Guest Post: Are you better off?

The American Economy: Then and Now

by Samuel L. Skogstad, Ph.D.

October 9, 2012

In next month’s presidential election the voters face two candidates with strikingly different visions of the American economy, how it works and how its course should be influenced by government policy.  Democrats and Republicans seem to agree that a central question Americans will be answering with their votes is this: “are we better off now than we were four years ago?”

In this note we review the economic outcomes over the past eight years in three areas that are central to the evaluation of how “well off” we are as a nation: (1) jobs and employment opportunity; (2) Income (GDP) and its growth; and (3) government budget management, deficits and the national debt.  We conclude with a fourth section (4) which comments on the conduct of government economic policy.  These four areas were chosen in the belief that they are among the very highest priority concerns of all voters. 

1. JOBS AND EMPLOYMENT.   This comparison is very straight-forward.  By the measure of employment opportunity, the situation as of September 2012 was worse, by a staggering margin, than it was in September 2008.      

The data in the table below show an increase of 11 million in the working-age population over          this period.  Ordinarily, 6 to 7 million of these would have found jobs.  But in this interval, there were no new jobs, and in fact our economy lost over 2 million jobs that existed in September 2008.

                                 Table 1: Employment and Working-Age Population

                                                                        Bush                               Obama                                                                            

                                                                    (September 2008)         (September 2012)  

          Number Employed (millions)                  145.1                                143.0

          Population (16yrs+) (millions)                 234.4                                245.3   

          Employed as % of Population                   61.9                                  58.7

Thus the effective jobs shortage as of last month was over 8 million. (i.e. 6 million or more  new job seekers and two million jobs eliminated.)

 One can, of course, hope for significant improvement in the future. Nevertheless there is no honest way to reconcile data showing 11 million more working-age people and 2 million fewer jobs, with a story of being “better off.”

1. Income, Production and Growth.  Our population has added well over 10 million people in the past four years.  Of course all age groups are represented (though in varying proportions) in the growth, and all must be supplied with the goods and services to feed, house, clothe, educate and otherwise nurture them.  Even if Americans aspired to no improvement at all in per capita incomes, positive GDP growth would be required to meet the needs of the growing population.  Thus macroeconomic performance must be evaluated in the context of population growth.  (This GDP/Population relationship is shown in Table 2 below.)

In 2005 and 2006, aggregate production grew over three times as fast as the population (which grows at just less than 1 percent per year).  In 2007, evidence of a significant slowdown in production appeared, and December of that year is marked as the beginning of the 2007-2009 recession, the first downturn in 81 months.  The unemployment rate was 5.0 percent at that time, and real GDP managed 1.9 percent growth for the full year. 

But from mid-2008 to mid-2009 the recession was devastating.  Real GDP dropped steadily to an annual rate $600 billion (4.6 percent) below its value in the second quarter of 2008.  The unemployment rate jumped from 5.5 percent to 9.5 percent. On a per-person basis, real GDP fell over 5 percent. 

It is worth noting that the first quarter of 2009 ended the significant reductions in real GDP (hence the smaller decline shown in Table 2 below for 2009 GDP.)  The second quarter GDP was 99.9 percent of the first quarter value.  Thus in terms of real GDP alone, President Obama entered office just as the contraction was ending.  The most urgent economic problems his administration faced therefore were: (1) to encourage and support job creation and a broadly-based recovery of GDP growth; and (2) to take swift action to gain disciplined control of the federal government budget and the national debt.  As his term ends, neither of these accomplishments can be claimed.

                                    Table 2.  Value of U.S. Production of Goods and Services (GDP)

                          (Annual Data, 2005-2011, Quarter II for 2012.  Dollars Amounts in Billions)

                                   

                                    2004      2005       2006       2007      2008      2009      2010      2011      2012

TOTAL REAL GDP   12,247   12,623    12,958   13,206   13,162   12,758   13,063   13,299   13,549

Percent Change               3.5          3.1           2.7          1.9         -0.3        -3.1         2.4         1.8          1.3

                               

 PER CAPITA GDP                                                    (In 2005 $)

                                 41,618    42,505   43,370    43,683   43,729   41,370    42,091   42,572   43,143

