Even the Grey Lady Can't Deny We're in a Boom
I would like to personally thank the New York Times for expropriating the word I have used over and over again to describe our current economic climate:
“Boom.”
The Grey Lady ran a front-page story this morning entitled, "U.S. Economy Still Expanding at Rapid Pace," and had this to say about our booming United States economy:
"Americans seem to have noticed the boom, too. Although polling suggests that they are deeply unhappy with the war in Iraq and worried about the price of gas, they report being generally pleased with the state of the economy."
Even MSM's ringleader can't help but admit the obvious.
Of course, the Chicken Little, liberal Times couldn't help itself and tried its best to point out as much negative as it could find. But as anyone with their finger on the economic pulse can point out, Sulzberger's soldiers had their work cut out for them. Things are good.
And as the Times pointed out, in addition to our current economic boom, consumer confidence has risen to its highest level in four years, according to the Conference Board.
The Times also neglected to mention the powerful catalyst President Bush's tax cuts played in launching this U.S. boom. No surprise there.
Did I mention that free-market capitalism is the best path to prosperity?
“Boom.”
The Grey Lady ran a front-page story this morning entitled, "U.S. Economy Still Expanding at Rapid Pace," and had this to say about our booming United States economy:
"Americans seem to have noticed the boom, too. Although polling suggests that they are deeply unhappy with the war in Iraq and worried about the price of gas, they report being generally pleased with the state of the economy."
Even MSM's ringleader can't help but admit the obvious.
Of course, the Chicken Little, liberal Times couldn't help itself and tried its best to point out as much negative as it could find. But as anyone with their finger on the economic pulse can point out, Sulzberger's soldiers had their work cut out for them. Things are good.
And as the Times pointed out, in addition to our current economic boom, consumer confidence has risen to its highest level in four years, according to the Conference Board.
The Times also neglected to mention the powerful catalyst President Bush's tax cuts played in launching this U.S. boom. No surprise there.
Did I mention that free-market capitalism is the best path to prosperity?
posted by Money Politic$ at 9:56 AM
18 Comments:
Yes, great GDP numbers indeed. So, all the Republicans in the Great Sausage Factory had to do was shut their mouths and wave this report in the air and tell America, "See. 4.8% GDP growth. We know what we're doing." Their majority would have been in the bag. Instead they have unleashed a torrent of the most assinine claptrap and economic gobbledygook over gas prices that the public can only assume that the great GDP numbers are a result of pure luck, a case of the blind squirrel that is the GOP majority fortuitously finding a nut.
The great GDP numbers are the result of many things, our economic system, the people who make it work, a normal cyclical recovery from the last recession, the continuing strength in construction, etc. etc. etc. But to suggest that current crop of clowns in Washington (GOP or Democrats) had anything to do with the current growth other than in a negative sense is hard to believe. The economy is cranking along in spite of them not because of them.
Quirk-
Of course, but that is not how politics is played. Politicians run for office by claiming credit or placing blame for such things, regardless of their irrelevence to the result. My statement was pointing out a colossal failure of political chess-playing.
Having said that, I do believe that policy matters. While our economy is broad and deep and structurally sound enough to slough off what politicians do, policy has its effects, mostly at the margins but sometimes at the core, and it is important to get it right, despite the economy's robust independence.
I understand what you are saying DB. This is just part of my continuing vent against the bums in Washington. John Snow indicated a significant percentage of the 1st qtr growth was part of the predicted recovery after the damage from Katrina. A smoothing if you like from the 1.7% growth from the last quarter. He indicated he expects growth to moderate for the rest of the year.
However, I was wrong to dismiss government activity in the growth number. I suspect that government spending has played a part (not sure how significant) in the growth numbers. Some of it is good and necessary (re-construction after Katrina) but a lot of it I suspect is pork and waste. It's the old 'guns vs butter' economic argument with regard to the creation of productive assets vs non-productive assets. For instance, one wonders what marginal value spending $1 billion on a bunch of RV's and having them deteriorate in a field somewhere is really contributing to productive growth of the country.
