Thursday, September 16, 2004

"The current economic downturn"

If I understand it correctly, a relative of mine was just tasked by his school newspaper with explaining why the current economic downturn (sic) is not Bush's fault. Another student will argue the other side.

Current economic downturn?!?

Perhaps my relative's editors have been getting too much of their information from the New York Times, CBS News and the like. I could see that leading to a world view in which this sort of reasoning might prevail: Bush is in office and he's incompetent, so the economy must be in a downturn. Now let's debate whose fault it is.

Hate to break the news, but the economy's booming.

Here's my unsolicited draft attempt to write the article my relative was assigned:

In the last year our nation has seen the greatest rate of growth in the last two decades. We're growing faster than any other industrialized nation. The chairman of the Federal Reserve last week testified to the traction of the current expansion.

Let's look at some of the evidence:

  • Jobs. This economy has created roughly 1.7 million jobs in the last year. The federal government's household survey* shows more Americans working now than ever before in the nation's history. The survey also shows almost 2 million more Americans working now than when Bush took office.

    So, how do the employment numbers compare to recent history? In the 70s average unemployment was 6.2%. In the 80s it was 7.3%. In the 90s it was 5.8%. Today unemployment stands at 5.4%. Not bad.

    Bush policies created all this job growth despite two strikes:

    1. Bush inherited a recession, and
    2. About a million jobs were lost in the four months following 9/11.

    What, I hear my Democratic critics yelling, how can you say Bush inherited a recession?

    Well, the stock market started to dip in spring of 2000, well before Bush took office (in January 2001). In the third quarter of 2000, growth was negative, and after small positive growth in the fourth quarter, it was negative again in the first quarter of 2001. By late 2000, there was widespread feeling among economists that we were headed towards a downturn. The official start of the recession was March 2001, about forty days after Bush took office. There is no conceivable policy that Bush could have undertaken in those forty days to avoid recession. Indeed, this was a Clinton-Gore recession. Bush's first ecomomic policies were not signed into law until considerably later in 2001, after the recession was well underway.

    A point of interest regarding the discussion of jobs during this campaign: Be wary of Kerry supporters who like to talk about supposed job loss in the private sector only. This ignores the roughly 900,000 new public sector jobs (most of which are teaching jobs).

  • Home ownership. More Americans own homes than at any other time in the nation's history (in both percentage and absolute terms). And minority home ownership also is at an all-time high.

  • Other ecomomic indicators: Inflation rates remain in check, interest rates remain low and productivity remains high.

  • Taxes. Bush has lowered the tax burden for all tax-paying Americans, and (despite what you may have heard) the wealthy pay a higher portion of the income tax burden under the Bush tax cuts than they did previously.

In summary, Bush inherited a recession (compounded by the ecomomic consequences of 9/11), and he turned it around to the point where the country's economy is growing faster than it has in the lifetime of any current high school student.

* Note: Some people prefer to look at the payroll survey because it has a larger sample size. However, the payroll survey fails to count jobs created by new small businesses, entrepreneurs and sole proprietors, where much of the current job growth is focused.

Note to my relative: If you do decide to use any of this, check the numbers first. Many of them come from interview answers by the Secretary of Commerce, speaking without notes. You should probably verify the figures with unbiased sources. I have provided links to back some, but not all of the data. Some of the data (like minority home ownership) would be better if it were more current. Other data (like number of teaching positions created) need to be sourced.

Update: Turns out he only has 100 words.