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To read Mitt Romney’s economic plan is to join a more elevated conversation. This is a document written by people who value expertise, and it shows.
It avoids overstatements and misstatements. It credits Presidents Bush and Obama for pulling the financial system back from the brink in 2008-2009. While acknowledging the role of government policy in abetting the housing bubble, the report lays the blame for the excesses of the 00s on the bankers who committed them. The report does take some partisan jabs, but they meet the truth test.
The National Bureau of Economic Research (NBER), the non-partisan research organization that determines when business cycles begin and end, tells us that the Great Recession came to a conclusion in June 2009, when the economy technically returned to the path of growth. However, if the downdraft officially ended at that juncture, that assessment is almost an artifact of NBER’s definitions and nomenclature. For the Obama Recovery is different from its predecessors. As one team of economists has put it in the colorless language of their profession, “the path of adjustment [has] exhibited important departures from that seen during and after prior deep recessions.” In plain words, we are now more than two years into an economic recovery that has been one of the most lackluster in our nation’s history.
The document has one great excellence and two major failings.
The excellence is the focus on long-term economic growth. In his introduction to the plan, Columbia Business School Dean Glenn Hubbard remarks: “Robert Lucas, a Nobel laureate in economics, famously wrote that once one starts to think about economic growth, it is hard to think about anything else.”
Achieving long-term growth is the most fundamental task of national economic management. Achieving long-term growth also happens to be the problem set to which conservatives bring their best answers. Romney’s answers to the problem are as expected, but no less potent for their familiarity: keep taxes low and regulation predictable. Promote trade, while penalizing countries that manipulate their currency to subsidize exports to the detriment of US industry. Within the Republican tradition, he might have added more: invest in scientific research and basic infrastructure. Extra points for recognizing the importance of skilled immigration and rationalizing the corporate tax system in particular.
But here are the major failings, and they are serious.
A President Romney would take office in January 2013, at a time when even on a best-case scenario more than 10 million Americans will still be unemployed or under-employed, more than half of them for a very long time. What to do for them? On this urgent topic, the plan falls dismayingly quiet. Even if Romney’s policies do raise the long-term growth rate of the United States beginning sometime about 2014, unemployment won’t return to normal levels until a Romney second term. That portends almost a decade of very high unemployment.
Since the long-term unemployed tend to become unemployable, such a scenario portends that millions of Americans will likely never return to work at all. What to do about them? Put them on disability pensions? Create federal make-work programs? But the Romney plan calls for early and rapidly enlarging cuts to federal spending, militating against those two obvious answers. What then?
The second failing is illuminated by Mitt Romney’s speech announcing his new plan. In the speech, Romney laid great stress on raising the incomes of middle-class Americans. Good! But as his adviser Glenn Hubbard can tell him with graphs and charts, the heaviest weight on middle-class incomes is the rise in the cost of employer-provided healthcare, which devoured every dime of extra employee compensation during the Bush years.
Until health care costs are controlled, it’s again hard to see how wages can grow. So where’s the plan for health-care cost control? It’s a subject with which Mitt Romney is deeply familiar, to put it mildly.
At least Romney has a plan. Thank God for him.
I’m hoping for change next November. God help us.
Smegmalicious! I have a plan too! The first thing we do, let’s kill all the lawyers!
Parker 2012! I would be ecstatic to count you among my fans. Or do you cozy up only to those crusty old jocks and their supporters?
Hey, did you know that Mormons become Gods, when they get their own planets to populate and rule?
“There are many gods who create and rule over other worlds, and on those worlds, worship excludes the God of our world. So there is only one God for us, and this God is typically referred to as the Heavenly Father. Mormons may also speak of the term “God” in reference to “the Godhead,” which is a team of separate Gods (McConkie, Mormon Doctrine, 576-7; Joseph Fielding Smith, ed., The Teachings of the Prophet Joseph Smith, 346-7 [pre-2002 edition]”
“The nature of these gods is identical to the nature of man, and as such these humans had to become gods; they haven’t always been gods (Fielding Smith, The Teachings of the Prophet Joseph Smith, 345 [pre-2002 edition]; Thomas C. Romney, The Life of Lorenzo Snow, 46; D&C 76:23-4; and Abraham 3:18-28).
“Worthy Mormons may become gods to create, rule over and receive worship from their own worlds some day. They will do this exclusively as the god or the team of gods for that world or that set of worlds (like the Father, Son, and Holy Ghost are for this world or this set of worlds), and thus the God of this world will not perform those functions there (Ibid; D&C 76:50-8 and 95, 132:15-23, 29, and 37; and Gospel Principles, 302 [1997 edition]).”
Its a lot like Stargate SG1, except that the symbiotes are non-corporeal. And no stargates.
“The first thing we do, let’s kill all the lawyers!”
Wouldn’t this leave you a widow? We wouldn’t want that to happen.
Shall I lecture you on the Constitutional right of freedom of religion?? LOL
You forgot that the angels who brought the golden plates down from the sky and gave them to Joseph Smith also gave him some special goggles so only he could read what was printed on them. No foolin’.
Yeah, it’s all wack-wack, but anyone beats the half-Kenyan reparationist we got in now.
Just sayin’.
There’s a saying – one man’s religion is another man’s belly laugh.
Being non-religious myself, I see Mormonism as about the same level of weirdness as some god-man needing to do the ultimate human sacrifice to save us all from what a talking snake commanded in a bronze age myth.
Religion being all around me, and religious people by and large being decent and responsible and clever and all that, I’m used to people nowdays pointing to their religion. And, having lived in Colorado for a decade long spell, and from personal acquaintance, I’m not one bit bothered by some being Mormon.
I happen to like the other Mormon in this race better.
That is, if I have reason again to vote Republican.
Banty, if you believe we’re on the right course then vote Democratic again next November.
See, Smarg – I’m not quite such a simpleton to go for this ‘right course’ stuff. We’re in a really rough patch.
I do know what got us here, who is clueless about that, and who offers nothing but the same. And it’s the current crop of Republicans.
Someone like Huntsman, or my congresscritter Gibson, might be cut from a slightly different cloth, but, with the application of litmus tests (didja see that forum Monday?), demands to sign oaths, being whipped into one block for every vote, and other such stuff, I know the guy I’m voting for, isn’t what he’ll be forced to turn into, when he gets into office.