With regard to your comments on the current political comedy that's playing out, I believe you are right. But it should come as no suprise that in times of perceived "crisis", politicos panic and diverge from their talking points and move to a "bread and circuses' approach to governance. Propositions like $100 gas tax point up the cynicism of these guys. It would make you laugh if it wasn't so pathetic.
I see that the Mexican government has come out in support of Monday's immigrant work boycott in support of immigration rights, "A Day Without Immigrants." They plan to send a delegation to LA to take part in the demonstrations. This a clear meddling in the internal affairs s of another sovereign state and it should be viewed as a clear provocation by the Bush administration. However, the chances of hearing Bush or Condi even mention it, are probably pretty slim. Likely the only places you will hear about it are on Lou Dobbs (condemning it) and on NPR (praising it).
If Bush wants a war, maybe he should complete the job that James Polk and Zach Taylor started. It might be a be a clever "October Surprise" and would guarantee an improvement in his poll numbers.
It appears there are also plans in place to have the US national anthem sung in Spanish on Monday.
GWB, to his credit, has said that he believes the national anthem should be sung in English.
The GDP going up is not the problem. The economy is creating a lot of jobs for illegal aliens. The problem is that the standard of living for 50-80 percent of the American people is declining. The American dream is shattered.
The American Dream can reasonable be defined as 1) owning your own home. 2) money in the bank. 3) a car and 4) lots of appliances all provided by a SINGLE income. In today's economy that is not possible for the vast majority.
The government keeps a statistic called "Average Weekly Earnings." It is the weekly earnings, adjusted for inflation, of production or non-supervisory workers. It does not count executives, managers, or professionals. No doctors or lawyers are included. It includes a lot of people; about 80 percent of all employees.
Average Weekly Earnings peaked in 1973!
I generally get three reactions when I tell people that:
1) Denial - go check for yourself.
2) Accused of being a Democrat - I am a Goldwater/Reagan Republican.
3) My patriotism is questioned - an ancestor was in Washington's army.
From 1973 as far back as we have data Average Weekly Earnings rose in every decade including the decade of the Great Depression. To be sure there were years in which it went down but never a whole decade. From 1950 to 1978 Average Weekly Earnings rose 48 percent. Since 1973 it is down.
GDP is a Mickey Mouse measure of the well being of a nation. Mexico has a growing GDP and we still have a huge problem with Mexican illegal aliens. I will be impressed when this economy gets the Average Weekly Earnings above the 1973 level. Until then it is just spin. The Republicans are robbing our grandchildren to grow the GDP and the Democrats are driving the getaway car.
I will not deny the facts of that dataor accuse you of anything. I'll point out that this measure excludes benefits and other forms of compensation. The different measures are found in an article at Angry Bear
Many say benefits have risen faster than cash. I guess at some point, we have to make choices.
Sharp said...
Many say benefits have risen faster than cash. I guess at some point, we have to make choices.
This is part of the frustration of lower and middle class Americans. While it is true that measurements of real wages do not include certain benefits such as health care, the wages as measured have been flat for over a quarter century. While it's true that many employers have provided health care coverage, not all did. And in many cases, the coverage offered did not keep up with rapidly increasing health costs. Now, with healthcare spiraling out of control, workers and retirees see health care costs shrinking rather than expanding as they are asked to pay a larger and larger share of the costs thru increased minimimus and copays. In addition, certain companies faced with bancruptcy are freezing or threatening to end healthcare bennefits altogether for workers and retirees. Many of those retirees worked for 30 or 40 years under what they thought were the rules of the game. Now the rules have changed.
There is a certain cavalier attitude in much of the America that has adequate healthcare or the means to get it. That's why it amazes me that guys like Kudlow, intelligent guys, are so isolated they profess not to understand why people in general don't feel the economy is doing so good. It's not that the American people are stupid or that they don't know that there is positive growth in the GDP and markets; it's because they scared. They are scared that they or their kids or someone they know might lose their jobs because of dislocations caused by globalization. They see wages are flat and do not feel that they are progressing or sharing in this great economy they keep hearing about.
Making choices sounds real simple but knowing you are one health crisis away from bancrupty tends to lower one's appreciation of a great economy. And when the average size of new housing has increased by a third, making the choice between having an average size house or sending your kids to college can be frustrating. And for those in the lower income levels it is worse.
