Economy is peachy?

[Haruko]

I've heard from Pres. Bush on several occasions that the economy is doing great. He talks of growth and a deficit that has actually gone down. Is there any merit or anything otherwise as notable as he suggests in this? Is there an actual trend or is it just an anomaly that was being capitalized on?

[Darth Wong]

I've heard from Pres. Bush on several occasions that the economy is doing great. He talks of growth and a deficit that has actually gone down. Is there any merit or anything otherwise as notable as he suggests in this? Is there an actual trend or is it just an anomaly that was being capitalized on?

The economy is doing wonderfully if you're a rich person. Strong growth and a strong stock market are giving the wealthy even more money to play with.

The situation is a bit different if you're in the middle class, especially the lower part of that class. Their wages haven't really gone up in real terms since about 1975.

[Stormbringer]

I've heard from Pres. Bush on several occasions that the economy is doing great. He talks of growth and a deficit that has actually gone down. Is there any merit or anything otherwise as notable as he suggests in this? Is there an actual trend or is it just an anomaly that was being capitalized on?

It has improved. But what he artfully is not mentioning is that it's a long, long way from actually being good. Unemployment is still relatively high and a lot of the employed are in jobs that are not as good as those lost.

[Aratech]

Can someone please explain to me how exactly his continued chant of 'tax breaks' (repeat ad infinitum) is supposed to help? I took economics, and everything we've been taught there states that increasing your spending while cutting your revenue for an extended period of time is a recipe for economic disaster.

[Darth Servo]

The economy is doing wonderfully if you're a rich person. Strong growth and a strong stock market are giving the wealthy even more money to play with.

The situation is a bit different if you're in the middle class, especially the lower part of that class. Their wages haven't really gone up in real terms since about 1975.

Well, the weathy is the only class that really matters right? Afterall, all that money is supposed to "trickle down" to the rest of us, right?

Seriously though, its amazing how these guys worship the trickle-down theory. Many of them are the same people who criticize evolution as "just a theory". Nevermind that evolution has far more supporting evidence.

[Darth Wong]

Can someone please explain to me how exactly his continued chant of 'tax breaks' (repeat ad infinitum) is supposed to help? I took economics, and everything we've been taught there states that increasing your spending while cutting your revenue for an extended period of time is a recipe for economic disaster.

The idea is that there is an ideal tax rate. If taxes are too high, you stifle the economy and that actually reduces your tax revenue. If taxes are too low, you reach a point where the economy won't really grow any faster due to structural limits, so you're just wasting revenue opportunities. And right now, the fiscal conservatives are certain that taxes are too high, so lowering them is supposed to make the economy grow healthier.

This is not an entirely unreasonable argument, but it's pretty hard to be sure whether any individual tax cut is responsible for an economic boom or bust, given that there are so many complicated factors. And unfortunately, the economic growth that the country is experiencing (supposedly as a result of these tax cuts) seems to be benefiting only the wealthy (who also are the biggest beneficiaries of the tax cuts).

[Aratech]

Hmmmm, that makes some sense now. Thank you.

[fgalkin]

I've heard from Pres. Bush on several occasions that the economy is doing great. He talks of growth and a deficit that has actually gone down. Is there any merit or anything otherwise as notable as he suggests in this? Is there an actual trend or is it just an anomaly that was being capitalized on?

It has improved. But what he artfully is not mentioning is that it's a long, long way from actually being good. Unemployment is still relatively high and a lot of the employed are in jobs that are not as good as those lost.

Actually, unemployment is at its pre-9/11 levels right now.

Have a very nice day.
-fgalkin

[Darth Wong]

I've heard from Pres. Bush on several occasions that the economy is doing great. He talks of growth and a deficit that has actually gone down. Is there any merit or anything otherwise as notable as he suggests in this? Is there an actual trend or is it just an anomaly that was being capitalized on?

It has improved. But what he artfully is not mentioning is that it's a long, long way from actually being good. Unemployment is still relatively high and a lot of the employed are in jobs that are not as good as those lost.

Actually, unemployment is at its pre-9/11 levels right now.

If you don't adjust the employment figures for full-time vs part-time or benefits vs no-benefits or levels of pay.

