Oh Dear...

Dean Baker trying to fool his readers again.

Not that we world leaders can affect GDP, but at least the basics should be correct. What needs to be measured is GDP *per capita*.

And Dean knows this.

So let's try again, using the latest Penn Tables. Wish they had this back in 1880!

Eisenhower 1.9%*
Kennedy/Johnson 4.5%
Nixon/Ford 2.0%
Carter 2.9%
Reagan 2.3%
BushI 1.4%
Clinton 3.2%
Bush II 2.0%

* This is the boom period Krugman hails in his recent book. Krugman also knows better.

gladstone wrote, Not that we world leaders can affect GDP, but at least the basics should be correct. What needs to be measured is GDP *per capita*.

Yes, but to first order, the fractional change in GDP/capital is just the fractional change in GDP minus the fractional change in POP (if I've got my math right this early in the morning).

Then, if we're comparing such differences across time periods, the effect of differences in the fractional change of POP will be a second-order effect.

In fact, if you take the difference in your values minus the difference in Deans, you don't get a constant, but the fluctuations aren't that big, except for the Reagan years.

This is the boom period Krugman hails in his recent book.

(1) Did Krugman really hail the Eisenhower years, or did he hail the postwar years, from 1946--1973 (1973 is the break in wage increase trend)?

(2) To what extent is the mediocre number in the Eisenhower years due to an accelerated birthrate (baby boom)? In that case, while POP is increasing faster, the increase isn't one that's contributing immediately to the supply of labor (although it would contribute to demand).

Crediting presidents with growth that happened "on his watch" is a questionable practice but even if we assume it has some value in relation to evaluating fiscal policy, shouldn't we get the timing right?

The Clinton numbers reflect starting office after a recession, being in office during a huge stock market bubble and then leaving office as the bubble crashed but before the economy really tanked. From this point of view Bush II starts with a handicap- does he not?

Krugman has praised the 50s as a boom period when interviewed about his latest book.

There is also a GDP/working person ratio that doesn't look so great in the 50s. I think it was 1950 that did have an exceptionally productive year. The 50s weren't bad, just nothing to hold up as Krugman does. I really don't see why he kept repeating that.

I do not recall President Bush or anyone else requesting home owners to overpay for their homes?

If we teach homeowners to read, add and subtract, we would not have a discussion about "subprime". If I did not buy a home since 2000 because they appeared overpriced, others could have seen that too?

Let's include all of the 50s - GDP growth in Truman's second term (ending in 1953) was higher than in any of the subsequent periods (not corrected for population, but I'll bet that doesn't change it).

How does the adjustment for population mean that Dean was trying to fool anybody? Bush II still is near the bottom, and growth in every Democratic administration is still better than in every Republican administration. Clinton is still higher than both Bushes and including population raises Carter above Reagan.

Of course Presidents do not really control GDP growth, but Dean's point is that any claim that things are better in Bush II is completely false. Claims that GDP growth was better in Reagan-Bush I would also be completely false.

The point I was making is that presidents are not responsible for the business cycle. If Dean disagrees with this, I will make a point of reminding him the next time there is a downturn during a Democratic administration.

Using year 2000 of your U.S. dollars:
GDP/capita

1950 $11,100
1960 $13,100

About 1.7% to 1.8% growth per year in Krugman's booming 1950s.

Look at the Clinton years.
It is more fair to shift at least 6 months at the start and end of each president's term. What was Clinton doing in office those fisrt 6 months besides getting expensive haircuts and trying to change the military policy on gays?

1993 $27,900
2000 $34,600
2001 $34,200

At least the first half of 2001 should go to Clinton.
Clinton is closer to 3.0%

How does Baker get 2.0 for Bush II?

Bruce,

I am usually the first to say that presidents only deserve limited/blame responsibility for the events that occur on their watch, but I would say that the view attributed to you appears to uniquely single out Bush as someone who cannot properly be given responsibility for the bursting of the housing bubble.

I would say that the housing bubble was certainly a much more preventable event than many others that faced sitting presidents, such as the quadrupling of oil prices in 1979 due to the Iranian revolution, which derailed the economy just in time for the 1980 election.

I think Bush is responsible for a lot of bad stuff in the economic area, as I explained in my Impostor book. And maybe with the benefit of hindsight there are things the administration might have done that would have prevented a housing bubble from developing. But the fundamental blame has to lie with the Federal Reserve, which was too easy for too long. I don't blame Bush for that. Sadly, a chapter I wrote on this topic got cut from my Impostor book.

