Update: Click here for the most recent jobs statistics.
On the first Friday of every month, I update the unemployment numbers so that I can compare the unemployment rate under President George W. Bush with the unemployment rate under President Obama at that time. The genesis of this ritual began when I felt compelled to respond to some left-leaning sites that were comparing Obama’s first two years and four months in office with Bush’s last and worst economic year (the above chart shows the most recent incarnation of this narrative).
In June, the private sector added a paltry 84,000 jobs in the twenty-eighth consecutive month of private sector job growth. This development is somewhat negative news. The country had a net employment gain of only 80,000 total jobs (private and public). Unfortunately, 80,000 is below the 125,000 jobs needed each month just to keep pace with the growth of the working-age population, which is discouraging news.
More importantly, June is the sixth month in which the overall number of jobs lost/gained during the Obama administration is better than the number lost during the Bush administration. It is also the second month since the number of net private sector jobs gained during the Obama administration turned positive. That said, the unemployment rate is still 0.9 percentage points worse today than it was during President Bush’s last full month in office, and it is 0.4 percentage points worse than when President Obama first entered office. In other words, the unemployment rate in all 42 months of Obama’s presidency has been higher than that of any single month in President Bush’s 8 years in office.
The seasonally adjusted unemployment rate was flat at 8.2% — the third lowest month of unemployment during the Obama presidency. This number remains 0.9 percentage points higher than President Bush’s last full month in office in December 2008. It also marks 41 consecutive months in which the unemployment rate has been 8% or higher in the 42nd month of the Obama presidency.
That said, the unemployment rate only accounts for the percentage of the unemployed who are actively seeking employment. It does not include people who have given up on finding jobs. The month ended with more people employed at the end of June than were employed at the end of May, and the civilian labor force increased faster than the number of new employees entering the work force increased. Therefore, the main reason the unemployment rate was flat is that the denominator (the civilian labor force) in the unemployment equation increased more than the numerator (the number of employed Americans).
The civilian labor force ended June at 155.2 million vs. May’s 155.0 million. 142.4 million people had jobs in June, which was an increase of about 128,000 people from May versus about 156,000 people who entered the labor force.
Both the Bush and Obama presidencies have been marked by a steady decline in the labor force participation rate. The labor force participation rate measures the number of people in the labor force as a percentage of the total working-age population. The labor force participation rate remained at 63.8% in June.
Putting the Numbers into Perspective
The employment statistics during President Bush’s period in office continue to look better than those under President Obama’s to date if one puts more emphasis on the overall unemployment rate. However, President Obama’s employment statistics seem better if one looks at total private sector employment. Over President Bush’s tenure, the private sector lost a net 646,000 jobs, assuming that he gets credit for all jobs lost in January 2009 and none for those lost in January 2001. I changed my methodology in response to a left-leaning blogger‘s fair point “that CES estimates represent information reported by survey respondents for their pay periods that include the 12th of the month.” Hence, any subsequent numbers for jobs created near the end of January would likely appear in the February numbers.
If one attributes the first 19 days of January 2009’s job losses to Bush, and the remaining 11 days of job losses to Obama, the private sector shed 339,000 jobs during the Bush administration (the private sector gained a net 147,000 jobs if one attributes all of January 2009’s job numbers to Obama, and all of January 2001’s numbers to Bush). Surprisingly, this number includes the 3.78 million private sector jobs lost in 2008, and an additional 839,000 in 2009 (514,000 if one attributes the first 19 days of January 2009’s job losses to Bush).
In contrast, under President Obama’s administration, the private sector has gained a net 160,000 private sector jobs (a loss of 165,000 if one attributes the remaining 11 days of job losses in January 2009 to Obama, and a loss of 679,000 if one attributes all of January 2009’s losses to him).
Again, the point of this argument is not to assess blame on either administrations’ policy. It simply puts the numbers into perspective.
For each job the private sector cut under George W. Bush, the private sector gained~0.25 jobs under Barack Obama (if one attributes January 2009’s job losses to Obama, the private sector eliminated ~5 jobs for every job it created under Bush). The economy would need to destroy 806,000 private sector jobs for Bush to break even with Obama (not accounting for the 125,000 jobs that the economy must create each month just to keep pace with population growth).
While President Obama has surpassed President Bush on private sector job creation, the unemployment rate has remained persistently high. It will likely continue to remain so as more people enter the labor force as the economy improves, even if the private sector continues to add jobs at similar rates. The country still has a long way to go to restoring full employment and the President is running out of time. According to The New York Times, no sitting President since Franklin Roosevelt has won re-election when unemployment was over 7.2% on election day.
And President Obama is no FDR.
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How come you’re not pointing out all of the public sectors jobs that have been lost by conservative efforts in the states to cut spending in these areas while continuing to give tax breaks to the private sector. Rather than raising taxes or at least eliminating the Bush tax cuts there would have been plenty of revenue to sustain these jobs.
According to “Michael Linden, the Director of Tax and Budget Policy at the Center for American Progress Action Fund, as of April, there are now more private sector jobs in the United States than there were in January 2009, when President Obama took office. … We have now replaced all of the private sector jobs lost while Obama has been president. And that was no mean feat, given that over the course of 2009, the private sector shed about 4.2 million jobs.