Percent Change                        2.1          2.0           0.7          0.1         -5.4         1.7          1.1          1.3                                                              

                                                    

                                      GDP in PREVAILING CURRENT PRICES                                                                                                                                                                                                       

TOTAL GDP            11,853    12,623   13,377   14,029    14,291   13,974   14,499    15,076     15,586 

% Change                   6.4          6.5          6.0         4.9             1.9        -2.2         3.8          3.9            3.4 

Source: U.S. Department of Commerce, BEA, NIPA Tables1.1.6 (www.bea.gov) Updated September 27, 2012 for GDP.  BUCEN for population data.

Real GDP declined slightly in 2008, and then very dramatically in 2009.  In 2010 there was a spurt of growth (2.4 percent) though the pace slackened to 1.8 percent in 2011 and further to 1.3 percent in 2012. GDP did recover its 2007 level in 2011, and is now above that mark.  Nevertheless, on a per capita basis, it is still $600 below the 2008 high.  With the real growth rate falling, there is little on which to base optimism for a continued or stronger recovery.

3.      Managing the National Budget, the Deficits and the National Debt.  The key measures of the government’s management of the public finances are its yearly budget deficits, and the resulting changes in the national debt.  Over relatively short periods, a government may have little ability to control these flows.  However, over a full four-year term, any administration must accept responsibility for its own fiscal management, regardless of the situation it “inherited” from its predecessor.

A.  The Deficits.  Focusing on deficits, we see that the maximum reached during President Bush’s last term was one-half of one trillion dollars in FY 2008.  This represented 3.8 percent of GDP, a key component of the nation’s “ability to pay.”   For FY 2009, during which President Bush was in office for three months and President Obama for 9 months, the deficit peaked at a record-breaking 11 percent of GDP.

                           Table 3. U.S. GOVERNMENT BUDGET MANAGEMENT

                                                     (In Trillions of Dollars)

       THE BUSH YEARS                                                         THE OBAMA YEARS              

                                             Surplus (+) or                                                                      Surplus(+) or

         Receipts     Outlays       Deficit (-)                                      Receipts     Outlays       Deficit(-) 

                                            $     %GDP                                                                       $       %GDP

                                                                                

2004    1.9        2.3            - 0.4      3.3              2008                2.5              3.0          -  0.5       3.8

2005    2.2        2.5            - 0.3      2.4              2009                2.1              3.5           - 1.4     11.0

2006    2.4        2.7             -0.2      1.6              2010                2.2              3.5            -1.3     10.0

2007    2.6        2.7             -0.2      1.5              2011                2.3              3.6            -1.3       9.8            

2008   2.5         3.0            - 0.5      3.8              2012                2.5              3.8            -1.3       9.6

Source: U.S. Department of Commerce, Bureau of Economic Analysis (BEA), Public Web Site.

If we consider the budget outcomes for the entire period 2004 to 2008 (the Bush Administration), we find that the average of the annual budget deficits was 2.5 percent of GDP.  Adding in FY 2009, the average rises to only 3.9 percent of GDP.  This contrasts sharply with the record of the current (Obama) Administration.  Considering only the fiscal years 2010 through 2012 the responsibility of the Obama Administration, the average annual deficit is 9.8 percent of GDP.  The apparently low priority in the past four years of sound budget management, has created such a national debt that it portends ever increasing difficulty in managing future budgets.  The failure of the Administration to craft a budget acceptable to either party contributes to the fiscal stress our country now faces.  

To hope that the future will be better is natural.  But to expect that hoping it will make it so is not a promising strategy.  As for the facts right now, they make it clear that we, as a nation, are not better off with current fiscal management strategies than we were with those of four years ago.

B.  The National Debt.  This too is a very short story in terms of the question “are we better off now than we were four years ago?”  At the end of the Bush Administration, our government owed our creditors $10 trillion (the value 7 months of this year’s total GDP.)  Today we owe a little over $16 trillion, an increase of 60 percent, and more than the value of a full year of our nation’s total production of goods and services (GDP).  In each of the four years ending last month, government outlays have far exceeded revenues, and the sizes of these deficits---both in dollars and as a percentage of the national economic “pie” (GDP) are rarely seen in peace-time American economic history.  In the past four fiscal years, the U.S. Government  paid out over $15 trillion, though its receipts of tax and other revenue was “only” $9 trillion. The difference is approximately the amount that has been added to our national debt.