Short Viking posted a comment on this blog to the effect that if someone can't afford $3 per gallon gas, they shouldn't drive. Tell that to a single mother who has to get to work and her kids to school and can't afford $50 to fill up the tank.
However, rather than Short Viking not caring it may be that he just never actually thinks about it. I'm not sure which is worse. (I'll admit that's a value judgement on my part.)
Short Viking World: Where the weak and poor are killed and eaten.
Sharp:
The Angry Bear article is for a different time span. He is using 1990-2005. I went back to 1973 and noted a 48% rise from 1950 to 1973 and a decline from the 1973 peak. Americans did have health insurance then. Even so doing without it was a reasonable risk unlike today when not having it is very high risk.
As for benefits I have no data but it seems to me that except for health care they are declining. True I have only antidotal evidence but Aloha Airlines just dumped their pension obligations onto the government and IBM just reduced them. If that did not save IBM money I expect they would not have done it. I recently got a letter from a former employer from whom I am due a pension when I retire telling me that if I returned to work for them I would not get an additional pension. I see no reason to believe benefits have increased in value since 1973. In any case, job benefits are no substitution for cash.
All those good paying factory jobs that are being lost and replaced by low paying service jobs are having an impact on the people of this nation. In addition cheap foreign labor in the form of green cards, H1-Bs, and illegal immigration hurt Americans. That impact is reflected in a declining standard of living for native Americans. At the same time they cause profits and GDP to rise.
Quirk:
I expect that Kudlow's consulting fees are at an all time high and he has little contact with anyone feeling the middle class contraction. If he needs a nanny for his children they have never been cheaper.
Q, I did not imply the choices are easy because I know they are hard. Everything you say is true, but it will not change the reality that businesses can pay so much and the wage package holds x dollars to spend. Employers need to do a better job communicating with employees on the facts and choices. I, too, have insurance that pays less and costs more each year. I have already had notice of a bigger change next year. I have family without insurance and see the consequences. I am not so isolated as Larry and am willing to see the problem. Blaming employers or government will not answer anything.
I would like to see the law changed so no company can stay in business while breaking its promises to retirees or those about ready to retire. I can see companies starting new employees with a self-directed retirement or health care plans, but I cannot see not honoring the old commitments and being allowed to remain in business to make new ones.
I think college tuition is another problem made worse by government that I have covered before. These problems have always existed. I went through college on scholastic scholarships I applied for quarter to quarter never knowing it would be there. None of this is new.
Most people see the appreciation of home costs as a positive. I guess it looks negative if one is buying. Still interest rates are low. There have been times it costs 16+% and that limited the size of the house one could afford.
We all pay for the tough choices we made and make, and I will not spend time blaming anyone else for mine.
n6t3s, I do not see that it matters how far the data goes back, the fact is a larger percentage of the wage/salary package are being paid for benefits rather than cash. Manufacturing jobs have been lost in every country including China due to improved productivity. Our manufactures that remain are going through a boom and are looking for qualified workers. The oil and gas drillers and service companies and the mining companies are looking for workers. These are not low paying jobs. Baker Hughes hired 1200 last quarter and had to get 2/3 of the college grad's from other countries because Americans don't study the relevant fields any more. It and many other companies have training centers set up around the country. There is a shortange of teachers and nurses. I don't know what kind of jobs people are seeking, but it has frequently been necessary to relocate and retrain in a progressing country. The GM model has proven unsustainable and will not be repeated.
I think the uneducated illegals take jobs from our low paid workers, but I will not agree that the educated legal immigrants or the H1-Bs take jobs from Americans. I see them as an asset to America. Legal immigrants have always added to our society.
I had links to more article on the benefit/wage discussion, but I could not find them in the time allowed. Maybe I will run across them. The one below is limited, but it does show the problem.
ttp://www.californiaconnected.org/wp/archives/202
Sharp:
I disagree that the United States has a shortage of workers of any kind. I remind you of the definition of shortage: A shortage is a situation in which the buyer is paying less than the market clearing price. Free markets do not have shortages. In a free market the price rises to meet the demand. A rising price increases demand. In the case of the H1-B government action has artificially increased the supply by allowing employers to hire from third world. An Indian programmer who is making less than a thousand a month comes here to work for half what a new graduate makes. As a bonus he gets American citizenship. Americans cannot compete with that. You will notice that in the last five years the starting salaries for engineers and computer programmers has declined. That is an indication of a surplus not a shortage.