It is not only the real GDP per capita that matters. It also matters how that is distributed among the population. Is someone supposed to be happy that the aggregate per capita output of the country goes up if what has happened to their live is the reverse?

I too think the kind of analysis that attributes to Presidents responsibility for economic results during their terms isn't necessarily due. The economic effects of a President's policies, to the extent they are determinative, are often felt over longer time horizons which don't necessarily coincide with their terms as President. But that doesn't mean that prudential regulation of foolish excess is not important.

I think the housing bubble was predictable. I had expected it myself even though I wasn't even aware of the financial markets role in creating the problem due to misinformation I was given by a mortgage broker, as well as lack of reporting about that in the media. Because of my belief that these loaning practices would produce a bubble and the loans would eventually go bad, I had asked this broker if the loans were being sold into the secondary market and was told, wrongly, that they weren't. As I think back on it, I should have reasoned that the broker's information was wrong. At the time I remember thinking that at least the people making the loans would pay the price for their foolishness. I should have realized that something else was going on. I should have realized the reason people didn't have the fear of the losses I expected to happen had to have some rational basis. It turned out that the absence of fear was precisely because it was a system based upon loaning out other people's money and hiding the risk, through the extreme complexity of supposed financial wizardry, from the people whose money it was. I simply don't understand how the people in charge of regulation, who supposedly understand and believe in markets, could ignore the problem getting the incentives so very wrong.

And that is apart from my long held belief that high housing prices are bad for the country, economically and ethically. It makes us less competitive, transfers wealth from the have-nots to the haves, and draws investment away from what could be truly productive for the country.

Bruce,

this is not a hindsight story -- the bubble was clearly recognizable at the time. Greenspan gets top villain in the story, but the Bush administration gets a huge share of the blame as well. He should have had all the boys and girls screaming about the housing bubble from 02 or at least 03. And, if Greenspan wasn't prepared to go along in trying to stem the growth of the bubble, Bush should have found a Fed chair who was.

Whether straight GDP or per capita, Dean's point is clear. Bush II has nothing to brag about regarding GDP growth and the NYT should know that.

But a further point that the figures (Dean's and Gladstone's) tend to point out. Several of the Republican candidates and the supply side pundits have been referring fondly to the last 25 years (Reganomics!!) of unprecedented growth. Also blatantly untrue in GDP per capita terms. Using the BEA stats in 2000 chained $ (GDP per cap Table 7.1 1929-2005, downloaded in 2006), GDP per cap growth per annum as follows: 1950's 2.3%, 1960's 3.0%, 1970's 2.2%, 1980's 2.1%, 1990's 1.9% and 2000-2005 1.7%.

Gladstone,(are you related to the English dude?) regarding the 1950's, per the BEA per cap GDP in 1949 was $10,957 and in 1959 $13,782, for annual growth of the 2.3% noted above.

Lastly, referring to the much-maligned "Stagflation" 1970's, I was of age then and it wasn't pretty. But as shown above, on a purely GDP growth basis, it beat each of the subsequent periods Republican or Democrat.

I wrote lots of stuff about the housing bubble back in 2005, but then nothing happened for a long time. I don't blame policymakers for being less sensitive to a market bubble than people in markets were. I think you are unfairly using 20-20 hindsight in blaming Bush for current economic problems.

As I told the reporter, the real Bush failure is on the budget, which will become apparent during the next president's watch. When that president is forced to raise taxes because of what Bush did, you can depend on me to put the blame on Bush.

Bruce,

you should have stuck to your guns. You can't tell the timing on a bubble, but you can know that they will burst. I first saw the stock bubble in 1997 and was pretty sure that it would burst in 6 months for the next three years.

I first recognized the housing bubble in 2002 and would have expected it to burst within six months, except for my experience with the stock bubble.

For my part, I assign enormous blame to Clinton for allowing the stock bubble to continue to grow (although Greenspan has top villain status there also) and I think the Clinton-Rubin high dollar policy was a disaster. They should have tried first talk, and if that failed, a policy of actively intervening in foreign exchange markets to lower the value of the dollar.

The falling dollar we see now and the resulting inflation are the result of their failure (and Bush's) to do anything sooner. An over-valued dollar can be thought of in the same way as tax cut driven budget deficits: short-term gain for long-term pain.

gladstone wrote, About 1.7% to 1.8% growth per year in Krugman's booming 1950s.

Meaningless comparison if you're not doing a cyclical corrected. You yourself say: "I think it was 1950 that did have an exceptionally productive year."