Unfortunately, the news is not nearly so good when it comes to the public sector, where there are currently 607,000 fewer people working than there were when President Obama took office.” SOURCE
Then of course there are those efforts by the GOP to sabotage the economy to fulfill Senate Minority Leader Mitch McConnell’s primary goal for the Party to make Barack Obama “a one-term president.”
“[I]t’s not just that Republicans and their failed policies wrecked the economy and now they’re just trying to wait out the clock until November. ThinkProgress’ Jeff Spross outlines five ways the GOP has sabotaged job growth:
1. Filibustering the American Jobs Act. Last October, Senate Republicans killeda jobs bill proposed by President Obama that would have pumped $447 billion into the economy. Multiple economic analysts predicted the bill would add around two million jobs and hailed it as defense against a double-dip recession. The Congressional Budget Office also scored it as a net deficit reducer over ten years, and the American public supported the bill.
2. Stonewalling monetary stimulus. The Federal Reserve can do enormous good for a depressed economy through more aggressive monetary stimulus, and by tolerating a temporarily higher level of inflation. But with everything from Ron Paul’s anti-inflationary crusade to Rick Perry threatening to lynch Chairman Ben Bernanke, Republicans have browbeaten the Fed into not going down this path. Most damagingly, the GOP repeatedly held up President Obama’s nominations to the Federal Reserve Board during the critical months of the recession, leaving the board without the institutional clout it needed to help the economy.
3. Threatening a debt default. Even though the country didn’t actually hit its debt ceiling last summer, the Republican threat to default on the United States’ outstanding obligations was sufficient to spook financial markets anddo real damage to the economy.
4. Cutting discretionary spending in the debt ceiling deal. The deal the GOP extracted as the price for avoiding default imposed around $900 billion in cuts over ten years. It included $30.5 billion in discretionary cuts in 2012 alone, costing the country 0.3 percent in economic growth and 323,000 jobs, according to estimates from the Economic Policy Institute. Starting in 2013, the deal will trigger another $1.2 trillion in cuts over ten years.
5. Cutting discretionary spending in the budget deal. While not as cataclysmic as the debt ceiling brinksmanship, Republicans also threatened a shutdown of the government in early 2011 if cuts were not made to that year’s budget. The deal they struck with the White House cut $38 billion from food stamps, health, education, law enforcement, and low-income programs among others, whilesparing defense almost entirely.
And when it comes to Mitt Romney, economists agree that his plans will actually make things worse and could cause another recession.“
You neglect to consider the adverse effect that a tax hike has on private sector employment. The net effect of your proposal on total employment would be far less than the total number of public sector jobs created.
I’m amazed by the persistence of the “Republicans are evil” narrative that seems to prevail among the American left. Opposition to Democratic proposals–which are always well-thought-out, perfectly sensible ideas–are never motivated by good faith disagreement with Democrats’ assessment of their merits; they are purely cynical. Repubicans opposed the ACA because they want sick people to suffer, and they oppose Obama’s economic proposals because they want to sabotage the economy. There’s no other explanation.
“Economists agree”? There’s a howler if I ever read one. Still, I couldn’t resist following the link. Notice that the article’s author refers to *two* journalists he interviewed. It takes more than two economists to constitute a professional or academic consensus.
Correction: two *economists*, not journalists.
“You neglect to consider the adverse effect that a tax hike has on private sector employment.”
No I didn’t because there is no basis for this contention.
“I’m amazed by the persistence of the “Republicans are evil” narrative that seems to prevail among the American left.”
You mischaracterize my comments. I don’t disagree that Democrats are not above the tactics their GOP counterparts use. But I think certain facts and comments give credence to my claim.
1. Senate Minority leader Mitch McConnell has told the world that their #1 goal is to see Obama as a one-term president.
2. The record clearly shows that they have blocked damn near every effort of the President’s attempt to try and effect some positive outcomes to our economic crisis, such as opposing a health care plan, that as a Party they promoted themselves back in 1994 and reneging on supporting amendments they themselves proposed to financial reform once they found out Obama would agree to them. Just to name two.
3. No liberal advocates themselves, Thomas Mann and Norman Ornstein in their new book “It’s Even Worse Than It Looks: How the American Constitutional System Collided With the New Politics of Extremism” have pointed out that though both Parties have contributed to the gridlock in Washington over the years, only “one of these parties has taken on the role of insurgent outlier; the Republicans have become ideologically extreme, scornful of compromise, and ardently opposed to the established social and economic policy regime.”
“It takes more than two economists to constitute a professional or academic consensus.”
You keep mischaracterizing my words. I never used the word “consensus”. Do your cognitive skills malfunction much?
But answer me this. Tell me what Romney’s plan is that will prevent the economy from making things worse and perhaps causing another recession? He’s offered nothing more than cutting taxes for the rich, de-regulation and trickle down economics. This approach was used by Bush and the GOP and look where it led us. Do you really believe repeating the same thing will bring a different result?
I strongly beg to differ on this point. There are reams of economic theory that support Tevyeh’s contention. An increase in taxes directly results in less disposable income. When there is less disposable income, people spend less. When people spend less, business profits decline. To maintain steady profits, businesses cut expenses, one of which is employee overhead. This is basic economics, and I daresay most economists would not dispute this point.