You say:
"I will not agree that the educated legal immigrants or the H1-Bs take jobs from Americans"
My personal experience is different. Before the H1-B was extended from 65,000 a year to 195,000 a year in 2001 I was employed as a computer programmer making a six figure salary. I lost that programming job and have not found a programming job since. I have a master's degree and over 20 years programming experience. being over 40 in the globalize economy that qualifies me to be a greeter at Wall-Mart. Baker Hughes is hiring from other countries because they are cheap. Goggle "Labor Condition Application database" (there are several online) and type in Baker Hughes and look at the salaries that are well below American salaries.
Note that even if we brought back slavery we would not be labor price completive with China or India and lots of other countries. That is why we are losing manufacturing jobs. Not their productivity.
I blame government more than industry. Government negotiated free trade deals that are very unfair to American industry. You see this in the trade deficient that we have with almost every country. We give them free trade we get restricted trade. GWB is such a wimp when it comes to China.
n65
I just watched the experts on H1-Bs on C-Span answer questions. It is very expensive to bring in the foreign worker. The man from one company said it takes $100,000-$250,000 to get through the process and get the worker. They must be paid the same salary as an American. They are not automatically eligible for citzenship. The term is usually three years which is a short time if one is engaged something like scientific research. There are shortages in some fields and the employers are paying higher wages to attract and retain people. They have even started courses in coal mining at junior colleges in W.Va., and the jobs pay around $50,000. The O&G, E&P, construction, manufacturing calls I listen to all report having to raise wages and compete for employees. Valero reported paying up 20-25% in the GOM. Baker Hughes operates around the world, and that may explain its hiring practices. When I Googled as instructed, I got three pages of slanted references. I do not understand the lower salaries for engineers unless it is the field of expertise chosen. I just read today most parents who are engineers are pushing their kids away from the field. Computer related jobs had the salaries inflated during the bubble years and were bound to come down with all of the companies which disappeared and the contraction of the sector. Unbeliever is a programmer and has written well concerning that, and he would be the one to speak to it.
Even China has lost manufacturing jobs. Plants are much more productive and employ fewer people to do more work. I know manufacturing jobs have been lost due to outsourcing and companies moving offshore, but that is not the only reason. The U.S. economy has changed. Those jobs aren't coming back to any country. We have a trade deficit because American have more money to spend than others, and we spend it. The free trade agreements benefit all countries. Tariffs and quotas hurt all countries. GWB is no easier on China than Clinton/Rubin were. Trade with China was everything to them, and Rubin dismisses the trade deficit in his book.
I located one of the references for the benefit/wage topic. I have read many on the productivity of manufacturing, but I do not have them at hand.
Listening to Exxon's call today reminded me why the GDP should be important to everyone. When asked about future operations, the speaker said it depends upon the GDP. Economic growth does produce the jobs. They may not be in the field people want, but they are created.
http://www.econbrowser.com/archives/2005/12/declining_real.html
A shortage is a situation in which the buyer is paying less than the market clearing price. Free markets do not have shortages.
Not true. Free markets have shortages while the market adjusts to changing variables. The equilibrium price is rarely reached and maintained for extended periods of time. Whenever a variable changes--an influx of new workers (supply shift), a change in perceived/expected value for compensation (supply distortion), a technological advance providing increased productivity (demand shift)--different actors will respond differently, depending on their understanding of the new variables.
It may be correct to say "given static circumstances, there are no shortages in a free market in the long run"; but given the human nature of the actors in an economy, combined with the problem that information does not tend to disseminate perfectly and evenly (which is a whole other topic I won't get into), short-term shortages are entirely possible in a free market. These shortages often lead to surpluses as well, as the market attempts to establish the correct equilibrium price. Eventually, depending on the information flow, either a a bullwhip effect or an equilibrium develops; but none of these effects are antithesis to a free market.
