Skip to comments.Mankiw's Magic (White House economist)
Posted on 01/10/2005 7:33:28 AM PST by harpu
Fridays job report shows that White House economist Greg Mankiw was very nearly right when he projected almost a year ago that jobs could rise by 2.6 million in 2004. Of course, he was widely ridiculed inside Washington after making this statement, and at one point even the White House turned its back on the Harvard professors estimate.
But the Labor Departments latest employment release shows the yearly gain for nonfarm payrolls coming in at 2.3 million. Thats close enough for government work. Its also the best jobs performance in five years.
Why so good? The labor market responded powerfully to lower personal tax rates. As workers were able to keep more of what they earned, the unemployment rate declined from 6.3 percent to 5.4 percent. A full 2.5 million jobs were added since August 2003.
Mainstream economists continue to scoff at the economic power of lower marginal tax rates. But once again a supply-side experiment worked. For all of 2004, nonfarm job additions averaged just under 200,000 per month. At this rate, 2005 will be another banner year for employment and economic growth.
A recent study by the Atlanta Federal Reserve estimates that only 98,000 new jobs per month are required to keep unemployment under control. The reason? Labor-force participation has declined somewhat as more students remain in school, more workers take early retirement, and more moms stay home to have kids and attend to child care.
With this study in mind, it is possible that this years unemployment rate could dip below 5 percent. Outside of the bubble economy of the late 1990s, this would mark the lowest unemployment rate since 1973. Declining unemployment also signifies lower federal spending on unemployment benefits and other small-scale entitlement payouts.
Additionally, at 5 percent or lower unemployment, the 4 percent growth rate of the economy will spur a flood of new individual tax collections at lower tax rates. Hence, another economic surprise of 2005 will be a pronounced decline in the federal budget deficit. As stock market appreciation throws off more tax collections from investor dividends and capital gains, even at these lower tax rates the budget deficit will decline even more.
Americas cowboy capitalism, to borrow Europes derisive term, is hatching yet another economic boom.
Kudlow should wear a skirt and carry pom-poms, and not just because he makes Charles Nelson Reilly look like Charles Bronson. Maybe he's right, what do I know? But he's always such a rah-rah guy, I can't take him seriously. Much better to hear the same outlook from someone with maybe a somewhat more developed sense of skepticism.
Rah Rah he may be, but Kudlow's almost always right. More than that he's a supply sider, like any well informed person who understands that efficient funding of our capital stock is key to our economy's growth, and that it happens best when we are least repressed, least restricted, most 'liberalized.' He's one of the good guys, even if excitable.
As soon as they make their adjustments, it will be even closer.
It wasn't such a difficult job to make this prediction. The reason it was ridiculed in the media is that they had an agenda.
I had completely forgotten about this, as will the MSM. So that guy was pretty much right? I wonder if anyone in the MSM would bring that up, but I guess at this point, it is no longer news...
It would be helpful if the White House would also make note of this.
Mankiw is an idiot. Same as Kudlow.
Face it Willie, we are in a long term expansion and there won't be too many layoffs for you to report. Should be lots of high speed rail stuff going on though so you won't be out of work at least.
You might like to try a more reputable source for your economic commentary.
Good resources are The Wall Street Journal and Investor's Business Daily. More research oriented sites are maintained by the 12 Federal Reserve system banks.
Or have you misspoken?
Those misguided publications advocate policies that are detrimental to our domestic economy.
"I am one of those who do not believe that a national debt is a national blessing, but rather a curse to a republic; inasmuch as it is calculated to raise around the administration a moneyed aristocracy dangerous to the liberties of the country."
-- President Andrew Jackson - (1824)
Another current resource.
You're two for two.
Spoken like a true, native Detroiter...not swift enough to leave the Coleman Young burial grounds.
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