By Jennifer Rubin – The Washington Post.
The Wall Street Journal reports: “U.S. employers added a seasonally adjusted 178,000 jobs in November and the unemployment rate fell to 4.6%, the Labor Department said Friday. While the rate was the lowest since August 2007, it reflected some people finding jobs while even more dropped out of the workforce.”
Certainly troubling trends continue. (“Declining participation in the labor force is one of the nation’s more worrisome economic trends, highlighting crosscurrents that have lifted the prospects of many Americans while creating new challenges for others.”) And there are some specific bright spots. (“A broad measure of unemployment and underemployment, which includes those who have stopped looking and those in part-time jobs who want full-time positions, was 9.3% in November, down from 9.5% the prior month and the lowest level since April 2008. The rate averaged 8.3% in the two years before the recession.”) However, as we anticipate a new administration with a president who painted the U.S. economy as a wreck, some perspective is in order.
Credit is due to President George W. Bush and, in turn, President Obama (and the Federal Reserve and the presidents’ respective treasury secretaries) for the emergency measures that averted a meltdown of the financial system. Bush passed and Obama continued the Troubled Assets Relief Program, which right- and left-wing populists bitterly opposed.
My colleague Robert Samuelson wrote: “One lesson of the financial crisis is this: When the entire financial system succumbs to panic, only the government is powerful enough to prevent a complete collapse. Panics signify the triumph of fear. TARP was part of the process by which fear was overcome. It wasn’t the only part, but it was an essential part. Without TARP, we’d be worse off today.” That was in 2010, when unemployment was close to 9 percent.
Given the large gap in time between the nearly billion dollar stimulus and the onset of real job growth, we are less convinced that this played much of a role in reviving a then-$15 trillion economy. (Liberals complained it was too small to work — before deciding that it gave us the “Obama recovery.”)
The alarmists on all sides got it wrong. Obamacare didn’t sink the economy, nor did the expiration of a sliver of the Bush tax cuts. Those on the right who claimed otherwise were wrong. Meanwhile, the absence of a second stimulus did not prevent us from reaching 4.6 percent unemployment. Inequality did not, contrary to the president’s frequent claims, impede recovery. The left had those things wrong. Populists were also off base: Trade deals don’t prevent us from growing or adding substantial numbers of jobs. (We have job churn, not losses because of trade, and many other factors.) The trade deficit does not mean we are losing jobs or failing to grow; the opposite is true.
Each side will claim the recovery would have been better and faster if it had its way, but our point is that essential gridlock for eight years after TARP did not cause economic calamity. We should promote pro-growth, pro-job programs but with caution and humility to admit the U.S. economy left to its own devices generally recovers. (There certainly are other reasons — inequality, upward mobility, wage growth — for pursuing some robust policy changes. Liberals, conservatives and populists will differ as to what those are.)
What is not in dispute is that Donald Trump will enter office in January with an economy that is nothing like the dystopia he painted. Before charging off to throw up tariffs or pass a massive tax cut that opens up a gusher of red ink, or throw 11 million people out of the country, perhaps some caution is warranted. We are not now in a recession, and we should stop pretending we are to justify extreme measures which carry unintended consequences. We are growing at 3.2 percent at last count; and Trump’s treasury nominee declares we can grow at a rate — get this — of between 3 and 4 percent.
We suggest getting back to reality and assessing our real needs:
- We have a gap between skills and the needs of the 21st century economy.
- We need to upgrade infrastructure.
- We have a Byzantine corporate tax code — made worse by Trump’s erratic threats and interventions — that encourages misallocation of capital. Sure, broaden the base and eliminate loopholes but keep it revenue neutral.
- We are in a competition with other countries for the best and brightest people but have an immigration system that favors family reunification, not economic value. (We also have an aging population and growing entitlement problem that would benefit from an influx of young workers, at a range of skill levels.)
- We still have under-performing K-12 schools and a higher-education system that could be cheaper and more varied.
- We could use some rational regulatory reform. (“Greater use of market-based solutions is one promising avenue,” writes Michael Boskin. “A complementary useful tool would be to build conditional reforming regulation ‘sunsets’ into rules at interim periods if they failed to pass ex post independent cost-benefit tests based on interim data, thereby forcing corrective action. So long as such a process did not relax ex ante scrutiny, it would create incentives for regulatory agencies to design better rules in the first place. And the nature of costs and benefits considered must expand beyond direct costs to the effects of regulation on competition and innovation.”)
That would seem to be an appropriate starting point for an agenda to bolster and sustain a recovery. Rather than running around with their hair on fire, perhaps the new administration officials and Congress alike should commit to a simple rule: First do no harm.