Fun With Robert Samuelson: The Good News Is Bad News
|Monday, 28 January 2013 05:00|
It's always entertaining to read Robert Samuelson's columns on Monday mornings. They are so deliciously orthogonal to reality. Today's column, asking whether America is in decline, is another gem.
He starts with a set of "good news" items from a paper issued by Goldman Sachs:
"For starters, the U.S. economy is still the world’s largest by a long shot. Gross domestic product (GDP) is almost $16 trillion, “nearly double the second largest (China), 2.5 times the third largest (Japan).” Per capita GDP is about $50,000; although 10 other countries have higher figures, most of the countries are small — say, Luxembourg."
That sounds good, except that having double the GDP of China depends on looking at exchange rate measures of GDP. This figure is inflated by the over-valued dollar and under-valued yuan. Using the purchasing power parity measure of GDP, the gap is much smaller, with the IMF projecting it will go the other way by 2017. According to some estimates China's GDP is already larger than ours, so it's probably best to keep this celebration short.
It is true that the U.S. has a higher per capita income than Germany, France, and most other wealthy countries. But by far the main reason for this gap is that we work about 25 percent more on average than workers in Western Europe who all get 4-6 weeks a year vacation, paid parental leave, and paid sick days. This is far more an issue of a different trade-off between work and leisure than a question of people in the United States being richer.
Next we get the good news about our massive energy resources:
"In turn, the oil and gas boom bolsters employment. A study by IHS , a consulting firm, estimates that it has already created 1.7 million direct and indirect jobs. By 2020, there should be 1.3 million more, reckons IHS."
Ignoring the issue of pollution from drilling out this windfall, it is important to put these jobs numbers in perspective. These are gross jobs, not net jobs. In other words, the vast majority of the 3 million jobs that IHS is promising us in oil and gas by 2020 are not additional jobs to those that would otherwise exist in the absence of these resources. These are jobs that displace jobs in education, medical research, health care, and other sectors. Samuelson may be excited that more people will be employed digging gas wells in 2020 and fewer educating the young, but the economic and social benefits of this reallocation of workers are not obvious.
Then we have the fact that we will be younger than other countries:
"American workers will remain younger and more energetic than their rapidly aging rivals. By 2050, workers’ median age in China and Japan will be about 50, a decade higher than in America."
Yeah, you probably jumped ahead on this one. A main reason that we will be younger is that we have shorter life expectancies. The good news just keeps coming.
Then we have the U.S. as the prime destination for highly educated emigrants:
"Moreover, the United States attracts motivated immigrants, including 'highly educated talent.' A Gallup survey of 151 countries found the United States was the top choice for those wanting to move, at 23 percent. At 7 percent, the United Kingdom was second."
Let's see, the U.S. population is roughly five times as large as the U.K.'s population. That means if the poll reflects actual immigration patterns, then the U.K. will draw 50 percent more highly educated workers relative to the size of its population as the United States.
If Samuelson's good news is not quite as good as he would like us to believe, the bad news is also not as bad:
"The truth is that most of the affluent world — again, the United States, Europe and Japan — faces similar threats.
First: Their welfare states are overwhelmed. Aging societies face a collision between promised benefits and acceptable taxes. Either the first must be cut, or the second must be raised."
Actually, if per person health care costs in the United States were remotely comparable to those in other countries then there would be little problem paying for the welfare state in the United States. We would be looking at long-term budget surpluses rather than deficits. And, if our government is too corrupt to reform the U.S. health care system we can always look to take advantage of the more efficient health care systems elsewhere through increased trade in health care services.
Then we have problem number two:
"Second: Economic management is breaking down. Before the 2007-09 financial crisis, most economists thought they could avoid deep slumps and engineer acceptable recoveries. Confidence has given way to contentious disagreements. Policies are improvised."
Yes, this would be the problem that deficit hawks, like Samuelson and his friends at the Washington Post, have managed to brush aside all the evidence and successfully block measures to restore the economy to full employment. Samuelson is right that it is a big problem that such people are taken seriously in policy circles, but this has been a longstanding problem, not something that has just arisen in the last few years.
Finally we get a big "huh?"
"Third: Global markets have run ahead of global politics. Countries depend increasingly on international trade and money flows. But globalized commerce is menaced by nationalistic, ethnic, religious and political differences among nations."
Yes, we have wars and conflicts. Is this new? Is it worse today than 20 or 30 years ago? Will it be worse in the future? I wouldn't necessarily argue the opposite, it's just that Samuelson presents zero evidence that things are getting worse in this area.
Anyhow, there you have it: classic Robert Samuelson. The good news is largely bad and the bad news doesn't make much sense. Enjoy your week!