[K. A. Pital]

And right now, the fiscal conservatives are certain that taxes are too high, so lowering them is supposed to make the economy grow healthier.

How does this figure out? Finland with it's obscenely high taxes is rating in the WEF world's #1 innovative economy and #1 long-term investment country, which says a lot about it's economic health... so I don't think the taxes are exclusively to blame.

There's so many factors in the economy, so simplifying it to the "high tax = evil, low tax = growth" is idiotic.

[Darth Servo]

And right now, the fiscal conservatives are certain that taxes are too high, so lowering them is supposed to make the economy grow healthier.

How does this figure out? Finland with it's obscenely high taxes is rating in the WEF world's #1 innovative economy and #1 long-term investment country, which says a lot about it's economic health... so I don't think the taxes are exclusively to blame.

There's so many factors in the economy, so simplifying it to the "high tax = evil, low tax = growth" is idiotic.

And thus you see the mind of a Republitard at work. Simply worship the dogma no matter how much evidence is against it or how stupid your justification for it is.

[Stormbringer]

It has improved. But what he artfully is not mentioning is that it's a long, long way from actually being good. Unemployment is still relatively high and a lot of the employed are in jobs that are not as good as those lost.

Actually, unemployment is at its pre-9/11 levels right now.

Which was by no means great in a lot of places anyway. Things had been slumping for about a year before September 11th after all.

And that ignores the very real fact that a lot of the jobs created are not equal to the jobs lost. Sure a former GM foreman may not be unemployed if he's pushing boxes in a retailers warehouse but that doesn't mean he's doing nearly as well. Unemployment numbers aren't really telling the story there.

[Master of Ossus]

I've heard from Pres. Bush on several occasions that the economy is doing great. He talks of growth and a deficit that has actually gone down. Is there any merit or anything otherwise as notable as he suggests in this? Is there an actual trend or is it just an anomaly that was being capitalized on?

It has improved. But what he artfully is not mentioning is that it's a long, long way from actually being good. Unemployment is still relatively high and a lot of the employed are in jobs that are not as good as those lost.

Oh, bullshit. Unemployment is the lowest it's been in over 5 years. I don't think anyone considers 4.4% unemployment to be high. I also have not seen any data that indicates that real wages are down, recently.

[Big Phil]

Can't speak for other parts of the country, but here in the Pacific Northwest there are lots and lots of jobs available. Many of them are high tech jobs and those of affiliated industries, so High School diplomas aren't going to cut it. The construction industry doesn't actually have enough workers, they're that busy.

[Stormbringer]

Oh, bullshit. Unemployment is the lowest it's been in over 5 years. I don't think anyone considers 4.4% unemployment to be high. I also have not seen any data that indicates that real wages are down, recently.

Your article appears to require a subscription.

Even if we do have a low, five years ago puts solidly in November 2001, which I don't recall every lauding as the best of times. Things had already taken a clear and sharp downturn for at least a year and a half. The present recession had begun in mid-2000 after all.

And 4.4% may be good nationally but there are also a goodly number of states and regions where the numbers are significantly higher than that. See BLS Map I would definitely call 5.5-7.2% rates as quite bad and it's a concern when a good chunk of the nation is lagging behind. Last I heard Michigan and a couple other states were still losing ground!

And the pay rates of available jobs are definitely down. I've seen a lot of that locally because Michigan's been hard hit in that department. There's been less attention to it nationally but it is a very real concern. There have been recent reports on that topic on CNN as well as other issues like a rise in inflation. They haven't really gotten as much attention because they're boring, complicated, and depressing.

I don't mean to imply that things are terrible. Things are getting some what better actually. But that doesn't really mean that the economy is peachy. There is a lot more room for improvement and there are still regions which have not seen much improvement.

[Master of Ossus]

Your article appears to require a subscription.

Get it straight from the source.

Even if we do have a low, five years ago puts solidly in November 2001, which I don't recall every lauding as the best of times. Things had already taken a clear and sharp downturn for at least a year and a half. The present recession had begun in mid-2000 after all.

