Things are starting to look better economically in the United States. Not because of any particular thing that is going on, but because of several things that spark guarded optimism for 2013. Of course in expressing this optimism we cannot be naïve, nor can we ignore or deny the extreme resistance that remains in some quarters – particularly among the naysaying, sky-is-falling denizens of the Republican Party.
But as we acknowledge that resistance we cannot be distracted from the facts. The nation is, indeed, a long way from experiencing robust economic growth. (After all, we just learned this week that fourth quarter GDP was a negative 0.1 percent.) Yet, there are signs all around us that we are making steady strides toward coming to grips with what ails this nation economically. In doing so we may finally be able to make some fixes if we can just get enough people to accept policies over politics.
America is not in decline, no matter how often the extreme declare it. America is not on the verge of bankruptcy, no matter how loud the extreme proclaim it. America is not headed toward “European-style Socialism,” no matter how forcefully the extreme assert it.
How do I know this? Why do I express such optimism?
For one, the amount of investment some companies are pouring into their businesses. Just recently, General Motors announced that it plans to invest $1.5 billion in its plants around the country. The company said $600 million of that will go into its complex in Kansas City. Although the improvements will not result in more hiring at the plant it should help several businesses that supply the plant and will be assisting in its makeover. At the same time, Ford, Daimler and Nissan announced that they will work together to build fuel-cell electric cars by 2017, and Ford and Toyota have partnered to develop hybrid rear-drive trucks.
We also have more people recognizing the need to create an infrastructure bank to pay for numerous much needed projects, which should lead to jobs and economic growth, as Mark Thoma argued in his Fiscal Times article, "One Investment That Can Reduce Our Long-Term Debt." And even though the fourth quarter GDP numbers were not impressive, there were some impressive things in the report. For example, "real disposable personal income increased 6.8 percent," leading to a rise in both personal consumption and personal savings. There were also increases in nonresidential fixed investment (up 8.4 percent.) and residential investment (up 15.3 percent).
The icing on the cake came Friday when the Bureau of Labor Statistics released its January jobs report. According to the bureau's preliminary numbers, the nation added 157,000 private sector jobs last month. The bureau also revised its jobs numbers for November (247,000) and December (196,000). That means the country has experienced more than 30 months of positive job growth. Included in those January numbers were 28,000 construction jobs and 33,000 retail jobs. The education, health care, and business services industries each added 25,000 jobs.
In addition, for what might be the first time in many years, economists across the ideological divide have come to grips with one of the most argued points since the start of the Great Recession: It’s not about the national debt; rather it is about revenue, jobs, and economic growth. While that could be seen as a minor adjustment in emphasis, it is an important one because it removes the cover that so many hid beneath.
Economists from Paul Krugman to Bruce Bartlett to Jan Hatzius to Richard Koo to Alan Blinder to Lawrence Summers to James K. Galbraith to John Makin and Daniel Hanson have declared that the way to worry about the nation’s long-term deficit is to not worry, to stay calm, to deal with it in a few years when the economy is better.
“The federal government is not on the verge of bankruptcy,” economics columnist Martin Wolf said last week in the Financial Times. “If anything, the tightening has been too much and too fast. The fiscal position is also not the most urgent economic challenge. It is far more important to promote recovery. The challenges in the longer term are to raise revenue while curbing the cost of health. Meanwhile, people, just calm down.”
According to E.J. Dionne of The Washington Post, Wolf, a “thoroughly pro-market economist," offers excellent advice. Wolf is not alone.
In the same column, Dionne quotes conservative economist Bruce Bartlett, a former White House advisor to Ronald Reagan and George H.W. Bush, saying: “In fact, our long-term deficit situation is not nearly as severe as even many budget experts believe. The problem is that they are looking at recent history and near-term projections that are overly impacted by one-time factors related to the economic crisis and massive Republican tax cuts that lowered revenues far below normal.”
In his Jan. 29 column, “Outsourcing, Insourcing and Automation,” for The New York Times, Bartlett wrote that one of the major issues facing the nation is unemployment, in particular cyclical unemployment that is turning into structural unemployment. Cyclical unemployment, Bartlett argues, does not have the same long-term impact as structural unemployment, which occurs when workers’ skills do not match the jobs being created.
“The longer someone is out of work, the less likely that person is to find a job,” Bartlett wrote. “Skills deteriorate, younger workers tend to be hired for available vacancies, jobs move to new geographical locations and so on.”