It’s always been true to some extent for both parties, but, the past ten years and to a crazy degree the past two years, it’s the Republicans where I end up voting for a brand, when I’m trying to vote for a person or a platform. And it’s a rotten brand indeed.
Change that (not you, I know), I’ll be in a position to stop voting *against* that brand.
Banty, I disagree.
I offer one up example. California. The GOP didn’t destroy the state. I say it was the Democrat’s progressivism.
The recent announcement that California’s unemployment again nudged up to 12 percent—second worst in the nation behind its evil twin, Nevada—should have come as a surprise but frankly did not. From the beginning of the recession, the Golden State has been stuck bringing up a humbled nation’s rear and seems mired in that position.
California’s dominant ruling class—consisting of public-employee unions, green jihadis, and Democratic machine politicians—has no real use for science as Gilman saw it: as a way to create prosperity for its citizens. Instead, the prevailing credo of the state has been how to do everything possible to return to its pre-settlement condition, with little regard for what that means to the average Californian.
Nowhere was California’s old technological ethos more pronounced than in agriculture, where great Californians such as William Mulholland, creator of the Los Angeles Aqueduct, and Pat Brown, who forged the state water project, created the greatest water-delivery system since the Roman Empire. Now, largely at the behest of green tree huggers, California agriculture is being systematically cut down by regulation.
Many Californians who aren’t slumbering are moving out of the state—and not only the pathetic remains of the old Reaganite majority. According to the most recent census, those leaving the state include old boomers, middle-aged families, and increasingly, many Latinos as well. Outmigration rates from places like Los Angeles and the Bay Area now rival those of such cities as Detroit. In the last decade, California’s population grew only 10 percent, about the national average, largely due to immigrants and their offspring. Population increases in the Bay Area were less than half that rate, while the City of Los Angeles gained fewer new residents—less than 100,000—than in any decade since the turn of the last century!
Increasingly, California no longer beckons ambitious newcomers, except for a handful of the most affluent, best educated, and well connected. Through the 1980s and even through the late ’90s, the aspirational classes came to California. Now they head to other, more opportunity-friendly places like Austin, Houston, Dallas, Raleigh-Durham, even former “dust bowl” burghs like Des Moines, Omaha, and Oklahoma City. Meanwhile, Golden California, particularly its expensive, ultragreen coast, gets older and older. Marin County, the onetime home of the Grateful Dead and countless former hippies, is now one of the grayest urban counties in the country, with a median age of 44.
Now, the usual Smarg would just cut down all of this verbal subterfuge and say, “Look at California, where the Demoncraps drove the state into an illegal attracting, bankrupt cesspool!” Which is actually easier, and less pressure on my fingertips as I fatfinger this keyboard.
Just sayin’.
Smarg – you still have the “fruit and nuts” image of California??
You’re talking to an ex-Silicon Valley denizen. Know why *I* out-migrated in 1988 once I got my Stanford PhD and went back east (to that not-so-conservative state of New York) even though it’s the archetypal home of the industry I’m in?? Because I didn’t want to raise a family sending my kids to schools already partly gutted by Prop. 13, and didn’t want to pay $500,000 for a 3 bedroom bungalow even then. It was the crazy referendum system, where people want the Moon for Free, the early anti-tax movement, and rank and sheer housing speculation, long predating the boom of the ’00′s, that turned me away.
Back when ‘Duke was Gov. A Republican, in case you don’t know…
Banty, sounds like you DID move out due to the fruits and nuts.
Yeah, the voters went wild on both sides there, and the housing bubble’s greed hastened the downfall.
Having been to San Diego in the winter as a younger man, I dreamed of moving to the area (especially fell in love with La Jolla) upon eventual retirement. Gawd, the weather there was simply luscious. Then of course, reality set in. After further investigation I found that besides the weather, everything else is tits up. The schools suck because the illegals and their anchor babies made life for affluent children unbearable, driving up costs for private academies. Homes and garages are broken into regularly by the illegals. Locked doors? No problem. They wait until you go to work and they bring a skillsaw and cut into the roof. High prices. “No go” areas.
Sad.
I don’t think you even read what I said, Smarg.
Yes I did, but I have an obvious agenda.
Hey Smarg, I was born in Texas (military brat) but lived in CA all my life. Two years in N. CA, the rest in S. Calif.
I like it here. Not planning to move anywhere else.
I agree that our referendum system is crazy and for the last 20 years, EVERY special interest (liberal or conservative) keeps putting bond measures on the ballot with oh so legitimate reasons why we need more debt (and that is a big reason CA budget is a mess). Yes, our public employees labor unions are too strong and have milked the system for too much, especially prison guards and teachers. Part of that fault is the state GOP determined to be more extreme than the voters and in the last 25 years there isn’t a credible GOP presence in the state, which is bad.
As for why CA was great, certainly water and agriculture is a part. But CA water wars are more complicated than your soundbite and I suspect that outlying states who accuse CA of stealing their water would have a different viewpoint of the greatness of CA (and conservative) farmers than you do. Equally as important to growth was the first class education system and road system that was built in the 50′s and 60′s. Those were built with investment that would be considered progressive today in our current polarized political climate.
Before you blithely say that CA is a hellhole due to the illegals and their anchor babies (I know your common refrain), don’t forget that CA is still a bellweather state. 100 – 150 years ago, all the immigrants came through New York and were European (and we had the same sort of issues with the Irish, the Jews, the Slavs, etc.). It was just harder to put a racial epithet on them ’cause they looked pretty much the same as the other white folk who came before. Now those immigrants are coming from the South and the are no different than the ones who came before. We see them first here, and in TX and AZ, but they are coming to your state too.
BTW, if they don’t come, who’s going to be left working in a couple of decades to pay for your standard of living? Immigration (legal and illegal) is the lifeblood of a flourishing society. They provide revenue and growth. If you doubt that, just look at Japan today.
So instead of carping on them damn foriegners, how about craft a sensible immigration policy that adds value to the country?
Just sayin
My o my Smarg, you don’t sound your usual angry, over confident self.
Cold feet would be proper. The silent majority is not praying nor are they embracing the obstruction tactic.
So, you perceive me as angry and overconfident?
What do you suggest I do to correct my personality deficiencies?
Lobotomy.
People say Obama has trouble “messaging” but if you heard Romney yesterday, he makes Obama sound like Charlton Heston as Moses. He was hyperventilating all over the place. It’s easy to see why his support is ankle deep.
