three highest growth years were during the tax heavy 1950s for the wealthy.

 

-Data shows income decreases after tax cuts of the late 80s and increase after Clinton tax increase for the wealthy.

 

-The highest median income growth was 4.7% in 1972, when tax rates for the wealthy was much higher.

 

-Like GDP growth and median income growth, hourly wages decreased following the late 1980s tax cuts, and spiked upwards after the 1993 tax increase.

 

-During the 50s, wages grew at a rate of at least 1% a year, when the tax rate for the high bracket was 91%. How would that be possible? :shifty

 

-Three of the four largest unemployment decreases post 1950 took place when the tax rate for high brackets was around 91%. How were those jobs created? Mana from heaven?

 

 

 

But which one is it tonyi, Presidents control the economy or dont?

I dont think anyone would return to such tax levels. It was there just to make a point on the trickledown theory.

 

 

Whether or not the President controls the economy or not, it was Bush who was running about telling everyone his tax cuts were going to do the trick. Krugman makes the valid point throughout the article that the administration jumped all over the economy and now they are trying to spin it any which way, including returning to the argument that the President doesnt control the economy(through certain conduits of course, never linked to Bush). Bush argues this after he argues his tax cuts are doing the trick? Sounds like flipflopping to me.

The claim:

Tax cuts help the economy.

Last year's tax cut was officially named the Jobs and Growth Tax Relief Reconciliation Act of 2003 - and administration economists provided a glowing projection of the job growth that would follow the bill's passage.

 

Status:

False

 

The Reality:

That projection has, needless to say, proved to be wildly overoptimistic.

U.S. businesses announced 107,863 job cuts in September, up from 74,150 job cuts in August, a gain of 45 percent, according to Chicago-based Challenger, Gray & Christmas, which keeps track of monthly job-cut announcements.

 

It was the worst month for job-cut announcements since January, when 117,556 cuts were announced. September's job-cut plans were 41 percent higher than the 76,506 cuts announced in September 2003.

 

Meanwhile, companies announced plans to add just 16,166 new jobs, compared with 132,105 in August.

Source

 

:mad :