Do not make the mistake of thinking that because my conclusion is the same as another person's that my reasoning is the same
The Ownership Society, David Brooks' editorial in today's NY Times, is floating an idea he says will be in Bush's State of the Union address.
"This is going to change the entire economy," one senior Bush official observed. "How do we deal with it?"
There are essentially three answers to that question. The first is the pure free–market answer, which says the market will take care of itself. Productivity gains will eventually lead to job creation, and workers will learn to adapt. The second is the unions' answer, which is that the job picture is stagnant because of unfair global competition. Rewrite the trade rules, and jobs will be more secure.
The third response has been championed most ardently by centrist organizations like the Democratic Leadership Council: embrace the more productive and fluid economy, but make sure government aggressively moves to give workers the tools they need to cope.
Over the past three years, the Democratic Party has shifted behind the unions' approach. When Dick Gephardt and Howard Dean are asked about manufacturing job losses, they talk first about unfair trade. The Bush administration, meanwhile, is embracing its own version of the centrist Democratic approach, occupying the ground abandoned by the leftward–veering Democrats.
In his State of the Union address, the president will announce measures to foster job creation. In the meantime, he is talking about what he calls the Ownership Society.
This is a bundle of proposals that treat workers as self–reliant pioneers who rise through several employers and careers. To thrive, these pioneers need survival tools. They need to own their own capital reserves, their own retraining programs, their own pensions and their own health insurance.
Administration officials are talking about giving unemployed workers personal re–employment accounts, which they could spend on training, child care, a car, a move to a place with more jobs, or whatever else they think would benefit them.
I'm kind of mixed about all that.
I'm wondering how many people have enough of an understanding of trends to make good judgments about what would benefit them long term. For instance, did you know Forester Research says 26 percent of computer programming and software engineer jobs will be gone by 2015? How many people do you think would almost reflexively enroll in computer–related training of some kind? CNN/Money has an article about jobs vanishing due to structural changes in the economy that gives a decent overview of the current state of the problem.
Even if everyone understood what's going on in the economy, job market, etc. (and I'm convinced we don't), there's the "President Proposes, Congress Disposes" problem. What's the difference between giving workers "their own health insurance" and a national health care program? What's the difference between giving workers "their own pensions" and privatizing Social Security? Two of the most contentious proposals ever floated, one each from the left and right, neither of which ever got enough support to pass. And imagine the representatives of those blue states, the ones whose populations are already declining, voting in favor of a package that subsidizes the abandonment of their states? Redistricting is seven years away (unless Republicans get their way), but at my age that doesn't seem like a long time.
Though Brooks says the proposals treat workers as "self–reliant pioneers," the simple fact is, in this economy they are neither self–reliant nor pioneers. In the aftermath of the proposals Brooks says Bush will set forth, rather than a nation of pioneers we will be a nation of migrant workers.
The Ownership Society
By DAVID BROOKS
Not long ago, a man who runs a construction company came to the White House to meet with a senior Bush administration official. He talked economic policy, then was asked how his business was going.
He said things were going well. Orders were up. He'd revamped his I.T. system, and he'd re–engineered his production process so he'd been able to reduce his work force to 7,200 from 9,800.
You can imagine the reaction as he dribbled out this final bit of good news. For here in a nutshell is the administration's problem. The economy is doing well, but because of enormous productivity gains, it is not yet producing enough jobs to sharply reduce unemployment and ensure President Bush's re–election.
This situation means that the name Arthur Okun is once again reverberating off White House walls. Okun, an economist, is the author of Okun's Law, which predicts how fast the economy has to grow to reduce unemployment. Back in the early 1990's, economists expected that the economy had to grow faster than 2.6 percent to create jobs. Today, because of productivity gains, growth rates have to be much higher.
"This is going to change the entire economy," one senior Bush official observed. "How do we deal with it?"
There are essentially three answers to that question. The first is the pure free–market answer, which says the market will take care of itself. Productivity gains will eventually lead to job creation, and workers will learn to adapt. The second is the unions' answer, which is that the job picture is stagnant because of unfair global competition. Rewrite the trade rules, and jobs will be more secure.
The third response has been championed most ardently by centrist organizations like the Democratic Leadership Council: embrace the more productive and fluid economy, but make sure government aggressively moves to give workers the tools they need to cope.
Over the past three years, the Democratic Party has shifted behind the unions' approach. When Dick Gephardt and Howard Dean are asked about manufacturing job losses, they talk first about unfair trade. The Bush administration, meanwhile, is embracing its own version of the centrist Democratic approach, occupying the ground abandoned by the leftward–veering Democrats.
In his State of the Union address, the president will announce measures to foster job creation. In the meantime, he is talking about what he calls the Ownership Society.
This is a bundle of proposals that treat workers as self–reliant pioneers who rise through several employers and careers. To thrive, these pioneers need survival tools. They need to own their own capital reserves, their own retraining programs, their own pensions and their own health insurance.
Administration officials are talking about giving unemployed workers personal re–employment accounts, which they could spend on training, child care, a car, a move to a place with more jobs, or whatever else they think would benefit them.
President Bush has a proposal to combine and simplify the confusing morass of government savings programs and give individuals greater control over how they want to spend their tax–sheltered savings. Administration officials hope, in a second term, to let individuals control part of their Social Security pensions and perhaps even their medical savings accounts.
