Arnold Kling  

Presidents and Jobs

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How many jobs can a President create? Former Clinton Administration economist Jeffrey Frankel says that "The answers don't fit into a stump speech." He writes,


[The Democratic Presidential candidate's] proposals are good economics, and they come by their populist ring honestly in that the current system is letting corporations get away with too much. But Kerry cannot claim that these reforms by themselves will be enough to bring back the 2.2 million jobs lost under Bush.

Not that Bush's tax policies should be blamed for the 2.2 million lost jobs. The recession began two months after he took office, before he had had a chance to do much damage. As convenient as it would be for the Democrats to be able to claim that Bush fiscal policies caused the weak economy of the last three years, good economic logic does not support that contention. If anything, Bush's tax cuts, leaving aside their Robin-Hood-in-reverse character, might have moderated the economic slowdown. It's hard to give away a couple of trillion dollars without having some stimulus effect on the economy.


Regardless of who is President from 2005-2008, it is reasonable to expect that the economy will add about 200,000 jobs a month, or rougly 10 million jobs overall. Kerry's boast that his economic program will create 10 million jobs is comparable to a rooster's boast that its crowing will make the sun come up. See Economic Attribution Errors.

For Discussion. Is it the fault of the public, the politicians, or economists that reasonable economic analysis seems incompatible with the typical stump speech?


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CATEGORIES: Macroeconomics



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The author at Pejmanesque in a related article titled ON JOB CREATION writes:
    Also sprach Arnold Kling: Regardless of who is President from 2005-2008, it is reasonable to expect that the economy will add about 200,000 jobs a month, or rougly 10 million jobs overall. Kerry's boast that his economic program will create... [Tracked on April 15, 2004 7:33 PM]
COMMENTS (9 to date)
Lawrance George Lux writes:

The fault lies definitely with the Economist, though the Politicians and the Public get no Honors. The Economists allow economic error to be perpuated without contest. Keynesian stimilus is counter-productive or negative stimilus, when the Economy is not under stressed recessionary conditions; yet no one will contest the icon except myself. Tax Cuts and legal advantages for Business actually incites less hard capital construction and worse Business ethics, but Supply-Siders are still allowed to bray; though this is the second Recession they have caused, the first being under Reagan. Most Economists innately understand Outsourcing would be halved, if Business taxes were identical with previous Boom periods. Economists expect about 200,000 a month Job growth, but they will be wrong, unless Business is forced to produce more because they have less after-tax take-home profit. lgl

Robert Schwartz writes:

"How many jobs can a President create?"

The correct answer is none, unless you believe in the over-saving theory of economic cycles. If the theory ever had any validity, the Japanese managed to prove that running huge deficits and undertaking enormous deficits have no effect on such cycles. At any rate, it has been many long years since Americans were accused of oversaving.

It should be noted that Presidents and other governmental powers can destroy jobs in a trice. Robert Mugabee has completely trashed the economy of his unhappy land. The Federal Reserve, Herbert Hoover, and Congress bear major responsibility for the Great Depression (although we should not leave the Treaty of Versallies and its draftsmen uncredited).

"Is it the fault of the public, the politicians, or economists that reasonable economic analysis seems incompatible with the typical stump speech?"

Here I blame the Democrats. Not content with blaming the Republicans for the Great Depression (with some justice, as the gold standard and high tarrifs were core Republican policies, but ignoring Wilson's role in the Versallies fiasco), they wanted to be credited with curing the Depression with the feckless melange of fascist and socialist policies they labled the New Deal.

The Great Depression ended. But the New Deal had nothing to do with it. Renegotiating the terms of trade, restucturing the international economy and jetisoning Versallies at the end of WWII did that. But the legend of the New Deal sustained the Democrat Party through many political campaigns.

Even today the words New Deal warm the cockles of the hearts of the faithful Louis Uchitelle’s column in Today's 4/11/04 NYTimes "Maybe It's Time for Another New Deal".

Of course, the Great Depression is 2 generations in the past and it is, as I have previously pointed out, silly to suppose that a public works program could be concieved and executed in a time frame that could respond to transient economic events. Perhaps, the Kerry Campaign will be the last hurrah for the new deal rhetoric.

Bernard Yomtov writes:

"Is it the fault of the public, the politicians, or economists that reasonable economic analysis seems incompatible with the typical stump speech?"

Not so much the public, I think. economics is complicated and, more important, its results are often counterintuitive.

Politicians? Yes in part. Because most candidates running for high office have access to decent economic advice and ought to know better. But of course honest analysis doesn't appeal to voters very much. It depends on what you think the obligations of political leaders are in this area.

Economists? Yes to the degree they fail to explain policy issues clearly, though this is often difficult. Even more, because reputable economists often endorse dubious ideas for political reasons, and seem to get something of a pass from the profession.

But you left out the main culprit - the media. Economics reporting is almost uniformly awful. Reporters seem not to have any grasp of the subject, no ability to distinguish crackpot thinking from reasonable disagreements, no idea of whether someone claiming to be "an economist" really has any basis for that claim whatsoever.

Craig Howard writes:

this is the second Recession they [Supply Siders] have caused, the first being under Reagan

Interesting claim (if old) but you ignore the sequence of events in 1982: it was recession, tax cuts take effect, boom.

Both recessions were caused by money-tightening at the Fed.

Mike McD. writes:
Is it the fault of the public, the politicians, or economists that reasonable economic analysis seems incompatible with the typical stump speech?

For what it's worth, I take it to be due to a society's unfaltering gaze into the future. The desire is for quicker, faster, sooner...but never for better.

Monetary stimulus that takes more than a month for visible results? Long term fiscal management which our children will benefit from more so than I will? What are these economists, out of their minds?

(Or does my Bachelor of Arts deceive me, and that is nothing more than a doobie-fueled stab backwards at the American Dream?)

Boonton writes:
"Is it the fault of the public, the politicians, or economists that reasonable economic analysis seems incompatible with the typical stump speech?"

Here I blame the Democrats. Not content with blaming the Republicans for the Great Depression
...

Of course, there was a certain political party that tried to claim the economic boom of the late 90's was caused by tax cuts by a certain President in the early 80's (cuts which were followed by tax increases). No doubt if Kerry is elected for 2 terms and the economy is booming in year 7 we will hear it was all caused by Bush's policies at the turn of the century.

Eric Krieg writes:

It is the fault of the economics profession.

I like economics. I read a lot of economics blogs. It is my distinct impression that there is a lot of good analysis of the jobs data online, and that NONE of the good analysis is being done by highflying professors at the premier programs.

Could it be that game theory has sucked all the oxygen out of the field of economics?

David Foster writes:

Part of the problem is that there is a lag between cause and effect. President #1 can adopt policies that hurt (or help) the economy, but the effects may well not show up until several years later, during the term of President #2. It's like steering a ship or a large boat..if you don't understand the lags, you will make an interesting s-shaped pattern in the water...

Tom Grey writes:

The public. The corrupt public. The public that wants, and consistently votes for, beneficial gov't action, benefits, to be paid for with Other People's Money collected as taxes.

People know there's no such thing as a free lunch -- but almost all are happy to pig out if/ when somebody else is "willing" to pick up the tab.

The big (gov't) lie -- Tax the rich to help the poor. Of course, the rich find ways of avoiding too much of the tax. And since the poor don't vote so much, much of the programs' benefits go to the middle class. In other words, Tax the rich, er, middle class, to help the poor, er, middle class. Minus bureaucracy deadweight costs, of course.

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