i'd also add that there is nothing wrong with deficit spending, not only in times of national emergencies, but to spur on the economy.
i didn't say unchecked deficit spending, but deficit spending in general, i think the nineties proved that a good economy, with changes in government spending practices can turn a deficit around quicker than many think.
I'm not sure it's as quick or easy as you suggest. It took both houses of congress and the presidency to belong to the same party, who then voted on Clinton's proposals without a single Republican vote, and then they got killed in the '94 election, largely as a result of that vote. Then it was another 5 years or so before the deficit was substantially reduced. Politically, fiscal responsibility is hard. Irresponsibility is easy.
I do agree with you that it can be silly to try to balance a budget to the penny when the natural cycle produces a deficit. But what we're doing now is different. We have a level of revenue that is lower right now as a share of GDP than it's been since WWII, and that was before Medicare, Medicaid, and many many other federal spending programs. And we're currently adding to those with this prescription drug benefit for example. It just isn't going to work. We're not simply letting the business cycle put us in deficit so that we'll then grow out of it when the economy turns around. We're creating long-term imbalances.
The Commerce Department announces very good growth during the previous quarter. Many observers declare the economy's troubles over. And the administration's supporters claim that the economy's turnaround validates its policies.
That's what happened 18 months ago, when a preliminary estimate put first-quarter 2002 growth at 5.8 percent. That was later revised down to 5.0. More important, growth in the next quarter slumped to 1.3 percent, and we now know that the economy wasn't really on the mend: after that brief spurt, the nation proceeded to lose another 600,000 jobs.
The same story unfolded in the third quarter of 2002, when growth rose to 4 percent, and the economy actually gained 200,000 jobs. But growth slipped back down to 1.4 percent, and job losses resumed.
My purpose is not to denigrate the impressive estimated 7.2 percent growth rate for the third quarter of 2003. It is, rather, to stress the obvious: we've had our hopes dashed in the past, and it remains to be seen whether this is just another one-hit wonder.
The weakness of that spurt 18 months ago was obvious to those who bothered to look at it closely. Half the growth came simply because businesses, having drawn down their inventories in the previous quarter, had to ramp up production even though demand was growing slowly. This time around growth has a much better foundation: final demand ? demand excluding changes in inventories ? actually grew even faster than G.D.P. So it's unlikely that growth will drop off as sharply as it did back then.
But ? you knew there would be a but ? there are still some reasons to wonder whether the economy has really turned the corner.
First, while there was a significant pickup in business investment, the bulk of last quarter's growth came from a huge surge in consumer spending, with a further boost from housing. These components of spending stayed strong even when the economy was weak, so there shouldn't have been any pent-up demand. Yet housing grew at a 20 percent rate, while spending on consumer durables (that's stuff like cars and TV sets) ? which last year grew three times as fast as the economy ? rose at an incredible 27 percent rate last quarter.
This can't go on ? in the long run, consumer spending can't outpace the growth in consumer income. Stephen Roach of Morgan Stanley has suggested, plausibly, that much of last quarter's consumer splurge was "borrowed" from the future: consumers took advantage of low-interest financing, cash from home refinancing and tax rebate checks to accelerate purchases they would otherwise have made later. If he's right, we'll see below-normal purchases and slower growth in the months ahead.
The big question, of course, is jobs. Despite all that growth in the third quarter, the number of jobs actually fell. And new claims for unemployment insurance, a leading indicator for the job market, still show no sign of a hiring boom. (By the way, for the last month there's been a peculiar pattern: each week, headlines declare that new claims fell from the previous week; a week later, the past week's number is revised upward, and the apparent decline disappears.)
And unless we start to see serious job growth ? by which I mean increases in payroll employment of more than 200,000 a month ? consumer spending will eventually slide, and bring growth down with it.
Still, it's possible that we really have reached a turning point. If so, does it validate the Bush economic program? Well, no.
Stimulating the economy in the short run is supposed to be easy, as long as you don't worry about how much debt you run up in the process. As William Gale of the Brookings Institution puts it, "Almost any tax cut or spending increase would succeed in boosting a sluggish economy if the Federal Reserve Board follows an accommodative monetary policy. . . . The key question is, therefore, not whether the proposals provide any short-term stimulus, but whether they are the most effective way to provide stimulus." Mr. Gale doesn't think the Bush tax cuts meet that criterion, and neither do I.
To put it more bluntly: it would be quite a trick to run the biggest budget deficit in the history of the planet, and still end a presidential term with fewer jobs than when you started. And despite yesterday's good news, that's a trick President Bush still seems likely to pull off.__
One good quarter will not save Bush. He needs a year of sustained job creation... on average at least 200,000 a month.
And considering he hasn't lifted a finger beyond tax cuts to make it happen... hasn't created incentives to keep jobs in the US... hasn't done anything to help small businesses... who create the most jobs.
