Sunday, September 05, 2004

Jobs

One of the most annoying thing about presidential politics is the pretense that Presidents can magically "create" new jobs. To wit:

1) Bush promised 3 million new jobs by last year.

2) Bush is trying to take credit now for an upturn in the jobs figure last month.

3) Kerry is pretending that his economic plan will create "10 million jobs."

4) As a general rule, the opposing party tries to blame any downturn in jobs on the governing President.

All of this is ludicrously false. As is shown in this generally good New York Times article today:
An intelligent voter could be forgiven for thinking that the most important domestic consideration in the election is how many jobs the candidates would create over the next four years. And writers who in another season were buzzing over interest rates, or Monica, now swarm over the monthly jobs report as if it were a running report card on the president -- the Beltway equivalent of the stock market.

This mind-set has come to frame the way we think about virtually every economic issue, even those -- like the budget deficit -- that have little impact on employment. It has colored our sense of history, so that a reader of campaign news might reasonably conclude that Bill Clinton "created" 22 million jobs and that Bush first "lost" nearly 3 million and, then -- wonder of wonders -- won half of them back.

There is one problem with such thinking: virtually no one involved with presidential politics, and virtually no economist, believes it.
Robert Barbera, chief economist at the brokerage firm of ITG/Hoenig, says that in his 30 years in the business, ''the notion that presidents create and lose jobs is the most grotesque mischaracterization of the economic backdrop'' that he has witnessed.

The emphasis on jobs is likely to intensify during the campaign's final weeks, especially given that in August the Bureau of Labor Statistics reported the weakest monthly job totals in a year. The news, predictably, was treated as if the president had taken home a D. So it is striking that neither Bush's economists nor Kerry's nor many who have served in administrations past really believe that job numbers are a reflection of presidential performance. Robert Reich, secretary of labor under Clinton, says bluntly, ''Job numbers are largely a function of population and the business cycle, and the business cycle has its own rhythm.'' Administrations should be able to improve the quality of jobs -- shorthand for raising both the requisite skill level and the compensation -- Reich argues, but the lead time is so great that presidents have little political incentive to try.

There are three problems with the breathless, scorecard approach to job numbers. First, most jobs are in the private sector, and the president is only one of many influences over whether a manager decides to hire or fire. Some of the others that come to mind: Alan Greenspan, the stock market, the strength of international economies, technological change, oil prices and the weather (try legislating that).

Another problem is that, assuming Washington does have some influence, attributing it to the appropriate officeholder is next to impossible. The labor market does not correspond to neat, quadrennial cycles, and the notion that the Bush team, which took office when the economy was already cooling, precipitated a decline in the job market that began 10 weeks later is simply implausible. Governmental decisions have a long half-life. The balanced budget achieved by Clinton in 1998 owed much to the 1990 budget agreement forged by the first President Bush, who had been kicked out of office as a failure. If you want to blame the current president for a recession, argues Jeffrey Frankel, a Harvard economist, blame him for the next recession, because the Bush deficits will seriously narrow the options available to whoever is unlucky enough to be presiding then.

The third, and most serious, flaw is that focusing on the number of jobs fosters a simplistic and illusory sense of what a president can do. It misdirects policy toward ''creating'' jobs, which are, if anything, an outcome of good policy rather than an end. As Randy Kroszner, a former member of the Bush White House Council of Economic Advisers, puts it, ''To think we have a magic lever, blue for jobs, red for growth, that's mistaken.'' His real point is that the levers are not, in the long term, distinguishable. Jobs result from growth -- from employers' desire to increase profits, not from their desire to increase payrolls. Countries that have tried to target jobs specifically -- say in Europe, by restricting the freedom of businesses to lay off workers -- have discovered an unpleasant paradox. Lessened flexibility in the labor market leads to more tentative hiring and fewer jobs.

Moreover, since the economy benefits when companies are able to produce more goods and services with fewer workers, maximizing the number of jobs is not always in society's interest. If it were, we would all have wonderful memories of the Carter administration, which recorded the fastest job growth of any president since the 1960's.

* * *

Kerry described how he would ensure this -- his plan for 10 million jobs. The central points include subsidizing health care, tightening the tax treatment of U.S. companies that operate overseas, reducing the general corporate tax rate and giving manufacturers and firms affected by outsourcing an incentive to hire. How does that add up to 10 million? Actually, it doesn't. Kerry's ''plan'' isn't an industry-by-industry summation; it's simply a forecast, based on population trends, for what will occur in the labor force if the economy returns to health. Any economics student could have come up with that number or with some other one.

1 Comments:

Blogger TS said...

Nice Blog!!!   I thought I'd tell you about a site that will let give you places where
you can make extra cash! I made over $800 last month. Not bad for not doing much. Just put in your
zip code and up will pop up a list of places that are available. I live in a small area and found quite
a few. MAKE MONEY NOW

10:11 PM  

Post a Comment

Subscribe to Post Comments [Atom]

<< Home