It’s Not the Deficit, Stupid

From “That Terrible Trillion,” Paul Krugman, NYT:

“The first thing we need to ask is what a sustainable budget would look like. The answer is that in a growing economy, budgets don’t have to be balanced to be sustainable. Federal debt was higher at the end of the Clinton years than at the beginning – that is, the deficits of the Clinton administration’s early years outweighed the surpluses at the end. Yet because gross domestic product (GDP) rose over those eight years, the best measure of our debt position, the ratio of debt to GDP, fell dramatically, from 49% to 33%.

“Right now, given reasonable estimates of likely future growth and inflation, we would have a stable or declining ratio of debt to GDP even if we had a $400 billion deficit. You can argue that we should do better; but if the question is whether current deficits are sustainable, you should take $400 billion off the table right away.

“That still leaves $600 billion or so. What’s that about? It’s the depressed economy – full stop.

“First of all, the weakness of the economy has led directly to lower revenues; when GDP falls, the federal tax take falls too, and in fact always falls substantially more in percentage terms. On top of that, revenue is temporarily depressed by tax breaks, notably the payroll tax cut, that have been put in place to support the economy but will be withdrawn as soon as the economy is stronger (or, unfortunately, even before then). If you do the math, it seems likely that full economic recovery would raise revenue by at least $450 billion.

“Meanwhile, the depressed economy has also temporarily raised spending, because more people qualify for unemployment insurance and means-tested programs like food stamps and Medicaid. A reasonable estimate is that economic recovery would reduce federal spending on such programs by at least $150 billion.

“Putting all this together, it turns out that the trillion-dollar deficit isn’t a sign of unsustainable finances at all. Some of the deficit is in fact sustainable; just about all of the rest would go away if we had an economic recovery.”  Emphasis added.

It’s Nice That Someone’s Looking Out for Our Economy

The Federal Reserve announced significant monetary easing today that will continue until unemployment falls below 6.5% or inflation rises about 2.5%.

Not sure who is happier today, me or Paul Krugman, but this is excellent news for the economy.


Last Jobs Report Before the Election

The unemployment rate ticked up to 7.9% from 7.8% in October, but that was because more people were looking for work.

There were 171,000 jobs added in October, more than the 125,00 economists anticipated, plus the August and September numbers were revised upward, with another 84,000 jobs added.

Nothing election-changing here.

“Rough Justice” in Unemployment Drop

From “Jobs Report:  Cooked Or Correct?,” Joe Nocera, NYT:

“It’s worth pointing out that the last time anyone accused the Bureau of Labor Statistics of being politically motivated was Richard Nixon.

[T]he idea that a handful of career bureaucrats, their jobs secure no matter who is in the White House, would manipulate the unemployment data to help President Obama, is ludicrous.  Jack Welch knows it, too; when I called him Friday afternoon, he quickly backpedaled. ‘I’m not accusing anybody of anything,’ he protested. [Welch had tweeted: “Unbelievable job numbers.  These Chicago guys will do anything.  Can’t debate so change numbers.”]

“[T]here is something truly absurd about having the presidential race hinge on the unemployment rate.  Even putting aside the reliability of the short-term numbers, the harsh reality is that no president has much control over the economy.  That is especially true of President Obama, whose every effort to boost the economy these past two years has been stymied by Republicans.  Again and again, they have shown they would rather see the country suffer economically than do anything that might help Obama’s re-election.

There is rough justice in the way things are playing out.  Having spent the last year wrongly blaming the president for high unemployment, Republicans can only stand by helplessly as the unemployment rate goes down at the worst possible moment for them.

“But the data were largely overwhelmed by positive signals.  In its revised figures for July and August, for instance, the bureau said that more jobs had been created than it originally estimated.  People with only high school degrees were finding jobs.  The number of people who had been out of work for six months or more was at its lowest point in three years.

“Whether the Republicans like it or not, the economy is slowly getting better.

“Awful, isn’t it?”  Emphasis added.

Education = Employment

While the overall national unemployment rate is 8.1%, there is a wide disparity based on education levels.

College graduates have a rate of 4.1%, those with two year of college are at 6.6%, high school graduates are at 8.8%, and high school dropouts are at 12%.

Anybody can end up unemployed, but if you have a college degree you have one-third the risk of a high school dropout.

Uh Oh

From “Professors’ study predicts Romney win,” Alex Byers, Politico:

“Mitt Romney will win the popular vote and take the White House with more than 300 electoral votes, according to an election model that correctly determines the winner when applied to the last eight presidential elections.

“The model, based on state-level economic data, predicts that President Barack Obama will lose nearly all key states that many observers view as toss-ups: North Carolina, Virginia, Ohio, Florida, Colorado, Wisconsin and New Hampshire. He’d also drop Pennsylvania and Minnesota, where polls indicate Obama is ahead, the study says.

“The analysis, authored by Colorado political science professors Kenneth Bickers and Michael Berry, looks at unemployment rates and per capita income from the last 22 years and builds a model that would have accurately predicted each election. It also looks at other indicators, like which party currently holds the White House.”

Ok, but Mitt wasn’t the nominee in any of those last eight presidential elections.

Laura Ingraham Slams Mitt and His Miserable Campaign

I remember Laura Ingraham speaking for Mitt at the Iowa Straw Poll in 2008.  Here she was on her radio show today:

“I might be the skunk at the picnic but I’m going to say it. I’m going to say it clear. Romney’s losing. I don’t like to start a Friday show with this, but I feel like I must.

“If the election were held today, Mitt Romney would lose. This is especially vexing when we have survey after survey showing that two-thirds of Americans think the country is going in the wrong direction. This is especially disconcerting when you see the numbers that came out yesterday on the voters’ confidence in America’s future: an overwhelming majority of Americans think America now is in decline and that their children’s future will not be as bright as their own. Forty-two months straight of over 8 percent unemployment.

“Each of these statistics on their own, on its own, should indicate a sizable win for a strong conservative. Mitt Romney cannot at this point be convincing himself that he’s winning. I hope they’re not. I hope the Romney campaign actually knows what’s going on with these numbers.”