Economists Discuss Differing Views on American Economy and Workforce
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JEFFREY BROWN: As we’ve just seen in their campaign speeches, and in their recent conventions, the two candidates for president offer two very different portraits of the American economy and workforce.
Two political economists join me with their analysis. Lawrence Mishel of the Economic Policy Institute is co-author of a report out today called “The State of Working America.” And Kevin Hassett of the American Enterprise Institute. He’s their director of economic studies and has been advising the Bush-Cheney campaign.
So two visions of the state of play starting with you, Larry Mishel, who’s right?
LAWRENCE MISHEL: I see that we are in the third year of an economic recovery. But we still have a very weak job market. As you know, we still have one million fewer jobs than when the recession started.
And you would have expected two to two and a half million jobs to be created a year, so we’re around five or six million jobs short. We see that wages are growing very slowly, they have fallen around 1 percent behind inflation over the last year.
Fewer workers have health care provided to them by their employers. And we see that middle class families have lost income for three years in a row, every years since 2000, $1,500 overall. So we may be turning the corner, but it’s a very, very wide bend.
JEFFREY BROWN: Kevin Hassett, I’ll give you a crack at the same question.
KEVIN HASSETT: We’ve heard a lot of numbers in those statements, and I didn’t hear a number that was incorrect.
It’s really a replay of the theme we’ve been seeing since the beginning of the campaign where Sen. Kerry takes rhetorical advantage of the fact that it was about two years before the economy really got going again after the recession.
So if you look at four-year numbers for president bush then you’ll be able to find numbers that are weak. But President Bush is taking advantage of the fact, again rhetorically, that the last year has been relatively strong. GDP growth over the last 12 months was about as fast as we saw in any 12-month period in the Clinton administration, and job growth picked up quite a bit, not as much as we’d like to see but quite a bit.
So the candidates have been basically arguing while the 40 years weren’t wonderful, and on the other side saying but the last year has been great, that’s a sign my policy is working.
JEFFREY BROWN: That has struck me too, it’s really almost a function of where you start the clock, by how you see things?
KEVIN HASSETT: Yes, that’s right. If we go back a little further to think about whether people are really getting better or not, then I think that there are a lot measures that aren’t mentioned by people who go farther back than a year, the president usually sticks to the year.
This suggests that things are looking pry good. So if you go back to ’96 which is the last year that a Democratic incumbent was seeking the White House, than there were about 5 million people who were part-time employed for economic reasons, they wanted a full-time job but couldn’t have it. Today that’s about 4.3 million.
Back then about 65 percent of Americans owned a home, it’s about 69 percent. So if you wanted to show progress you could list a number of things that suggest that it’s not as bad as Sen. Kerry was saying.
LAWRENCE MISHEL: As my good friend Kevin is just explaining why he didn’t vote for President Clinton for re-election. But the fact is that we’ve been in a very tough time, and there have been some good growth in GDP. But working families don’t need GDP.
What we’ve seen is that their family incomes haven’t done very well, they’re actually falling. Wages are going down. People have not benefited from whatever recovery there’s been. And we’re three years into a recovery.
We even calculate that there’s two to two and a half million people missing from the labor force that should be counted in the unemployment rate, which would be 7 percent if they were included. So this is a pretty weak time, and it’s no wonder that half the people think that the economy is going on the wrong track, and it’s a very, very important election issue.
JEFFREY BROWN: One of the things you play up in your report, Larry Mishel, is the quality of jobs, that is that the jobs that are being created are not, as in your findings, good paying jobs?
LAWRENCE MISHEL: Well, it’s hard to get a measure of job quality, but I can tell you the few that we focused on. We have found that the industries which are expanding, pay substantially less, actually 35 percent less per year than the jobs in the industries which have been contracting in terms of employment.
We find that job growth has been disproportionately part-time — disproportionately temporary. And most of all we find that workers wages are now less than they were a year ago. So that’s not a sign of a vibrant robust economy. And if that keeps up, we are not going to be able to have a robust recovery.
One of the things that’s going on with this economy is that it’s not self sustaining because we’re not creating the jobs, we’re not creating the wage income that allows people to consume and keep the economy going. That’s why I think the economy is faltering at this point.
JEFFREY BROWN: Do you see, Kevin Hassett, some good news in the quality of jobs more recently?
