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Politics : Politics for Pros- moderated -- Ignore unavailable to you. Want to Upgrade?

To: Lizzie Tudor who wrote (14526)	10/30/2003 5:55:02 PM
From: Sully-	Read Replies (1) \| Respond to of 793601

"and the job market is the worst in 60 years" Huh? bls.gov Why do you make blanket statements that have no basis in fact or reality? It really takes away from your attempt at discussing economic issues as though you were an authority on the subject, much like Krugman. The stronger the political bias, the more biased the analysis becomes; resulting in fairly inaccurate observations/opinions/conclusions FWIW. JMO

To: Lizzie Tudor who wrote (14526)	10/30/2003 6:40:52 PM
From: Original Mad Dog	Read Replies (3) \| Respond to of 793601

Think about it- GDP of 7% while the deficit is the highest ever, states are broke and the job market is the worst in 60 years is not really something to cheer about. I think about the fact that the economy, recovering from the 2000 bubble (two thirds of which deflated by January 2001) and the September 2001 attacks, is recovering strongly. And the recovery is going exactly like past recoveries fueled by tax cuts have gone. The news stories this morning talked about the GDP surge last quarter being the biggest since the first quarter 1984. Let's look at that quarter for a minute. You are worried about (1) large GDP growth; accompanied by (2) stubbornly high unemployment; and (3) high deficits. But that's exactly what recoveries look like when they are going to be strong. In the first quarter of 1984, we also had a large deficit -- much larger, in fact, as a percentage of the budget or of GDP than we do now. The unemployment rate was significantly higher than it is now. And people told us it was Reagan's fault, that the tax cuts were bad policy, that the sky was falling. Here are the numbers from 1984: 1984: $185,367,000,000 federal deficit 21.7% of total federal spending that year 1984 GDP: $3,932,700,000,000 1984 deficit as %-age of GDP: 4.71 percent w3.access.gpo.gov (cell D91 of spreadsheet for deficit number; C91 for spending number; D91/C91 for percentage) bea.gov (B63 for GDP number) Unemployment looked particularly gruesome at 8.433 percent of the labor force: econstats.com Yet GDP growth that 1st quarter surged from $3.6888 Trillion to $3.8134 Trillion (http://www.bea.gov/bea/dn/gdplev.xls) (cell F159) Until today, that rate of growth was never repeated in a quarter. But look what happened to the unemployment rate from that point in 1984 forward. Below are the monthly seasonally adjusted monthly unemployment rates for 1984-1989: 1984 8.0 7.8 7.8 7.7 7.4 7.2 7.5 7.5 7.3 7.4 7.2 7.3 1985 7.3 7.2 7.2 7.3 7.2 7.4 7.4 7.1 7.1 7.1 7.0 7.0 1986 6.7 7.2 7.2 7.1 7.2 7.2 7.0 6.9 7.0 7.0 6.9 6.6 1987 6.6 6.6 6.6 6.3 6.3 6.2 6.1 6.0 5.9 6.0 5.8 5.7 1988 5.7 5.7 5.7 5.4 5.6 5.4 5.4 5.6 5.4 5.4 5.3 5.3 1989 5.4 5.2 5.0 5.2 5.2 5.3 5.2 5.2 5.3 5.3 5.4 5.4 bls.gov (fill out form and request chart, then set years to include 1984-1989) So the last time we faced this situation, the budget deficit was 21.7 percent of the federal budget. Right now it is far below that level. The last time we faced this situation, the