The past few weeks have been pretty interesting in the US. We have had two party conventions, speeches from some rising stars, including a potential President Castro (no relation to the Cuban variety – this is the Hispanic mayor of San Antonio, Texas, whose twin brother is also standing for Congress), one hurricane and a set of not great but not dire jobs numbers.
First, to the Republican convention in Tampa, Florida. The most memorable thing about that gathering was Clint Eastwood’s conversation with an empty chair. The Republicans tried desperately not to talk about their economic plans in case the US public found out what they were, so most of the time they just played the man – that is, Barack Obama, who they seem to hate viscerally – rather than the ball. If the Dow had doubled under a Republican president as it has under Obama, who also took out Osama Bin Laden, presumably they would have been yelling his praises from the rooftops. For the past couple of years, the Republicans in Congress have had just one goal: to defeat Obama, no matter what the consequences are on the US economy. One rule for you, one rule for me.
The cheek of it
Paul Ryan’s budget appears to be a classic example of a Keynesian stimulus, although of an unusual kind. The Republican vice-presidential candidate is in favour of huge public spending cuts on Medicare, Medicaid, food stamps and student grants, to name but a few. Plus, huge tax cuts for the rich so that Mitt Romney and his various billionaire supporters would get richer while the poor would get poorer. Ryan wants a $2trn increase in unspecified defence spending that the Pentagon has made clear it doesn’t want. Romney and Ryan would not raise any taxes, but they say they would close unspecified tax loopholes. These could include mortgage and retirement tax relief, which would be hugely unpopular. So Romney not only refuses to release his tax returns, but won’t say how he’ll fund his tax cuts. This was all made clear by Bill Clinton, whose Democratic convention speech was an economics masterclass.
On 7 September, the Bureau of Labor Statistics produced its jobs report for August, which showed that numbers on non-farm payrolls increased by 96,000. Romney greeted this with this astonishing response: “After 43 straight months of unemployment above 8 per cent, it is clear that President Obama just hasn’t lived up to his promises and his policies haven’t worked. They aren’t better off than they were four years ago. My plan for a stronger middle class will create 12 million jobs by the end of my first term.” This was pretty cheeky, given the Republicans in Congress voted down Obama’s jobs bill and offered nothing in its place.
Are Americans better off than they were four years ago? Employment as measured by non-farm payrolls obtained from employer surveys has risen in each of the past 30 months and by a total of 4.1 million (see first chart). Since January 2009, when Obama became president, employment is down by just over a million, but this is because of the economy he inherited from George W Bush that was bleeding jobs. Job losses in the first six months of 2009 averaged 566,000 a month. Since July 2009, employment is up nearly 2.8 million. So the starting point matters – it takes a long while for policies to have an impact.
For comparison, I have included the equivalent chart of employment change in thousands for the UK, which has about a fifth as many workers as the US (29.5 million and 142 million, respectively). Since May 2010, UK employment is up 545,000, but only up 355,000 if we count six months forward as I did for Obama. Employment has grown in the UK since December 2010 by an average of 20,000 per month, compared with an average of 146,000 per month in the US.
Out of balance
Now to the claim that Romney would create 12 million jobs. That is more than was created in the nine-year period from 1999 to 2007. The last time three million jobs were created in one year was under Clinton, in each year between 1997 and 1999 (the only other years when that occurred was in 1983, 1984, 1987 and 1988). Clinton created 12 million jobs from 1996 to 2000. The last four-year period it was done was 1976-79, largely under Jimmy Carter.
Romney’s claim looks pretty bold, given that he hasn’t told us what measures he intends to take to create this almost unprecedented number of jobs. He seems unaware that there are major headwinds hitting the US economy, including concerns about the eurozone and a slowing down of the world economy. In addition, public-sector employment continues to fall: it is down 675,000 since the start of 2009.
There is little more the Federal Reserve can do to help, not least because Romney has said he is opposed to more monetary stimulus in general and more quantitative easing in particular (his adviser Glenn Hubbard calls the latter unmandated fiscal policy). Romney has also said that he would remove Ben Bernanke as chairman of the Fed. If Romney were to become president, he would likely sing from a rather different hymn book, as David Cameron and George Osborne have in relation to the need to have even looser monetary policy; what you say in opposition is often quite different from what you do when you have to make the decisions.
Romney and Ryan don’t have a credible economic plan. There’s no chance in heck they can generate 12 million jobs based on their policies. They could create these jobs with an unfunded $5trn fiscal stimulus, but that would explode the debt, if they didn’t close any loopholes or raise any taxes. So much for balanced budgets.
David Blanchflower is economics editor of the New Statesman and professor of economics at Dartmouth College, New Hampshire