A war president with a strong campaign has defied the electoral odds presented by the economy. It's not too early to begin to mend it.
November 3, 2004
President Bush seems to have defied the electoral logic inherent in the economic data that has been providing an ominous, if muted drum roll throughout his first term. This may be attributable to the fact that he is a war president and possibly to the effectiveness of Karl Rove and the campaign strategists in getting out the vote of the committed Republican base. Whatever the reason, the President must deal effectively with the economy early in his next term: we face unprecedented challenges which affect us both immediately and long into the future.
The war on terror has been joined and the President now will have a clear mandate to pursue it as he sees fit; America is with him and shown that it is no Spain, and the rest of the World can no longer ignore and rebuff him. But the economy is a vital concern.
With all due respect, most of what was said in the presidential campaign about employment and the economy was spin. But there's no getting away from the fact that there really is a malaise in the country that pretty much everyone can feel. What is the source of that malaise? Taking a look at the data provided by the Bureau of Labor Statistics provides some clues.
The first numbers to look at are the Change In Employment, which show how many new jobs were created or how many were lost. The numbers from the BLS website show that in the eight Clinton years, 1993 - 2000, 23 million new jobs were created; in no year did the number of jobs go down. During the four Bush years, 2001 - 2004, 874,000 jobs have been lost, net; the trend is obviously changing in the right direction with 1.6 million net-new jobs being created in the first nine months of 2004 but this has been a very difficult period for many people.
The last time that jobs were lost was in 1991, during the previous Bush's term. During Bush Senior's four years 2.5 million jobs were created; but he was voted out of office despite the fact of net job creation and despite the fact that this measure of the economy had turned up strongly before the election. Over ten years before, Jimmy Carter also had only one term; in the last two years of his presidency job creation turned down sharply, but even under Carter, net job creation was not negative and still Reagan made a resonant point in asking if we felt better off than four years previously ... obviously we did not.
It is this reality that has been defied by this election: the largest voter turnout and the largest popular vote under these circumstances gives a mandate. But it is more a mandate for the war on terror than it is a mandate for the economy; I believe that had the election been fought in the absence of the war on terror given the current economy, the outcome would have been different.
But the mandate is there, nonetheless. So the opportunity must be grasped. Health Savings Accounts, addressing the impending bankruptcy of Social Security and a simplified tax code will be big steps in the right direction. But more than that is needed because we have hit a wall. Not the normal wall of cyclicality but a permanent, secular wall that is being created by the very success of our economic system, a wall that has China as its icon, a wall that cannot be broken with protectionism and to which we must significantly adapt. Newly re-elected President Bush must use his mandate and lead the charge.
A further two statistics amplify this point. The first is the Unemployment Rate. This number declined in every year of the Clinton administration. It rose in the first three years of the Bush administration and only this year has it begun to fall, but at 5.4% in September, it's still the highest in several years. Never mind the fact that this number has been much higher in our lifetimes and never mind that it's below the average of 6.1% over the period from 1948 to now; the fact of the matter is that this country has become accustomed to lower numbers and the recent experience has shown they are attainable.
The last statistic is the Total Employment number: how many total people are employed? This number has been essentially flat after growing throughout all of the Clinton presidency. Everyone knows that Social Security is at risk because the Baby Boom generation is being followed by a much smaller working population, but the Total Employment statistics do not reflect this phenomenon, not yet. Not only are new workers coming into the workforce but the existing workers are staying longer and the economy must grow to accommodate them.
The locality of unemployment is fairly well understood, but there's nothing like a picture to bring home the point. The BLS provides a map showing the states color coded by unemployment levels. It shows that even the states that are believed to be providing job growth are suffering at the moment. Worker mobility is never a sufficient answer to regional economic difficulty but it's especially not sufficient in the current situation because there's nowhere to move to find relief.
GDP growth is the engine of job growth. It took a terrible hit in 2000 - 2001 with the twin disasters of the collapse of the Internet bubble and the corporate governance scandals that continue to be unearthed.
- President Bush is right that education is a jobs program; both basic education and re-education.
- He is also right to focus on the simplification of the tax code because in its current form, badly porked since its last real reform in 1986, it is a terrible burden; there is a realistic fear that any changes will simply perpetuate and aggravate the current scandalous situation, but the attempt must be made.
- Health care costs both burden employers and threaten individuals; I am not one to favor the large governmental programs of the Democratic party but at this point the electorate is probably nearly ready to give them a try because the burden is nearly insupportable.
- Neither Ronald Reagan nor anyone else showed that deficits don't matter. It is absolutely correct to point out that Mr. Rubin retired the 30-year bond on the strength of increased tax receipts driven by a hot economy. It is also correct fiscal policy for the government to go into deficit when the economy turns down, but the recent tax and spending bills have been bloated in fantastically irresponsible ways with pork barrel favors to K Street and elsewhere. A growing economy will once again help to pay down the current deficit, including the war costs, but it is very wrong to make the situation worse as the current Congress has consistently done, unchecked. The dual discipline of responsible spending and anticipating the deficit pay down need to be more in evidence that they have been of late.
In short, we need leadership from the next administration and it's not too soon to start to demanding it. President Bush just gave a speech that was extremely optimistic on all these points and America has good reason to be optimistic.
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