Bye-Bye, Bush Boom
By PAUL KRUGMAN
When does optimism — the Bush campaign's favorite word
these days — become an inability to face facts? On Friday,
President Bush insisted that a seriously disappointing jobs
report, which fell far short of the pre-announcement hype,
was good news: "We're witnessing steady growth, steady
growth. And that's important. We don't need
boom-or-bust-type growth."
But Mr. Bush has already presided over a bust. For the
first time since 1932, employment is lower in the summer of
a presidential election year than it was on the previous
Inauguration Day. Americans badly need a boom to make up the
lost ground. And we're not getting it.
When March's numbers came in much better than expected, I
cautioned readers not to make too much of one good month.
Similarly, we shouldn't make too much of June's
disappointment. The question is whether, taking a longer
perspective, the economy is performing well. And the answer
is no.
If you want a single number that tells the story, it's
the percentage of adults who have jobs. When Mr. Bush took
office, that number stood at 64.4. By last August it had
fallen to 62.2 percent. In June, the number was 62.3. That
is, during Mr. Bush's first 30 months, the job situation
deteriorated drastically. Last summer it stabilized, and
since then it may have improved slightly. But jobs are still
very scarce, with little relief in sight.
Bush campaign ads boast that 1.5 million jobs were added
in the last 10 months, as if that were a remarkable
achievement. It isn't. During the Clinton years, the economy
added 236,000 jobs in an average month. Those 1.5 million
jobs were barely enough to keep up with a growing
working-age population.
In the spring, it seemed as if the pace of job growth was
accelerating: in March and April, the economy added almost
700,000 jobs. But that now looks like a blip — a one-time
thing, not a break in the trend. May growth was slightly
below the Clinton-era average, and June's numbers — only
112,000 new jobs, and a decline in working hours — were
pretty poor.
What about overall growth? After two and a half years of
slow growth, real G.D.P. surged in the third quarter of
2003, growing at an annual rate of more than 8 percent. But
that surge appears to have been another blip. In the first
quarter of 2004, growth was down to 3.9 percent, only
slightly above the Clinton-era average. Scattered signs of
weakness — rising new claims for unemployment insurance,
sales warnings at Target and Wal-Mart, falling numbers for
new durable goods orders — have led many analysts to
suspect that growth slowed further in the second quarter.
And economic growth is passing working Americans by. The
average weekly earnings of nonsupervisory workers rose only
1.7 percent over the past year, lagging behind inflation.
The president of Aetna, one of the biggest health insurers,
recently told investors, "It's fair to say that a lot
of the jobs being created may not be the jobs that come with
benefits." Where is the growth going? No mystery:
after-tax corporate profits as a share of G.D.P. have
reached a level not seen since 1929.
What should we be doing differently? For three years many
economists have argued that the most effective job-creating
policies would be increased aid to state and local
governments, extended unemployment insurance and tax rebates
for lower- and middle-income families. The Bush
administration paid no attention — it never even gave New
York all the aid Mr. Bush promised after 9/11, and it
allowed extended unemployment insurance to lapse. Instead,
it focused on tax cuts for the affluent, ignoring warnings
that these would do little to create jobs.
After good job growth in March and April, the
administration declared its approach vindicated. That was
premature, to say the least. Whatever boost the economy got
from the tax cuts is now behind us, and given the size of
the budget deficit, another big tax cut is out of the
question. It's time to change the policy mix — to rescind
some of those upper-income cuts and pursue the policies we
should have been following all along.
One last point: government policies could do a lot about
the failure of new jobs to come with health benefits, a huge
source of anxiety for many American families.
John Kerry is right to make health care a central plank of
his platform. I'll analyze his proposals in a future column