Which is irrelevant to the fact that the 4.4% inflation rate is trivially low. In 2000, the unemployment rate averaged a little over 4% annually, and only 2 years (counting 2000) since 1970 have enjoyed such low periods of inflation.

And 4.4% may be good nationally but there are also a goodly number of states and regions where the numbers are significantly higher than that. See BLS Map I would definitely call 5.5-7.2% rates as quite bad and it's a concern when a good chunk of the nation is lagging behind. Last I heard Michigan and a couple other states were still losing ground!

When has that not been true, even during great economic times?

And the pay rates of available jobs are definitely down. I've seen a lot of that locally because Michigan's been hard hit in that department. There's been less attention to it nationally but it is a very real concern. There have been recent reports on that topic on CNN as well as other issues like a rise in inflation.

Ah, yes, there's been little attention to it except that major newsfeeds are covering it.

They haven't really gotten as much attention because they're boring, complicated, and depressing.

Neither do unemployment rates for largely the same reason. And you're lying. Real wages increased significantly (a full fucking percent) during the last month for which we have data.

http://www.bls.gov/opub/ted/2006/oct/wk4/art01.htm

I don't mean to imply that things are terrible. Things are getting some what better actually. But that doesn't really mean that the economy is peachy. There is a lot more room for improvement and there are still regions which have not seen much improvement.

What conditions would have to be met for you to conclude that the economy is "peachy?" Real wages are up. Unemployment is historically low. Labor Force participation is way up. Real GDP is way up. Productivity is through the roof.

[His Divine Shadow]

And right now, the fiscal conservatives are certain that taxes are too high, so lowering them is supposed to make the economy grow healthier.

How does this figure out? Finland with it's obscenely high taxes is rating in the WEF world's #1 innovative economy and #1 long-term investment country, which says a lot about it's economic health... so I don't think the taxes are exclusively to blame.

We got lucky with Nokia and international circumstances if you ask me. Taxes are being lowered here too, I think the average tax pressure now might be 44% of GDP and it's been lowered from 46% or more over the years. Getting to Switzerlands level of 30% or 35% I think would be appropriate level for balance. It'd require the state to cease alot of its myriad of small-time bullshit though and focus on the essentials like infrastructure, police, army and healthcare and pretty much privatize the rest or scale it down.

Thank god I'm not swedish though with what.. 52% of GDP now? Fat loada good that does 'em, nowadays I always look to sweden and feel lucky my parents moved back to Finland in the 1970's.

[K. A. Pital]

We got lucky with Nokia and international circumstances if you ask me.

Lucky? Innovative economy is a matter of shrewd governance. Doesn't Finland have one of the greatest innovation-sponsoring funds and a "Commitee for the Future" which concerns with future innovations to keep the mark?
Also, from what I heard, there's a very high culture of labour and great education in Finland my sister wants to move to your country for higher education next year

[Sikon]

I wonder how good of a picture GDP growth rates really give of the economy.

Looking at the Bureau of Labor Statistics, there are approximately 145 million U.S. workers out of the 300 million total U.S. population. The $28600 average annual earnings per worker correspond to their combined income being about $4.1 trillion. Checking CIA World Factbook info., the U.S. has a GDP of $12.5 trillion.

That is a factor of 3 difference between GDP and the figure that would often be of much greater relevance!

The expenditure method of calculating GDP is GDP = consumption + investment + government spending + (exports - imports).

It is as if there is a bias in favor of counting government spending more than once and letting deficit spending lead to popular incorrect assumptions about economic output. Much of the government spending ends up paid to government workers and contractors who then spend much of it on consumption, making it be counted a second time. For deficit spending to give a misleading increase in GDP seems possible. Indeed, $1 of deficit spending by the government would also tend to increase consumption, creating more than $1 of apparent GDP increase.

There is also the income method of calculating GDP:
GDP = compensation of employees + gross operating surplus + gross mixed income + taxes, adjusted for subsidies

The income method is to give the same result as the consumption method.

Perhaps when GDP increases by a given percentage in years of extreme exponential growth in government spending and deficit spending, the result is more misleading than almost anybody mentions...

