November 12, 2013
That probably wasn’t his intention, but in a column where he tells readers:
“by historical standards, the United States is doing well domestically and internationally. And by any objective measure, the trend lines are positive, not negative,”
he shows the opposite.
His list of positives begins in the first paragraph:
“The economy is growing much more quickly than expected. Inflation is basically nonexistent. The federal budget deficit has been slashed dramatically. The stock market is reaching all-time highs. One of our long-running wars is over, and the other is winding down. The status of the United States as the world’s preeminent economic and military power is unchallenged.”
Okay, just about everything here is wrong. The economy grew 2.8 percent in the last quarter. According to the Congressional Budget Office we’re are 6 percentage points below potential GDP. They estimate the rate of growth of potential GDP as between 2.2 percent and 2.4 percent. This means that at the third quarter growth rate we will close the output gap and get back to full employment somewhere between 2023 and 2028.
But wait, it gets worse. The reason why the third quarter growth rate came in higher than expected was that inventories accumulated at a rapid pace. This means that cars were accumulated unsold on dealers’ lots and clothes were accumulating on store shelves. This means that production will almost certainly be cut back in the fourth quarter. That is not a positive story.
Even if the actual growth rate were 2.8 percent that would still be pathetic for a country with a severely depressed economy. We should be seeing growth in the range of 5-6 percent to make up lost ground. That is the sort of growth we saw in prior recoveries.
The other economic success stories are equally off base. We should want a higher inflation rate. That would mean lower real interest rates and reduced debt burdens for homeowners who took a hit in the housing crash. If Robinson has a story as to why the low inflation rate is good news he should write it out. It would win him a Nobel prize in economics.
The same is the case with his boast about the lower budget deficit. This means less demand in the economy and therefore slower growth and higher unemployment. Hey, let’s balance the budget and throw another 6 million people out of work. Then we can really celebrate!
It’s not clear why anyone would give a damn that the stock market is at a record high unless they are among the 20 percent of the population who own a substantial amount of stock. The value of stock is not an indicator of the well-being of the economy; it is a measure of the wealth of people who own stock. Why should the bulk of the population be happy that Bill Gates and Jeff Bezos are now much wealthier and can command a much larger share of the country’s output than was the case last year.
When Robinson tells us that by historical standards the United States is doing well he is using a history that he has invented. We are experiencing a downturn with a length and severity only exceeded by the Great Depression. The median household income in 2012 was below its 1997 level (Table A-1) meaning that the typical household has nothing to show for the last 15 years of economic growth.
It’s not clear if Robinson thought his column would really cheer people up, but to anyone familiar with the reality in America today, it is just depressing.
Oh, and China is about to pass the United States as the world’s largest economy for people who care about such things.
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