Romney is a proven businessman/politician. Perry is a career pol with better speaking skills.
Either one would be better than the clown we have in now.
Smegmalicious!!!
Please explain why these newly castrated versions of Romnoid and Pervy, peddling a rehash of Bush policies, deserve a shot at the presidency. After all, Bush policies have been proved disasterous. Have they learned anything?
“Insanity: doing the same thing over and over again and expecting different results.” Albert Einstein, (attributed)
OK TJ, I’ll bite.
Why did a half-term Senator, half-Kenyan, anti-White, anti-American guy deserve a term in the WH??
Because the alternative was far worse – just like the current crop of Dominionist Christian bigots leading the GOP primary.
Huntsman in 2012, or to hell with it, I’ll be voting for Obama – because the GOP gave me to non-fuckwad choices.
Meddy, I have to agree with you on the choices presented to voters in the last ~20+ years or so. They sucked.
Bush I?? Too wishy washy and compromising. Clinton? He only got in because the demented crazoid Perot drew off anough votes. Dole? An old geezer who thought the nomination was his inheritance. Bush II? A big disappointment to conservatives. Gore? A nut job that Tipper finally ditched in disgust. McCain? Another geezer. And of course all of you know my feelings on BHO.
I think that the really good candidates on both sides refuse to run the gauntlet that it takes. Can’t say as I blame ‘em.
[quote]Romney is a proven businessman/politician.[/quote]
However, unlike the head of Bain Capital, the President can’t just fire all the citizens and sell off what’s left of the country at a profit.
Completely agree. He was speaking so fast at times it was hard to follow him. He came across as nervous. Certainly did not come across as confident.
I can’t stop hearing Romney as an excited six-year old trying to tell you about his new toy.
Despite the superficially intelligent packaging (after all people like Hubbard have their professional reputations and careers to worry about) the substance of Romney’s plan is essentially Republican boilerplate of the zombie variety that would do little to expand employment or even as Frum points out materially affect real income levels for the middle class. The overwhelming problem facing the economy is weak demand as a consequence of high unemployment levels, fear, domestic deleveraging and the debt overhang particularly in the housing market. This in turn is stifling investment by business. What exactly does Romney’s proposal to lower the top corporate rate of tax to 25% (when the effective rate currently paid by industy is in single figures) do to address these issues?
By lowering corporate taxes corporations have a greater incentive to make investments as the after tax return on investment increases.
But without demand, there is little incentive or need to increase investment. Why expand when there is no one to buy your increased production of goods?
There’s no shortage of capital right now, many companies are sitting on piles of cash. Lowering corporate taxes, while generally a good thing, is not really relevant in the current environment.
“But without demand, there is little incentive or need to increase investment. Why expand when there is no one to buy your increased production of goods?”
Consumption, measured by PCE, has become an increasingly large portion of aggregate demand.
http://research.stlouisfed.org/fred2/graph/fredgraph.pdf?&chart_type=line&graph_id=&category_id=&recession_bars=On&width=630&height=378&bgcolor=%23b3cde7&graph_bgcolor=%23ffffff&txtcolor=%23000000&ts=8&preserve_ratio=true&fo=ve&id=PCE_GDP&transformation=lin_lin&scale=Left&range=Custom&cosd=1960-01-01&coed=2011-06-01&line_color=%230000ff&link_values=&mark_type=NONE&mw=4&line_style=Solid&lw=1&vintage_date=2011-08-17_2011-08-17&revision_date=2011-08-17_2011-08-17&mma=0&nd=_&ost=&oet=&fml=a%2Fb&fq=Quarterly&fam=avg&fgst=lin
We do not suffer from a lack of consumption. We suffer from a lack of investment.
We need policies that increase household income and encourage productivity. A difficult combination to achieve at the same time. The most promising idea I have read about involves forward year tax receipts.
make up your mind….increase household income is called jobs
From wikipedia…
“In economic theory or in macroeconomics, investment is the amount purchased per unit time of goods which are not consumed but are to be used for future production. Examples include railroad or factory construction. Investment in human capital includes costs of additional schooling or on-the-job training. ”
Sounds like a job creating activity to me.
Not if there isn’t sufficient demand for their products and they already have plenty spare capacity it isn’t. Your claims get curiouser and curiouser. Your suggestion that current demand in the US economy is anything other than weak and that there isn’t plenty of spare capacity is beyond bizarre. This is an economy with LOTS of spare capacity Viz:
“The average workweek for all employees on private nonfarm payrolls edged
down by 0.1 hour over the month to 34.2 hours. The manufacturing workweek was 40.3 hours for the third consecutive month; factory overtime increased by 0.1 hour over the month to 3.2 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls edged down to 33.5 hours in August, after holding at 33.6 hours for the prior 6 months. (Seetables B-2 and B-7.)”
August Bureau of Labor stats.
And it may come as an immense surprise to you but it is broadly known that consumer spending now represents about 70% of GDP which is why the consumer spending number is a key indicator. It’s not looking too bad at the moment but that does NOT mean overall demand is strong or that there isn’t quite a lot of capacity to meet it.
http://www.bls.gov/opub/mlr/2011/04/art10full.pdf
“Your suggestion that current demand in the US economy is anything other than weak and that there isn’t plenty of spare capacity is beyond bizarre.”
I did not suggest current demand is strong. You are conflating my statement regarding consumption with demand. Demand is weak, but lagging consumption (The big C in Y=C+I+G+NX), is not what is causing weak demand. There is not a glut of people who are unwilling to purchase goods or services. If this were the case PCE – the most prominent measure of consumption, C, would be falling as a percent of GDP. As the chart clearly shows, it is increasing.
A lack of investment, I, is what ails us. An increase in private investment would be the most healthy and productive way for our economy to reduce unemployment. We need businesses to invest in the United States. The long term unemployment that weighs down on our economy is because of companies – specifically information services and manufacturing companies choosing to invest in other countries. Spend time looking at unemployment by industry at the FRED, and you’ll see what I’m saying is accurate.
I’m not saying that lowering the corporate tax rate will result in huge gains in investment, or that it will solve all our problems, but it will help some.
“A lack of investment, I, is what ails us”
“There is not a glut of people who are unwilling to purchase goods or services.”