budget deficit was 4.7 percent of GDP. Right now the deficit is between 3 and 4 percent of GDP, lower than 1984 in proportion to the relative size of the economy. And unemployment right now is closer to 6 percent than the 8 percent it was at the beginning of 1984. In 1984, we had just phased in the third phase of a large tax cut. Deficit hawks were wailing; Chicken Little's prediction that the sky was falling was such a common refrain we actually had to look up to make sure it wasn't so. But the sky wasn't falling; the clouds were lifting. Within 5 years, economic growth had occurred for 20 consecutive quarters. Real (inflation adjusted GDP) had grown more than 20 percent. Unemployment had gone from 8 percent to a steady range between 5 and 5.5 percent. The deficit was far smaller as a proportion of the federal budget and the economy than it had been. What you are seeing is what should happen in the early stages of a robust recovery. Jobs don't come first in a recovery. Hiring decisions require that companies see growth which justifies adding to their labor expense. Growth therefore is the first thing you see when the recovery gets underway; jobs are the last. Actually if you look at the historical figures since 1973 our current unemployment rate of 6.1% is roughly at the median: 1973 4.9 5.0 4.9 5.0 4.9 4.9 4.8 4.8 4.8 4.6 4.8 4.9 1974 5.1 5.2 5.1 5.1 5.1 5.4 5.5 5.5 5.9 6.0 6.6 7.2 1975 8.1 8.1 8.6 8.8 9.0 8.8 8.6 8.4 8.4 8.4 8.3 8.2 1976 7.9 7.7 7.6 7.7 7.4 7.6 7.8 7.8 7.6 7.7 7.8 7.8 1977 7.5 7.6 7.4 7.2 7.0 7.2 6.9 7.0 6.8 6.8 6.8 6.4 1978 6.4 6.3 6.3 6.1 6.0 5.9 6.2 5.9 6.0 5.8 5.9 6.0 1979 5.9 5.9 5.8 5.8 5.6 5.7 5.7 6.0 5.9 6.0 5.9 6.0 1980 6.3 6.3 6.3 6.9 7.5 7.6 7.8 7.7 7.5 7.5 7.5 7.2 1981 7.5 7.4 7.4 7.2 7.5 7.5 7.2 7.4 7.6 7.9 8.3 8.5 1982 8.6 8.9 9.0 9.3 9.4 9.6 9.8 9.8 10.1 10.4 10.8 10.8 1983 10.4 10.4 10.3 10.2 10.1 10.1 9.4 9.5 9.2 8.8 8.5 8.3 1984 8.0 7.8 7.8 7.7 7.4 7.2 7.5 7.5 7.3 7.4 7.2 7.3 1985 7.3 7.2 7.2 7.3 7.2 7.4 7.4 7.1 7.1 7.1 7.0 7.0 1986 6.7 7.2 7.2 7.1 7.2 7.2 7.0 6.9 7.0 7.0 6.9 6.6 1987 6.6 6.6 6.6 6.3 6.3 6.2 6.1 6.0 5.9 6.0 5.8 5.7 1988 5.7 5.7 5.7 5.4 5.6 5.4 5.4 5.6 5.4 5.4 5.3 5.3 1989 5.4 5.2 5.0 5.2 5.2 5.3 5.2 5.2 5.3 5.3 5.4 5.4 1990 5.4 5.3 5.2 5.4 5.4 5.2 5.5 5.7 5.9 5.9 6.2 6.3 1991 6.4 6.6 6.8 6.7 6.9 6.9 6.8 6.9 6.9 7.0 7.0 7.3 1992 7.3 7.4 7.4 7.4 7.6 7.8 7.7 7.6 7.6 7.3 7.4 7.4 1993 7.3 7.1 7.0 7.1 7.1 7.0 6.9 6.8 6.7 6.8 6.6 6.5 1994 6.6 6.6 6.5 6.4 6.1 6.1 6.1 6.0 5.9 5.8 5.6 5.5 1995 5.6 5.4 5.4 5.8 5.6 5.6 5.7 5.7 5.6 5.5 5.6 5.6 1996 5.6 5.5 5.5 5.6 5.6 5.3 5.5 5.1 5.2 5.2 5.4 5.4 1997 5.3 5.2 5.2 5.1 4.9 5.0 4.9 4.8 4.9 4.7 4.6 4.7 1998 4.6 4.6 4.7 4.3 4.4 4.5 4.5 4.5 4.6 4.5 4.4 4.4 1999 4.3 4.4 4.2 4.3 4.2 4.3 4.3 4.2 4.2 4.1 4.1 4.0 2000 4.0 4.1 4.0 3.8 4.1 4.0 4.1 4.1 4.0 3.9 4.0 3.9 2001 4.1 4.2 4.2 4.4 4.4 4.6 4.6 4.9 5.0 5.4 5.6 5.8 2002 5.6 5.6 5.7 5.9 5.8 5.8 5.8 5.8 5.7 5.8 5.9 6.0 2003 5.7 5.8 5.8 6.0 6.1 6.4 6.2 6.1 6.1 I just don't see any reason why a tax cut accompanied by a deficit and moderate unemployment which leads to a surge in growth means that there is something bad down the road. As these numbers show, the last time it happened it was a recipe for dramatic growth and a large reduction in unemployment.