I've recreated their chart here:
We all know there is a long way to go and many Americans are still struggling to find jobs, but there is certainly cause for optimism depicted in this chart.
No doubt many of you were reminded of the chart we've been tracking with linear fit trending since October. Perhaps the Obama administration took note of how we presented these same facts in our earlier post!?
Thanks to all for the emails. Keep them coming.
Posts
GNE,
ReplyDeleteI agree with about 90% of the time but I really think Scott Grannis makes the better point that stimulus money is just taking money out of one person's pocket to pay for something that the free market didn't want in the first place. I think targeted tax cuts for business would have been much better and I certainly don't see how you can argue that the stimulus has had any effect on jobs since 2/3 hasn't even been "spent" yet. I do worry that taxes will be raised to pay for this which could really hurt the economy starting in 2011.
Bill,
ReplyDeleteI agree with Scott 90% of the time, but with respect to Adam Smith, the invisible hand and Laizze Fair economics, I believe he is wrong... and really it is a philosophical difference.
My belief is that as our system of capitalist enterprise evolved in the 19th century, more and more businesses found it in their interest to combine with their competitors in huge trusts or cartels in order to control prices and production. This type of collusion continues to this day if left unchecked by the FTC. Today the analysts say a market is "consolidating".
Competition, which in Laizze Fair is expected to regulate the market, seems instead to be encouraging monopoly when a market segment consolidates. The principle of state noninterference was largely discarded by most - particularly after the extreme failure of the Hoover administration, which said on the way out of the White House, "There is nothing more to be done, we have done all we can do." Had FDR policies not called upon the state to restore and preserve freedom of competition where it appeared to be in danger of disappearing and restore confidence in the banking system of the day, we would have continued into the great abyss of that area. (Have a look at the massive number of laws but in place by FDR and Congress almost immediately after FDR took office or read the book "The Worst Hard Times.")
Bernanke has been "the great student" of the causes of the Great Depression, and even though a fellow Republican was not about to take a "hands off" approach this time. He had several colleagues created huge financial models to proof what massive issues would have ensued had nothing been done by FDR and Congress.
I believe Scott's (and others') case against the stimulus revolves around the idea that the economy would be no worse off without it. In fact, a Wall Street Journal opinion piece last year said, “The resilience of the private sector following the fall 2008 panic — not the fiscal stimulus program — deserves the lion’s share of the credit for the impressive growth improvement.” I had to chuckle when I saw that two of article’s three authors were listed as working at a research institution named for Herbert Hoover!!
Of course, no one can be certain about what would have happened in an alternate universe without a $787 billion stimulus. But there are two main reasons to think the hard-core skeptics (including Scott) are misguided...
The first is the basic trending that data shows since passage of the bill. (I've chosen to highlight GDP, Manufacturing Growth, and Job Saving at this blog,) but pick just about any other area of the economy and you come across the stimulus bill’s footprints and continue to see planning to use the funds well into 2011 and perhaps beyond in some instances.
The second argument in the bill’s favor is the history of financial crises. They have wreaked terrible damage on economies. Indeed, the damage in all cases is significantly worse than what we have suffered in this recession.
Around the world over the last century, any typical financial crisis without intervention caused the jobless rate to rise for almost five years, according to the extensive work by the economists Carmen Reinhart and Kenneth Rogoff. (You've seen me quote that work here before... "is this time different?") On that 5 year timeline, our unemployment rate would still be rising in early 2012 and even that may be optimistic, given that the recent crisis was so bad.
As Bernanke and Paulson (Both Republicans) and many others warned in 2008, this recession had the potential to become a depression. (and that was indeed averted relatively quickly compared to historical precedent.)
And now the jobless rate is expected to begin falling consistently not even a year after we were in free fall.
With all due respect to Scott, I think the past history of action vs. non-action and the results that follow, disprove his philosophical view.
GNE,
ReplyDeleteReboot Congress has a different take on your chart:
http://rebootcongress.blogspot.com/2010/02/employment-population-ratio.html
By dividing the number of people employed by the population, you get a more accurate unemployment picture. The decline started with Bush, but Obama's "stimulus" has done nothing to stop it.
GNE:
ReplyDeleteThere's a great video, produced by an economist, in which John Maynard Keynes and F.A. Hayek are "rapping" their views about steering markets vs. setting them free. A little tilted in Hayek's favor, but very entertaining and educational!
"Fear the Boom and Bust"
http://www.youtube.com/watch?v=d0nERTFo-Sk
Joe
Great video,
ReplyDeleteThanks Joe!