As I said your pronouncements are getting curiouser and curiouser. Auto sales are creeping back to 13 million (the peak was 17 million), new home sales are at fifty years lows, we’ve got 14 million unemployed. What planet are you on? Why don’t you learn the difference between cause and effect? Sure industry is not investing at the rate we’d like but this is the consequence of weak demand and more than adequate existing capacity (you obviously didn’t look at those govt stats). In this situation no amount of investment incentives (particularly not ones as ineffective as tax cuts which are probably going to be used for divs or stock buybacks…there are in fact much more effective targetted investments incentives like depreciation allowances) are going to persuade manufacturers to up their capital investment budgets. I’m not going to say what you are because it’s completely obvious. And it’s equally obvious your comprehension problems have not gone away either.
“Sure industry is not investing at the rate we’d like but this is the consequence of weak demand ”
Again you are conflating consumption with demand. Investment is part of demand.
Aggregate Demand = Consumption + Investment + Government Spending + Next Exports.
Consumption, as measured by PCE, has been growing to be an increasingly larger portion of our GDP. You call my statements foolish, but you don’t refute them. You say demand is weak (when you mean consumption) and then cite car sales and home sales going down. These things are only a portion of consumption. I’m looking at the entireity of consumption as measured by PCE and saying… look… it has increased steadily as a % of aggregate demand. Demand is not lagging because of a glut in households desire to consume. Demand is weak because nobody is investing and creating job opportunities.
You imply that I am a …. but you don’t respond to anything I write. You patently ignore it and conflate terms that are note the same. Household consumption does not equal aggregate demand. Household consumption is apart of demand. I’m sure your favorite economics book explains this if you would take the time to read it.
Curiosity:
“Demand is not lagging because of a glut in households desire to consume. Demand is weak because nobody is investing and creating job opportunities.”
You are genuinely brain dead buddy despite your claimed numeracy. I’m fully aware consumption is only part of demand, it always has been but in our post indusrial economy it’s by far the largest part as you pointed out. Again your comprehension problem, I said so above! According your bizarre take on reality all the US auto manufacturers (who are pulling about 50% SOM or 6.5 million unit on 2011 forecast sales) have to do is crank up output to 8.5 million units (50% of the market’s previous peak) and this will automatically create this level of demand for this volume of autos. Just repeat this picture across all US manufacturing industry and the problem goes away. One little problem. Consumers don’t have the disposable income to satisfy their desire to consume and where they do they are assigning a higher priority to paying down debt or building up savings. Are you sure you’re not Willy P because you are definitely in his peer group for sheer idiocy and denial of demand and capacity data.
You said….
“One little problem. Consumers don’t have the disposable income…” – Otto
When I had said…
“We need policies that increase household income and encourage productivity.” – Curiosity
You said….
“According your bizarre take on reality all the US auto manufacturers (who are pulling about 50% SOM or 6.5 million unit on 2011 forecast sales) have to do is crank up output to 8.5 million units (50% of the market’s previous peak) and this will automatically create this level of demand for this volume of autos. ” – Otto
When I had said…..
“You say demand is weak (when you mean consumption) and then cite car sales and home sales going down. These things are only a portion of consumption. I’m looking at the entireity of consumption as measured by PCE” – Curiosity
You said…..
“And it may come as an immense surprise to you but it is broadly known that consumer spending now represents about 70% of GDP which is why the consumer spending number is a key indicator. It’s not looking too bad at the moment but that does NOT mean overall demand is strong or that there isn’t quite a lot of capacity to meet it. ” – Otto
When I had said….
“I did not suggest current demand is strong. You are conflating my statement regarding consumption with demand. Demand is weak, but lagging consumption (The big C in Y=C+I+G+NX), is not what is causing weak demand.” – Curiosity
Now…. Who has the reading comprehension problem again?
“I did not suggest current demand is strong. You are conflating my statement regarding consumption with demand. Demand is weak, ”
You’re the guy with the comprehension problem however much you try to circularise the argument. You admit demand is weak. As is obvious from those hourly week stats there’s plenty of spare capacity in the economy. Why would business want to invest in expanding capacity in these circumstance? It’s really an ever so simple proposition. You might but I can’t imagine anyone in his right mind doing so. Here you go. Krug will explain to you how you’re talking out of your hat. All that ignorance dispelled and all for just 12 bucks.
http://www.amazon.com/Peddling-Prosperity-Economic-Diminished-Expectations/dp/0393312925
The irony in you suggesting a economics book to me is just too much otto.
Also I love how when I directly put your responses next to my initial statements, you say I am trying to “circularize” the argument.
“Why would business want to invest in expanding capacity in these circumstance? It’s really an ever so simple proposition.”
Since you seemed unable to answer this simple question I thought the book would help you through the process however “too much” you may find it. Obviously, you think you’re far too clever to learn anything from Krug’s little tome. After all what does he know by comparison with you?. And btw circularizing definitions is what your silly little word game is called. Go look it up.
Curiosity,
More factless bullshit from you…
Corporate tax rate have NEVER, let me repeat, NEVER determined when corporations invest or not. It is all about demand as Otto rightly points out.
If you can show us any analysis that shows corporate investing dropping in America during times of higher corporate taxes I would like to see it. Or if you can show us where there is significantly lower corporate investment in countries that have significantly higher corporate tax rates I would like to see it. Or if you can show us any empirical evidence of higher corporate investment when corporate taxes have been lowered I would like to see it.
U.S. corporations currently pay an “effective” tax rate of about 16%, which is among the lowest in the OECD. Effective tax rates are the rates after all deductions. There are many corporations that consistently pay no taxes in this country. Corporate tax rates are not a problem. If anything rates are too low.
Look at the aggregate hours in the link I provided end of 2010 by comparison with mid 2007.
“Corporate tax rate have NEVER, let me repeat, NEVER determined when corporations invest or not. It is all about demand as Otto rightly points out. ”
Right. My industry is doing well and hiring. Microelectronics. Demand is there for chips.
Same tax rate, many regulations, including lots of environmental regulations (lotsa nasty chemicals), long and arduous permitting procedures. Doing well and hiring. Every weekday (and some weekend days), I drive to a wafer fab that puts the lie to the cant about economic growth and regulations and ‘uncertainty’ and all that stuff.
Banty,
Another interesting point you bring up…. there is also no evidence that more or less regulation has had any impact on jobs and job creation in the U.S. Ever.
Companies do not hire less people because of regulations. They just adapt and at most pass on any increased costs to consumers.