The 50s weren't bad, just nothing to hold up as Krugman does. I really don't see why he kept repeating that.

Krugman is describing a period marked by both strong economic growth one where the gains were pretty widespread across the income spectrum.

If you want to claim that Krugman is stressing the 1950s per se, as opposed to the period beginning shortly after WWII and ending in 1973, please provide actual citations to that effect.

Bush has touted his "ownership society" since Day One. As recently as this past summer Bush was still bragging about the % of americans that now "own" their homes. Thus, to minimize this administration's role in super-easy Fed policy and crazy-low interest rates is wrong. There is no doubt that the White House has/had primary influence over the Fed and Treasury, esp. in the 2-4 years following 9/11.

To disconnect Bush's "ownership society" from our current "foreclosure society" is revisionist and dishonest.

Greenspan made excuses about of lack of regulatory jurisdiction but aren't there Federal Reserve rules now pending that deal with the excesses that caused the problem? And didn't Edward Gramlich warn of the problem?

Here is the average GDP growth (year over year) by decade:

50s 4.17
60s 4.42
70s 3.25
80s 3.07
90s 3.11
00s 2.54

The 50s are not as good as the 60s, but better than any decade since. The 50s and 60s were baby boom years, so their advantage per capita would probably be less. I am not sure how babies would increase GDP - it would be at least as valid to normalize by working population, and the baby-boomers came through that later.

I haven't read Krugman's book yet, so I don't know exactly why he says the 50s were great, but I say it's important to compare the 50s and 60s with later years from the point of view of tax policy. This graph

www.skeptometrics.org/Taxrate_GDP.PNG

shows GDP growth along with the highest marginal income tax rate. What this shows without any shadow of doubt is that high marginal rates do not cripple the economy, and the "Reagan Revolution" did not improve GDP growth. A graph I referred to earlier on Paul Krugman's blog:

www.skeptometrics.org/Rct_Exp_GDP_bars.png

shows the impact of Reagonomics and BushIIonomics on Federal Government income and expenditures, as well as average dGDP by administration (I did not refer explicitly then to Bush II because I did not think anyone would be stupid and/or dishonest enough to claim that performance during his admistration has been good).

GDP growth is not a the best way to differentiate Presidential administrations economically - the average over a period longer than one term is not too variable. GDP growth has gradually decreased since 1950, as shown by the linear regression on the first graph, but this is probably not because of anything Presidents have done.

GDP/worker in the 1950s, 2.1%

Krugman would be correct if he discussed equality, which he does often in the book, but when interviewed he almost always talks about the "boom economy" of the 1950s, and those interviewing him don't check the data but just repeat "Yeah, the 50s were great!"

Punching in "growth rate of real GDP/capita, constant chain" Carter had:

1977 4.0%
1978 4.7%
1979 2.0%
1980 -2.0%

------------------
1950s 2.0%
Carter 2.2%
Reagan 2.5%
Clinton 2.7%

There hasn't been a steady decline.

Where is the Bush II data?

(and go listen to Krugman's interviews to hear him repeat time after time "the booming economy of the 1950s")

gladstone wrote, Punching in "growth rate of real GDP/capita, constant chain"...

How about giving a link or a cite?

In one of Krugman's books, I don't recall which, he stated that the way economists compared eras was by measuring the growth from zenith to zenith or nadir to nadir of the business cycle. So, are the numbers presented here as meaningful? Or, is Krugman's contention suspect? Or, have I misunderstood entirely? If Krugman's contention is the most valid, then can we see comparison's that way?

GDP growth can be looked at in many ways, and don't forget that CPI inflation comes into it - if it's wrong that could throw everything off in comparing eras.

The issue is whether Dubyanomics has been successful (and whether the Reaganomics myth is true), and the answer is no - this is not changed by measuring GDP in other ways.

It's probably true that the 60's were actually better than the 50's, with respect to employment as well. Would Krugman's arguments be invalid if he used the 60's instead of the 50's?

Practically everyone assumes that tax cuts are stimulative (going back to Keynes) and that more will be necessary. But we have been running $400 billion deficits mostly as a result of tax cuts before the proposed new $150 billion package, and there were similar large deficits during Reagan-Bush I. It's not a matter of comparing Presidents or eras - the important question is the effect of tax policies.

The problem with sticking to one's guns is that it is very easy to fall into being a crank like the gold nuts who always see hyperinflation right around the corner. About every 10 years they have their day. But buying gold year in and out is mostly a good way to lose money. There are others of this type that I call stopped clocks--they are right twice a day.

