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Home Publications Blogs Beat the Press Alan Krueger is Wrong, Robust Recoveries Do Move In Straight Lines

Alan Krueger is Wrong, Robust Recoveries Do Move In Straight Lines

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Monday, 05 July 2010 12:00

In an article reporting on the weak jobs report for June, the NYT quoted Alan Krueger, the chief economist at the Treasury Department, as saying "economic recoveries don’t move in straight lines.” Actually robust recoveries from steep downturns, like the one we just experienced do move in pretty much straight lines.

When the economy first start creating jobs rapidly in April of 1983, following the 1981-82 recession, it generated more than 200,000 jobs a month for 20 straight months. The one exception was in August of 1983 when a strike at AT&T led to a reported loss of 308,000 jobs. This was more than offset by a gain of 1,114,000 jobs in September. Given the growth in the labor force, 200,000 jobs in 1983 would be equivalent to more than 300,000 jobs a month in 2010.

Comments (3)Add Comment
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written by izzatzo, July 05, 2010 5:54
Quoting from the same NYT article:

While Mr. Krueger’s remarks at the hearing were not widely reported, their implications were clear: raising taxes can support both deficit reduction and job growth. He testified that the tax cuts enacted in 2001 and 2003 “did not result in better performance in the labor market than was achieved in the 1990s, a period when government revenue increased, and the deficit was reduced and eventually eliminated.”


So the tech stock bubble under Clinton produced superior employment and deficit reduction performance despite higher taxes, compared to subsequent tax cuts under Bush after that bubble burst which also demonstrated supply side failure.

The housing bubble comes along and bursts, and Krueger apparently suggests for the same reasons that taxes can be higher during the current deep jobless recession to reduce the deficit and promote job growth, as if raising taxes now would have same effect it did in the '90s to reduce the deficit.

Sounds like a messenger with a message for less stimulus and more austerity, yet presented as if they work in the same direction rather than obviously contradict each other.

Why not go for the whole enchilada like Bush did and claim instead that reducing taxes rather than raising them is a move towards austerity that will raise revenue and reduce the deficit. The media won't remember, teabaggers will be delighted, it's consistent with Keynes, and Obama can sell austerity over fiscal stimulus.
No reason to run around with our hair on fire
written by lambert strether, July 05, 2010 8:42
The Great Helmsman just revealed a broadband initiative that's going to create 5,000 temporary jobs. That should deal with this little unemployment matter!
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written by skeptonomist, July 06, 2010 9:40
The 1983 job recovery was very sharp, especially at first, but 1992 and 2002 were unfortunately much slower - in those cases it was about 2 years from the time employment hit bottom to when it moved significantly upward again. If recovery this time is similar, real job growth may not come until late 2011.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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