Economy: G-20 To Meet About Continuing Financial Support
• "The Group of 20 leading nations will agree this weekend it is too early to pull the plug on emergency support for the global economy and launch a new system of checks to help rebalance world growth and prevent future crises," Reuters reports. "British finance minister Alistair Darling is hosting the third meeting of G20 finance ministers and central bankers this year in St Andrews, Scotland" today, "aiming to put flesh on the bones of agreements made at a leaders' summit in Pittsburgh in September."
• "A senior House Democrat said Thursday he would push to extend unemployment insurance benefits through all of 2010 before the end of this year, when the eligibility window for new enrollees will shut down or begin to phase out for existing beneficiaries," CongressDailyAM (subscription) reports. "The projected cost of such a program is potentially $80 billion to $85 billion, according to preliminary estimates."
• "No large financial firm should be too big to fail, said two members of the U.S. Senate Banking, Housing and Urban Affairs Committee," Bloomberg News reports. Republican Bob Corker of Tennessee and Democrat Mark Warner of Virginia "are sponsoring legislation to give the Federal Deposit Insurance Corp. the authority to force large bank holding companies into receivership. Any firm that benefits from a government-funded orderly wind-down would be required to close its doors permanently to avoid a perpetual series of government bailouts."
Is job creation the best way to measure whether the Obama administration's economic plan is working? Obama has promised to create "or save" at least 3 million jobs by 2011, but an analysis [PDF] by the Obama team estimates job losses of 3 to 4 million without action. Does that commit Obama to roughly reaching current levels of employment by 2011? Is the analysis correct to estimate 3.7% GDP growth from his $775 billion plan? Is the analysis, by Christina Romer and Jared Bernstein, reasonable in its estimates of the growth effects of spending, versus tax cuts and other options?
-- John Maggs, NationalJournal.com
Responded on January 12, 2009 10:31 AM
J.D. Foster , Senior Economist, the Heritage Foundation
Job gains or losses are an imperfect metric for gauging economic performance, for the same reasons the group tasked with deciding when recessions begin and end consider a wider array of economic data. However, the political process and the American people are accustomed to employment data such as the unemployment rate and changes in the level of employment, and these serve reasonably well approximating the overall state of the economy, especially when referring to changes in private sector employment. This focus on private-sector employment is especially important in the context of President-elect Obama's jobs claim. This claim ought to be understood to relate solely to private employment, excluding any change in the number of Americans working for the government. Government workers often perform valuable services, and no demeaning of their contributions is intended. But the private sector supports through their taxes the jobs of government workers. So the relevant measure of the economy ought to reflect only pri...
Read More
Job gains or losses are an imperfect metric for gauging economic performance, for the same reasons the group tasked with deciding when recessions begin and end consider a wider array of economic data. However, the political process and the American people are accustomed to employment data such as the unemployment rate and changes in the level of employment, and these serve reasonably well approximating the overall state of the economy, especially when referring to changes in private sector employment.
This focus on private-sector employment is especially important in the context of President-elect Obama's jobs claim. This claim ought to be understood to relate solely to private employment, excluding any change in the number of Americans working for the government. Government workers often perform valuable services, and no demeaning of their contributions is intended. But the private sector supports through their taxes the jobs of government workers. So the relevant measure of the economy ought to reflect only private sector jobs.
That said, it would be the height of cynisism to suggest that President-elect Obama means anything but that private-sector employment will be millions of jobs higher than it is today if his plan is implemented. No one could credibly measure what employment would be in the absence of one stimulus plan or another. And so no one should suggest that President-elect Obama does not intend to be held accountable for the results of his plan, which would imply private, non-farm employment somewhere between 139 and 140 million by the end of 2010.
Unfortunately, the Obama stimulus plan as currently envisioned has little chance of creating a net of 3,000 private-sector jobs, let alone 3 million or more. Another half trillion dollars of deficit spending or more on top of the 2 trillion or so already expected for the next two years is hardly a prescription for economic recovery, but for an unproductive and massive increase in the national debt. So the President-elect should be given credit for being clear about his goal, the benefit of the doubt that his words mean plainly what they imply, and fair warning that his plan as described cannot achieve his goal.
Collapse