The Politics of Jobs

TERENCE SMITH:

Although the nation's jobless rate dipped slightly for a second straight month, today's unemployment report was coupled with bad news about the economy. Companies eliminated more than 90,000 payroll jobs, half of them in manufacturing, a sector that's suffered since the economic downturn began in March of 2001.

Speaking to a Latino audience during their first official debate last night, the Democratic presidential candidates attacked President Bush's handling of the economy, and the loss of jobs to workers overseas. North Carolina Senator John Edwards said the president had carried out what he called a "war on work."

SEN. JOHN EDWARDS:

You know, the president goes around the country speaking Spanish. The only Spanish he speaks when it comes to jobs is hasta la vista.

TERENCE SMITH:

And Massachusetts Senator John Kerry had this to say.

SEN. JOHN KERRY:

In fact, I think the only jobs created in the United States of America by George Bush are the nine of us running for President of the United States.

TERENCE SMITH:

Donning a union jacket at a training center in Richfield, Ohio, on Labor Day, the president announced that he had tapped an assistant secretary of commerce to focus on revitalizing the nation's manufacturing sector. But a harsh fact remains: Since President Bush took office, the nation has lost some 2.7 million jobs. And a vast majority of those jobs may be permanently lost, according to a study by the Federal Reserve Bank of New York.

TERENCE SMITH:

Today in Indiana, the president addressed the latest jobless report.

PRESIDENT GEORGE W. BUSH:

There are a lot of Americans looking for work. And we need to do something about that in Washington, D.C. We've taken steps to get our economy growing again, and there are some very hopeful signs that progress is being made. I'm optimistic about the future of this country. Yet, today's unemployment report shows we've got more to do. And I'm not going to be satisfied until every American who's looking for a job can find a job.

TERENCE SMITH:

The president added that he was working with Congress to pass what he called a comprehensive plan to create more jobs.

TERENCE SMITH:

For a closer look at the latest jobs numbers and their potential political fallout, we get two views. Alice Rivlin was vice chair of the Federal Reserve from 1996 to 1999. She is also the former director of the Office of Management and Budget during the Clinton administration. She is now a senior fellow at the Brookings Institution. And Bruce Bartlett is a former deputy assistant secretary for economic policy at the Treasury Department during the first Bush administration. He is now a senior fellow at the National Center for Policy Analysis.

Welcome to you both. That last quote that we just heard from President Bush suggests a man who is paying attention to the jobs numbers, and maybe concerned politically about their implication. Should he be?

BRUCE BARTLETT:

Of course he should be concerned, if only… I mean if only for political reasons, others as well. But I mean conventional wisdom is, and always has been that people vote their pocketbooks. And the conventional wisdom was also that the first President Bush back in 1992 lost in large part not only because of the objective economic conditions but people had a sense he simply didn't care. This president is definitely not going make that mistake.

TERENCE SMITH:

Alice Rivlin, when you look at these numbers, how do they play politically for a president who has a reelection campaign just ahead of him.

ALICE RIVLIN:

Well, the news today was definitely bad. The statistics have been coming up better over the last few weeks because things like output and retail sales have been growing. But jobs are still declining. And that's serious. This has been not just a job, jobless recovery, it has been a job loss recovery. And so I think this is a real concern. The president ought to be worried. Now, it depends what happens. This could turn around. I'm optimistic, as he is, about the economy. I think we're likely to have stronger growth in the second half of the year and going into 2004, and eventually, if that's true, the job numbers will look better. But maybe not soon enough.

TERENCE SMITH:

Do you concur with that, Bruce Bartlett, that they're likely to look better?

BRUCE BARTLETT:

Well, I think they will look better. In fact I think they look better right now. You have to remember the Bureau of Labor Statistics calculates jobs with two different surveys: The payroll survey and the household survey. The household survey number, which is the official one for calculating the unemployment rate, actually showed a very substantial increase in jobs. We've had more than a million new jobs created this year on that survey, but we've had a loss of about 400,000 some jobs on the other survey. So this is not unusual at this point in the business cycle because a lot of new jobs are being created by new companies that have come into existence that are not in the survey. So I think that when the data revise, we may find that there were more jobs being created than we thought.

TERENCE SMITH:

Alice Rivlin, sticking with the politics of it just for a moment. Do the Democrats seem to you, we heard them as well, seem to be getting any traction on this issue?

ALICE RIVLIN:

Well that's a question for a pollster rather than an economist, I think. But, yes, I think that the polls do show that people are worried about their jobs. The unemployment rate may not be very high, but when it's as high as 6 percent and there's job loss, especially in manufacturing, month after month, people are worried about the future.

TERENCE SMITH:

Well, explain that to us. Explain how, in a situation where the economy is moving forward slowly but moving forward, where the stock market is rising, why are jobs continuing to be lost?