If anyone can show me just one credible objective study that shows any evidence whatsoever that there has been less job creation during periods of greater regulation and more job creation during periods of less regulation I would like to see it. Or they can show that states with less regulation do much better than states with more regulation or they can show that countries with less regulation do better than countries with more regulation in job creation I would like to see it.
There has been plenty of research by objective sources that says that regulation has little impact on jobs and job creation.
See:
“Regulation, employment, and the economy: Fears of job loss are overblown”
http://www.epi.org/publication/regulation_employment_and_the_economy_fears_of_job_loss_are_overblown/
I would suggest that lack of regulation is a job killer and has massive costs on society. Just look at how a lack of regulation of derivatives and the mortgage market has hurt the U.S. and the planet.
armstp:
Fundamentally you’re correct. Regulation can be a pain in the butt but it’s never stopped companies investing if there was a demand for the product and they could pass on the costs. If this were true there be no pharmaceutical industry in the US for godsake. It’s another of those Republican boogeymen like the confidence fairy who might fly away.
Such BS. The 8b corp i work for wouldnt make a single invrstment. We would bondholders or set cash aside. We are not making any investments untill demand returns, and new businesses start opening again.
It always amazes me how little the “party of business” understands actual business governance.
Curiousity-have you ever hired net new employees? If so, what drove the decision to hire? Ever made a business case to add a new body? Ive personally hired close to 100 people the past 5 years, and build pro formas to justify ROI and not once did corporate taxes come in to the equation.
To be more clear we wouldnt invest in north america. It possible we would invest in emerging markets where we have strong partners like Brazil, and China. Those investments would do nothing for the NA economy. It would be a net revenue loss for the US Govt.
This is the problem. We need companies to invest in the United States. We need companies to create jobs here.
“Curiousity-have you ever hired net new employees?”
Curiosity has never run a pretzel stand. Ergo he doesn’t understand that you don’t go and invest in the push kitchen and the raw materials unless you think someone is going to buy your pretzels. Curiosity thinks opening a pretzel stand on the highway 30 miles outside Billings MT makes perfect sense. After all he’s created the supply of pretzels, it only remains for Joe Consumer to show up and buy them. Any suggestions for businesses that Curiosity might like to enter and create demand. Outdoor tropical plants in Alaska? Snowmobiles in Florida? Climbing gear in Libya?
Your right. I have never ran a pretzel stand. If a question ever comes up on how to properly run one, I’ll make sure to contact you since it is obviously a past time of yours.
Seriously… I’m not sure what makes you think that I am arguing that suppliers need to massively increase production. Did I ever say that?
I’m arguing that household consumption is at a healthy level. I’m arguing that what we need to do to increase aggregate demand, is promote investment to create jobs.
If the government were to fund projects to rebuild or create public infrastructure… That would be an increase in investmnet. It would be government sponsored and fall under government expenditures, but it would be government sponsored investment.
This really isn’t a hard concept. Even you should be able to understand it Otto.
Curiosity:
“If the government were to fund projects to rebuild or create public infrastructure… That would be an increase in investmnet.”
Well of course it would. But this is public investment and for the entire time above you have been justifying Romney’s proposed tax breaks as an incentive for private investment. Or wasn’t this you?
“By lowering corporate taxes corporations have a greater incentive to make investments as the after tax return on investment increases.”
“We do not suffer from a lack of consumption. We suffer from a lack of investment.”
“A lack of investment, I, is what ails us. An increase in private investment would be the most healthy and productive way for our economy to reduce unemployment.”
And yes I’m sure you look down on pretzel stand owners but even they have the savvy to understand that no business makes additional investments when demand for their product is weak and they have spare capacity. But apparently it’s beyond you as is the difference between public and private investment.
“I’m arguing that household consumption is at a healthy level.”
I’ll let your belief in the accuracy of this statement speak for itself as a guide to your level of understanding. Finis.
“Well of course it would. But this is public investment and for the entire time above you have been justifying Romney’s proposed tax breaks as an incentive for private investment. Or wasn’t this you?”
Ummmm yeah… That was me. You see, I’m in favor of policies that encourage investment. I guess you only like investment if the government is doing it?
Or maybe you think that corporations don’t pay any attention to the corporate tax rate?
Also you said….
“And it may come as an immense surprise to you but it is broadly known that consumer spending now represents about 70% of GDP which is why the consumer spending number is a key indicator. It’s not looking too bad at the moment….” -Otto
Then I said….
“I’m arguing that household consumption is at a healthy level.” -Curiosity
Then you said….
“I’ll let your belief in the accuracy of this statement speak for itself as a guide to your level of understanding. Finis.”
Yes… The statement that speaks for itself as a guide to my level of understanding…. you previously agreed with.
…….
Finis.
Agreed. Corporation are sitting a large amounts of cash. But with no consumer demand, it makes no business sense to expand.
Glenn Hubbard is the same genius who coached Bush into two massive tax cuts that just happened to coincide with two unfunded (not in the Pentagon budget) wars. These fiscal policies bled the Federal budget dry, resulted in the continued upward redistribution of wealth, and goes a great deal toward illuminating how we got to where we are today. So we should basically do more of the same according to Romney and Hubbard?
I think Frum talked about this yesterday – the problem with the economy is that consumers are paying down their debts and not buying more stuff – what corporate tax reduction will do to alleviate this is beyond me. Corporations are already hoarding uninvested capital – it seems like the upper class is the only one that’s aware of its economic self-interest, and that, as usual, the Republicans are willing to listen.
“consumers are paying down their debts and not buying more stuff”
The stuff is imported crap and will need replacement. Manufacturing replacements like toasters, coffee makers, appliances, furniture here in the USA is the answer. Skipping the big box middleman and direct sales is the answer. Stimulus used to market and promote American products is the answer.
Say no to the blue smock way of life!
“The stuff is imported crap and will need replacement”
You mean unlike the locally made crap? That’s like in the auto industry in the late ’70′s and early ’80′s with their “Buy American” slogans. The fact was that the American cars were shoddy, poorly made and overpriced as compared to the foreign competition. Instead of making better cars, the car companies AND the unions tried to convince the country that they ought to buy American just because. That failed and the car companies really have yet to recover from that legacy of 30+years ago, even though they have made great strides on quality. In that case the market spoke.
Yes, there is a place for American manufacturing. That place is to figure out how to make superior products that are price competitive. If we do not, then we will continue to lose manufacturing jobs. Same with our other standout industries like technology and education. If we don’t continue to improve, we’ll lose those industries to other countries.
