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Is President Bush a closet Keynesian?

Posted By Barry Ritholtz On September 3, 2004 @ 8:53 am In Finance,Politics | Comments Disabled

nytimes.bmp

Alternative title: Personal Income Growth vs. Governmental Hiring

In our previous post [1], we noted that one of the seven factors Forbes looked at in their econometric election model was “Personal income growth.” In reviewing how those factors fared under President Bush, the article stated that “income growth has lagged as well.”

That’s a pretty ambiguous declaration. I was curious about how much of a lag? The fuzzy answer got me thinking about where Personal income growth actually is, and how much the lag has been relative to prior Presidential terms of office.

I all but forgot about it — until this morning, when I saw New York Time’s business reporter Floyd Norris addressed that very same issue.

Buried in a piece titled “In the Bush Years, Government Grows as the Private Sector Struggles [2],” was this little economic tidbit:

“In the area people think of when they hear about personal income – wage and salary payments – the picture is not as pretty. The entire increase there comes from the government payroll. Adjusted for inflation, private industry is paying almost exactly the same as in 2000. To be precise, private spending on wages is up less than 0.1 percent.

No administration back to John F. Kennedy has done as poorly. The two that came closest – a 1.4 percent rise under the first President Bush and a 3.3 percent gain in the term that ended with Gerald Ford in the White House – each ended with incumbents losing the election.” (emphasis added)

Norris puts his focus on an underlying growth area within this stat: Government spending and hiring. It turns out Uncle Sam is repsonsible for all the growth in personal income (wage and salary).

Is it true? Is President Bush a closet Keynesian?

nyt_03norr.chart
Graphic courtesy of NYT [2]

Here’s an additional exerpt:

“The share of wage and salary income coming from the government can be seen as a measure of the size of government relative to the economy. It began to rise in the 1950′s and peaked in the second quarter of 1975, under Mr. Ford, at 21.8 percent of total wage and salary income. It declined under Jimmy Carter and Ronald Reagan, rose a little under the first President Bush and then fell rapidly under Bill Clinton, hitting a low of 16 percent in late 2000.

It has risen under the current administration. The latest quarterly figure showed 17.4 percent of all wage and salary payments came directly from the government.

Some of that is simple economic cycles. Government salary payments tend to rise less rapidly than private ones in good times and not to fall in bad times. But it also shows that this administration has not cut the size of government.

A bigger government and tax cuts are the main reasons that real personal incomes are up since 2000. The big question for the economy is whether the stimulus has been enough to produce a self-reinforcing recovery. More signs that the private economy has turned around will be needed before that can be deemed a sure thing.”

Yes, its true: Forget Supply Side economics: President Bush is actually a Keynesian!

Sources:
In the Bush Years, Government Grows as the Private Sector Struggles [2]
Floyd Norris
New York Times, September 3, 2004

http://www.nytimes.com/2004/09/03/business/03norris.html

It’s Not The Economy, Stupid [3]
Dan Ackman and Mark Hazlin,
Forbes, 08.25.04, 6:00 AM ET

http://forbes.com/home/business/2004/08/25/cx_da_0825economy.html

Is the Presidential race roiling the markets? Or are the markets roiling the race? [4]
Karyn McCormack
Business Week, August 30, 2004

http://www.businessweek.com/bwdaily/dnflash/aug2004/nf20040830_5077_db049.htm


Article printed from The Big Picture: http://www.ritholtz.com/blog

URL to article: http://www.ritholtz.com/blog/2004/09/is-president-bush-a-closet-keynesian/

URLs in this post:

[1] previous post: http://bigpicture.typepad.com/comments/2004/09/its_not_the_eco.html

[2] In the Bush Years, Government Grows as the Private Sector Struggles: http://www.nytimes.com/2004/09/03/business/03norris.html

[3] It’s Not The Economy, Stupid: http://forbes.com/home/business/2004/08/25/cx_da_0825economy.html

[4] Is the Presidential race roiling the markets? Or are the markets roiling the race?: http://www.businessweek.com/bwdaily/dnflash/aug2004/nf20040830_5077_db049.htm

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