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Home Publications Blogs Beat the Press Robert Samuelson Doesn't Have Access to Government Data

Robert Samuelson Doesn't Have Access to Government Data

Monday, 17 March 2014 05:02

That wouldn't be such a big problem if he didn't write on economic issues. This time the problem affects his discussion of past and future efforts at boosting the economy.

Samuelson seems to think that investment and consumption are depressed because of businesses and consumers fears about the economy. If he had access to the economic data, he would know that non-residential investment is almost back to its pre-recession share of GDP (12.3 percent in the most recent quarter compared to an average of 12.8 percent in the years 2005-2007). Given the large amount of excess capacity in most manufacturing sectors, this doesn't suggest much business pessimism. The consumption share of GDP is at near record highs, exceeded only by the 2011 and 2012 shares, which were boosted by the payroll tax cut.

So neither business investment nor consumption show any evidence of weakness due to pessimism. The obvious basis for continuing weakness is that housing construction is still depressed due to the overbuilding of the bubble years and continued high vacancy rates. Also consumption is lower relative to disposable income than it was during the bubble years because households have lost close to $8 trillion in bubble generated housing equity. Ultimately the problem is that the economy needs some extraordinary source of demand (e.g. large budget deficits or asset bubbles) to replace the $500 billion in annual demand lost to the trade deficit.

The piece also cites John Taylor's work to claim that the tax cuts that were part of the stimulus had no effect on consumption. Research by David Rosnick and me shows that Taylor's results on this issue are not robust. Minor changes in specification lead to the conclusion that the tax cuts had a substantial impact on consumption and growth.

Comments (6)Add Comment
Third Way is Best Way to Increase Demand
written by Robert Salzberg, March 17, 2014 7:03
Dr. Baker:

" Ultimately the problem is that the economy needs some extraordinary source of demand (e.g. large budget deficits or asset bubbles) to replace the $500 billion in annual demand lost to the trade deficit."

A financial transactions tax combined with closing loopholes like the carried interest deduction could be used for infrastructure spending, which would add a point or two of GDP to growth and be budget neutral. Patent law reform along with targeting a bit more inflation would help close the trade deficit and increase demand.

Samuelson Clown Act Says People in the Economic Boat are Not Paddling Fast Enough
written by Last Mover, March 17, 2014 7:04
But the emergency has passed. The economy, though struggling, is not failing. The administration attributes its sluggishness to many causes (household debt, Europe’s problems, Washington’s political discord). Maybe. But more stimulus won’t cure underperformance and may perversely contribute to it. By highlighting the economy’s weakness, it may magnify consumer and business caution. Pessimism becomes self-fulfilling. An economy dependent on periodic shots of stimulus is an economy in eclipse.

Samuelson attempts to rise above the usual clown act by citing more and better than usual references on economic stimulus issues.

But it's still a clown act. Now he tells us more stimulus will lead to uncertainty and pessimism along with crowding out, the same things he ranted when the original stimulus wasn't large enough. He didn't want it then and he doesn't want it now.

"But more stimulus won’t cure underperformance and may perversely contribute to it." Underperformance? Samuelson denies the "underperformance" is from the demand side rather than the supply side.

He stupidly insists the economy is no more than some able bodied people in a boat paddling too slow, held back by "government interference" that forces them to paddle slower than they can.
If only government would get out of the way he intones, they could paddle their way out of the one trillion dollar output gap.

Dean Baker keeps telling Samuelson and the rest that in effect, everyone is (now) paddling at the same normal speed that held up the economy in the past, but it's not working yet. It can't. The drag on the economy from the housing bust is too large and long. There really is a hole in demand and only one way to fix it - stimulus.

How do you respond to one with an economic clown act, that the very evidence they point to that the economy is underperforming, is the same evidence in the past that supported an economy performing at par?

Well Clown Samuelson, the people in the boat are paddling as fast as they were before. The difference is the boat slowed down because they're paddling upstream instead of downstream.
written by djb, March 17, 2014 8:47

i dont read wall street journal or watch fox news

they are in the category of having no value, since everything they say is brainwashing, manipulation and lying

i guess i have to now put the washington post in that category

hope jeff bezos is proud

Bezos = Bozo the publisher
written by S. Ken Brown, March 17, 2014 9:36
I'm convinced Samuelson believes what he says. He has a following who also believe him. However, objective observers understand he is peddling tripe to eaters of tripe. We need more objective observers. In time, all tripe peddlers will be found out and Wiki will say Bezos was a Bozo.
Obama must close the trade deficit!
written by Dave, March 17, 2014 10:52
I think the case is strong enough that Obama should shift economic focus from the national deficit to the trade deficit now. He needs to keep pushing minimum wage hikes, start pushing hard on an IETC hike, and put all other effort behind closing the trade deficit.

The problems in Russia provide a good excuse to shore up domestic economic security. This means higher prices for manufactured goods (threaten tariffs with china) and large carbon tax including gasoline. He won't do any of this, of course, but at least there is a path forward to a stable long-term growth. Oh, also crack down on the banksters.

Without these changes, the US political and economic situation will remain unstable, putting more power in the hands of right-wing propagandists, increasing the possibility of overseas military confrontation, and just generally destabilizing the world.
sjb, the WaPo is no different now
written by ifthethunderdontgetya™³²®©, March 17, 2014 12:04
...than it was under Donald Graham.

Fred Hiatt and Robert Samuelson have been carrying water for the plutocratic agenda for many years. (Cut Social Security, pass horrible "trade" deals, deregulation.)

And of course, there are all the wars the WaPo promotes. (Wars are welfare for the rich.)

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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.