Paul Krugman sees vibrant growth and job creation in an economy that has added only 5 million jobs above the pre-recession level, with GDP up only 2% per year.
WASHINGTON, Jan. 12, 2016 — Liberal economist and New York Times columnist Paul Krugman continues his somewhat delusional view of economic performance under the Obama administration, especially job growth. He claims that Obama created 14 million jobs in the last six years, more than twice the number created during the Bush administration.
Krugman notes that almost 300,000 jobs were created last month. That kept the unemployment rate at a seven-and-a-half year low of 5 percent. He claims that there is no evidence that “Obamacare led to a shift from full-time to part-time work and no evidence that the expansion of Medicaid led to a large reduction in labor supply.” Krugman’s delusion continues.
Krugman is correct that from the bottom of the recession in February 2010 until today, more than 14 million jobs have been created. And that is true—but.
Krugman disagrees. He says there is no evidence that the new jobs are mostly marginal or part-time. He also says that there is no evidence that changes wrought by the Affordable Care Act, which led to an expansion of Medicaid, resulted in a reduction in labor supply. Krugman’s delusion continues.
The Bureau of Labor Statistics provides the official unemployment numbers. The 5 percent rate is called the U3 rate; it is the total number of unemployed (people actively seeking a job who can’t find one) divided by the total labor force. They also publish a U6 rate, which includes the number of unemployed plus the number of people who dropped out of the labor market and the number of people working part-time who would rather work full-time.
Before the current recession started, the U3 rate was 5 percent and the U6 rate was 8 percent, a 3 percent difference consistent with historical standards. Today U3 is 5 percent but the U6 rate is 10 percent, a 5 percent difference, which is 2 percent more than the standard. That translates into about 3 million Americans.
Three million Americans are either working part-time instead of full-time or have simply dropped out of the labor market. People choose to work part-time or stay out of the job market if they have no hope of finding a full-time job and if there are social programs that provide substitute income.
Obama expanded the food stamp program, made it easier to get welfare (and increased welfare payments), extended unemployment benefits and provided free health care. These all encourage workers to stay out of the labor force or seek part-time work.
The labor force participation rate is about 62.5 percent. Historically the rate is 66 to 67 percent, as it was prior to the recession. Obama’s policies have significantly reduced labor force participation and the size of the labor force.
Economic growth is not a priority for President Obama, which explains why the economy has averaged just over a 2 percent annual growth rate during the current recovery. During the recovery following the more severe 1981 recession, annual growth was 4.5 percent
The president is not completely responsible for the economy, but he can propose legislation that Congress could pass to help the economy grow. Virtually all of Obama’s economic policy actions have been geared to reducing income inequality, mostly by raising taxes on the highest income earners and expanding social programs to help the lowest income earners. He also provided taxpayer funds for industries he supports and raised the minimum wage to employees of government contractors while encouraging others to do the same.
None of this stimulated growth; many programs actually served to slow growth by imposing additional costs and regulations on business that seek to hire workers and expand output.
Krugman suffers from Gruberisms. That occurs when a researcher is concerned with curing perceived social injustices rather than reaching unbiased conclusions. Krugman, like Obama, sees the world unrealistically and prescribes solutions that are simply delusional.Click here for reuse options!
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