4.  Comments on Government Economic policy management.  Economic outcomes can be influenced by government economic policy, most particularly in the short-term.  The outcomes presented above are quantified and hence are subject to little dispute.  As President Clinton famously declared in his Democratic Convention speech, “the numbers are what they are, it’s just a matter of arithmetic.”  In this section, we offer a brief commentary on the connection between the observed outcomes and government policy.

As noted earlier, the recession of 2007 to 2009 was almost over when President Obama took office.  Thus his greatest economic challenge was to use the tools of economic policy at his disposal to ignite and sustain a vigorous recovery.  While a sluggish increase in GDP and employment has begun, it has for the better part of the past two years become more sluggish.  GDP per person and employment both remain below their levels when President Obama took office.  The national debt has soared 60 percent and annual deficits under his administration (10 percent of GDP) have been double the share of GDP that most economists would consider acceptable, and more than double those of the previous 4 years.  Thus it is perfectly appropriate to ask why this Administration has not been able, in almost four years, to ignite a recovery.

There are two contributing factors relating to government anti-cyclical economic policy.  First, although total budgetary outlays and deficits increased significantly after 2008, the share of those outlays going to purchases of goods and services declined as transfer payments increased.  This is seen in the GDP accounts which show very small increases in the Government Spending component of GDP.  A second contributing factor was the government’s use of appropriated “economic stimulus” funds for such projects as promoting alternative energy sources (e.g. making gasoline out of corn) and high-speed rail transportation.  Both categories of projects use relatively little labor, and have relatively long gestation periods.  Neither characteristic is conducive to prompting recovery from a cyclical downturn.

Fundamentally, the policy preferences revealed by the Obama Adminsitration show a lack of confidence in free markets to produce efficient and equitable economic outcomes.  The Republican candidate, on the other hand appears to  see private markets as the appropriate default mechanism for allocating resources and distributing income.  However, this vision also includes government standing ready to “referee” the system, fill in where markets are ineffective, and provide an environment hospitable to economic innovation and growth.  In next month’s presidential election, the voters will have an opportunity to cast a vote for whichever of these visions best represents their own views on the matter.

Samuel L. Skogstad is Professor Emeritus and

Retired Chairman of the Department of Economics

At Georgia State University.  He is also a retired

Senior Foreign Service Officer of the United

States Agency for International Development,

where his last assignment was as Director of

Economics in the Bureau for Eastern Europe and

the Republics of the former Soviet Union.  He

resides in Sarasota, Florida. 

Visiting the Wounded at Fort Hood

We must be respectful of the president

Just as the liberals were of George Bush. And for God's sake, don't show him as a chimp, as they did with Bush. That would prove racism.

What would the media have said?

What would the media have said if George W. Bush, like Barack Obama, had…

--Run up first-year deficits that were the largest in history, higher than all the preceding eight years’ deficits combined?

--Promised to cut waste by going through the budget line by line and striking out items, then signed a pork-laden budget that doubled the national debt in five years, without asking Congress for one change?

--Sent his kids to a tony private school, then killed the Charter Schools program for Washington, DC which gave poor black parents the right to choose their children’s schools.

--Passed a budget that will double the national debt in five years?

--Promised "not one penny in new taxes on people making less than $250,000 a year," then raised the cigarette tax $1.01 a pack, which hits the poorest people hardest, because they smoke more?

--Denigrated the Special Olympics on the Leno show?

--Said he had campaigned in 57 states with one to go?

--Called a local cop “stupid” for an arrest?

--Promised to meet with the “president” of Canada, which has a prime minister, not a president?

--Said that Iraq was soaking up translators needed in Afghanistan (though they speak different languages)

--Given the Queen of great Britain an iPod of his speeches?

--Given the Prime Minister of Britain DVDs that don’t play on British TV, which has a different format?

