Things an Economist Cannot Say in Crawford
Mark Thoma focuses on what Ben Bernanke has been saying recently, while Brad DeLong noted what he did not say:
He apparently failed to stress two important things:
Bush administration fiscal policy is way out of balance in the long run, and this is a very serious problem: if the government doesn’t balance its budget (in the sense of keeping real debt growing no faster than real GDP), then the market will balance the budget for it in ways that nobody will like.
Bush administration international economic policy is way out of balance as well: the administration should be doing much more than it is doing–i.e., nothing–to try to minimize the size of the financial crisis should foreigners suddenly decide to dump their dollar assets on a large scale.
Let me start by noting a couple of things that Bernanke briefly mentioned that the average Joe might understand. As I drove into the office today, I noticed that $30 barely put 11 gallons into my gasoline tank – so high energy prices are on the minds of most people. Alas, Bernanke was likely not permitted to say that the energy bill his boss just signed does nothing to change this reality but does add the government deficit. The average Joe likely also appreciates the mention of rising health care costs, but notice that Bernanke is not allowed to say the this Administration’s policies have likely increased the cost of providing health care. Now you might say that the Prescription Drug Benefit lowered a few people’s out of pocket expenses for pharmaceuticals but only by shifting this expense onto taxpayers in the future. But can we really expect an Administration economist to admit to the government budget balance problems?
Bernanke’s review of the U.S. economy touts the recent output growth and increases in employment. Non-farm payroll employment was 133.786 million as of July 2005, which compares to 132.015 million as of July 2000. In other words, employment growth has averaged less than 30 thousand new jobs per month over the past five years. It is true that employment has been growing at a fairly nice clip as of late but the employment to population ratio is still below 63%, whereas it was about 64% in 2000. Real GDP in the second quarter of 2005 was only 12.6% higher than it was in the second quarter of 2000. In other words, real GDP growth over the past five years has averaged only 2.4% per year.
I guess it would be asking too much for an economist to enjoy Texas barbeque at Bush’s Crawford ranch – and then say what he really thinks about the current economic situation or fiscal policy.