No jobs strategy... no post-war Iraq strategy... almost 3 years into his term and he doesn't have ANY domestic policies to brag about.
Three people walk outside after a week of rain. The weather is partly overcast. One looks up and says "it is going to rain again I just know it". One looks up and says "it is going to be sunny in a few hours this will burn off". The third one looks up and says "I think it will be like this all day".
None of them know. Even more uncertain is asking them each what they think the forcast for the rest of the week is.
One looks at the forecast and is able to take a good guess.
Reminds me when I said "This war will encourage terrorism and lead to unsettled times" and (won't mention names) said: "How do you KNOW? How do you KNOW?"
I cannot even begin to respond to the ridiculous comments posted above.
We acutally have people here saying "My two friends don't have jobs...so don't tell me the economy is getting better". My god...how can you people be serious?
I'm sorry to be "arrogant" about it, as one poster said...but give me a break, folks. Unemployment, Fran, IS IN FACT a lagging indicator. The main measure of the economy is GDP growth. There is simply no argument there. What would YOU measure it with...whether or not you and your friends have jobs? Wow. You can't be serious either!!! Can you?
And once again, I get called out for posting a thread quckily on the topic. Meanwhile, we have six billion anti-Bush threads posted every day.
What a joke you guys can be. The economy is in full blown recovery and your bullshit partisan poltics refuse to let you see it.
SDW,
Please get off your high horse! It's a lot more than " my two friends ". The entire state of Oregon is still not doing well jobs wise. Also don't start with the " isolated incident " crap. It's a lot more than just Oregon. You can believe that black is white and continue to ignore your personal blind spot but we don't have to swallow it. So if you keep up with this right wing rhetorical nonsense expect more of the same in response.
Yes, I do believe it. Look at the data and tell me otherwise. We have historically low and dropping unemployment. We have a booming market for the year. We have bigtime GDP growth. Shall I continue?
First were do you get "booming market," second where on God's green earth do you get that unemployment is dropping?? No article has said that more jobs have been created just that GDP is up.
One single indicator does not indicate that a full recovery is underway. I do hope that it is, however.
If it is, this still will not make me feel any better about Bush and his cronies. The problem is ideology. The structures that have been put in place in the U.S. ensure that the benefits of any recovery will be geared to the very richest elements of the population. It is interesting that, although the U.S. is a wealthier country than Canada in terms of GDP per capita, this extra wealth is concentrated only in very top part of the population. You are much better off to be poor or middle class in Canada. There are any number of recent exposes of how miserably the U.S. takes care of the less fortunate. And this is only going to get worse. The already poor social supports that are in place are going to be further undermined by the current structural deficits in the States. And you know what, the Republicans are happy about this.
All economic growth indices (revenues and employment as well as GDP) were positive when Reagan entered office. Then the supply-side voodoo of tax cuts and deregulation began, and by 1982 (Reagan's second year of office) we found ourselves in the worst year for economic growth since the Great Depression....
Tax cuts and deregulation led to the 1982 recession? Are you serious? The '82 recession was largely a consequence of the incredibly high interest rates of the time which were in turn a product of the anti-inflationary policies of Paul Volker's Fed.
Quote:
The only problem Reagan inherited was high inflation...
The Dow on December 31, 1979 finished LOWER than it was on January 1, 1970. You sure that was the only problem Reagan inherited?
Quote:
I'll concede that the grade analogy is more of a soundbite than anything else, but the point I was making stands....
Your point descibes the economic picture in 1980 far better than it does today. Unemployment (the number that seems to of most interest here) was 8.5% in 1976, 7.7% in '77, 7.1% in '78, 6.1% in '79, 5.8% in '80 and 7.1% in '81. No wonder Carter talked about a "malaise".
Personal income rose a modest 0.3 percent in September, and consumer spending, after three strong monthly gains, dipped by the same 0.3 percent, the Commerce Department reported yesterday. Adjusted for inflation, the drop in consumer spending was even sharper, 0.6 percent, which some economists said was an indication that some of the spending momentum that helped power the economy to a 7.2 percent annual rate of growth in the third quarter was not continuing into the final months of the year.
Well this doesn't seem to me what a full blown economy looks like.....
I'd keep arguing but I have to go watch the Alien Vs. Predator trailer....again.
Well this doesn't seem to me what a full blown economy looks like.....
Consumer spending is the one thing that has remained strong throughout the downturn. Now busness investment is starting to carry the ball too. If personal income is rising and consumer spending is falling, it'd be interesting to see what's happening to the savings rate. It should be rising too.
Comments
Originally posted by superkarate monkeydeathcar
i'd also add that there is nothing wrong with deficit spending, not only in times of national emergencies, but to spur on the economy.
i didn't say unchecked deficit spending, but deficit spending in general, i think the nineties proved that a good economy, with changes in government spending practices can turn a deficit around quicker than many think.