Granted Sean there are Libertarian think tanks like the CATO institute an The Heritage Foundation that have come up with an analysis that supports this view but there are liberal think tanks that suggest otherwise. The reality is that most companies don’t look at tax rates to determine whether the economy is good or not, they look at demand. With high unemployment numbers that resulted from the Wall Street crisis there is less demand right now so having more in their pockets isn’t going to get them creating jobs.
Clearly tax cuts would help middle and low income earners but those making over $250,000 annually still have plenty of disposable income to make purchases and a lot of research shows that most of the spending that does go on these days are those who have very high incomes.
Besides, the tax rates for everyone are as low as they have been in fifty years. So why aren’t we seeing better results from this premise you and Tevyeh support?
“there are liberal think tanks that suggest otherwise”
lb, I would give liberal think tanks more credit than this. They simply aren’t that stupid.
“The reality is that most companies don’t look at tax rates to determine whether the economy is good or not, they look at demand. With high unemployment numbers that resulted from the Wall Street crisis there is less demand right now so having more in their pockets isn’t going to get them creating jobs.”
But this isn’t the argument I made. The argument I made actually is in line with this point. Taxes rise, people spend less. When people spend less, there is lower demand. When there is lower demand, business lay people off. While we can argue back and forth about whether having more money in people’s pockets isn’t going to create job, it is economically indisputable that increasing taxes will definitely not create jobs. Moreover, it is likely to destroy them by curbing demand.
“Clearly tax cuts would help middle and low income earners but those making over $250,000 annually still have plenty of disposable income to make purchases and a lot of research shows that most of the spending that does go on these days are those who have very high incomes.”
I would argue that you extend all the tax cuts for everyone. Increasing them on any segment of the population will curb demand.
“Besides, the tax rates for everyone are as low as they have been in fifty years. So why aren’t we seeing better results from this premise you and Tevyeh support?”
Because unemployment is at 8.2%. When people don’t have jobs, they don’t spend. Putting more of them on the street will only exacerbate the problem.
“lb, I would give liberal think tanks more credit than this. They simply aren’t that stupid.”
Believe what you want to believe. I’m not going to do all of the leg work for you Sean but here is one liberal think tank that contradicts your POV.
“Apparently, conservatives believe that a key driver of overall job growth is the tax rate that rich people pay on their last dollar of income. They argue that these very rich people are the ones who “create” the jobs and therefore taxing them at even slightly higher rates will make them less likely to invest, expand their businesses, and hire more people. That sounds plausible, but it turns out to be completely baseless.
In fact, they are just as wrong about this as they are about the relationship between marginal tax rates and overall economic growth. In the past 60 years, job growth has actually been greater in years when the top income tax rate was much higher than it is now.” SOURCE
There is more evidence here in Christina Romer’s NYTimes Op-ed piece “That Wishful Thinking About Tax Rates
Romer concedes that marginal tax rates “have some impact on reported income, and it’s possible they have other effects through subtle channels not captured in the studies I’ve described. But the strong conclusion from available evidence is that their effects are small.”
I stand corrected. Apparently liberal think tanks are that stupid.
The study you cited makes a classic error: it assumes correlation implies causation. Keep in mind that it is more likely that high marginal tax rates were simply more prevalent in the immediate post war period. At that point in history, Europe and Japan had been destroyed, and therefore American companies had virtually no foreign competition. Rebuilding the European and Japanese economies provided sufficient aggregate demand for US companies for over a decade without any economic competition whatsoever. As such, high marginal tax rates did not result in better economic performance per se. Rather robust aggregate demand coupled with little foreign competition more than offset the negative effects of a high marginal tax rate on several hundred thousand people. It also explains why government accounted for only ~19% of GDP on average vs. the 25%+ it is today.
You know Sean, I have about given up hope that the word “rationale” in your blog title is sincere anymore.
“I stand corrected. Apparently liberal think tanks are that stupid.”
What you stand corrected on is assuming something falsely from failure to do due diligence on the topic. You weave through my comments to find only those things that fit your narrative and avoid most of the rest. By asserting that a liberal think tank has made some kind of “classical error” you presume 1. that economics is an exact science, 2. that political agendas don’t play roles in many economic analyses and 3. that only your perspective is true and all others are false. It is you sir who is losing credibility here.
“As far as I’m concerned, [Chrisitna Romer has] lost all credibility with the American public.”
Again, another arrogant presumption on your part. You’re going to speak for the entire “American public”? Romer’s diagnosis on this was off as were many others. I suspect she was being optimistic. But to claim her missing this is all the reason necessary to discredit her altogether is absurd. She’s a smart lady who has got it more right than wrong. Are you willing to be as dismissive as those economist you share an ideological view with when they exaggerate and over state their claims? If so, I have seen it from someone who claims to be rational.
correction: If so, I have NOT seen it from someone who claims to be rational.
I am not arguing what right wing economists argue. I am arguing what mainstream economists would argue. Even Paul Krugman, one of the farthest left leaning economists, would agree that tax increases do not stimulate aggregate demand. Moreover, he would assert that at the margin, they lessen demand. Even your own source, Christine Romer does not dispute this point. She merely argues that the negative impact of taxation is not as bad as others have argued. I am not citing a right wing source for my logic because I don’t need to. Your sources, however, are exclusively partisan.
Step back and think through your logic. Do you tend to spend more or less if you have less disposable income?
My argument rests entirely on this simple economic principle. It’s logic is rational and entirely indisputable.