--Mentioned in German-speaking Austria the non-existent “Austrian Language”?

--Asked the public to report anything said that was “fishy” about his policies to a special White House e-mail site?

--Scheduled an address to all the nation’s school children on the Internet and had the Education Department send out teaching materials with questions like, “What can we do to help the President?” and suggested the kids read books praising him in advance.

--Claimed that his uncle helped liberate Auschwitz, actually liberated by Soviet troops?

--Claimed that 10,000 people had died in a Kansas tornado which actually killed 12?

--Claimed that his parents got together because of the events of “Bloody Sunday” in Selma, AL, which took place four years after he was born?

--Appointed several tax scofflaws to high government positions.

--Appointed a self-described communist who publically called senators of the other party “a--holes,” to a high administration position.

--Stated one day that Iran doesn’t “pose a serious threat to us.” And the next day that, “I’ve made it clear for years that the threat from Iran is grave”?

--At a speech, pointed to secretary of Defense Robert Gates and said that “William Gates was on hand”?

--Hired an agency to gather e-mail addresses and other information about folks from social networking sites?

--Refused to open his educational records?

--Called a black performer a “jackass”?

--Told Congress during an address a tear-jerker story about a man who died due to losing insurance, which wasn’t true. http://www.redstate.com/erick/2009/09/16/barack-obama-did-lie-in-his-speech-he-got-the-facts-wrong-in-his-tear-jerker-story/

What would the media have said if George W. Bush, like Joe Biden, had…

--Said, “When the stock market crashed (1929), Franklin D. Roosevelt got on the television and didn't just talk about the, you know, the princes of greed. He said, 'Look, here's what happened.'” which was long before US Homes had TVs and before Roosevelt was President?

--Asked a man in a wheelchair to “stand up to be recognized”?

Going back further, what would the media have said if George W. Bush, like Bill Clinton, had…

--Been legally accused of sexual harassment?

--Lied under oath in that sexual harassment case?

--Had sex with an employee in the White House oval office?

--Been accused by another woman of rape? (Remember how feminists used to say that “women don’t lie about rape” and that a boss having sex with an employee was the equivalent of rape because of the power difference?)

--Commuted the sentence of a former Congressman of his party who was convicted on 12 counts of sexual assault, obstruction of justice and solicitation of child pornography and convicted on 15 unrelated counts of bank fraud and lying to SEC investigators.

--Pardoned a “most-wanted” indicted international fugitive, whose former wife had made large donations to the President’s party?

--Told reporters he remembered the pain of Black churches being burned in Arkansas when he was a boy. A reporter checked and found no news reports that this had happened.

If Bush had done any of these things, large or small, the MSM would mention it every time they mentioned Bush's name.

If the National Debt was a road trip

This makes the situation easy to visualize for the math impaired.

http://www.youtube.com/watch?v=P5yxFtTwDcc

Just Blame it on Bush!

Is Gitmo still a thorn?
Does your base look so forlorn?
You can still protect your tush—
Just blame it on Bush!

Has Detroit just cooked your goose?
Is Osama still on the loose
Out in the Hindu Kush?
Just blame it on Bush!

Are the banks still going down?
Does Korea make you frown?
Oh, when shove comes to push,
Just blame it on Bush.

Is Iran still hanging Gays,
And your cabinet no taxes pays?
Well don’t let them frost your tush—
Just blame it on Bush!

Is Joe Biden mouthing off?
And the terrorists think you’re soft,
While Israelis your buttons push?
Just blame it on Bush!

As new problems now evolve,
There are none that you can’t solve,
You’re got answers up the tush—
Blame them all on Bush!

~Rab the Rhymer

Where's yur Willie Shakespear noo?

Okay, you can do better. Post additional verses as comments.

Who Upheld American Values?

Our Values and Terrorist Incentives
By Randall Hoven

It has become fashionable to condemn President Bush not only for violating "our values", but also for spawning anti-US terrorists. These thoughts only make sense if you ignore all US history through 2007.