The Ownership Society idea allows Bush to be centrist and conservative at the same time. It is centrist because it means actively using government to solve problems. In 2000, Bush declared: "I do not believe government is the enemy. But I do not believe government is always the answer. At its best, it can help people find the tools they need to build for themselves. At its best, it gives options, not orders." The Ownership Society platform is designed to update that message for 2004.
But the platform is culturally conservative. Talking with staff, Bush emphasizes that he wants to use these policies to move from an "anything–goes culture" to a "responsibility culture." By giving individuals control of their own retraining, their own savings and their own homes, he hopes to inculcate self–reliance, industriousness and responsibility.
With events like the State of the Union address, an incumbent president has the power to change the subject and reshape the domestic debate. The Bushies haven't done it yet, but they are about to.
Posted by P6 at December 20, 2003 09:22 AM | Trackback URL: http://www.prometheus6.org/mt/mt-tb.cgi/2585Anyone reading this column carefully should be able to spot a common David Brooks technique: take problem for which the White House is commonly blamed, then "prove" that it is actually caused by something else, using a scholarly analysis of something irrelevent.
Brooks also used this rhetorical method to "prove" that the White House was not favoring Halliburton, and cited experts associated with the gov't bidding process. Problem: the no-bid contracts awarded to Halliburton subsidiary KBR were never subjected to the rigorous bidding process because the IGC is a sovereign agent! That means the IGC, a wholly autonomous entity (*snurk!*), has its own system for assigning awards.
Moving right along, Brooks cites the wholly irrelevent Okun's Law, which is nothing more than the result of a regression correlating unemploment to economic growth. He says, productivity gains mean more economic growth is required to maintain the same level of unemployment (NAIRU). A Martian economist who just arrived as a consultant might suppose this meant that productivity growth rates in the USA were unprecedentedly higher. Remember, Okun's Law is correlating economic growth to NAIRU. If growth overtakes hiring, this implies that productivity growth has increased, so a LARGER SHARE of economic growth is explained by productivity increase. That's not true.
"Okay," the Martian economist says, "I just looked at the productivity statistics furnished by the Earthling Bureau of Labor Statistics--"
"US Bureau."
"--US Bureau of Earthling Statistics, and it tells me that the growth in productivity hasn't been all that much."
"No, because you see, the US is one of several nations on our planet. The US economy has been flooded by cheap goods from other nations, like China. So output has gone up by more than the statistics say, because the competition has pushed down the prices."
"But don't you have GDP deflators for inflation? And haven't those been adjusted to account for the decline in relative prices?"
"Of course, O Martian Economist. But inflation is still exagerated because it doesn't take adequate account of the effect of quality. See, the economy produces more stuff and it produces better stuff. Possibly if we captured the increase in quality there would be no inflation at all, and that would mean there was a bigger real improvement in productivity. And that would mean Okun's Law had been revised, and we now need our economy to grow a lot faster than 2.6% annually to maintain NAIRU."
"Ahhh, thank you, O Earthling. But tell me this: do not Earthlings of the American persuasion have a metric of marginal productivity of labor?"
"We do indeed, O Martian Economist."
"So it seems to me that your argument is something like this: in prior decades, productivity was accurately measured. So Arthur Okun was able to accurately calculate the rate of real growth needed to maintain NAIRU. But now, quality has begun to grow as a component of productivity. And it adds some q to real GDP growth with each passing year. Right?"
"Exactly."
"So if you get a measure of inflation of, say, 2%, and q is 1.5%, then the REAL level of inflation is actually 0.5%."
"Correct."
"And it follows that productivity has climbed to the historic norm plus q? Is this true?"
"Obviously."
"So in order to offset the extraordinary growth in productivity, Okun's Law should be revised to 2.6% + q , or--say--4.1%? Do I understand?"
"Yes, that's about right. The economy has to grow by so much faster because it can produce 1.5% more--which happens, by a curious coincidence, to be exactly the share of economic output we cannot measure, which by yet another amazing coincidence, is confined to the USA since around late 1999. Or thereabouts."
"Well, Earthling, I do not want to trample on deeply cherished religious beliefs, which is what your unprecedented growth in immeasurable quality amounts to. So let us ignore that. Let us inquire as to the marginal productivity of labor."
"Please."
"Productivity growth in the USA has been about 2.5% since 1992."
"Uh-huh. Actually, 2.5 + q."
"But about multifactor productivity? That has also gone up by q? Or is it the marginal productivity of labor?"
"I dunno."
"Well, there are two possibilities. Either it is marginal productivity of labor, or it is multifactor productivity.."
"Okay."
"Well, if it is the marginal productivity of labor, then it makes no difference. The employee adds 1.5% or so more to the output in the form of immeasurable quality, but then nobody notices because of foreign exports pushing the prices down, which nobody notices because before 2000, this immeasurable quality improvement didn't happen and Okun's Law supposedly applied back then."
"Uhhh"
"So if the laws of economics work on this planet the way Earthling economists say they do, and firms expand until marginal cost equals marginal revenue, it should make no difference because the immeasurable part of productivity growth doesn't affect costs."
"Uh-huh."
"But if the increased productivity is in the form of multifactor productivity growth, which nobody measures, then that means economic growth is ALREADY q bigger than you thought, in which case Okun's Law still applies--you just don't measure the last 1.5% of growth, either way."
Okay, that proves Brooks is being silly. Our Martian consultant has just proved it.