The slowing economic momentum --- Paul
>> second quarter g.d.p. numbers were revised downward. earlier, the slowing economic momentum.
>> it’s not a recession. but we think that the economy needs to grow around 3.5% annual rate just to keep up with productivity growth and growth in the labor force. so this is actually the economy that’s going backwards a little bit in terms of the things that matter. for about three months there we thought we had a real boom underway. it’s not there anymore. we’re now down to the best growth in four years and falling.
>> they also say the other point is that it is just a couple of months, that maybe it is a pause as chairman greenspan has called it and nothing more than that.
>> that’s probably true. i think most people, even people who don’t think that the policies are very good, think that the next job report will be better than the last one and the next g.d.p. report will be better than the last one. but we still have an economy that’s way down from where it ought to be. we ought to be having 4579% or 5% growth. we’re not doing that.
>> some will say 3% is not that bad, 3579% still not that bad. we’re still doing so much better than so many of our other industrialized nations, if you will. that it’s really just not as bad as everyone would steam think that it is. there are still a million jobs that have been created in the last year.
>> but remember, the economy needs something like at least 1.5 million a jobs a year just to keep up. just to prevent the labor market from deteriorating. and we’re way, way down. we’re 1.2 million jobs below where we were at the last peak. and the population’s grown. we should have five or six million jobs more than we now do. we’re―actually, we’re losing. we’re not keeping up. if you’re look at profits, it’s not bad. if you’re look at g.d.p., it’s not bad. if you’re looking at jobs and wages, it’s pretty lousy.
>> do you think the chairman should not have raised rates?
>> i think he should not. i think this was a mistake. they bought into the story of a self-sustaining recovery too early. i understand the last one they were afraid to not have raised rates because it would have looked like panic. i think they made a mistake.
>> the argument says even though they are raising rates, they’re only bringing them back down to―getting them away from recession level rates. you’re only bringing them back up to neutral level
>> yeah. but we still have recession level labor market problems. unemployment number is the only number that looks good. everything else looks like an economy with 7% employment. this is not a happy economy. we don’t have the recovery that would say it’s time to remove the stimulus.
>> we’ve got the convention coming our way in the next couple of days what do you think we’re going to expect to hear from the republicans?
>> well, they say they have to come up with something. they can’t just say look at our record, everything worked. the numbers aren’t that good. the feel isn’t that good. everything we know says it’s going to be ownership society stuff. most of the ownership society stuff―a lot of time savings skts small change. maybe they can dress it up to look like it’s bigger. maybe people won’t realize it doesn’t help middle class families much. but big item i’m almost sure is social security privatization. it’s going go back to 2000 when he talked about private accounts. the trouble with the ridge me tick it didn’t work. which is why it didn’t happen. maybe he can roll it out again and hope people don’t notice that they can once again be fooled by not understanding the aremetic.
>> what about the deficit? the bush administration says they’ll be cutting it in half over the next five years.
>> it’s a hillarious forecast. the key elements in that are tax cuts expiring even though the bush administration is campaigning to have them made permanent. and ignoring alternative minimum tax reform which the administration is campaigning for. so the deficit will fall a lot if congress doesn’t give us what we want. and that’s our plan. it’s an amazing joke.
>> does kerry present a better alternative?
>> kerry is doing not a lot about deficit reduction. he’s not proposing additional things that will widen the deficit. and he’s proposing some corporate tax reform which should help a bit. but kerry―his main thing is to roll back part of the tax but to use it for health care so he’s not ache deficit hawk. some democrats are disappointed. others say, look, the public doesn’t understand the deficit’s very much. he’s got to offer something fozz people.
>> once again, paul krugman speaking with our suzy assaad. his most recent book, the great unraveling is in paper back. confidence among u.s. con seemers fell. the final reading on august consumer sentiment dropped to 95.9 in august. marketing the first decline since may. however, the readings still came in higher than the initial estimate of a drop to 94. the university attributed the decline to concern about the pace of employment growth. employers plan to cut health care benefits to slow the rise in their insurance costs next year to 9.6%. that’s the finding of a preliminary survey of more than 900 u.s. employers by mercer human resource consulting. health insurance premiums have risen 39% over the past three years. last year’s jump was the biggest since 1990, according to the henry kaiser foundation. families have been cope big cutting benefits and shifting costs to workers. new york city is gearing up for the convention. delegates, journalists and protesters. we’ll have a preview of what might happen when we come back.