Seeing an economic problem coming too soon is almost as bad as not seeing it at all. A friend of mine once put it this way, "Being too far ahead of the curve is indistinguishable from simply being wrong."

Of course, I'm talking here about investing, not public policy. But how can we expect poorly-paid bureaucrats or congressional staffers to see and react to far-off problems that may or may not occur when those with real money on the line can't do so?

What Krugman keeps saying in interviews is a myth. The 50s weren't great economic years. The 60s were quite good. He and baker must know that the standard is GDP/capita even if you want to add in equality. But look at Baker's graph. Just straight GDP.

Baker also doesn't say how he gets 1.9% GDP for Bush I from 2001 to 2007. can we have the yearly breakdown?
Something tells me he won't give that.

Bush II is closer to 2.5%.

Looked at the wrong Bush for a second! Still GDP/ capita is what Krugman and Baker should use. Bush II will likely fall below Carter, but closer to around those booming 1950s.

wltiii wrote, [Krugman] stated that the way economists compared eras was by measuring the growth from zenith to zenith or nadir to nadir of the business cycle. So, are the numbers presented here as meaningful? Or, is Krugman's contention suspect? Or, have I misunderstood entirely?

Krugman's contention is correct, and you haven't misunderstood.

It makes perfect sense, since it's a way to look at the trend and at the same time factor out the effect of the business cycle.

I've definitely seen dishonest people try to minimize the growth in some period by picking years that are effectively measuring peak-to-trough (or max'ing by doing trough-to-peak).

Of course, this doesn't necessarily fit in well with looking at what happens during various presidents' terms.

The link to the BEA figures is down so I can't check, but are those growth figures nominal or real? If they aren't adjusted for inflation, then the Bush II numbers look much better as compared to the Nixon-Ford-Carter trifecta.

Bruce,

the pay grade for Treasury secretaries and Fed chairs is not that low. And, if you know your fundamentals, you don't have to worry about looking like a nut. No one had an argument that passed the laugh test that justified either the stock prices of 98-00 or the housing prices of 02-07. Of course, there was no telling when the bubble would burst, but it was easy to recognize the bubble. Two plus two with always equal four.

Dean,

You transposed the Reagan number: it's supposed to be 3.2%, not 2.3%

Using chained 2000 dollars real GDP numbers from the BEA:

1981Q1 = 5307.5
1988Q4 = 6848.6

(6848.6/5307.5)^(1/8)-1 = 3.2%

This discussion is weird, why give presidents credit for growth that happened during their first year?

If you recognize a two year works within fiscal policy Carter administration shows lowest average growth 78-82 with .9% average.

A second point, why do we want our presidents preventing housing bubbles? If we compensate for deficiencies in the market don't we just reward and exasperate such deficiencies in the future? Why then should we say he is "responsible"?

liberal...

This is what Krugman wrote ten years ago in his infamous 'Myth of the Asian Miracle':

"one arrives at a crucial insight about the process of economic growth: sustained growth in a nation's per capita income can only occur if there is a rise in output per unit of input."

Why does he switch to real GDP without using per capita when gushing over the 1950s?

But how can we expect poorly-paid bureaucrats or congressional staffers to see and react to far-off problems that may or may not occur when those with real money on the line can't do so?

This is just a weird argument...perhaps being conservative disposes you to wealth-worship. Was Bartlett stupid when he was a Congressional staffer? Dean predicted the bubble...he must be a genius to have done so handicapped by his low salary.

The most obvious answer is that people on Wall Street are paid to make money, not policy. Making money happens in a much shorter time horizon than policy works. Even if you understand that you are in an asset bubble, the best and easiest way to make money is to ride the bubble up, and hope you get your bonus or sell off before the whole thing crashes. Plenty of smart people did just that in the real estate bubble (the dot-com bubble too). In fact, the whole structure of real estate financing in this bubble was designed to let mortgage originators sell off their loans *quickly*, before any default was possible. Makes you think, huh? And in the real estate market itself, people could barely wait a year to flip.

The extra regulation necessary to get a handle on this bubble was obvious enough. If securities had been made anything like as transparent as stocks, this never would have happened. For-profit, easily corruptible rating agencies were the ones in charge of telling people what they were buying. They didn't give the originators any bad news.

It's hard to know where to start.

First of all even discussing Bush's economic record in terms of GDP is already handicapping the discussion. One has to be wilfully ignorant to believe that 'GDP growth' assess the 'state of the union' in the modern era. We all know exactly what is underlying this statistic -- massive benefits for an extremely small sector of society, most of that engaged in completely non-productive real work. Buying and selling paper is not productive of real wealth, it's just a way of moving real wealth around.