I am open to other views provided that you have a rational basis for them. If you cannot articulate a logical pathway through which increasing taxes leads to increased aggregate demand, then you’ve lost the argument. Right now your leading argument assumes correlation implies causation while discounting many more powerful drivers that impacted the economy during the immediate post-war period.
Speaking of ignoring arguments, you have not responded or addressed a single one of mine. Instead, you simply refer me to weakly argued liberal propaganda. You are not reading my arguments carefully to come to your own conclusion. You seem to be reflexively retorting with someone else’s poorly reasoned talking points. Ralph Waldo Emerson’s warning about being the parrot of other men’s thinking applies readily here.
If you do anything, please carefully think through this simple premise: can reducing people’s disposable income through increased taxation lead them to spend more of their money?
That’s it. That’s the only contention on which I am challenging you. Answering the question requires no fancy degrees, only common sense and unadulterated logic. I need not rely on other men’s thoughts (right or left) because my proposition stems from nothing but pure rationality.
If you can convince me that taking away disposal income leads to increased consumer spending, I am happy to change my views. However, proving 1+1 = 3 is an extremely difficult hurdle to overcome. I certainly welcome you to try.
By the way, Christina Romer is the same economist who predicted that if the country passed Obama’s stimulus plan, we would be at 5.6% unemployment today. As far as I’m concerned, she’s lost all credibility with the American public.
I’m with Sean on this one. The proposition that a tax hike is contractionary isn’t some Heritage Foundation innovation, it’s the conclusion of all mainstream macroeconomic models that I’m familiar with (Classical, Keynesian, Monetarist, etc.). Higher taxes –> lower disposable income –> lower aggregate demand.
A very common logical error (that I have beaten to death elsewhere on this blog). The rate of taxation is only one of many variables that affect the “health” of the economy. The “econ 101” proposition that tax hikes are contractionary is not rebutted by pointing to the current sorry state of the economy despite low tax rates.
This GOP “obstructionism” that we keep hearing about would indeed be a sign that Republicans are trying to sabotage the economy, but only if you assume that the President’s proposals are unquestionably wise. I’m not quite ready to make that leap. In the words of columnist David Harsanyi: “The left claims there is an unprecedented level of obstructionism in Washington (failing to note that perhaps there is an unprecedented level of terrible legislation in need of obstruction)…”
“It takes more than two economists to constitute a professional or academic consensus.”
40 Economists Say The GOP Has Abandoned Economic Reality
I’m not sure how to interpret this? Is this a criticism of my arguments, Tevyeh’s, or just Republicans in general?
First, I myself don’t agree with the general Republican mantra that the stimulus was a failure, though I don’t think it worked as well as it could have nor as well as was promised. If it worked as well as was promised, we would have been at <6% unemployment by this point. That said, the absence of a stimulus would have been an economic disaster much as the aftermath of 9/11 would have been without the Bush stimulus (the "Bush tax cuts" that Democrats are so fond of demonizing and the massive increase in defense spending to fuel two wars).
Second, the presumption that we can close the deficit without a tax increase is also wrong. However, what this liberally-biased Think Progress article blatantly fails to acknowledge is that most economists would agree that increasing taxes now (and decreasing spending now) would harm the global economy. Basically, the country has twin problems: an unsustainable deficit and sluggish economic growth. You can't tackle both problems simultaneously because the measures necessary to fix the deficit immediately will also lead to another recession or depression as Britain is now learning. The country must get the economy going first through stimulus (both by keeping taxes low, spending in place, and maintaining loose monetary policy), and then restructuring the tax code and finding ways to reduce government spending in the intermediate term (but not now).
The problem is that both parties are frankly, stupid. Each is touting its own ideological views as solutions. Cutting spending now is not helpful (some Republicans want austerity now). Increasing taxes now is not helpful either (some Democrats are demanding tax increases on the wealthy). Finding the right dragon to slay and in the proper sequence is the problem today, and neither party is getting it right.
“I’m not sure how to interpret this? Is this a criticism of my arguments, Tevyeh’s, or just Republicans in general?”
Actually it was simply a delayed response to Tevyah’s doubt that there were only 2 economists that could explain why Romney’s economic plan would actually makes things worse and cause another economic recession. I merely placed this latent response too far down the thread.
“… most economists would agree that increasing taxes now (and decreasing spending now) would harm the global economy. Increasing taxes now is not helpful either (some Democrats are demanding tax increases on the wealthy”
Well now it’s your turn to validate what “most economists” would claim. Care to provide your own list of such economist?
I still stand by my earlier statement that economics, unlike the physical sciences, is not an exact science and any claim that makes absolutes is usually suspect for having a political ax to grind. There can be a blend of spending and strategic tax increases for a set period of time that would get the jobs back we have lost and once these jobs were in place and they consisted of a livable wage, then tackling the deficit with some spending cuts would likely be effective with a lot less suffering from low and middle income families who would at least have jobs, especially those with health care benefits.
And let me repeat that taxes are as low now as they have been for everyone in the last half century, especially the 1% and there are records profits with many large corporations. Where are the job creators with this going on? I suspect they are still catering to foreign labor markets and making fewer employees here in this country work harder to sustain their record profits.