I'm not sure it's as quick or easy as you suggest. It took both houses of congress and the presidency to belong to the same party, who then voted on Clinton's proposals without a single Republican vote, and then they got killed in the '94 election, largely as a result of that vote. Then it was another 5 years or so before the deficit was substantially reduced. Politically, fiscal responsibility is hard. Irresponsibility is easy.
I do agree with you that it can be silly to try to balance a budget to the penny when the natural cycle produces a deficit. But what we're doing now is different. We have a level of revenue that is lower right now as a share of GDP than it's been since WWII, and that was before Medicare, Medicaid, and many many other federal spending programs. And we're currently adding to those with this prescription drug benefit for example. It just isn't going to work. We're not simply letting the business cycle put us in deficit so that we'll then grow out of it when the economy turns around. We're creating long-term imbalances.
a A Big Quarter
By PAUL KRUGMAN
The Commerce Department announces very good growth during the previous quarter. Many observers declare the economy's troubles over. And the administration's supporters claim that the economy's turnaround validates its policies.
That's what happened 18 months ago, when a preliminary estimate put first-quarter 2002 growth at 5.8 percent. That was later revised down to 5.0. More important, growth in the next quarter slumped to 1.3 percent, and we now know that the economy wasn't really on the mend: after that brief spurt, the nation proceeded to lose another 600,000 jobs.
The same story unfolded in the third quarter of 2002, when growth rose to 4 percent, and the economy actually gained 200,000 jobs. But growth slipped back down to 1.4 percent, and job losses resumed.
My purpose is not to denigrate the impressive estimated 7.2 percent growth rate for the third quarter of 2003. It is, rather, to stress the obvious: we've had our hopes dashed in the past, and it remains to be seen whether this is just another one-hit wonder.
The weakness of that spurt 18 months ago was obvious to those who bothered to look at it closely. Half the growth came simply because businesses, having drawn down their inventories in the previous quarter, had to ramp up production even though demand was growing slowly. This time around growth has a much better foundation: final demand ? demand excluding changes in inventories ? actually grew even faster than G.D.P. So it's unlikely that growth will drop off as sharply as it did back then.
But ? you knew there would be a but ? there are still some reasons to wonder whether the economy has really turned the corner.
First, while there was a significant pickup in business investment, the bulk of last quarter's growth came from a huge surge in consumer spending, with a further boost from housing. These components of spending stayed strong even when the economy was weak, so there shouldn't have been any pent-up demand. Yet housing grew at a 20 percent rate, while spending on consumer durables (that's stuff like cars and TV sets) ? which last year grew three times as fast as the economy ? rose at an incredible 27 percent rate last quarter.
This can't go on ? in the long run, consumer spending can't outpace the growth in consumer income. Stephen Roach of Morgan Stanley has suggested, plausibly, that much of last quarter's consumer splurge was "borrowed" from the future: consumers took advantage of low-interest financing, cash from home refinancing and tax rebate checks to accelerate purchases they would otherwise have made later. If he's right, we'll see below-normal purchases and slower growth in the months ahead.
The big question, of course, is jobs. Despite all that growth in the third quarter, the number of jobs actually fell. And new claims for unemployment insurance, a leading indicator for the job market, still show no sign of a hiring boom. (By the way, for the last month there's been a peculiar pattern: each week, headlines declare that new claims fell from the previous week; a week later, the past week's number is revised upward, and the apparent decline disappears.)
And unless we start to see serious job growth ? by which I mean increases in payroll employment of more than 200,000 a month ? consumer spending will eventually slide, and bring growth down with it.
Still, it's possible that we really have reached a turning point. If so, does it validate the Bush economic program? Well, no.
Stimulating the economy in the short run is supposed to be easy, as long as you don't worry about how much debt you run up in the process. As William Gale of the Brookings Institution puts it, "Almost any tax cut or spending increase would succeed in boosting a sluggish economy if the Federal Reserve Board follows an accommodative monetary policy. . . . The key question is, therefore, not whether the proposals provide any short-term stimulus, but whether they are the most effective way to provide stimulus." Mr. Gale doesn't think the Bush tax cuts meet that criterion, and neither do I.
To put it more bluntly: it would be quite a trick to run the biggest budget deficit in the history of the planet, and still end a presidential term with fewer jobs than when you started. And despite yesterday's good news, that's a trick President Bush still seems likely to pull off.__
And considering he hasn't lifted a finger beyond tax cuts to make it happen... hasn't created incentives to keep jobs in the US... hasn't done anything to help small businesses... who create the most jobs.
No jobs strategy... no post-war Iraq strategy... almost 3 years into his term and he doesn't have ANY domestic policies to brag about.
None of them know. Even more uncertain is asking them each what they think the forcast for the rest of the week is.
