Whither the economy, Mr. Bush and Mr. Greenspan?
President George W. Bush and Federal Reserve Chairman Alan Greenspan seem to see the state of our nation’s economy through entirely different eyes.
The Bush administration insists that as a result of tax cuts for the wealthy, the economy is in a robust recovery, which will create 2.6 million jobs by the end of this year ” oops, make that 11⁄2 or maybe just 1 million jobs.
On the gloomier side, Greenspan warns that because of Bush’s tax cuts it may be necessary to reduce Social Security benefits because we will not be able to continue them at current levels into the baby boom retirement years.
He also suggested that the answer for workers who have seen their well-paying jobs disappear is to train themselves so they can qualify for different high-paying jobs. Let’s take a look at the implications and possibility of success of what these two men are telling us.
Taking Greenspan’s recommendation to displaced workers first, it appears to be based on unfounded optimism. In the first place, retraining to acquire the type of new job skills needed for a well-paying job takes both time and money, and the funds which have been allocated for job training are very limited.
Second, there are not a lot of jobs available for retrained workers. Only about one-fourth of those who retrain are able to find openings for the new skills they have learned.
And third, the very reason why these workers’ jobs have disappeared stands in the way of their finding a new high-paying job ” and that is not also going to disappear.
The so-called economic recovery, of which Bush is so proud, has been achieved by “increased productivity.”
But lift the sheet and you find that the increased productivity has been achieved primarily by replacing higher-paying jobs with high-tech automation, or by “outsourcing” jobs overseas to places like India, Russia and China.
So anyone training for a new job that pays well is likely to find that job also eliminated in order to enhance corporate profits by trimming costs even further.
So what about President Bush’s claim that tax cuts are the answer to creating more jobs? The combined effect of Bush’s tax cuts and his war in Iraq is a record federal deficit of more than half a trillion dollars this year, which he says he hopes to cut in half in five years.
Even if it is possible to achieve that reduction (which seems highly questionable) the national debt will increase at least $2-3 trillion over the next five years. That is an increase of nearly 50 percent over what the national debt was when Bush took office.
All the money necessary to underwrite this burgeoning debt will constitute a drag on the economy, making job growth even more problematic. The funding of a rapidly growing debt will absorb trillions of dollars of capital, shrinking the amount available to businesses for expansion and creating new jobs.
The competition for investment capital between government and the private sector will increase interest rates, which in turn will raise the cost of borrowing money for both new and existing businesses. This will discourage the kind of activity needed for the creation of new jobs.
The end result of Bush’s tax cut plan, which he says he wants to make permanent, may very well be to put a damper on new job creation, instead of a boost.
The recent uptick in new jobs, which Bush likes to take credit for, is probably hollow, since 80 percent of those jobs are low-paying, part-time jobs providing no benefits. Low-paying jobs generate little money to pay down the debt and support Social Security.
In the final analysis, it may be that the only valid comment on the subject of the economy coming from either Bush or Greenspan is the latter’s warning that the government will no longer have the money to maintain the current schedule of Social Security payments, and will have no choice but to shrink those payments. Add the effect of rising oil prices, and the outlook is even less encouraging.
Glenwood Springs resident Hal Sundin’s column runs every other Thursday in the Post Independent.
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