For the record, that “liberal blog” used a survey result from the Chicago Booth IGM Forum whose panel of economist included “distinguished experts with a keen interest in public policy from the major areas of economics, to be geographically diverse, and to include Democrats, Republicans and Independents as well as older and younger scholars. The panel members are all senior faculty at the most elite research universities in the United States.”
I don’t need to provide a list of economists, because my views are based on genuinely accepted economic principles and logic. If you tax more, people spend less because they have less money to spend. But if you need one, I’ll cite Paul Krugman (he’s about as far left as they come).
Additionally, as with the stimulus so goes low tax rates. While things seem bad, they likely would have been worse without either. The reason things are so bad right now is that things are uncertain (i.e., businesses aren’t spending because they are unsure of what their tax rates will be next year and whether demand will pick up). Consumers are behaving the same way, particularly in light of high unemployment. When people stop spending, profits decline, so companies cut cost in a positive feedback loop or death spiral. Increases taxes only accelerates that process, even if they are at record lows.
Again, I maintain my position. Each party is trying to have it both ways and they are each wrong. You either believe that stimulus (in the form of tax cuts and increased spending) works or it doesn’t. Democrats ignore the former while Republicans ignore the latter. While one can argue which of the two is more effective (I think tax cuts are, but that’s a separate argument), reducing spending and/or raising taxes now is folly.
“If you tax more, people spend less because they have less money to spend.”
I’m not disputing this Sean and neither is Paul Krugman. And Krugman’s support for this general view is caveated with his belief that these tough economic times call for the small sacrifice that raising taxes on the wealthiest, for a brief period at least, will have. But this is not what’s giving us grief right now because taxes are lower than they have been for nearly 50 years. We had higher taxes under Clinton but people were spending despite this and the economy was booming. People are not spending now because a lot fewer people have job incomes. Give people a job with a decent wage and small incremental tax increases may mean they have less to spend but they do not necessarily spend less. Sadly though, many will spend beyond their means with easy credit and the belief that the economy will remain robust.
“The reason things are so bad right now is that things are uncertain (i.e., businesses aren’t spending because they are unsure of what their tax rates will be next year and whether demand will pick up).”
I’m glad you brought this up again because since you last did I have found those arguments that weaken such a claim. It’s a canard foisted by some of the very wealthy to blame the poor economy on “uncertainty”. Dr. Jan Eberly, assistant secretary for economic policy at the Treasury Department disputes the oft-cited “cloud of uncertainty” premise that is supposed to explain the dilemma with the nation’s economic future.
“Eberly points out that if regulations were really “destroying jobs” or stopping businesses from hiring, there would be evidence of negative changes in “one or more of the following: business profits; trends in the workforce, capacity utilization, and business investment; differences between industries undergoing significant regulatory changes and those that are not; differences between the United States and other countries that are not undergoing the same changes; or surveys of business owners and economists.”
That’s a lot of possible places to find indications of regulatory uncertainty. But not a single one reveals any indication that regulations are holding the country back. Corporate profits have almost reached their pre-recession share of gross domestic product, the broadest measure of total economic activity. Businesses aren’t increasing work hours for existing employees, but they are increasing investment in equipment and software, both of which are inconsistent with concerns about future regulations. And independent surveys of business owners and economists point to weak demand, not regulation, as the biggest impediment to hiring more workers.” SOURCE
“I’m not disputing this Sean and neither is Paul Krugman. And Krugman’s support for this general view is caveated with his belief that these tough economic times call for the small sacrifice that raising taxes on the wealthiest, for a brief period at least, will have. But this is not what’s giving us grief right now because taxes are lower than they have been for nearly 50 years. We had higher taxes under Clinton but people were spending despite this and the economy was booming.”
lb, the economy was booming despite high taxes. Remember, the Clinton economy benefited from the dotcom bubble economy and the post Cold War dividend. Moreover, politicians always call for temporary sacrifices, but the taxes and programs seem to never go away. Remember the AMT? It was supposed to hit the wealthiest <200 Americans. Now it impacts millions, and 27 million more Americans will be impacted if the Bush tax cuts expire near the end of the year.
"I’m glad you brought this up again because since you last did I have found those arguments that weaken such a claim. It’s a canard foisted by some of the very wealthy to blame the poor economy on “uncertainty”. Dr. Jan Eberly, assistant secretary for economic policy at the Treasury Department disputes the oft-cited “cloud of uncertainty” premise that is supposed to explain the dilemma with the nation’s economic future."
lb, you misread my point. I said nothing about regulations. I spoke of a broader concept of uncertainty. Businesses and consumers have no idea what their tax rates will be next year. As such, many are holding back on making purchases. I know I am cutting back, and would cut back even more if I had less disposable income. That said, regulatory uncertainty definitely impacts demand. The Production Tax Credit in the wind industry is a perfect case study that illustrates this point (I wrote a post some months ago on this and you should be able to find it if you do a search for regulatory uncertainty on this site). I agree that weak demand is certainly the biggest driver, but that is influenced by overall uncertainty particularly regarding future tax policy and what happens to the Euro. Businesses are delaying purchases as they wait to see how Congress resolves the so-called fiscal cliff and what happens in the EU.
How about calculating the unemployment rate of the private sector? Given the public sector rate of 4.2%, and 14% of the workforce, I get 8.9% unemployment for the private sector. That number sounds devastating to me. More than double the rate of government workers.
