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Friday, October 31, 2003
NY Times "economist" Paul Krugman really gets me sometimes. Yesterday's news of 7.2% GDP growth for the last quarter was impressive to everyone in the field of economics, with the obvious exception of Krugman. Ever the pessimist, Krugman lets on that he believes the recovery is precarious at best.
The big question, of course, is jobs. Despite all that growth in the third quarter, the number of jobs actually fell... 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.
Krugman knows that job growth does not precede capital investment, nor does it generally happen in parallel. Businesses invest, then jobs become necessary as a result of such investment. Should we look for job growth in the fourth quarter? At the current rate, yes. I don't pretend to be an economist, but I am familiar enough with the business cycle to know that jobs inevitably must follow business investment.
Does Krugman give credit to the Bush tax cuts? Of course not.
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... 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.
So Krugman maintains that the deficit coupled with monetary policy is the real reason for economic growth. This blog has mentioned this fact in the past, and it will again. As a percentage of GDP, the deficit is NOT the largest in American history. I would never call the Bush administration spendthrifty, as I have been critical of many of their spending initiatives, but to stigmatize them by saying the deficit is the largest ever, and is the real inertia behind economic expansion is disingenuous.
Truth be told, job growth in the 90s due to a phantom tech spurt was bound to implode upon itself. Manufacturing efficiencies lead to a smaller need for human capital. That is the nature of evolving economies. Human resources have to be diverted elsewhere when such is the case. To be sure, corporate losses, and outsourcing have led to job shrinkage in real terms, but not as much as many would have you believe (read: Krugman, et. al.)
When businesses and individuals are allowed to keep more of their money, they invest it in jobs, homes, and durable goods. This is the real impetus behind economic growth. But economists with an agenda will never tell you that.Labels: Archives_2003
.: posted by
Dave
9:55 AM
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