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More economic
analysis of Bushonomics. The consensus seems to be that he is out of gas,
running on empty. Others say, finished. Once again, it’s
imperative to correct the misinformation and grandstanding that flows
incessantly from this administration, that “the rate of job
growth over the period to which the president referred was 3.6%; the historical
average for comparable periods in the past is 8.4%.” We must repeat
these corrections as often as the incorrect and false is repeated, in order to
break the cycle of “misinformation”. KwC Short Changed
The times call for good economic stewardship, and last night we didn’t
get it. By Jared Bernstein, The American Prospect, Web Exclusive:
02.01.06 When the economy is
doing well, presidents tend to spout growth rates and historical comparisons in
their State of the Union speeches, while leaders of the other party suffer
through the speech. If a president is presiding over a downturn, he feels their
(and everybody’s) pain, tortures a few numbers to suggest things are not that
bad, and describes a way forward. But -- despite the
serious economic challenges the country faces -- we heard little about it last
night. The economy and economic policy got short shrift, with one or two
statistics (4.6 million jobs and four-plus years of uninterrupted growth), a
few sentences on health care, a few lines on tax cuts, and a smattering of
education. Sometimes what presidents don’t say speaks volumes. It’s worth
pondering why the economics section of the speech was light. First, many things are
not going Bush’s way right now. A few days ago, we learned the real GDP rose
1.1 percent in the last quarter of 2005, the worst growth rate in three years.
Before that, the Bush team could brag of at least moderate growth rates, but
their Achilles’ heel was that the growth wasn’t trickling down -- it was
gushing up. In fact, the morning
of the speech, we at the Economic Policy Institute released a note showing
that, according to Bureau of Labor Statistics data, one of the broadest
measures of wage growth in the economy fell about 1 percent in real terms last year. The
administration’s rap had been, “Pay no attention to the wage squeeze. With
rising health costs, employers are just taking dollars from the wage side and
plowing them into health benefits.” Except real compensation was essentially
unchanged (down 0.2 percent) in 2005. And this was yet another year with strong
productivity growth. The fact is that profits, which soared over the last few
years, are squeezing both wages and compensation. The president is right about the economy
growing for four years. But the distribution of that growth has been highly skewed. It’s possible the administration
truncated the usual “ain’t we great” rap here because of the dissonance it
might cause with so many Americans working harder yet still falling behind. Oh, and that 4.6
million jobs. It sounds like a big number, but that’s half the rate at which jobs were growing
at this point in the last recovery. The rate of job growth over the period to
which the president referred was 3.6 percent; the historical average for
comparable periods in the past is 8.4 percent. In fact, that remaining slack in the job market
is one reason real wages are doing so badly (faster energy-induced price growth
is another). It also seemed, to me
at least, that another reason for the shabby treatment of domestic policy was
that the president isn’t that engaged in this stuff anymore. Sure, he’d like to
cut more taxes, but, especially given the flop of his 60-city Social Security
tour, the fire in his belly is all about 9-11, the Iraq war, domestic spying,
and intimidating the wimps who refuse to see it his way on foreign policy. But
enough psychoanalysis. Here is a look at some of the president’s
recommendations. Don’t Let the Sun Go Down: The president touted his $880 billion in “tax
relief” and tried to connect those dots to the ongoing economic recovery. To
see the stretch in this argument, check out this analysis by my EPI colleague Lee Price, but it’s a typical State of the Union
move to make such connections. There were, however,
two pretty egregious parts that followed. First, there was this crazy argument
that if we stick to the law and let the tax cuts sunset (they’re set to expire
over the next few years), “American families will face a massive tax increase
they do not expect.” Do not expect? The
cuts were sold on the basis that they’d expire by the end of this decade.
That’s the only way the president and Congress could at least create the illusion that they could
control the deficit that the cuts helped to create. Their expiration is on the books; that’s
hardly unexpected. We all understand that powerful forces would like to extend
them, but there can be no doubt that making the tax cuts permanent involves new
tax cuts, and there are many in Congress, including Republican moderates, who
may not be so quick to sign off on these new cuts. The other
objectionable part here was the president’s equating good stewardship with cuts in
“non-security discretionary spending.” What’s really being said here is that given these massive
tax cuts, they’ve got to make a show of cutting spending. But they can’t go
after entitlements or defense, or any of those programs with big lobbyists
behind them, which leaves Medicaid, food stamps, student aid, child support
enforcement -- these are what our benighted fiscal stewards are going after,
and they’re actually making “progress.” Attention Health Care Shoppers: The president was expected to say more
here, but again, his heart wasn’t in it. The administration will soon be
offering expansions of Health Savings Accounts, their major health care
initiative. These are personal accounts (sound familiar?) where you can save
and withdraw money tax free for medical expenses. To join the program, you have
to purchase an insurance policy with a high deductible. These policies cover
the really expensive stuff, but for the rest of your care, you pay
out-of-pocket. The idea is that by
shifting the costs for the small stuff from their insurers to their wallets, consumers
will become better health-care shoppers. This is not the place for detailed
analysis but many economists don’t believe these plans will save money or lower
health costs, and most people -- surprise -- are not interested in bearing more
costs, even with the tax incentive. Which isn’t to say
there’s not a big problem in need of a solution here. To his credit, the president acknowledged
last night that it isn’t really Social Security that’s going to gobble up the
economy; it’s health care. HSAs won’t change that one whit, nor will it do much
to address the plight of the 46 million uninsured Americans. And by the way, the
president did admit his team has no idea what to do about the health-care
challenge, i.e., he announced a bipartisan commission to study the coming
pressures on Medicare, Medicaid, and Social Security. Speaking of
admissions, the impressive part of the speech was the president’s
acknowledgement that “America is addicted to oil,” words that don’t come easy
to an old oil guy (I imagined a big sneer from Cheney when he heard that). But
here again, as the The New York Times
put it this morning, “… the goal was grand,
the means were minuscule.” According to one analyst, the proposed
new expenditures would just get renewable-energy funding back to its pre-Bush level. After a nod to his
guest-worker program, this part of the speech ended with some Clintonesque ideas about enhancing research and development
and encouraging children to learn math and science. But by then it was
pretty clear that beyond cutting taxes, inveighing against “protectionists”
(anyone who’s concerned about the downsides of globalization), and incentivizing risk-taking as a health-care plan, the Bush
administration’s economic agenda has run out of gas. I suppose one could
applaud that development but I find that too cynical. We face a set of economic
challenges calling for true stewardship. We haven’t had it for years, and we
didn’t get it last night. Jared
Bernstein is a senior economist at the Economic Policy Institute, a nonprofit,
nonpartisan think tank in Washington, D.C. and author of the forthcoming book,
All Together Now: Common Sense for a Fair Economy, published by
Berrett-Koehler.
http://www.prospect.org/web/page.ww?section=root&name=ViewWeb&articleId=11066 |
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