Category Archives: labor market & jobs

Looking Back on Barack

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At the end of his time in office Barack Obama merits an enumeration of some of his many accomplishments.   The recollection should start as he started, on January 20, 2009: the pilot taking the cockpit just when the plane was in an uncontrolled dive.

The circumstances were the most adverse faced by any new president in many decades.  Two ill-conceived and ill-executed foreign wars were underway, which had done nothing to bring to justice the mastermind of September 11, 2001.  He inherited an economy that was in free-fall, whether measured by the seizing up of finance markets, the fall in GDP, or the hemorrhaging of employment.  (The rate of job loss was running ran at 800,000 per month.)  True, Franklin Roosevelt inherited the Great Depression and Abraham Lincoln took office just as the Civil War broke out.   But what other president has come in facing both an economic crisis and a national security crisis?

The rapid policy response to the economic crisis included — in addition to aggressive and innovative monetary easing by the Federal Reserve — the Obama fiscal stimulus (the American Recovery and Reinvestment Act, passed by the Democratic Congress in February 2009) and rescue programs for the financial system and the auto industry.  Republicans were near unanimous in opposing the stimulus. And almost everybody was critical of the rescue programs – either urging nationalization of the banks and auto firms, on the one hand, or urging letting them go out of existence on the other.  There was and is insufficient recognition of how the Obama Administration succeeded, against all odds, at making the middle path work:  jobs were saved, while shareholders and managers suffered consequences of their mistakes  and the government got its money back after the recovery.

Most importantly, the free-fall ended promptly.  The timing and clarity of the turnaround is much more visible than one would think by listening to debates on what was the right counterfactual to evaluate the effect of Administration policies.  Economic output in the last quarter of 2008 had suffered a shattering 8.2 % p.a. rate of decline and job loss had been running at more than 600,000 per month.  Output and employment began to level out almost immediately after the February stimulus program.  The bottom of the recession came in June 2009; output growth turned positive in the next quarter.  Job creation turned positive early in 2010 and employment growth subsequently went on to set records all the way through the end of Obama’s time in office, adding more than 15 million jobs.

By the last half of Obama’s second term, the unemployment had fallen by half, to below 5% (2015 and 2016), wages were rising (by 2.9% nominal over the 12 months to Dec. 2016); and real median family income was finally growing too (by a record 5.2% in the most recently reported year, with lower-income groups advancing even more).

It is certainly true that the recovery was frustratingly long and slow.  Reasons include the depth and financial nature of the 2007-08 crash and the early reversal of the fiscal stimulus after the Republicans took back the Congress in the 2010 election and blocked Obama’s further efforts.   2011-14 are the years when the economy really could have used infrastructure spending and (the right) tax cuts.  But it would seem that Republicans only support fiscal stimulus when they are the ones in the White House — including when the economy is no longer in recession.

Obama’s other two biggest accomplishments in those first two years before the Congress starting blocking everything he tried were the Dodd-Frank financial reform bill and the Affordable Care Act (Obamacare).  In both cases, the reforms would have been better without a succession of steps by the opposition party to weaken them, both at the stage of passing the legislation and subsequently.

But each of those important reforms nonetheless succeeded in moving the country more clearly in the right direction than most people realize.  Dodd-Frank in a variety of ways helped make less likely a repeat of the 2007-08 financial crisis. Among other things, it increased transparency for derivatives, raised capital requirements for banks, imposed additional regulations on “systemically important” institutions, and, per the suggestion of Senator Elizabeth Warren, established the Consumer Financial Protection Bureau (CFPB).  Obamacare has succeeded in giving health insurance to 20-million-plus Americans who lacked it (for example, due to pre-existing conditions) and the cost of health care contrary to most predictions and perceptions slowed noticeably.

In the area of foreign policy, the wars in Afghanistan and Iraq were  intractable.   But the President made the tricky decisions that resulted in the elimination of Osama bin Laden (a goal in which George W. Bush had lost interest, in his eagerness to invade Iraq).  In 2015, just as the press was saying Obama was a lame duck, he achieved a string of foreign policy successes: a much-needed nuclear agreement with Iran, normalization of relations with Cuba, agreement on the Trans-Pacific Partnership (TPP), and important progress to address global climate change via a breakthrough with China.

Needless to say, the man who assumes the Presidency this month has said he will reverse most of these initiatives, if not all.  In some cases, he will do exactly that. TPP is certainly dead, at least for the time being.  (And four years from now will probably be too late to revive it, as East Asian countries may by then have responded to America’s withdrawal from the region by joining China’s trade grouping instead.)

In other cases, real-world constraints will make it harder for Mr. Trump to translate crowd-pleasing sound-bites into reality.  Repealing Obamacare is apparently top of the list.  But the Republicans are likely to be stymied by the absence of an alternative that does not take health insurance away from those 20 million Americans nor raise the net cost.  Some important innovations, such as the switch to electronic patient record-keeping and more emphasis on preventative care, are bound to survive in any case.  Perhaps the eventual outcome will be relatively minor changes in the substance of the Affordable Care Act, together with a new name – the analog of building a big beautiful wall on a quarter-mile of the Mexican border as a sort of stage set suitable for photo opportunities.