In his speech to the 2009 graduating class of the US Naval Academy, President Obama used the word "values" nine times. Specifically, he said,

"We uphold our fundamental principles and values not just because we choose to, but because we swear to; not because they feel good, but because they help keep us safe and keep us true to who we are. Because when America strays from our values, it not only undermines the rule of law, it alienates us from our allies, it energizes our adversaries, and it endangers our national security and the lives of our troops. So as Americans, we reject the false choice between our security and our ideals. We can and we must and we will protect both."

Our Values

What were "our values" before Bush? I assume we could infer such values from the actions of Democrat Presidents. Let's look at some.

President Franklin Delano Roosevelt ordered the internment of over 110,000 Americans of Japanese descent during World War II, most of whom were US citizens, over half being women and children. These people lost their homes, property and liberty without due process - no trials, no tribunals.

In 1942, six men who had lived in the US prior to the war were caught on US soil suspected of intending to bomb various US infrastructure sites. They had not done any actual bombing when they were caught. President Roosevelt ordered a special military tribunal consisting of seven generals (not a civilian trial). While none of the Germans was waterboarded, as far as we know, six of them were executed by electric chair.

President Harry Truman decided to drop two nuclear bombs on Japanese cities - civilian population centers, not military complexes. The civilian death count at Hiroshima alone may have exceeded 200,000 . (The estimated Iraqi civilian death count is about 100,000 to date, none of which were targeted as civilians and almost all of which were due to the actions of other Iraqis or foreign jihadis.)

In 1961, President John F. Kennedy authorized the Bay of Pigs invasion of Cuba in an attempt to overthrow the Castro regime. The US had not declared war on Cuba, nor had Congress passed any authorization of the use of force.

In 1962, JFK increased the number US military advisors in Vietnam from 700 to 12,000. At that time there was neither a declaration of war nor a congressional authorization of the use of force.

JFK's successor, Lyndon Baines Johnson, asked for and received from Congress an authorization for the use of force in Vietnam. (The vote was unanimous in the House, and received only two No votes in the Senate, all under Democrat majorities.) By 1968 there were 540,000 US troops in Vietnam. (At the height of the "surge" in Iraq, there were 177,000 US troops in Iraq.)

US fatalities peaked in 1968, with the cumulative total being 36,152 through 1968. In that year, America's anchorman, Walter Cronkite claimed, "It seems now more certain than ever that the bloody experience of Vietnam is to end in a stalemate."

Yes, boys and girls, Vietnam went from 700 US military advisors and 9 US fatalities to 540,000 US troops, 36,152 US fatalities, and a "stalemate", all under Democrat Presidents and Congresses, before Richard Nixon ever took a seat in the Oval Office. (Total US military deaths in Iraq to date number 4,300.)

The above litany is all from the 20th century. If we go back to the 19th century, we could list what various Democrats from Andrew Jackson to James Buchanan did for Native Americans and black slaves. Hints are Trail of Tears and Dred Scott, all occurring before a Republican was ever elected President.

I recall this history not to condemn it, or to condemn Democrats of the past, but to condemn those today who twist that history beyond recognition to pursue their own agendas.

The post-WWII period is now known as the time the US enjoyed the most international support and influence. Funny, isn't it, that that occurred just after the US dropped two atomic bombs on cities full of civilians?

Terrorist Incentives

And what of this notion that when we stray from our "values", it "energizes our adversaries"? (Note that we do not have "enemies" now, only "adversaries.") Others have been more specific about when we strayed from our values; they mean Abu Ghraib, Guantanamo abuses, and waterboarding.

The Abu Ghraib abuses and photos became public in April of 2004. Newsweek published (and later retracted) its "flushed Koran" story about Gitmo in 2005 . The public became aware that the CIA used waterboarding in 2007.

Let me recount some terrorist activities that happened prior to 2004.

The World Trade Center was bombed by Islamists in 1993, killing six and injuring 1,042. The intention was to topple the tower and kill thousands.

US Special Ops forces in Mogadishu suffered 18 fatalities while fighting Islamist allies of Osama bin Laden in 1993.

Osama bin Laden declared war against the U.S. in his fatwa of 1996.

The Khobar Towers used to house our servicemen in Saudi Arabia were bombed by Islamists in 1996, killing 19 US servicemen.

