Zombie economics in a time of insurrection.
Don't make a big deal out of one month's employment numbers! That's been a cardinal rule of short-term economic analysis and good economic journalism as long as I've been in the business. Month-to-month numbers are noisy in the best of times. They're especially noisy now, as documented in a recent blog post from Joe Biden's Council of Economic Advisers: The pandemic and its aftermath have thrown things like normal seasonal patterns out of whack, so what looks like a big number, good or bad, may well just be random measurement error. |
The council has been urging us to focus on three-month averages, which is a reasonable if imperfect fix. As of a month ago the three-month average showed employment growing at an annual rate of 4.54 percent; the latest report raised that to 4.7 percent. Both are very good numbers; leaving aside the wild pandemic-related swings of 2020, we haven't seen this kind of growth since 1984. But your assessment of how we're doing shouldn't have changed much. |
What actually happened, of course, was a huge change in the tone of media economic coverage — and an even huger change in the tone from Republicans. Before Friday's report, they were all denouncing Biden for presiding over a weak economy. As soon as the new number came out, they swung 180 degrees and began touting the economy's extraordinary success, which they said was a dramatic vindication of … Donald Trump's 2017 tax cut. |
This wasn't the first time we've seen this story — or the second, or the third, or …. In fact, it's behavior that goes back to the Clinton years. When Bill Clinton raised taxes in 1993, Republicans en masse declared that a depression was imminent. When the economy boomed instead, they insisted that credit for the good economy of the late 1990s be given to Ronald Reagan's 1981 tax cut. Applying the same time lag to Reagan-era developments would imply giving credit for the 1983-84 boom to Lyndon Johnson, but somehow that wasn't part of the argument. |
Now, it's not news that there is, in fact, not a shred of evidence in favor of claims that tax cuts have magical effects. Here, for example, is a picture of taxes and job growth over the decade before Covid-19 hit: |
 | | See the impact of taxes? Me neither.FRED |
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The actual tax changes were bigger than the picture shows: Barack Obama also introduced new taxes to pay for the Affordable Care Act, and Trump's tax cut was largely focused on corporate profits. But you see that there were two big changes in tax policy. Do you also see the big economic downshift after Obama raised taxes and the big upshift after Trump cut them? Neither do I. |
Nor is it news that tax-cut fanatics will always find a way to excuse the failure of their predictions: Anything good that happens to the economy is a delayed payoff to past tax cuts. |
What is news, and something I find somewhat surprising, is that the G.O.P. is still doing this stuff with everything else going on. It's not that the party is coming to its senses — quite the opposite. We're talking about a party with some members who believe that Jewish space lasers have been setting forest fires and Italian satellites were used to switch vote counts. More important, we're talking about a party that has basically decided that its opponents can never legitimately win elections and that violent attempts to overthrow election results are no big deal, or maybe even justified. |
And in the middle of all this they still have time for voodoo economics? |
OK, a couple of explanations for what's going on. |
One is the Upton Sinclair principle: It's difficult to get people to understand something when their salaries depend on their not understanding it. The G.O.P. was once a party run to serve the interests of plutocrats who fanned white rage to win elections; now the white rage has taken over. But it still depends on plutocrats' money, so despite all the talk of "populism" it remains committed to an ideology that justifies redistributing income upward. |
Another is the intellectual insularity of right-wing politicians. I'd be curious to know how many Republicans in Congress have ever seen a chart like the one above, showing no break in economic performance after Trump took office, or know that America gained more jobs under Clinton than it did under Reagan. My guess is very few: They aren't numbers guys, they don't know much about economic history, and the people they talk to always claim that the Reagan expansion was unmatched until the Trump boom. |
Furthermore, they probably imagine that what they hear from right-wing think tanks represents mainstream economic opinion and are almost surely unaware that a great majority of professional economists rejects the idea that tax cuts pay for themselves and believes that tax rates have little impact on economic growth. |
Anyway, it's almost reassuring to see that in the midst of the greatest challenge to democracy since the Civil War, right-wing zombie economics is still shambling along, eating brains. |
Lumber prices were one of the things feeding inflation fears. But they're plunging. |
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 | | And be sure to report those fringe benefits.YouTube |
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These days the taxman doesn't have the resources to audit superstars. |
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