--------------

Total spending on the federal government went from $1.653 trillion in 1998 to $2.472 trillion in 2005, over a seven-year period. Total federal taxation actually increased from $1.722 trillion in 1998 to $2.154 trillion in 2005, but Congress normally always spends more than any amount of money received except in rare times of multi-party gridlock.

The federal national debt is $8.6 trillion, increasing by hundreds of billions of dollars of deficit spending every year. That is a $3.1 trillion net increase since late 1998.

State and local spending was $1.75 trillion earlier in 2000. Although less precise, this implies it reached at least $1.9 trillion by 2004. Total government spending is at least $2.5 trillion federal plus at least $1.9 trillion state & local. That corresponds to $4.4 trillion annually at a minimum.

Beyond the federal national debt mentioned earlier, there is also huge state and local debt from their additional deficit spending.

Every publication I have ever seen only compares those figures to the $12 trillion GDP. If one instead compares them to the $4.1 trillion combined income for the 145 million U.S. workers, the result is very interesting. Note their after-tax income must be even less than $4.1 trillion, as that was before taxes.

The figures in this post may seem unbelievable, but every reference is to a government website that can be looked at if in doubt.

It makes one wonder where the economy is really headed and if the $12 trillion GDP gives a good picture or not...

[His Divine Shadow]

We got lucky with Nokia and international circumstances if you ask me.

Lucky? Innovative economy is a matter of shrewd governance. Doesn't Finland have one of the greatest innovation-sponsoring funds and a "Commitee for the Future" which concerns with future innovations to keep the mark?
Also, from what I heard, there's a very high culture of labour and great education in Finland my sister wants to move to your country for higher education next year

We still got lucky that we had Nokia, and that the international climate changed rapidly in the 90's which allowed us to move westwards and get in early when the global economy started recovering. And yes they we have that but it would hardly have altered matters if Jorma Ollila hadn't focused in Nokia to the path of telecommunications in the same time that mobile phones where about to explode on to the market.

[Lord Zentei]

Can someone please explain to me how exactly his continued chant of 'tax breaks' (repeat ad infinitum) is supposed to help? I took economics, and everything we've been taught there states that increasing your spending while cutting your revenue for an extended period of time is a recipe for economic disaster.

The idea is that there is an ideal tax rate. If taxes are too high, you stifle the economy and that actually reduces your tax revenue. If taxes are too low, you reach a point where the economy won't really grow any faster due to structural limits, so you're just wasting revenue opportunities. And right now, the fiscal conservatives are certain that taxes are too high, so lowering them is supposed to make the economy grow healthier.

This is not an entirely unreasonable argument, but it's pretty hard to be sure whether any individual tax cut is responsible for an economic boom or bust, given that there are so many complicated factors. And unfortunately, the economic growth that the country is experiencing (supposedly as a result of these tax cuts) seems to be benefiting only the wealthy (who also are the biggest beneficiaries of the tax cuts).

What you just mentioned is the (in)famous Laffer Curve. But there is more to it than this: it's not just that tax revenues are optimized at a given point, but that the economy as a whole is reduced as taxes go up: i.e. the sum of private consumption+investment and government expenditures are higher the lower the tax.

The difference is known as the "deadweight loss" of the tax. In that sense, zero tax is the "optimal" level; and the lower the tax the more "efficient" the economy is - this is the concept of economic efficiency that crops up from time to time and is often misunderstood (as for instance, people alleging that the privatized healthcare cannot be more efficient since they use a dizzying array of different protocols - that's another matter entirely). It is usually this that is being spoken of when "a tax break to lift the economy" is mentioned.

Of course, there is also the question of how the private consumption+investment and government expenditures are distributed. But when speaking of the economy as a whole, that is an entirely seperate issue.

[Darth Wong]

What conditions would have to be met for you to conclude that the economy is "peachy?" Real wages are up. Unemployment is historically low. Labor Force participation is way up. Real GDP is way up. Productivity is through the roof.