Our embassies in Tanzania and Kenya were bombed in 1998 by bin Laden supported Islamists, killing at least 223 and injuring thousands.

The USS Cole was bombed in 2000 by Islamists, killing 17 US sailors.

In 2001, Islamic terrorists highjacked four commercial airliners and flew them into the World Trade Center and the Pentagon, and crashed one in Pennsylvania, killing almost 3,000 - more than died at Pearl Harbor.

The insurgency in Iraq began prior to April 2004. From May of 2003 (after the fall of Baghdad) through March of 2004, 466 US troops were killed in Iraq.

April and November of 2004 were the bloodiest months in Iraq, with 135 and 137 US fatalities, respectively. These dates were well before the Gitmo "flushed Koran" or waterboarding stories became public.

All it takes is a belief in the principle of causality (effect cannot precede cause) to see that Abu Ghraib, Gitmo abuses, and waterboarding were not what instigated anti-US violence by Islamic extremists.

Not to mention, we are talking about a group of people who can find excuses to kill innocents because of a Danish cartoon or movie . Their answer to "why are you killing?" is straight out of the move The Wild One: "whaddya got?" Abu Ghraib will do. So will a cartoon of Mohammed. So will girls attending school.

Upholding Our Values

Despite our history, and despite what it takes to recruit jihadis, did we stray from our values in recent years?

Concerning Abu Ghraib, Gitmo and waterboarding:

Abuses at Abu Ghraib and Gitmo did not result from directives from Bush, Cheney, Rumsfeld or any other high authority. They were investigated, the guilty punished, and reformed procedures installed. The "flushed Koran" story was not even true.

Waterboarding was conducted on three men not long after 9/11, all of whom had time-critical information that could save thousands of lives. It was not attempted until all other techniques failed. The technique, never outlawed by Congress, was vetted by multiple attorneys, briefed up the chain of command and briefed to legislators, including Nancy Pelosi, before being used.
The waterboarding procedures were carefully calibrated (so many ounces per pour, so many pours per minute, so much time between pours, so many times a day, etc.), and conducted under the watch of both a physician and a psychologist, in order to prevent crossing the line into "torture."

"Our values" were indeed upheld. The Constitution was followed. The law was followed. When violations were discovered, there was investigation, trial and sentencing. Accusations to the contrary do not constitute proof, no matter how often repeated.

Try this multiple-choice question:

A global network of highly zealous and violent men have declared war on the US via fatwa and conducted multiple attacks on American interests resulting in dozens of dead Americans, culminating in a highly coordinated attack on New York City and Washington, DC, that killed 3,000. They seek WMD. What should the President do?

(a) Everything possible.

(b) Everything possible within the constraints of the law and the Constitution, perhaps even testing those limits in court.

(c) Little more than his predecessor, treating global terrorism as any other criminal activity and going nowhere near constitutional limits.

(d) Whatever the ACLU requests.

President Bush chose (b). I agree with that choice and think any reasonable person would. It was not a "false" choice.

If you think Bush chose (a), please tell us where he exceeded his constitutional authority. And please, be specific. Credible claims have already been investigated and some have gone to court. In most cases, the courts upheld the President's position. In those few where they did not, procedures were changed to conform to court rulings. If you can identify any innocent people who suffered only due to procedures later ruled unconstitutional, please let me know.

Where I think we did not uphold our values was in providing classified information on exactly how we interrogate those trying to kill us. Every enemy of the US now knows we will never harm him in any way, once detained. He knows every threat is a bluff. He knows every apparent act against him is carefully calibrated to do him no physical or mental harm.

We had never disclosed such information to our enemies in over 200 years in existence as a country. It would have been considered treasonous in any previous time.

In short, Bush upheld our values; Obama did not.

"So as Americans, we reject the false choice between our security and our ideals," said President Obama.

The man does have a gift for ignoring history, defying logic, imposing his agenda and blaming Bush with such economy of language.

Randall Hoven can be contacted at randall.hoven@gmail.com or via his web site, kulak.worldbreak.com.

Page Printed from: http://www.americanthinker.com/2009/05/our_values_and_terrorist_incen.html

Posted with the author's kind permission.