Interesting. That’s a perspective you never here in the news media.
” How come you’re not pointing out all of the public sectors jobs that have been lost by conservative efforts in the states to cut spending in these areas while continuing to give tax breaks to the private sector. Rather than raising taxes or at least eliminating the Bush tax cuts there would have been plenty of revenue to sustain these jobs. ”
Your statement makes no sense. Public sector jobs consume tax revenue . Private sector jobs produce tax revenue . You have to shrink the bloated public sector down to the essentials . The private sector cannot support that public sector .
As proof, I cite the Obama economy . As further proof I cite the fact that the states run by newly elected Republican Governors, who have tried to control the public sector and it’s obscene pension costs, are generally doing better than the rest of the country . And if that does not make you happy here is one last proof . Most of the cities in America that have recently been at the brink of financial ruin, have been run by Democrats like uh, , forever . Like Scranton, Pa., Harrisburg, Pa, San Bernardino, Ca., and Stockton Ca.
” How come you’re not pointing out all of the public sectors jobs that have been lost by conservative efforts in the states to cut spending in these areas while continuing to give tax breaks to the private sector. Rather than raising taxes or at least eliminating the Bush tax cuts there would have been plenty of revenue to sustain these jobs. ”
That to me sounds like “You work harder for ME.” Basically if the puclic sector gets to BIG. Who pays for all of the public sector then? Private would be dwarfed *Hence why so many people don’t want a big government.”Big government means more tax money towards public sectors. If it gets to big then we need more money from private *higher taxes*… Most times when taxes were raised were during times of war to fund the war.
The biggest problem with money in the government is them spending money on a credit card basically. On top of that states keep things like “tolls” on the highways. For roads that are already paid for then raise the price for them. The government on any level have no fear from the people. So they think of the american people as nothing more than a disposable income for the government to further corrupt its self.
The point you make is perfectly reasonable. Economists refer to it as government “crowding out” private industry.
Remember the telephone tax on the rich to pay for the Spanish American War ? It took 108 years to pay off that war .
Let’s be perfectly clear here. The economy is not suffering from tax hikes, of which there have been none under Obama. It is the result of the failed free markets mismanaged by greedy financial interests on Wall Street. Your original theme was about job losses under both Obama and Bush and I simply interjected that your numbers were skewered because you failed to consider public job losses as a result of GOP to cut public sector spending.
At that point Tevyeh interjected by saying that I neglected “to consider the adverse effect that a tax hike has on private sector employment.” This took the conversation in another direction. I responded that tax hikes in and of themselves do not impact private sector employment. It’s only when other conditions exists that create high levels of unemployment do tax hikes have some effect on private sector jobs, like the financial collapse of the free markets in 2008
But you and Tevyeh ignored my comments about how when taxes were higher over the last 50 years than they are now we still saw growth in private sector jobs. So why wasn’t this condition that was impacting disposable income apparently not impacting job growth back then? The main reason for this is as lower rates of employment existed and people felt secure in their jobs – jobs by the way that were paying a higher rates of income than they are today – people were still spending on consumer goods other than necessities. This created the demand needed to spur businesses to hire people or at least not lay them off or ship them over seas.
” Paul Krugman, one of the farthest left leaning economists, would agree that tax increases do not stimulate aggregate demand.”
Clearly tax hikes would not “stimulate aggregate demand”. This was never my argument. Implicit in my comments however was the position that tax hikes are NOT automatically a negative factor on employment It was about the claim that “the adverse effect that a tax hike has on private sector employment.” As a stand alone proposition this just doesn’t hold up to the reality of historical records. Demand is what drives job growth and as long as people have jobs with livable wages they are still going to spend enough to attain some level of material comfort. They may have a little less disposable income but still make enough to spend at rates that sustain growth and employment.
When thrown out of a job, NOT because businesses had less disposable income but because financial markets sold many investors get rich quick schemes and collapsed the economy, then higher rates of unemployment occur leaving people without sufficient income to even buy necessities causing a reduction in demand and thus creating higher unemployment rates. Reducing taxes has reduced the national treasury and created deficits allowing for the cry by those on the right that we need to cut public sector jobs to pay for the deficit their cuts helped create.
It should be noted here too that a slightly higher tax rate on wealthy incomes has no real traceable impact on purchases. Higher tax rates for low and middle income clearly does and this is why removing the lower rates under the Bush tax cuts for the wealthiest 2% and leaving it in place for the other 98% will put revenue back into the treasury to pay down our debt and create and maintain public sector jobs while not reducing the disposable income of low and middle income people who put it directly into the economy through purchases rather than tucking it away in investments.
Small tax increases for the wealthiest amongst us do not significantly reduce disposable income to the point that affects demand. That’s essentially what people like Krugman and Romer are saying. People out of work with NO incomes is what reduces demand. People who make wages at or even slightly above poverty levels will spend less on consumer goods other than essentials when taxes reduce their disposable revenue.
” Speaking of ignoring arguments, you have not responded or addressed a single one of mine. Instead, you simply refer me to weakly argued liberal propaganda. You are not reading my arguments carefully to come to your own conclusion.”
What?!? That’s a straw man argument and you know it. I think it is you who is guilty of avoiding my comment on how loss of public sector jobs has had a greater overall effect on unemployment under Obama than it did with Bush. Being misdirected about tax hikes and their alleged affects on private sector jobs and disposable income has allowed you to circumvent my initial comments.
