Sunday, October 2, 2011

Post-Recession Growth and Faith-Based Economics

If a person says "I cannot prove what I believe, but I choose to believe it anyway," he may be describing his religious faith. If a person says the same thing about his economic beliefs, who might you be talking to?—a Republican of course. The current urgency associated with job creation has again caused the two parties to separate into fact-based and dogmatic camps. The Democrats say job creation is lagging because demand is lagging. It has been revealed to Republicans that job growth is lagging because cash-laden corporations are uneasy about the future due to the fear and uncertainty associated with government regulation.

Lawrence Mishel addresses this issue with an article on the Economic Policy Institute site: Regulatory uncertainty: A phony explanation for our jobs problem. Mishel easily demolishes the Republican revelations and demonstrates that this recovery has many of the same characteristics as recent recessions. In terms of job creation, the weakest recovery of all was from the 2001 recession under the Republican, antiregulatory Bush administration.

Mishel provides us with this graph of investment activity covering several recessions.

"The data show that investment has increased more in this recovery than in the prior two recoveries and roughly the same as that of the 1980s recovery. It is interesting to note that there was no growth in investments (as a share of GDP) in the George W. Bush recovery. That means that this recovery, with Obama regulations pending, is far more investment-led than the recovery under the deregulatory Bush administration."

This graph presents data on job growth subsequent to the ends of the given recessions.

"The three recoveries since 1991, however, had very little job growth, at least at first, and all have been referred to as "jobless" recoveries. There was much faster employment growth in the 1980s recovery—mostly because the Federal Reserve had much more room to support this recovery through lower interest rates than it has had during the post-1980s recessions (and the 2000s recoveries in particular). There is certainly nothing special about job growth in the current recovery that stands out from the 1991 and 2001 recoveries to indicate a special regulatory-caused job problem."

"The most unusual aspect of this recovery is that government jobs have declined by roughly 600,000 (2.6 percent), whereas government jobs grew in the prior recoveries. Obviously, the loss of government jobs is not the consequence of fears of regulation. Despite the loss of government jobs in this recovery but not the last one, there has been more job growth overall (public- and private-sector) in the first 25 months of this recovery (up 0.5 percent) than in the corresponding period in the 2001 recovery (when jobs fell 0.4 percent)."

Given the fact that this recovery is tracking other recent recoveries—why all the angst? It is because many people still do not realize, or choose to admit, that this, the Great Recession, was a Republican-orchestrated catastrophe causing economic damage on a scale not seen since the Great Depression. The magnitude of the event was made clear by Businessweek in this graph.

If you are unhappy with the current situation, blame it on the high priests of Republican orthodoxy who created this mess, not the current administration which seems to be performing about as well as possible. Dogma and facts have never gotten along well. All we know for sure is that faith-based economic policies will inevitably lead us to another disaster.

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