Never Give Up: Bloomberg Bashes Bush Economy Again

Bloomberg has a TOP story (not found on bloomberg.com) impugning (again) the Bush economy, titled, "Bush's Expansion Leaves Workers Behind, Creating Conflict with the Fed." Just like the last time they did this, oh two weeks ago, they trot out some heavy guns to bolster the case. The main artillery here is economics legend Robert Solow. First they fire the Solow cannon by stating Solow's contention that an economy that is not distributing gains widely is "poorly performing." They leave that sweeping statement hanging there, with nothing more, as de facto proof of their thesis. The takeaway is no so subtle - Solow says the US economy is performing poorly. It would be too sticky to explain that the US economy probably distributes its gains more widely than any other economy (maybe excepting some one-trick pony petrostate like Norway) through various mechanisms, including high wages, broad-based stock ownership, massive government entitlements, employer-paid healthcare and pension benefits. By Bloomberg's Solow syllogism alone, you would have to infer that the best performing economies are highly collectivist ones, like France and Germany. 10% unemployment and sub-1% GDP growth isn't poor performance? Hmmm (scratching chin).

Then they break from Solow to bring out some lesser ordnance and return back to him after you've paged down 4 pages. Here we learn that Solow thinks that the Fed should seek full employment, which corresponds to a jobless rate of less than 4.9%. Granted this is still a major subject of debate but the general consensus is that full employment is around 5%. So this sounds plausible, but it still says "less than 4.9%," which means we are not there today because employment is right at 4.9%. Again, the implication is clearly negative. And, how can you argue with Nobelist Solow? Well, I think it would quite easy to given that the US has achieved less than 4.9% unemployment merely twice in the last 50 years, both times during dangerously overstimulated economies (LBJ's Great Society/Vietnam excalation from '65-'70 and the '94-'00 Internet bubble era) that came a tumblin' down soon thereafter. Is that what the Fed should really be doing, trying to achieve what happens only rarely and turned out badly when it did? Hmmm (squinting eye).

And, of course, the slightly more reasoned discussion, in that minimalist nod to fairness, is on pages 6 and 7 of 8...that wages are held down by gains in other areas, like benefits and workplace flexibility, etc.