You are correct in your other contention that the public sector has lost more state and local jobs (though federal jobs have expanded) under Obama than Bush. And it is certainly true that this effect would have a short term impact on demand. I didn’t address this issue because I didn’t necessarily strongly agree or disagree with it.
However, in states where public sector jobs have taken the biggest hit (namely those who elected Republican governors in 2010), the unemployment rate has actually come down. Why? Because these states have become more efficient, and thus require a lower tax burden from their citizens. The net impact is higher aggregate demand.
I actually agree with you that austerity is not the answer now. Deficit spending is necessary to avoid the near term threat of a deflationary spiral. This is where I disagree with many Republicans. That said, increasing anyone’s taxes at this point is equally foolish. It is simply another form of cutting deficit spending. The deficit is an intermediate problem that must be dealt with once the economy is on firmer footing. Obamacare certainly didn’t help with this intermediate problem.
By the way, your premise that high tax rates were not impacting private employment over the past fifty years is unprovable, because you cannot demonstrate whether or not job growth would have been higher in the absence of these higher marginal rates. Moreover, many on the left on arguing that this growth was actually the result of having higher marginal rates, which flies in the face of economic theory. In summary, you simply cannot prove a counterfactual. My argument is that there was job growth despite higher marginal tax rates because of tectonic shifts in the global economy – namely the destruction of Europe and Japan. Moreover, it is entirely possible that job growth would have been even greater without these higher marginal rates. Sadly, this second contention has the same problem yours does – it is impossible to prove a counterfactual.
Another myth, the persistance of which amazes me: that U.S. financial markets, in the years leading up to 2008, were an unregulated free-for-all. It’s easy, given 20/20 hindsight, to point to the regulatory failures that contributed to the financial crisis (the pervasive mandated reliance on NRSRO credit ratings, for example), so let’s not entertain the delusion that the 2008 collapse was the result of “free markets” run amok. Most of the perverse incentive structures that led up to the crash have government fingerprints all over them. I’m having Enron flashbacks.
I forgot to remove your comments at the bottom of my last response so if you will please take care of that so it won’t be so confusing to others who may read this. Thanks.
Done. My apologies for the delay.
For what it’s worth, there’s no strong correlation between unemployment rate and reelection. http://prospect.org/article/high-unemployment-why-obama-ahead
The more I get into discussions with you liberals, the more certain I am that your guy President Obama cannot win unless Governor Romney self destructs . Barring a Godzilla sized skeleton in a Romney closet, You guys cannot win . All of you are so bent on winning that you have to do mental gymnastics to make reality fit your delusions.
And what big delusions you guys have . First it was saved or created jobs, then it was job growth, now the unemployment rate doesn’t matter all that much in this election . I am sure you guys have twisted and cherry picked your facts to make it all work . I say you guys because I notice an amazing amount of group think on the liberal blogs .
But you have one thing semi right, the unemployment rate by itself will not defeat an incumbent . There is also the perception of whether things are improving or improving fast enough . When Reagan was at this point in the reelection cycle the economy was rapidly improving . If Obama had that rapid improvement, the unemployment rate would not be terminal for his political fate . Instead we have a Jimmy Carter malaise economy . FDR in 1936 got away with a bad unemployment rate because things had been so bad under Hoover. That won’t work now because the bad things hit much later in Bush’s term than in Hoover’s .
Reagan tripled the national debt!
To be completely honest that chart was used used to show that the economy and jobs have gotten better under Obama and not worse like some republicans have claimed.
Sean says: “You seem to be reflexively retorting with someone else’s poorly reasoned talking points. Ralph Waldo Emerson’s warning about being the parrot of other men’s thinking applies readily here.”
Sean give me a break…..these are the most disingenuous comments I have seen from you to date. I have been coming to this site now for 2-3 months, and can easily state with confidence that you have parroted plenty of talking points( polished in your own way) that have trickled down from the top of the echo chamber.
I am highly a highly tuned political news junkie…I read 2 dozen sources daily ..conservative, moderate, and liberal…as well as a dozen blogs…..this being one of them, and I have seen talking points take on a life of their own especially in a partisan world. I just read an Op-Ed from Newsmax…….Scaithe’s highly partisan website that is still parroting the Romney’s line were he said that Obama said…….. “you didn’t build that” when it comes to creating a small business. Nevermind that it was taken 100% out of context……but it has now come out that the small business owner Mr. Gilchrist, who owned the metal fabrication company Romeny used as an example of entrepreneurship, did in fact use government to “build” his company by receiving $800,000 in tax-exempt revenue bonds issued by the New Hampshire Business Finance Authority ‘to set up a second manufacturing plant and purchase equipment to produce high definition television broadcasting equipment’…” In addition, in 2011, Gilchrist Metal “received two U.S. Navy sub-contracts totaling about $83,000 and a smaller, $5,600 Coast Guard contract in 2008…The businessman, Jack Gilchrist, also acknowledged that in the 1980s the company received a U.S. Small Business Administration loan totaling “somewhere south of” $500,000, and matching funds from the federally-funded New England Trade Adjustment Assistance Center. I guess Mr. Gilchrist did indeed have quite a bit of help ……….of well over a million dollars of governmental support.