Similarly, it is hard to see how pushing harder on China would produce desirable results.  To take the most ironic example of ill-informed policy positions, if the Chinese authorities were to acquiesce to Mr. Trump’s demands that it stop manipulating its exchange rate, its currency would depreciate and its competitiveness would improve.

Similarly, if the Administration tries to carry out its promise to tear up the nuclear agreement with Iran, it will quickly find that US sanctions are ineffective without the participation of our allies.  Iran could rapidly renew and accelerate its nuclear program.  That is what happened with North Korea when George W. Bush essentially tore up the “agreed framework” upon taking office in January 2001.

Do the voters hold presidents accountable?   Bush made other serious mistakes in economic and foreign policy as well in those early years, of course, with the predictable consequences for the economy, budget, and national security.  Yet his poll numbers soared in his first term.

Conversely President Obama’s popularity sagged during much of his eight years.  Yet he leaves office with substantially higher poll ratings than most presidents at this stage and – unusually – with much higher ratings than his successor, let alone his predecessor at the end.  So apparently the person who occupies the White House does eventually receive the credit he is due for the intelligence of his policies and the content of his character.  It just takes longer than it should.

[A shorter version of this column appeared at Project Syndicate.  Comments can be posted there.]

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Trump Jr.’s Pants-on-Fire Allegation of Manipulated Jobs Numbers

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When asked July 24 about US unemployment numbers, which have fallen steadily since 2010, Donald Trump Jr., replied “These are artificial numbers. These are numbers that are massaged to make the existing economy look good, to make this administration look good when, in fact, it’s a total disaster.”  His father has made similar statements.

PolitiFact asked a variety of experts about the quote.   Their bottom line:  the quote from the younger Trump was a “Pants on Fire” lie.  The truth is that presidents don’t and can’t manipulate the jobs numbers.  No White House has even tried — at least not since Richard Nixon made a heavy-handed attempt in 1971 to interfere with BLS staffing.  After that, extra firewalls were put in place.

Here is my own full response to PolitiFact’s question regarding the Trump claim:

The statement is 100% false. The employment numbers come from the Bureau of Labor Statistics (part of the Labor Department).  In this administration, like every administration, those who produce the employment statistics are long-time nonpolitical professionals. The Secretary of Labor does not even know what the numbers are going to be when they are announced every month (the morning of the first Friday of the month).

Allegations that the official government numbers understate unemployment are sometimes based on a claim that some higher measure (which, for example, includes discouraged workers who have given up looking for a job, or part-time workers), should be used in place of the ones that get the most attention in the press.  But these other measures are also made publicly available by the BLS and the press is free to write about them as much as they want.

The important thing, of course, is to be consistent across time in which measure you use.  It wouldn’t be right to switch from looking at the conventional rate to a measure that includes discouraged workers just because you don’t like the incumbent president and want to make things look bad for him.

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Stagnant Wages Do Not Explain Trump

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The mainstream media are busily reproaching themselves for having been so out of touch with the economic troubles of angry white working men that they were late in taking Donald Trump’s presidential campaign seriously.   Most of us can join in to admit that we were very slow to take Trump seriously.   For one thing, we all thought that any candidate would be permanently derailed by even a small number of the many things that Trump has said.  We used to call these gaffes — either the ones that seemed designed to alienate particular groups (Hispanics, women, etc.) or the ones that revealed his lack of familiarity with real-world issues.

But can the under-estimation of Trump’s candidacy really be attributed to inadequate appreciation of the economic troubles of American workers?

The increase in inequality is very real, particularly the stagnation over the last 40 years of wage income among low-skilled men (defined as those without college education).  For many years, Democrats have made proposals to ameliorate the problem, while Republican presidential candidates have consistently pursued tax cuts for the rich as their number one policy response.

The puzzle is why anyone thinks that Donald Trump’s candidacy offers a break with this particular pattern.  The problem is not that he himself inherited great wealth.  The problem is rather that his policy proposals, such as they are, would not address the inequality issue.   He, like virtually all Republican candidates, proposes big tax cuts for the rich, with no way of paying for the lost revenue.

But he has also said something that no candidate has ever said: “wages are too high.”  He said it at least twice:  November 10, 2015, in the Republican presidential debate on Fox and November 11, on MSNBC’s Morning Joe.  (He has also denied having said it.  But the tapes are very clear. This is a pattern we have seen many times, of course.  Sometimes he brazenly accuses the media of having made up the quote.)

The elite media have beaten themselves up over their eliteness many times before.  Remember how, during the GWB years, journalists swallowed Karl Rove’s line that Republican votes were rising on an unstoppable tide of middle-America family values?  This was before people noticed that the red zip codes had higher rates of divorce, teenage pregnancy, and other indicators of lack of personal responsibility than the blue zip codes.

I don’t claim to understand the remarkable Trump phenomenon.   But whatever is the explanation, it is not a response by working white men that could have been logically predicted based on their stagnant incomes.

[Comments can be posted at Econbrowser.]

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