Oh puh-lease, you're crowing because of results in a lousy one-month window? You know perfectly well that you can't extrapolate from that. Here's the 30 year picture for real inflation-adjusted wages, taken from BLS:

They're stagnant, and have been for 30 years. Meanwhile, the inflation-adjusted GDP has more than doubled over that period. And where is all this money going? Even the CIA admits it goes to the wealthiest Americans, who are enjoying the benefits of this wonderful economy. Every time you hear people on the news talking about the fantastic growth rate, they're happy because they're part of the class that's benefiting from it. If the GDP growth over the last 30 years had been distributed equally among the population, working-class wages right now would be roughly twice what they are.

Here's an article from the Economic Policy Institute on this issue. And by the way, when "productivity is going through the roof", it means that companies are finding ways to make more money with fewer or lower-paid employees. For example, if I'm the CEO of Joe's Wiring Harness Supply company in Missouri and I decide to outsource my manufacturing to China, my productivity will go through the roof. I'll be making more profit, with lower labour costs.

[phongn]

We got lucky with Nokia and international circumstances if you ask me.

Lucky? Innovative economy is a matter of shrewd governance. Doesn't Finland have one of the greatest innovation-sponsoring funds and a "Commitee for the Future" which concerns with future innovations to keep the mark?

Finland might have decided to back projects in a different sector - in that sense they were lucky that wireless telecom was backed (in particular, Nokia). They got in at the right time. Japan tried a similar gamble in the 1980s with their Fifth Generation Computer project ... which failed, miserably.

[Master of Ossus]

Oh puh-lease, you're crowing because of results in a lousy one-month window? You know perfectly well that you can't extrapolate from that.

I was under the impression that we were looking at the economy right now for the purposes of this thread, and I would say that a 1% increase in real earnings over the course of 1 month is substantial and significant for those purposes. Over the course of the past year, real earnings are up 4% (which is, shockingly, rather close to our rGDP growth over the course of the past year--4.8%). That seems a reasonably lengthy window to gauge the economy and the validity of political claims made about the present. Or, maybe I need to look at the unemployment rate 18 months ago to determine how the economy is doing.

Every time you hear people on the news talking about the fantastic growth rate, they're happy because they're part of the class that's benefiting from it. If the GDP growth over the last 30 years had been distributed equally among the population, working-class wages right now would be roughly twice what they are.

Wages are set by the marginal worker, whose productivity has not improved markedly over that period.

Here's an article from the Economic Policy Institute on this issue. And by the way, when "productivity is going through the roof", it means that companies are finding ways to make more money with fewer or lower-paid employees. For example, if I'm the CEO of Joe's Wiring Harness Supply company in Missouri and I decide to outsource my manufacturing to China, my productivity will go through the roof. I'll be making more profit, with lower labour costs.

It, actually, means that we're getting more output given fixed monetary inputs--it makes no judgment on whether that is the result of more efficient use of employees or capital or both, although the real wage issue you cite over the last 30 years provides strong empirical evidence that the marginal worker has not become more or less productive in the last thirty years, and that the difference is mainly in capital.

[Darth Wong]

I was under the impression that we were looking at the economy right now for the purposes of this thread, and I would say that a 1% increase in real earnings over the course of 1 month is substantial and significant for those purposes. Over the course of the past year, real earnings are up 4% (which is, shockingly, rather close to our rGDP growth over the course of the past year--4.8%). That seems a reasonably lengthy window to gauge the economy and the validity of political claims made about the present. Or, maybe I need to look at the unemployment rate 18 months ago to determine how the economy is doing.

Nice bullshitting. The point of that graph was to show that the trends do show quite a bit of fluctuation, and not a helluva lot of long-term improvement, so you can't zero in on a narrow time period and declare that we're doing great. You make it sound as if everything's just fantastic, yet there is nothing about the hourly wage figures to indicate that this is actually true for the majority of Americans.

Wages are set by the marginal worker, whose productivity has not improved markedly over that period.

Interesting. How do we know that worker productivity has not improved over the last 30 years?

It, actually, means that we're getting more output given fixed monetary inputs--it makes no judgment on whether that is the result of more efficient use of employees or capital or both, although the real wage issue you cite over the last 30 years provides strong empirical evidence that the marginal worker has not become more or less productive in the last thirty years, and that the difference is mainly in capital.

Are you arguing that worker wage stagnation is proof of worker productivity stagnation?