Here it is 8 days after the “you didn’t build that” talking point handed down from Ayn Rand’s mount Olympus…..and despite the evidence to the contrary, you have a conservative source such as Newsmax still casting out the now debunked “talking point”…… but now is somehow tying the “you didn’t build that” comment with reverend Jeremiah Wright. I swear you can’t make this shit up. I will lay odds that I will indeed have a heated discussion with one of my fellow conservative friends 30 days from now who will be still parroting the “you didn’t build that” line.
Sean what bothers me is that you would accuse another of something which you readily do yourself.
I know it must be hard to maintain this blog but I think you need to balance your time here with more topics and less commentary on top of commentary. There are so many serious issues to address lately………but here we are at the bottom of the June jobs data post from 7 weeks ago……..Just a little critique which you are entitled to tell me to piss off……on.
I am highly a highly tuned political news junkie…I read 2 dozen sources daily ..conservative, moderate, and liberal…as well as a dozen blogs…
Two dozen a day, huh? Wow!!! Guess now we know who we should be bowing to!! 🙂 Assuming a conservative 10 minutes a blog that’s what, 240 mins a day, or 4hrs? Must be a union worker to afford that kind of time!! Haha
“Sean give me a break…..these are the most disingenuous comments I have seen from you to date. I have been coming to this site now for 2-3 months, and can easily state with confidence that you have parroted plenty of talking points( polished in your own way) that have trickled down from the top of the echo chamber.”
Jeff, I parrot nothing here. All my thoughts are well-reasoned based on my experience, data, and reason. Just because some things I say are congruent with Republican philosophy does not mean I am parroting other folk’s arguments. If I agree with an argument it is because through reason and forethought, I have come to agree with it. I don’t just blithely repeat what I read on Fox News. To be frank, I don’t even read Fox News. I certainly don’t watch it as I don’t have cable (another direct consequence of the Obama economy).
“In other words, the unemployment rate in all 42 months of Obama’s presidency has been higher than that of any single month in President Bush’s 8 years in office.”
You conveniently IGNORE the fact that at during BUSH’S term, the RATE on unemployment SKYROCKETED, but during the OBAMA term it stabilized.
The NUMBER of unemployed at any one time DOES NOT MATTER, it’s the RATE OF CHANGE that matters. You can’t do anything about yesterday’s numbers, you can ONLY effect CHANGE.
If someone throws you a hot-potato, YOU can’t be blamed for it being hot in the first place.
But you CAN be blamed if you do nothing to cool it down or slow even just slow its increase in heat.
So Obama “stabilizing” unemployment is the next evolution of the Democratic rationalization for nearly four years of a stagnant economy under President Obama.
Nevermind that it ignores the fact that we’ve “stablized” at above 8% unemployment when the President’s advisers promised we’d be below 6% unemployment by now if we passed the stimulus plan.
“The NUMBER of unemployed at any one time DOES NOT MATTER, it’s the RATE OF CHANGE that matters.”
Funny. This sounds like something Mitt Romney would say. I’m sure millions of unemployed people struggling to find jobs would strongly disagree with you.
“You conveniently IGNORE the fact that at during BUSH’S term, the RATE on unemployment SKYROCKETED, but during the OBAMA term it stabilized.
The NUMBER of unemployed at any one time DOES NOT MATTER, it’s the RATE OF CHANGE that matters. You can’t do anything about yesterday’s numbers, you can ONLY effect CHANGE.”
Oh, boy. You said it, I didn’t. When Bush left office in January, unemployment was at 7.8%. Today it is at 8.2%. By your logic, Obama “stabilized” unemployment at a rate 5% higher (or 0.4 percentage points higher) than when he took office and 3.5 years later. Moreover, you forget to mention something even more important: direction. The unemployment rate is worse than when the President took office. It didn’t rise as fast as it did during Bush’s last month in office, but it certainly hasn’t improved.
We are far too late in the game to continue blaming Bush for nearly four years of economic malaise. Blaming the last guy may be fair for a year, a year and a half tops. But now it is simply ridiculous. Obama has his “fair share” of the blame.
“If someone throws you a hot-potato, YOU can’t be blamed for it being hot in the first place.
But you CAN be blamed if you do nothing to cool it down or slow even just slow its increase in heat.”
If you are a CEO who takes over a struggling company, the board would fire you if you didn’t show strong results after one or two years.
Obama said he was the man for the job, he said he would get unemployment under 8%, he said that if he didn’t turn things around in 3 1/2 years he’d be a one term proposition. In the real world you can’t keep blaming the previous guy for the mess you’re in. If you are hired claiming you can clean things up and don’t do it…..you’re OUT! There is plenty of trickery when it comes to stats and charts on both sides. Look at reality…..are people better off? are they confident about the future? are they excited about gas prices? are they satisfied with the the equity they have in their house? I’m sorry to have to be the first to tell the libs, but the answer to all of the above is NO. You can blame everyone except Barry, you can say how much worse it was than he knew, but the fact is that he wanted the job, he campaigned for the job, he was elected….and we are worse off than before he started……..We The People MUST fire this man!
I completely agree.
I totally agree.
Comparing the POTUS to a CEO is simple minded. And, if this were the case under the Bush administration, he would have been canned for the gross mismanagement of multiple wars in the Middle East.
“Comparing the POTUS to a CEO is simple minded.”
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