ALICE RIVLIN:

Well, I think there are several reasons. With respect to manufacturing, we have been losing manufacturing jobs for a long time, as manufacturing gets more productive and people move into other sectors of the economy. But it has been accelerated by the recession, and by the fact that the productivity increase has been extremely large. That's good for the long run, but it means that companies are not hiring. And then there's the question of imports. We have growth in the economy, but some of it is being satisfied by imports.

TERENCE SMITH:

So companies are doing more with fewer people?

BRUCE BARTLETT:

Oh, absolutely. We've had just extraordinary productivity numbers. But they're not sustainable. You can't keep forcing people to work as hard as they have been doing. They'll do it for a while but sooner or later you have to hire. And you are starting to see some evidence of companies increasing their capital investment. And I believe that jobs will come along fairly quickly soon thereafter, although I would have expected to have seen it by now.

TERENCE SMITH:

How would you compare this to previous situations like this, both economically and politically? We were talking earlier about the first President Bush and how it affected his efforts at reelection in 1992.

ALICE RIVLIN:

I actually think that this President Bush is in less trouble economically than his father was. In part because the '80s were a period in which productivity was not growing very fast, wages were not growing very fast, people were discouraged about the economy. And then we had a recession on top of that. The recent history has been much better. The '90s were a period of extraordinary growth, and I think people got their optimism back and maybe haven't entirely lost it. So this President Bush may be in better shape. But it does depend what happens. It depends on the direction of change. If, as Bruce and I both expect, the economy does pick up and jobs begin growing again, then maybe he will be all right. If that doesn't happen, and if there's still substantial unemployment and continuing job loss, I think he will be in trouble.

TERENCE SMITH:

Do you agree with that?

BRUCE BARTLETT:

I agree. But I think a key reason why this President Bush is going to ultimately do better than the previous one is that the cycle is working better in his favor. His recession started the very first year of his presidency. His father's recession began a year later. And because perception always lags reality in economics, people always feel things are worse than they really are long past the end of a business cycle. And I think that we will certainly see a substantial turn around. Many economists are predicting something like 5 percent growth the second half of this year, which is enough to start bringing down the unemployment rate fairly substantially.

TERENCE SMITH:

So, in that situation, we should see jobs… the number of jobs increasing.

BRUCE BARTLETT:

That's right. And I think you'll see gradual increase in jobs well down through the election of next year. I think the economic and political situation a year from today will be substantially different than it is today.

ALICE RIVLIN:

But I think the president's vulnerable on another point. And that is that the efforts that he's made, largely tax cuts to stimulate the economy, while they may work in the short-run, have created huge deficits in the future. People are worried about that, and they should be. And the tax cuts have gone to, largely to upper income people. And most people aren't in the tax brackets that have gotten the advantages. They're going to worry about that.

TERENCE SMITH:

Bruce Bartlett, the president is unapologetic about that. He stands behind those tax cuts. He, in fact, calls on them to be made permanent and calls for additional tax cuts that would involve $1.1 trillion in cuts over the next ten years. How does that play politically?

BRUCE BARTLETT:

Well, first of all, it shows that the president cares and that he is doing something. Now you can disagree about whether he should have done something else, but you can't accuse him of sitting on his hands as his father was accused of doing. And secondly, I think he does believe in tax cuts. It is a very important part of keeping the Republican base happy and making sure that he gets all the Republican votes that he can get next year. And also I think that he feels that the tax cut is really only responsible for a fraction of the increase in the deficit, and that it's primarily due to– at least the deficit up to now– due to cyclical factors that will improve. And I think that the issue that Alice brings up about the structural deficit is one that is not resonating. It may resonate at some point politically but right now I don't think anybody is paying attention to it.

ALICE RIVLIN:

The Republican base isn't going to win the election for him. And I think people will worry as they see more and more as time goes on, that huge tax cuts are going to very rich people, and not to them. They've already had theirs. And they aren't going to get much more. And that's, I think, going to resonate with people.

TERENCE SMITH:

You know the other great economic consideration that was in the headlines this week of course was the very large bill that is coming down for the operations in Iraq. This goes to the deficit issue. I mean there's a political side to that as well, is there not?

BRUCE BARTLETT:

Yes, but the problem is that to defeat somebody on an issue like that, you have to have some kind of plan. I mean we're seeing in California right now a big debate about how to deal with that state's fiscal position problem. And I don't really hear anybody on the democratic side coming up with anything that I think is really plausible and workable other than let's repeal the tax cuts, which I think people are going to view as a tax increase. That's clearly not enough to deal with this problem. It would be nice to hear somebody put some spending cuts on the table. That goes for the president, too.

TERENCE SMITH:

Do the Democrats have to present an alternative to the president's plan; one that is credible to the public?

ALICE RIVLIN:

I think they have to have alternatives. And they have different ones because there are so many of them now, but several candidates are saying roll back the tax cuts for upper income people. And I think that may resonate. They are not saying cut spending for Iraq. Even those who oppose the war believe we're there now, we've got to finish it right. So I don't think that will be a theme that you will hear.

TERENCE SMITH:

All right, Alice Rivlin, Bruce Bartlett, thank you both very much.