Friday, October 08, 2004

Addendum on economic news today 

If you have a WSJ nearby today, find the Macro Investor column, wherein Steve Liesman reviews the economic performance as such:
The economy is growing strongly, while President Bush's economic ratings have been weak and growing weaker. This could be because corporations are getting a larger-than-normal share of the new wealth created by the economy. The job market remains weak, making it difficult for workers to reap their share of the economy's productivity (new wealth) gains.
That is actually about right; you can look at this table to get the details on the share of income to compensation of employees and profits, and here for productivity growth. Liesman wonders whether Bush is to blame for this pattern of distribution. His answer is an awful lot like mine: Economic policy matters far less for income distribution than people give credit (or blame) for:

Productivity is one of the strongest forces moving the economy, and it's also one of the forces over which the president has the least control. They don't, as far as I know, determine the rate of growth of a computer's clock speed.

It's also not up to a president how those productivity gains are doled out. That, in general, is determined in the marketplace between workers and employers. I spoke earlier this week with Kerry campaign advisor Robert Reich and not even he blamed the Bush administration for the disparity in income distribution. ...

Yet the president did propose a tax cut that lowered income taxes but rejected a tax cut that would have cut the payroll tax. That could have been more beneficial for job growth and helped workers reap more of the fruits of productivity gains.

What is far more important to consider is why companies, who have reaped all these profits, haven't spent more of them and hired more new workers? Is it concerns about the economic impact of the Iraq war and the growing costs of health care?

Or could it be concern about the differences in economic policy between the two candidates? The next two debates should tell the tale...