Do our gov’t regulations make it harder? Sure, but a regulation isn’t a bad thing. I can’t tell you how many contractors complain about regulations and yet how many homes fare better in the US from natural disasters than in other countries where they have few building codes. Regulations mean we have safe drinking water, few deaths due to contaiminated food, etc. Perhaps we should get rid of all drug testing requirements so any drug manufacturer can put whatever they want out in the marketplace?
Lastly, I’d like to see other countries do better. If China has a high standard of living, that means there are that many new consumers to buy American goods and services. China has quickly become the second largest car market and arguably saved GM as much as the bailout did.
Early and rapidly enlarging Federal spending cuts. It’s going to be a long decade.
I really do think it’s tragic that Romney will probably not be the GOP nominee. If anyone could make a smart and credible challenge to Obama, it’s him. But Rick Perry knows what GOP Primary voters want: not jobs, but Jesus.
“I really do think it’s tragic that Romney will probably not be the GOP nominee. If anyone could make a smart and credible challenge to Obama, it’s him.”
The same was true in 2008 and I agree he’s the most credible Republican challenger but this agenda is truly nonsense and raises the question of just how serious is this guy.
“The same was true in 2008 and I agree he’s the most credible Republican challenger but this agenda is truly nonsense and raises the question of just how serious is this guy.”
He’s incredibly serious – about wanting to be President. That’s about it.
In fact his biggest problem is that I don’t think anyone knows what he would actually do as President. What are his core beliefs, once you take away his incessant need to pander to get elected? Will he be the moderate Mass. Governor who got just about everyone in his state health care coverage, or the current incarnation of Tea Party Sycophant who wishes he never did that?
Romney has spent his adult life making millions, buying and selling companies and laying people off. For Willard, life is like a Monopoly game. When he opens his mouth it’s like the last 10 years never occurred. We had a cretin who liked to think of himself as the CEO President. We all know how that worked out.
Which Republican Presidential candidate is a gold bug? The answer:
http://viableopposition.blogspot.com/2011/08/which-republican-presidential-candidate.html
Thanks for the analysis David
Does he have any thoughts on the Financial System? I see he wants to repeal Dodd-Frank, and he also puts the bulk of the blame on the crisis on Bankers, but does he have any reform plans? Any type of Glass-Steagal, or something like that?
I thought Romney said his group’s plan, on Kudlow last night, addressed approx. 25% of what he will do. I would think that more details of reform will follow over the primary and general election.
The recession we are in now is not cyclical, and that is why none of the “ideas” about job growth are going to work. They all have their own merits to resolving cyclical unemployment due to a cyclical recession. The slump that we are in is structural. Put plainly, “We don’t make s*** no more!”
It is simple. We became a consumer society. Businesses went overseas to purchase and sell us cheap toys. We bought with ever increasing vigor because we were the richest nation in the world and could afford it. We are the largest consumer market the world has ever seen. The problem with that? We became the richest nation in the world by making things. Now, people expect high salaries and benefits to make things that other countries don’t. This all leads to…no jobs. No amount of stimulus, tax hikes or decreases, increased or decreased regulation, etc. is going to fix this.
Free trade simply is not fair trade. We have the largest consumer market in the world, for now. The privilege to sell here is a very valuable one. Would you rather market your product here with trillions in buying power or say…Cuba next door? When you are selling something of value such as the privilege to sell in the largest world market, what do you do? Charge a premium for it! How does that create jobs??? Well, that means to buy other country’s stuff that it costs just as much as if you made or bought it here. So, why bother outsourcing when you get the same product here for the same price.
People will say, “But, then we can’t sell to countries like Korea tariff free because they will raise the tariffs on us…” I call BS. Who has the more valuable consumer market, the US or Korea? Korea will still want to sell to us because we will be too valuable of a market to lose. In order to keep our markets, they will have to leave theirs somewhat open to our products. And, if they don’t, fine. We can sell to ourselves. All the better. We will still come out on top. Especially once the American consumers have jobs again and real wages actually increase.
In case anyone hasn’t noticed, real wages have remained largely stagnant over the past 30-40 years. That was just about the time we started the real big “free trade” economics kick. How has that worked out for us? You want an answer to why these CEO’s get richer and middle class gets poorer. Look no further than the Chinese made garbage sitting in front of you. CEO’s get rich importing those things while the middle class loses their job and real value as workers.
And hey, you want some deficit reduction? How about plowing the funds made from trade tariffs back into the general fund. I know, ridiculous. The only way to solve our fiscal and economic problems is borrowing billions and trillions more from the Chinese that will ultimately be funneled back to the Chinese in the form of cheap crap that they sell us.
“Free trade simply is not fair trade.”
This.
Somehow we’ve managed to have a debate about the decline of manufacturing in America while barely mentioning tariffs or the trade agreements we’ve entered into.
There will always be some country in the world that has less environmental regulation, fewer worker’s rights, and less of a middle class standard of living to maintain through decent wages, and any business with an international distribution model is likely to relocate to that country if possible. This makes the “If you can’t beat ‘em, join ‘em” approach to taxes and environmental laws a never-ending downward spiral, and a losing proposition for the U.S. in both the short and the long term. It’s kind of like trying to undercut Walmart on price – you simply cannot do it.
If you can’t incentivize business to stay in the U.S. through the tax code and environmental regulations (and for reasons mentioned above, you probably can’t), then at the very least you can disincentivize them to leave through tariffs. The dichotomy here, of course, is that the withdrawal from free trade agreements is bad for business, but simultaneously good for the people who retain or regain their jobs and live in a cleaner environment as more manufacturing is conducted within countries with pollution standards.
This is the great dilemma for today’s GOP: what’s good for business is often carried out at the expense of what’s good for the rest of society. There is always a cost that somebody must pay when it comes to environmental laws or where the tax burden falls, and for as much as they criticize Democrats for wanted to create an imbalance, they themselves are just as guilty.
“There will always be some country in the world that has less environmental regulation, fewer worker’s rights, and less of a middle class standard of living to maintain through decent wages, and any business with an international distribution model is likely to relocate to that country if possible. This makes the “If you can’t beat ‘em, join ‘em” approach to taxes and environmental laws a never-ending downward spiral, and a losing proposition for the U.S. in both the short and the long term. It’s kind of like trying to undercut Walmart on price – you simply cannot do it. ”
This. The Republican economic plans are about a race to the bottom.
