Economy vs. Letter

Real Life

Economy During the boom years of the Bush presidency — remember them? — economic growth was an especially unreliable indicator of how most Americans were doing.

The numbers were impressive, but the gains were lopsided, benefiting executives and investors far more than hourly workers and salaried employees. Because the growth was fueled by reckless lending and borrowing, it created an illusion of wealth even as many Americans lost ground.

The strange and painful disconnect was evident again in recent weeks.

The government reported that the economy grew at a surprising 3.3 percent in the second quarter, while productivity (the measure of how much workers accomplish per hour) soared. Unfortunately, those bounces did not mean a rebound in the lives of most Americans.

Growth rose, but so did unemployment. Productivity surged, but wages fell. Fixing that disconnect is the central economic challenge for the next president.

Increased exports were responsible for last spring’s strong economic growth numbers. But selling more abroad has not led to more manufacturing jobs or working-class pay raises at home.

One reason, as The Times’s Louis Uchitelle reported, is that manufactured goods accounted for an unusually low share of export gains in the first half of 2008, while commodities like corn and scrap metal accounted for an unusually high share. Worse yet, exports are likely to fall as the economies of Europe and Japan slow.

American consumers also helped drive recent growth, spending nearly $100 billion in government-provided stimulus payments. That was only a temporary lift. A true rebound cannot occur until the economy stabilizes. For that, oil prices have to settle at or below their recent levels; housing prices have to bottom out; and emerging economies, like China, have to avoid recession, thus propping up global growth.

Washington has little influence over those factors. But the government can try to stop things from getting much worse, helping to set the stage for a rebound. Congress will likely have to provide another round of stimulus — which should center on bolstered food stamps and grants to state and local governments. It may also have to provide more foreclosure relief.

That’s the easy part. Once the economy stabilizes, the creative and controversial work must begin to build an economy in which all Americans have a shot at sharing in the growth.

Senator Barack Obama has addressed the issue conceptually, rejecting the “you’re on your own” ethos of the Bush years. He has put forth prescriptions, including specific plans to create jobs with public-works investments, and he supports legislation that would make it easier for employees to form unions.

It’s well established that public-works spending yields a big economic bang for every buck and that unions lead to better pay. The politics are difficult. First, Americans must agree that government has a useful role to play in the economy, a notion that has been disparaged for decades. Big employers with powerful friends on Capitol Hill — Wal-Mart comes immediately to mind — can be expected to fight any attempts to foster unions.

Senator John McCain has also pledged to address the struggles of working Americans. Both candidates say their energy plans will create jobs. But Mr. McCain emphasizes more high-end tax cuts as the main engine for new jobs. Tax cuts are always politically popular. As job generators, however, they are a loser strategy, especially now. The Bush era, with its huge tax cuts, has the worst job-creation record of any post-World War II economic cycle.

America needs more jobs and American workers need a raise. Mr. Obama should sharpen his promising ideas. Mr. McCain has yet to address the real economy’s real problems head on.

Letter to the Editor for “Real Life Economy”

I found that it was very difficult for me to agree with anything said by the author, but for the purpose of trying to be constructive, objective, and encouraging I struggled to find a few points I liked. The author explains many facts that should be known to all Americans. S/He (I could not find the name of the author) tells us that although our economy is growing along with productivity, much of this gain is felt by the rich and hardly felt at all by the lower classes. He reports how unemployment has actually increased, despite the economic growth. He tells us about the fall in wage. His main point is to encourage the next president to fix these disconnects.

On the surface, all his points seem clear and obvious. He is attempting to use logos with all the facts used, and logical conclusions. To an economically ignorant reader (which most of us are) his arguments are effective and persuasive. He appeals to the part of us that wants everything to be “fair”. This is undoubtedly a hook to intrigue those readers that are feeling they are being paid/working unfairly. He is relating to all those looking for a change and rise in the middle class.

Despite his appeal to logic and facts, he takes facts out of context, and leaves out important details. He notes how unemployment has risen. Unemployment did rise, but this is sometimes a natural thing. Frictional unemployment is defined as being between jobs, and structural unemployment is defined as lacking new skills required for jobs. Both of these are not bad things. Between these two forms 4 percent of the unemployment lies. This is good unemployment. Cyclical makes up the bad part of unemployment, the part we can and want to prevent. It is estimated that this portion of unemployment remains low. Therefore either this author knows this about unemployment and is misleading the reader or s/he is unaware and therefore unfit to tell us how to think. The author also says things like how he wants to create more jobs and raise wages. These two things contradict each other. Entry level economics books teach you how increases in wages discourage employers from hiring more workers. That is common sense. If you have to pay your employees more, you can’t afford to hire as many. That is simple.

He explains how Obama is attempting to keep all the jobs in America (I guess this means putting tariffs on imports.) Again this looks good initially but as you look deeper it loses its strength. While increasing taxes on imports helps to sell American goods in America, it hurts all of those American manufactures who now are forced to buy expensive part over the cheaper foreign parts. The most open example of how this goes bad is our protected sugar industry. Our current sugar industry was inferior and less productive than the global competition so America (or more like the Sugar Lobbyists) set laws to increase taxes on foreign sugar “To Protect American Jobs”. While this seems great, let’s look at what happened. Sugar has nearly become extinct in America. Every Soda we drink now is made with the infamous and less tasty “high fructose corn syrup”. The companies could not afford to pay the taxes for foreign sugar, and the home prices were too high (due to not great production techniques), so they chose a cheaper (less tasty) alternative in the corn syrup. So while we protect a handful of American jobs (people who would most likely find jobs somewhere else), all Americans have to pay more for their sweets and not get to taste the same product we should have. The cost outweighs the benefits if you look at America as a whole. By the way, most sugar growers are upper class (bugs you that we are protecting them huh?)

The author makes some good points but loses ethos from those who see his lack of details and context. He gives great facts but leaves out what makes them strange.