But even using GDP, it should be extremely obvious to everyone that this debate is premature, and hence beyond silly. If the US goes into a recession this year, a real one, all this babble about how to spin the Bush GDP numbers so that they actually end up looking better than they are, will amount to absolutely nothing.

The odds are that within 5 years, and almost certainly within 50 George Bush will be remembered as the worst president by far in the history of the country and that will include his economic record.

The fact that the relatively well off (who are obviously posting here) are still busying spinning events so that what is obvious (that they are really in favor of government hand outs to the rich, but not to anyone else, that they are really in favor of government promoting their welfare over those of other citizens, up to and including starting wars around the globe in order to make the world safe for their profits), can be obfuscated they hope sufficiently to hide their activities until after they have achieved their aims, is itself quite transparent.

Bad news for you kids: We see what is happening. We know what it means when the Fed intervenes in private markets in order to ensure your profits -- it means your claims to free market righteousness, and government incompetence are and were from the get go, the lies with which you are now so thoroughly associated.

"It's hard to know where to start."

How about by looking around at the 5 billion people on the planet who must be far poorer than any of us commenting.

The Bush Administration and even more its boosters among certain annoying commenters on the econoblogs took every bit of good news on growth as proof of their tax cuts mantra. They practically wet their pants when we had a really good (pre-revision) Q3 2005 number (which in retrospect looks largely due to housing peaking). One particularly clueless commenter even took the Q3 2007 number as dispositive even as Bernanke was predicting pretty much what we are seeing.

The key point is not whether any President is responsible for any event or number at any given point in the business cycle, even supposing there is such a thing as a business cycle. The point is that supporters of the Bush tax cuts without fail seized on every positive data point as proof of the effectiveness of their policy. In the cold light of day growth numbers since at least Q4 2005 don't support their case and the relatively good numbers of 2003 and 2004 are more likely than not to be explained by over investment in residential real estate.

If you don't want blame on the way down, don't take credit on the way up. I know this will pain Bruce B, but going back to Reagan there is no real evidence that tax cuts in and of themselves drive investment in ways that increase the overall economy. Cactus at Angry Bear has put all kinds of measures against the outcomes during various presidential terms using all kinds of lags, the correlation between tax cuts and growth only comes if you squint and cherry pick the data.

To disconnect Bush's "ownership society" from our current "foreclosure society" is revisionist and dishonest

To disconnect Bush's "ownership society" from our current "foreclosure society" is revisionist and dishonest

is that ok ..?

In one of Krugman's books, I don't recall which, he stated that the way economists compared eras was by measuring the growth from zenith to zenith or nadir to nadir of the business cycle. So, are the numbers presented here as meaningful? Or, is Krugman's contention suspect? Or, have I misunderstood entirely? If Krugman's contention is the most valid, then can we see comparison's that way?

I think Bush is responsible for a lot of bad stuff in the economic area, as I explained in my Impostor book. And maybe with the benefit of hindsight there are things the administration might have done that would have prevented a housing bubble from developing. But the fundamental blame has to lie with the Federal Reserve, which was too easy for too long. I don't blame Bush for that. Sadly, a chapter I wrote on this topic got cut from my Impostor book.

"It's hard to know where to start."

How about by looking around at the 5 billion people on the planet who must be far poorer than any of us commenting.

To disconnect Bush's "ownership society" from our current "foreclosure society" is revisionist and dishonest

is that ok ..?

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To disconnect Bush's "ownership society" from our current "foreclosure society" is revisionist and dishonest

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I think Bush is responsible for a lot of bad stuff in the economic area, as I explained in my Impostor book. And maybe with the benefit of hindsight there are things the administration might have done that would have prevented a housing bubble from developing. But the fundamental blame has to lie with the Federal Reserve, which was too easy for too long. I don't blame Bush for that. Sadly, a chapter I wrote on this topic got cut from my Impostor book.

I don't blame policymakers for being less sensitive to a market bubble than people in markets were. I think you are unfairly using 20-20 hindsight in blaming Bush for current economic problems. As I told the reporter, the real Bush failure is on the budget, which will become apparent during the next president's watch.

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I too am a Tennesseean and can attest to the fact that Gov. Bredesen holds working people in contempt. Whether it is gutting TennCare or shredding the safety net or workers compensation, this man is a cheerleader for big insurance and big medicine.

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