When they say “jobs”, we should say “what kind of jobs, at what pay”.
If they pull out the tough talk and say “silly spoiled people, a job is a job, people are GLAD to take these jobs, heck, they’ll work two jobs if they have to”, we should say “then, should not the required number of jobs be *doubled*?”
“The slump that we are in is structural.”
No it’s not. It’s essentially a balance sheet recession. That’s not to say that large areas of our manufacturing capacity haven’t been lost and we need to do something about it but it’s not the cause of the recession.
You are right. There is no evidence that this recession is structural; ie. that it has been caused by fundamental shifts in economy. I do not consider the 2.0 million construction workers that have lost their jobs because of the housing bubble collapse as being truly structural.
This recession is exactly cyclical. It is just a very deep trough. The economists said in 2008/2009 that it may take at least 5 years to get out of and they were right.
armstp:
It is cyclical but I would argue that what makes it different is the fact that it’s a really severe balance sheet recession and not a tight money one which is what most of them have been since the war. The economy overheats, inflation starts to rise, the Fed chokes it off, slowdown. You could argue the dot com bust was also a balance sheet bust but it was much milder than this one. It is going to take years to repair domestic balance sheets. Corporate debt is still quite high actually but in the aggregate their net position is much better because they’re sitting on around $2 trillion of cash.
And while I agree with you entirely about this not being structural you could perhaps argue that the loss of construction jobs in heavily construction oriented states like NV or FL is to some extent structural. Nationally construction used to be about 6.5% of GDP (this is why the WSJ used to tell us the housing bubble was nothing to worry about…lol) but it’s now down to about 2.5% of GDP.
+1
This is exactly my view. This is a de-leveraging recession, and we need to keep it a long raggedy tilted-L shaped recovery, because that’s the best we can do and expect (although people are trying their best to hang it over Obama’s neck), while we strive not to fall into a true deflationary spiral. Although there are people, already moneyed and living far from centers of likely unrest, who think that’s actually what they want.
otto,
Krugman argues that it is no structural because if it was structural we would be seeing huge imbalances in the labor market, which we are not. There are not sectors of the economy where wages are significantly rising because they cannot find enough workers or the opposite; ie. suggesting a big structural change in the U.S. economy….
I would not put a reduction in the construction trade as necessarily structural. That is just normal boom and bust labor economics in the construction industry, although a bigger bust than normal.
Structural would be if there was no more construction trade in the U.S. at all and we have a massive increase in say biotech to offset….. the economy shifted from construction to biotech. however if there was that kind of structural change then we would see a huge demand for biotech people in the labor force and therefore wages for biotech workers would be rising significantly… we do not see this happening in any industry, so no really signals of massive structural changes in this country.
see:
http://krugman.blogs.nytimes.com/2011/07/09/the-fatalist-temptation/
or
http://krugman.blogs.nytimes.com/2011/02/13/whos-unemployed/
“structural” is just the latest buzzword being thrown around by people that do not know what they are talking about….
I read the Krugman pieces , I understand the difference between structural and cyclical unemployment, and I basically agree with him about the overall nature of our employment problem being cyclical rather than structural. All I’m saying is if you take a small universe like Nevada or Arizona where home construction was a disproportionate part of the state’s economy and you have a lot of unemployed construction workers who are relatively immobile and can’t easily switch employment you could say there is an element of structurality in unemployment within that state because it’s probably true to say construction in those states is going to be dead for a very long time and this is going to require real structural changes in the demand for labor.
“There are not sectors of the economy where wages are significantly rising because they cannot find enough workers ”
They’re saying they can’t find enough workers with certain skills and experience, but, somehow, the wages aren’t going up.
When you hear “we can’t find enough (skilled welders, PERL script writers, whatever)”, what you should interpret that is as “we can’t find enough (skilled welders, PERL script writers, whatever) at the compensation we offer”.
For example, no relocation packages, offered to people in Detroit underwater in their mortgages. No retraining, not even with tough aptitude tests, even though many current employees were trained on the job – heck, with for-profit ‘colleges’ out there churning out auto mechanics and the like with $40,000 in student debt, why train on the job like they used to?
It’s business that has taken full and brutal advantage of the very slack employment market, crying for their ideal world and threatening to offshore or close down if they don’t get their way. Not workers who can’t or won’t work. And they looooove a slack employment market.
Even in my industry, which is now hiring, compensation is flat. Anti-poaching agreements abound between partners and vendors. All the technical smarts and edumacation in the world doesn’t inoculate one. Only a position in upper management or being one of the technical rock stars does.
Otto is right. There are job areas which are going for good or for a long time. Due to different ways of doing things, due to certain gluts as in housing. It’s complex, and some of these things are symptoms of a deleveraging recession as much as a cause of high unemployment.
Banty,
whether some jobs are gone for good or for a long time in say construction does not mean there is a structural change in the labor market or in the economy. it just means demand has shrink because of the economic downturn. that is not the same as a structural change. A structural change means that the economy has fundamentally changed what it is doing. There is still a very big construction industry and housing market in this country. Sure the market is down and less construction is going on, but that is just normal change in the cycle and not a real structural change.
you can say that the U.S. has been going through a structural change in manufacturing for the last couple of decades, as we have gotten out of it and into service sectors, but that is not a structural change that was caused by this recession or happened in the last four years and caused all this unemployment. that structural change as developed over years and years. so you cannot say this is the reason for the increase in unemployment since 2007.
again, to understand where and if there is a structural change going on in the economy you have to look at the labor market. you need both an increase in demand for some sectors of labor offsetting the decrease in demand in other sectors. we are just not seeing any increases in demand in labor in ANY sectors, as all sectors are down with this recession. in addition, the increase in demand for labor in some sectors that would be caused by a structural change would be reflected in wages and we do not see any dramatic increase in wages in any sector. the increase in unemployment is not caused by structural changes in the economy. it is just a normal demand side recession, but a very very big one… otherwise what exactly has the structural change been since 2007… none… just a downturn in housing… which is not a structural change as economists define it.
“whether some jobs are gone for good or for a long time in say construction does not mean there is a structural change in the labor market or in the economy”
It could within the context of a small defined universe such as the examples I provided. I’m not disagreeing with your general principle, there’s no question our unemployment is cyclical. But taking NV it’s quite conceivable that the demand for employment in the gambling, tourism and other industries will recover to pre recession levels within say 3 years but that construction workers employment will never return or maybe not for a generation. This would be a structural change within the state of NV… wouldn’t it?
