Washington Post Relentlessly Anti-Bush

The Economy and Mr. Bush

Washington Post Editorial
Wednesday, December 28, 2005; Page A20

THE PAST YEAR has been remarkable for the economic disasters that did not happen. The huge U.S. trade deficit, which threatened a collapse in the dollar and a destabilizing spike in U.S. interest rates, actually delivered neither. High oil prices, which peaked dramatically after hurricanes devastated the Gulf Coast, created neither gas lines nor the wider economic fallout that many had anticipated. Instead, the U.S. economy kept growing at a rate close to the impressive 4.2 percent notched up in 2004, which many had assumed was unsustainable. All this testifies to the flexibility of the economy and the wisdom of the Federal Reserve -- though it shouldn't be assumed that the trade deficit, even bigger now than it was a year ago, will remain forever free of consequences.

Yet on one important measure, the economic news hasn't been as good. The majority of workers have not felt the benefits. The issue is not joblessness: Ten years ago economists debated whether unemployment could fall below 6 percent without triggering inflation, but in November joblessness stood at just 5 percent, down from 5.4 percent a year earlier -- a feat that the euro zone, with an unemployment rate of 8.3 percent, can only envy. Rather, the problem for workers lies in take-home pay. Wages for blue-collar manufacturing workers and non-managers in services have remained stagnant since the economic recovery began in November 2001.

Part of the reason lies in the rising cost of non-wage benefits, especially health insurance. The value of benefits received by the average civilian worker rose 5.1 percent in the year to September, and that increase followed two years in which benefit costs were roaring ahead at a rate of more than 6 percent. These increases, which outpaced inflation, help explain disappointing wages. If it costs more to provide medical insurance to workers, employers will pay themselves back by holding wages down.

But it may also be true that technology and globalization are contributing to wage stagnation; if workers can be replaced by machines or foreigners, they have limited bargaining power. In the four years since the recovery began, inflation-adjusted compensation (that is, wages plus benefits, as measured by the government's Employment Cost Index) has risen just 0.8 percent per year on average, less than in past recoveries and less than gains in productivity would seem to justify. One might expect wage gains to improve as the recovery matures and the economy reaches full employment. This may yet happen: After all, neither technological progress nor globalization prevented solid wage gains in the 1990s. But so far there's no clear evidence that the corner has been turned.

Truly an amazing conclusion in this editorial. We have had one of the shallowest recessions in history in spite of the major blow to the economy that was 9/11/01 as well as the increased expenditures necessary for security which followed. In addition, we have survived unbelievable hits on the economy this year, as pointed out in this editorial, yet still managed to have a 4.2% growth and a vigorous economy. In spite of this impressive accomplishment, including the statistics given in the editorial, the Post's editorial position is Bush has us on the wrong path. Simply breathtaking in its hubris and lack of intellectual consistency.

Full Story: Post: Robust Economy is Bush Failure?

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