Which, by the way, is why programmers are no longer worth 6-figure salaries in America. During the tech bubble of the 90's shortages of tech talent allowed IT workers (myself included) to command higher wages; and new college students, dissatisfied skilled employees, and even retirees were drawn my excessive profits into the market. And once the universities, night schools, and ITT Tech ripoffs started churning out "paper programmers", a surplus developed--especially since companies started using H1-B's to fill the shortages. However...
Channeling so many skilled graduates towards computer skills caused a shortage of skilled coal miners and oil workers. The shortage will eventually be remedied, but the problem is that employers cannot wait for another 4-yr cycle for workers to be available before hiring to fill their slots. Another shortage, another potential for surpluses... all a normal part of the free market.
As usual, Sharp and Unbeliever appear a couple clever fellows rifling quickly through their Fundamentals of Economics textbooks for academic responses to the casual observations of those not so enamored with or helped by the so-called Boom Market, or what some might call the Ka-Boom Market. Sometimes anecdotal observations are just so much more relatable.
As one of the benficiaries of the 90s boom, I felt so congnizant of the underlying boom drivers during that particular period. While I wasn't a tech guy per se, I made it in early-stage, high-growth technology companies as a "C"-level manager with a knack for the business. There was a palpable energy and pervasive feeling of tremendous opportunity during that boom that were supported by tremendous capital allocation and creation, technological innovation and, if one looks beyond the voodoo valuation calculus of the period, supportive market fundamentals.
I'm at a loss, however, in trying to understand the fundamental drivers of today's Ka-Boom. Okay, given the aftershocks of the 2001 market explosion, there was nowhere to go but up. Statistically, starting from a much smaller base, the growth percentages following 2002 were skewed to appear positively aggressive. A continued housing boom, interest rates and tax cuts put some juice in the ride, not to mention Corporate America's emergency fat cutting measures that put a lot of people on the unemployment rosters.
The last couple of years, however, have offered little fundamental justification for a susained or sustainable "boom" -- the housing bubble is in mid burst, interest rates continue to climb, gold prices are star bound, the dollar toilet bound, jobs continue to get sent abroad to low wage competing nations, the American middle class continues to whither, and government cannot apply fiscal discipline to its spending in proportion to its tax breaks. These are profound drivers, but not ones that support a "boom."
As for anecdotal observations, this boom rings hollow. Many in my circle are underemployed and unhappy with their current jobs, and the feeling of limitless opportunity is gone. While I don't have to work, I've immersed myself in new business ventures, and I find competition to be less diverse and more congolomerated, credit to be tight and less creative, and employees much more pragmatic and devoid of the risk-taking spirit so prevalant in the 90s.
Kudlow can talk all he wants to about a "boom," and well meaning guys like Sharp and Unbeliever can continue to reference macro economic theory and precarious indicators in their worship of false prosperity at his alter. But hot air won't keep this balloon airborne.
There is always "palpable energy" and hope in the sector where the capital flows. New companies were formed from nothing, employment was high in the tech sector, salaries inflated, and times were good. Hot air did not keep that balloon up either. It is only natural for things to be more bleak during the recovery. Jack Welch predicted long before Sarbox was passed that the new restrictions on business would stifle creativity and lead to businessmen unwilling to take risks. It did that, and it made it too expensive for most small companies to go public. It chased away many foreign companies, and the market is not as exciting as it once was.
If you wanted to hear the optimism and energy the past few years, it has been in commodities companies, transportation companies, construction, and manufacturers. These areas had been starved of capital for decades, and the capital started to flow their way along with the job market.
I don't think we worship at anyone's alter. That is insulting. I think we are seeing things as they are instead of looking backward.
This article from a Railway Magazine is a thoughtful discussion of the problems facing many of the companies in the old economy. It discusses the needs vs the expectations of job seekers today.
We all know about the big turnover that’s already under way in the railroad work force. But not all of us know that recruiting and training new hires isn’t doing enough right now. Oh, we can find them, all right. The wages and benefits railroads offer sure look mighty good in these tight times and service economy paychecks. The really, really hard part is keeping them around for more than a few months after investing the time, effort and money in bringing them up to speed on a railroad job.
http://www.rtands.com/B/ontrack.html
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