KEVIN HASSETT: Well, the quality of job debate is one of the more technical and difficult debates that’s out there. I know that fact check.org responded to some of Sen. Kerry’s claims that the new jobs that said the new jobs are good jobs, and I saw that Larry’s group put out a rejoinder to that.
And after reading all the studies, I found myself really quite confused and hoping for more data. But there are a lot of signs out there that people are holding up pretty well, in fact starting to do a lot better more recently.
One of the things that I found most interesting looking back at the bad years, a few years ago, where the statistics were really pushing things in the direction that Larry mentioned was that even back then during the bad years, the median person out there, the typical person out there had their consumption increase in real terms quite a lot.
I think there’s a lot more going out there than just the simple employment statistics that are quoted by the campaigns. One reason why the consumption stayed so high and even grew during the bad years is likely that 69 percent of Americans owned homes and a lot of those people refinanced them and found they had a lot more money that they could spend on things so, they could buy more things, so they probably felt better.
I think in the end, though, for an election what matters really is what’s going on with income overall. That been the best predictor historically — and I would guess those levels right now are saying President Bush is looking at a very favorable fall.
JEFFREY BROWN: How do you explain that, because you don’t see that in the income wages?
LAWRENCE MISHEL: I think macroeconomists like Kevin have to look at the averages, where I tend to study what’s happening to a typical family, someone right in the middle. He’s an economist at Yale and they do it as an aggregate — a model to who will win the election. And it didn’t predict very well in 1992.
That’s because you have an economy these days where the aggregate economy moves one way and typical working families aren’t benefiting from it. It doesn’t mean that people are going to vote for the incumbent. I think it is a very strange time that President Bush, unlike President Reagan who we revered who asked are you better off than you were four years ago, President Bush is asking if you’re better off than you were four months ago, and in fact maybe you were somewhat better off than four months ago, but this is a man who’s lived by low expectations and that’s what he’s creating; when they say they created jobs since last September they paid a 1.7 million jobs.
In fact, if you look at what president said he was going to do when he passed the tax cuts in 2003, he promised us we were going to get 300,000 jobs a month, and we’ve gotten less than of half that so far.
JEFFREY BROWN: Let me ask you both something that may help our audience put what they’re hearing in some perspective. Often we talk about the American economy, we talk about market forces in play, talk about big trends like globalization, technological change, population trends. So given all of that, how much can a president really impact the type of jobs and the number of jobs that are created?
KEVIN HASSETT: I think the president can have a big effect on overall job creation, and even the type of jobs that are created. And I think that really right now we’re looking at two candidates that have dramatically different programs.
I think President Bush’s are better and I’ll talk about why. The fact is that if you raise taxes as Sen. Kerry is proposing like most economists think that will make the economy grow slower and a slower growing economy will create fewer jobs.
If you stop free trade or oppose free trade, or maybe introduce tariffs, that will probably weaken the economy and cost jobs. President Bush on the other hand has said he wants to have a fundamental tax reform, fundamental tax reforms we’ve modeled zillions of times. They generally create jobs.
Most interesting, President Bush has proposed something new called an opportunity zone, which is I guess would be something that you folks would endorse, which is an attempt to focus government benefits for job creators in those areas that need them most, those parts of the country that around recovering as quickly as the others.
JEFFREY BROWN: Let me give Larry Mishel a chance at that.
LAWRENCE MISHEL: I think if any president can be held accountable for what the job creation has been on his watch it would be President George Bush. He first started talking about it as soon as he took office, and in 2003 when the economy wasn’t doing so well, we were having a significant job crisis, he named his tax cuts the job and growth plan.
And we have really seen, I think, anywhere near the job and growth plan we could have with a better policy. Mark Zanby of economy.com has done analysis, you can get on his website, economy.com, that shows that if a better policy of giving tax cuts to low income and middle income people, relief to the states, some richer unemployment benefit to help those who are long term unemployed, we would have had 2 million more jobs in 2004 with half the deficit.
So clearly more effective policy we could have been much further ahead. And I don’t think we should let this president off the hook. He also makes a lot of excuses.
JEFFREY BROWN: Okay, we’ll leave it there. There’s a lot more of this debate to come. Lawrence Mishel and Kevin Hassett, thank you both very much.