According to former treasury secretary Lawrence Summers, we cannot “lose sight of the jobs and growth deficits that ultimately will have the greatest impact on how this generation of Americans live and what they bequeath to the next generation.”
Even the International Monetary Fund has admitted that it underestimated the damage poorly-timed austerity has on economic growth.
Meanwhile, economic analysts at Goldman Sachs recently told clients that this country still has the world’s strongest economy. Goldman’s analysts also said there are “key economic, institutional, human capital and geopolitical advantages the U.S. enjoys over other economies.”
For example, gross domestic product in the U.S. is almost $16 trillion, “nearly double the second largest (China), 2.5 times the third largest (Japan).” Goldman also says America will continue to enjoy an advantage over other nations because this nation's work force is younger and more energetic; America has greater natural resources, including oil, gas and arable land; America performs the greatest amount of research and development; and America is still the land of choice for motivated immigrants, including those who are highly educated.
So as James K. Galbraith said: Stop worrying about our long-term deficit problem because we don’t have one.
“Foggy rhetoric about ‘burdens’ that will ‘fall on our children and grandchildren’ sets the tone of discussion,” Galbraith wrote in an Aug. 9, 2011, article for The New Republic. “The concept of ‘sustainability’ is often invoked, rarely defined, never criticized; things are deemed unsustainable by political consensus. Backed by a chorus of repetition from the IMF, headline-seeking academics, think-tankers, and, of course, the ratings agencies.
“But there isn’t, in fact, a ‘long-term deficit problem.’ So long as interest rates stay below the growth rate, as they are, debt-to-GDP levels eventually stabilize and even decline. The notion that there is a big problem is pure propaganda based on pseudo-debate, pitting two viewpoints that nevertheless converge on the practical issue.”
Galbraith’s point from more than a year ago was recently supported by Makin and Hanson of the conservative American Economic Institute. The two concluded that trillion dollar deficits are sustainable for now because of low interest rates.
“The Chicken Little ‘sky is falling’ approach to frightening Congress into significant debt reduction has failed because the sky has not fallen,” the two wrote. “Interest rates have not soared as promised… Trillion dollar federal budget deficits have continued to be sustainable because the federal government is able to finance them at interest rates of half of a percent or less. Two percent inflation means that the real inflation-adjusted cost of deficit finance averages -1.5 percent.”
Indeed, it's about jobs and growth.
But as we acknowledge that resistance we cannot be distracted from the facts. The nation is, indeed, a long way from experiencing robust economic growth. (After all, we just learned this week that fourth quarter GDP was a negative 0.1 percent.) Yet, there are signs all around us that we are making steady strides toward coming to grips with what ails this nation economically. In doing so we may finally be able to make some fixes if we can just get enough people to accept policies over politics.
America is not in decline, no matter how often the extreme declare it. America is not on the verge of bankruptcy, no matter how loud the extreme proclaim it. America is not headed toward “European-style Socialism,” no matter how forcefully the extreme assert it.
How do I know this? Why do I express such optimism?
For one, the amount of investment some companies are pouring into their businesses. Just recently, General Motors announced that it plans to invest $1.5 billion in its plants around the country. The company said $600 million of that will go into its complex in Kansas City. Although the improvements will not result in more hiring at the plant it should help several businesses that supply the plant and will be assisting in its makeover. At the same time, Ford, Daimler and Nissan announced that they will work together to build fuel-cell electric cars by 2017, and Ford and Toyota have partnered to develop hybrid rear-drive trucks.
We also have more people recognizing the need to create an infrastructure bank to pay for numerous much needed projects, which should lead to jobs and economic growth, as Mark Thoma argued in his Fiscal Times article, "One Investment That Can Reduce Our Long-Term Debt." And even though the fourth quarter GDP numbers were not impressive, there were some impressive things in the report. For example, "real disposable personal income increased 6.8 percent," leading to a rise in both personal consumption and personal savings. There were also increases in nonresidential fixed investment (up 8.4 percent.) and residential investment (up 15.3 percent).
The icing on the cake came Friday when the Bureau of Labor Statistics released its January jobs report. According to the bureau's preliminary numbers, the nation added 157,000 private sector jobs last month. The bureau also revised its jobs numbers for November (247,000) and December (196,000). That means the country has experienced more than 30 months of positive job growth. Included in those January numbers were 28,000 construction jobs and 33,000 retail jobs. The education, health care, and business services industries each added 25,000 jobs.