Frum on Romney’s economic plan « Against Dumb // Sep 7, 2011 at 1:25 pm
[...] at twenty-five Frum on Romney’s economic plan The enduring power of the Truthers How your iPhone adds to the US trade deficit [...]
Glenn Hubbard introduction?
Stop right there. This guy has been one of the biggest clowns for the last 10 years. If any of you have seen the documentary that won the academy award last year “Inside Job” you know exactly what I am talking about. He was the Chief Economic Advisor to the Bush Administration. He was a big part of the problem.This guy was also a big corporate paid academic cheerleader for the housing bubble and Wall Street. Glenn Hubbard has no credibility. The fact that Romney uses this guy tells you everything you need to know. More of the same Republican BS.
By the way here is Hubbert on the need for fiscal stimulus back in 2001: “…to quote George W. Bush’s chief economist, Glenn Hubbard, saying we needed stimulus “sooner rather than later.” ” He was also the chief architect of the 2003 tax cut which killed the deficit and debt.
As Frum points out Romney’s plan is not a short-term jobs program. It will likely not create a single job in 2013.
By the way has Romney outlined how he is going to pay for the reduction of the corporate and capital gains tax rates? More Republican bullshit…. just like Bush.
I will coin this term right now: “JLB” or just-like-Bush.
“If any of you have seen the documentary that won the academy award last year “Inside Job” you know exactly what I am talking about.”
Hubbard’s silences in that movie were longer than those in Waiting for Godot.
Mitt Romney Unveils Economic Plan To Mixed Reviews // Sep 7, 2011 at 2:42 pm
[...] fellow conservatives aren’t all that impressed. David Frum calls the plan one step forward, and two steps back: A President Romney would take office in January 2013, at a time when even on a best-case scenario [...]
BIG JOBS CREATOR AND WISE BUSINESSMAN????
Romney: Obama’s Defense Of American Tire Companies Is “Decidedly Bad For The Nation.” In his book, Romney criticized Obama’s tariff on Chinese tires, saying “President Obama’s action to defend American tire companies from foreign competition may make good politics by repaying unions for their support of his campaign, but it is decidedly bad for the nation and our workers.” [No Apology, 2010]
THE FACTS
International Trade Commission Found That China Was Disrupting U.S. Tire Production.
Denman Tire In Leavittsburg, Ohio Laid Off Employees As A Result Of Chinese Competition.
The Federal Division Of Trade Adjustment Assistance Certified That Jobs At Cooper Tire In Findlay, Ohio Were Lost In 2008 As A Result Of Chinese Imports.
The Federal Division Of Trade Adjustment Assistance Also Found That Cooper Tire Jobs Were Lost In Camden, NJ, Moraine, OH And Cedar Rapids, IA.
United Steel Workers: Tire Tariffs Led To The Creation Of At Least 595 Jobs, Including 100 New Workers At Cooper Tire In Findlay, Ohio.
*************************************************************************************
TODAY’S HEADLINE China loses a battle over tires, but other battles lie ahead
When President Barack Obama imposed tariffs on cheap tires being imported from China two years ago, we predicted that China would decry that move as protectionism.
Indeed, China did, and it took its claim all the way to the World Trade Organization, which responded this week.
The WTO’s top court has ruled that the United States was entitled to impose duties on Chinese tire imports under rules that allow trade partners to impose tariffs to counter a destabilizing flood of imports.
It feels good to win one of these battles, especially knowing that the Obama administration was willing to take on China in a way that the George W. Bush administration declined to do no fewer than four times.
Acting on a recommendation of the U.S. International Trade Commission in September 2009, Obama imposed the tariffs on the basis of a four-fold increase in tire imports from China between 2004 and 2008, from $453 million to $1.7 billion. Obama showed more restraint than the ITC called for. It recommended that the president impose a 55 percent tariff on Chinese tires in 2010, 45 percent in 2011 and 35 percent in 2012. Obama opted for tariffs of 35, 30 and 25 percent.
Still, China pursued its two year fight against tariffs and, thankfully, lost.
China was right in one regard in that it predicted that the tariffs would not restore the lost U.S. production of low-cost tires, it would only encourage imports from other cheap tire producing nations like Brazil and Mexico. With a few exceptions, most of those 5,000 jobs Americans had held for decades producing low-end tires were gone forever as almost every producer shifted production off shore.
But in making that argument, China actually showed why it is important for the United States to respond quickly and forcefully to predatory imports — not just in tires, but in steel, pipe, paper and a thousand other areas, including high- and green-technologies.
Fighting every flood
If China — or any other importer — is permitted to flood U.S. markets with goods that destroy any domestic industry, no domestic industry is safe. The price of maintaining jobs in the United States is vigilance and a willingness to fight to protect American jobs.
And, while we note that most of those American tire-making jobs were lost, U.S. Sen. Sherrod Brown, D-Ohio, cited one exception. After Obama announced the tariffs, Cooper Tire & Rubber Co. announced plans to add capacity to its Findlay works and hire up to 100 people. While 100 jobs is not a lot in the overall scheme of things, it is everything to 100 American families.
The U.S. balance of trade remains wildly out of kilter, as we have commented on consistently for more than a decade. That won’t change until American consumers come to recognize that cheap imported goods carry a hidden price tag, and until every president, regardless of party, aims for fair trade over free trade.
The media is filled with morons. Not once has any of them gone to a real economist and gathered up knowledge about the economy in advance of these fake debates. Here is a question I want them to ask each and every one of these liars:
1. The economy is summed up by an equation called Aggregate Demand. Please tell us what four items make up AD and how each is affected by the other and what you would do to increase AD.
The follow up question would be:
1. How did our free trade agreements increase or decrease AD and the balance of trade over the last 30 years?
My bet is that not a single one of them can identify the four components of Aggregate Demand and that none of them can tell you how any one component affects the others.
Okay Sinan, I’ll respond. You think the debates are about how smart the candidates are? This is not an economics class. I’m sure the only ones interested in the answer to your first question is Krugman, Stiglitz and you btw: AD = C+I+G+(X-M).
If any of the debaters gave that answer followed by how trade agreements effected AD, they would lose whom they are attempting to reach (GOP primary voters). This is politics not a poly-sci class.