Fellowship
Reminds me when I said "This war will encourage terrorism and lead to unsettled times" and (won't mention names) said: "How do you KNOW? How do you KNOW?"
Originally posted by Harald
One looks at the forecast and is able to take a good guess.
Yes indeed true. guesses...
"anybody's guess" could materialize or be false.
Fellows
Originally posted by FellowshipChurch iBook
Yes indeed true. guesses...
"anybody's guess" could materialize or be false.
Fellows
Did I say 'guess'?
I meant 'accurate prediction, sometimes to a very high percentage.'
Originally posted by Harald
Did I say 'guess'?
I meant 'accurate prediction, sometimes to a very high percentage.'
Fellows 8)
Originally posted by FellowshipChurch iBook
Fellows 8)
No. Clearly.
Originally posted by SDW2001
I cannot even begin to respond to the ridiculous comments posted above.
We acutally have people here saying "My two friends don't have jobs...so don't tell me the economy is getting better". My god...how can you people be serious?
I'm sorry to be "arrogant" about it, as one poster said...but give me a break, folks. Unemployment, Fran, IS IN FACT a lagging indicator. The main measure of the economy is GDP growth. There is simply no argument there. What would YOU measure it with...whether or not you and your friends have jobs? Wow. You can't be serious either!!! Can you?
And once again, I get called out for posting a thread quckily on the topic. Meanwhile, we have six billion anti-Bush threads posted every day.
What a joke you guys can be. The economy is in full blown recovery and your bullshit partisan poltics refuse to let you see it.
SDW,
Please get off your high horse! It's a lot more than " my two friends ". The entire state of Oregon is still not doing well jobs wise. Also don't start with the " isolated incident " crap. It's a lot more than just Oregon. You can believe that black is white and continue to ignore your personal blind spot but we don't have to swallow it. So if you keep up with this right wing rhetorical nonsense expect more of the same in response.
doesn't make the unemployed feel any better.
"what me worry? unemployment is a lagging indicator... I'm sure I'll find a job... someday."
Originally posted by SDW2001
Yes, I do believe it. Look at the data and tell me otherwise. We have historically low and dropping unemployment. We have a booming market for the year. We have bigtime GDP growth. Shall I continue?
First were do you get "booming market," second where on God's green earth do you get that unemployment is dropping?? No article has said that more jobs have been created just that GDP is up.
If it is, this still will not make me feel any better about Bush and his cronies. The problem is ideology. The structures that have been put in place in the U.S. ensure that the benefits of any recovery will be geared to the very richest elements of the population. It is interesting that, although the U.S. is a wealthier country than Canada in terms of GDP per capita, this extra wealth is concentrated only in very top part of the population. You are much better off to be poor or middle class in Canada. There are any number of recent exposes of how miserably the U.S. takes care of the less fortunate. And this is only going to get worse. The already poor social supports that are in place are going to be further undermined by the current structural deficits in the States. And you know what, the Republicans are happy about this.
Originally posted by kneelbeforezod
All economic growth indices (revenues and employment as well as GDP) were positive when Reagan entered office. Then the supply-side voodoo of tax cuts and deregulation began, and by 1982 (Reagan's second year of office) we found ourselves in the worst year for economic growth since the Great Depression....
Tax cuts and deregulation led to the 1982 recession? Are you serious? The '82 recession was largely a consequence of the incredibly high interest rates of the time which were in turn a product of the anti-inflationary policies of Paul Volker's Fed.
The only problem Reagan inherited was high inflation...
The Dow on December 31, 1979 finished LOWER than it was on January 1, 1970. You sure that was the only problem Reagan inherited?
I'll concede that the grade analogy is more of a soundbite than anything else, but the point I was making stands....
Your point descibes the economic picture in 1980 far better than it does today. Unemployment (the number that seems to of most interest here) was 8.5% in 1976, 7.7% in '77, 7.1% in '78, 6.1% in '79, 5.8% in '80 and 7.1% in '81. No wonder Carter talked about a "malaise".
Personal income rose a modest 0.3 percent in September, and consumer spending, after three strong monthly gains, dipped by the same 0.3 percent, the Commerce Department reported yesterday. Adjusted for inflation, the drop in consumer spending was even sharper, 0.6 percent, which some economists said was an indication that some of the spending momentum that helped power the economy to a 7.2 percent annual rate of growth in the third quarter was not continuing into the final months of the year.
Well this doesn't seem to me what a full blown economy looks like.....
I'd keep arguing but I have to go watch the Alien Vs. Predator trailer....again.
Originally posted by Argento
Consumer spending falls
Well this doesn't seem to me what a full blown economy looks like.....
Consumer spending is the one thing that has remained strong throughout the downturn. Now busness investment is starting to carry the ball too. If personal income is rising and consumer spending is falling, it'd be interesting to see what's happening to the savings rate. It should be rising too.