In addition, for what might be the first time in many years, economists across the ideological divide have come to grips with one of the most argued points since the start of the Great Recession: It’s not about the national debt; rather it is about revenue, jobs, and economic growth. While that could be seen as a minor adjustment in emphasis, it is an important one because it removes the cover that so many hid beneath.
Economists from Paul Krugman to Bruce Bartlett to Jan Hatzius to Richard Koo to Alan Blinder to Lawrence Summers to James K. Galbraith to John Makin and Daniel Hanson have declared that the way to worry about the nation’s long-term deficit is to not worry, to stay calm, to deal with it in a few years when the economy is better.
“The federal government is not on the verge of bankruptcy,” economics columnist Martin Wolf said last week in the Financial Times. “If anything, the tightening has been too much and too fast. The fiscal position is also not the most urgent economic challenge. It is far more important to promote recovery. The challenges in the longer term are to raise revenue while curbing the cost of health. Meanwhile, people, just calm down.”
According to E.J. Dionne of The Washington Post, Wolf, a “thoroughly pro-market economist," offers excellent advice. Wolf is not alone.
In the same column, Dionne quotes conservative economist Bruce Bartlett, a former White House advisor to Ronald Reagan and George H.W. Bush, saying: “In fact, our long-term deficit situation is not nearly as severe as even many budget experts believe. The problem is that they are looking at recent history and near-term projections that are overly impacted by one-time factors related to the economic crisis and massive Republican tax cuts that lowered revenues far below normal.”
In his Jan. 29 column, “Outsourcing, Insourcing and Automation,” for The New York Times, Bartlett wrote that one of the major issues facing the nation is unemployment, in particular cyclical unemployment that is turning into structural unemployment. Cyclical unemployment, Bartlett argues, does not have the same long-term impact as structural unemployment, which occurs when workers’ skills do not match the jobs being created.
“The longer someone is out of work, the less likely that person is to find a job,” Bartlett wrote. “Skills deteriorate, younger workers tend to be hired for available vacancies, jobs move to new geographical locations and so on.”
According to former treasury secretary Lawrence Summers, we cannot “lose sight of the jobs and growth deficits that ultimately will have the greatest impact on how this generation of Americans live and what they bequeath to the next generation.”
Even the International Monetary Fund has admitted that it underestimated the damage poorly-timed austerity has on economic growth.
Meanwhile, economic analysts at Goldman Sachs recently told clients that this country still has the world’s strongest economy. Goldman’s analysts also said there are “key economic, institutional, human capital and geopolitical advantages the U.S. enjoys over other economies.”
For example, gross domestic product in the U.S. is almost $16 trillion, “nearly double the second largest (China), 2.5 times the third largest (Japan).” Goldman also says America will continue to enjoy an advantage over other nations because this nation's work force is younger and more energetic; America has greater natural resources, including oil, gas and arable land; America performs the greatest amount of research and development; and America is still the land of choice for motivated immigrants, including those who are highly educated.
So as James K. Galbraith said: Stop worrying about our long-term deficit problem because we don’t have one.
“Foggy rhetoric about ‘burdens’ that will ‘fall on our children and grandchildren’ sets the tone of discussion,” Galbraith wrote in an Aug. 9, 2011, article for The New Republic. “The concept of ‘sustainability’ is often invoked, rarely defined, never criticized; things are deemed unsustainable by political consensus. Backed by a chorus of repetition from the IMF, headline-seeking academics, think-tankers, and, of course, the ratings agencies.
“But there isn’t, in fact, a ‘long-term deficit problem.’ So long as interest rates stay below the growth rate, as they are, debt-to-GDP levels eventually stabilize and even decline. The notion that there is a big problem is pure propaganda based on pseudo-debate, pitting two viewpoints that nevertheless converge on the practical issue.”
Galbraith’s point from more than a year ago was recently supported by Makin and Hanson of the conservative American Economic Institute. The two concluded that trillion dollar deficits are sustainable for now because of low interest rates.
“The Chicken Little ‘sky is falling’ approach to frightening Congress into significant debt reduction has failed because the sky has not fallen,” the two wrote. “Interest rates have not soared as promised… Trillion dollar federal budget deficits have continued to be sustainable because the federal government is able to finance them at interest rates of half of a percent or less. Two percent inflation means that the real inflation-adjusted cost of deficit finance averages -1.5 percent.”
Indeed, it's about jobs and growth.
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