Ideal Taxes Association

Raymond Richman       -       Jesse Richman       -       Howard Richman

 Richmans' Trade and Taxes Blog



Bernanke needs to get with the program
Howard Richman, 2/29/2012

Today, Federal Reserve chairman Ben Bernanke told the House Financial Services Committee that the rapidly falling unemployment rate reported this past year by the Bureau of Labor Statistics does not fit with the other data he has been seeing. He said:

The decline in the unemployment rate over the past year has been somewhat more rapid than might have been expected, given that the economy appears to have been growing during that time frame at or below its longer-term trend.

Bernanke is showing a lot of common sense here. Although he has not looked carefully at the BLS data, he realizes that something is fishy. Former Reagan budget director David Stockman calls the manipulations of the data by the Bureau of Labor Statistics (BLS) and the Bureau of Economic Analysis (BEA) "The Economists' Truman Show."

For example, the unemployment rate fell in January partly because the Bureau of Labor Statistics (BLS) reclassified 1.177 million people who might otherwise have been considered as unemployed as having dropped out of the labor force. (To find this December-to-January adjustment in the BLS press release, check out Table C.)

Bernanke probably looked carefully at the GDP numbers just released this morning. The headlines trumpeted the increase in real GDP in the fourth quarter at an annual rate of 3.0%, but a closer examination reveals that real GDP would only have grown by a minute annual rate of 1.3% if not for inventories growing at a 1.7% of GDP clip. The following table shows the contributors to GDP growth during each quarter of the past year.

Contributors to Real GDP Growth
Year 2010-1 2010-2 2010-3 2010-4
Household Consumption 1.5% 0.5% 1.2% 1.5%
Business Fixed Investment 0.2% 1.1% 1.6% 0.6%
Government Consumption -1.2% -0.2% 0.0% -0.8%
Net Exports -0.3% 0.2% 0.4% 0.0%
Inventory Change 0.3% -0.3% -1.2% 1.7%
Total Change in Real GDP 0.4% 1.3% 1.8% 3.0%

Bernanke doesn't seem to be aware that the goal is to trumpet positive numbers as loudly as possible, in hopes that positive expectations will produce a recovery. The Blaze reports that the stock market fell steadily while Bernanke was speaking:

The Dow, which had been up by as many as 51 points, reversed course as Bernanke started speaking. It turned negative within the hour. The current market losses are broad, with nine of the 10 industry groups in the S&P 500 losing ground. Materials and energy stocks had the sharpest declines, while consumer products and financial companies were nearly flat.

The Obama administration is hoping that the U.S. economy will grow rapidly, even while it permits mercantilism, restricts fossil fuel production, and grows entitlements. Its hope is that improved business expectations will increase business fixed investment and thus produce a recovery. The BLS and the BEA have been doing their part to improve expectations. Bernanke needs to get with the program.

Your Name:

Post a Comment:




  • Richmans' Blog    RSS
  • Our New Book - Balanced Trade
  • Buy Trading Away Our Future
  • Read Trading Away Our Future
  • Richmans' Commentaries
  • ITA Working Papers
  • ITA on Facebook
  • Contact Us

    Archive
    Jul 2017
    Jun 2017
    May 2017
    Apr 2017
    Mar 2017
    Feb 2017
    Jan 2017
    Dec 2016
    Nov 2016
    Oct 2016
    Sep 2016
    Aug 2016
    Jul 2016
    Jun 2016
    May 2016
    Apr 2016
    Mar 2016
    Feb 2016
    Jan 2016
    Dec 2015
    Nov 2015
    Oct 2015
    Sep 2015
    Aug 2015
    Jul 2015
    Jun 2015
    May 2015
    Apr 2015
    Mar 2015
    Feb 2015
    Jan 2015
    Dec 2014
    Nov 2014
    Oct 2014
    Sep 2014
    Aug 2014
    Jul 2014
    Jun 2014
    May 2014
    Apr 2014
    Mar 2014
    Feb 2014
    Jan 2014
    Dec 2013
    Nov 2013
    Oct 2013
    Sep 2013
    Aug 2013
    Jul 2013
    Jun 2013
    May 2013
    Apr 2013
    Mar 2013
    Feb 2013
    Jan 2013
    Dec 2012
    Nov 2012
    Oct 2012
    Sep 2012
    Aug 2012
    Jul 2012
    Jun 2012
    May 2012
    Apr 2012
    Mar 2012
    Feb 2012

    January 2012
    December 2011
    November 2011
    October 2011
    September 2011
    August 2011
    July 2011
    June 2011
    May 2011
    April 2011
    March 2011
    February 2011
    January 2011
    December 2010
    November 2010
    October 2010
    September 2010
    August 2010
    July 2010
    June 2010
    May 2010
    April 2010
    March 2010
    February 2010
    January 2010

    Categories:
    Book Reviews
    Capital Gains Taxation
    Corporate Income Tax
    Consumption Taxes
    Economy - Long Term
    Economy - Short Term

    Environmental Regulation
    Real Estate Taxation
    Trade
    Miscellaneous

    Outside Links:

  • American Economic Alert
  • American Jobs Alliance
  • Angry Bear Blog
  • Economy in Crisis
  • Econbrowser
  • Emmanuel Goldstein's Blog
  • Levy Economics Institute
  • McKeever Institute
  • Michael Pettis Blog
  • Naked Capitalism
  • Natural Born Conservative
  • Science & Public Policy Inst.
  • TradeReform.org
  • Votersway Blog
  • Watt's Up With That


    Wikipedia:

  • [An] extensive argument for balanced trade, and a program to achieve balanced trade is presented in Trading Away Our Future, by Raymond Richman, Howard Richman and Jesse Richman. “A minimum standard for ensuring that trade does benefit all is that trade should be relatively in balance.” [Balanced Trade entry]

    Journal of Economic Literature:

  • [Trading Away Our Future] Examines the costs and benefits of U.S. trade and tax policies. Discusses why trade deficits matter; root of the trade deficit; the “ostrich” and “eagles” attitudes; how to balance trade; taxation of capital gains; the real estate tax; the corporate income tax; solving the low savings problem; how to protect one’s assets; and a program for a strong America....

    Atlantic Economic Journal:

  • In Trading Away Our Future   Richman ... advocates the immediate adoption of a set of public policy proposal designed to reduce the trade deficit and increase domestic savings.... the set of public policy proposals is a wake-up call... [February 17, 2009 review by T.H. Cate]