From a Canadian perspective, in an OpinionJournal.com editorial called That ‘Sluggish’ Economy—It’s still the strongest in the world, we’re reminded of how (A) how irrelevant Canada has become, as it’s not even mentioned (I added some stats in square brackets); (B) how much better the economy is in the US compared to Canada; (C) how the liberal media manipulates facts; (D) How the article doesn’t even bothering comparing taxes and incomes, two points where the US is miles ahead of nearly every economy; (E) Canada wasn’t attacked by terrorists and isn’t engaged in an expensive war against terrorism and creating a democracy and freeing people in Iraq; (F) Canada has a weak and inadequate military defence; (G) and many other things.
www.opinionjournal.com
Thursday, December 30, 2004 12:01 a.m. ESTGoogle the words “sluggish U.S. economy” and “2004,” and in 0.40 second you get 4,540 results. “Weak employment report points to still-sluggish U.S. economy,” reads a recent headline, on the news that “just 112,000” jobs were added in November.
Well, we live in a world economy, so when headline writers use the word sluggish, we have to ask: Sluggish compared with whom? According to the November forecast of the Organization for Economic Cooperation and Development, gross domestic product in the U.S. is expected to increase by 4.4% in 2004. Elsewhere, the OECD predicts growth of 4% for Japan, 2.7% for the U.K., 2.1% for France and 1.2% for Germany. [CANADA: 3.5%] For the 12-country euro zone, the figure is 1.8%. To put matters in historical perspective, the last time Japan, Britain, France and Germany had growth rates at or in excess of 4.4%, the years were 1990, 1994, 1989 and 1991, respectively.
But, some say, America’s current economic performance is sluggish compared with its past performance. So let’s look at the data again. From 1997 through 2000—the great Clinton go-go years—U.S. growth averaged 4.25%. For Mr. Clinton’s first term, the average was 3.3%. For the eight years of the Reagan presidency, it was 3.4%. By what standard, then, can this year’s forecasted 4.4% be described as sluggish?
Maybe it can be argued that it’s been sluggish in terms of job gains. It is true that in 2004 there were some months when job growth failed to meet expectations, although there were other months when expectations were exceeded.
Here again, however, it’s worth putting things in an international perspective. Overall, the U.S. economy has added 2.3 million jobs since the third quarter of 2003, bringing the unemployment rate down to 5.4% from 6% in October 2003. In Germany, the unemployment rate is 10%; in France it’s 9.5%. [CANADA: 7.3%] For the 27 countries of the OECD, the average unemployment rate is 6.8%. Only Britain and Japan, among the major economies, have unemployment rates lower than the U.S.
OK, say the critics, but what has given the U.S. numbers a boost is that some people have so despaired of finding work that they’ve just dropped out of the job market. Yes, the rate of workforce participation in the U.S. declined slightly in the Bush years, from 76.8% in 2001 to 75.8% in 2003. But that still beats rates in Japan (72.3%) Germany (71.3%), France (68.2%) and Italy (61.6%).
Even more revealing are the figures for long-term (12 months-plus) unemployment, as the nearby table shows [below]. Here again, the U.S. looks good. Put simply, about 90% of Americans who lose their job can expect to find another within a year. Lose your job in Europe, and you face far more daunting odds.
Jobless, Permanently?
Long-term unemployed
(12 months or more)
as a percentage of total unemployed,
2002U.S. 8.6%
[CANADA: 12.5%]
Britain 23.1%
Japan 30.8%
France 33.8%
Germany 47.9%
Italy 59.2%Source: OECD
All right, but hasn’t the U.S. spent its way out of recession, leading to dangerously high levels of debt? Well, again, no. Household debt may be at an all-time high of nearly $10 trillion. But net household worth is also at an all-time high of $46 trillion.
We point all this out not to boast about America’s economy, or even to praise the Bush Administration’s handling of it. It’s true, for instance, that the Dow’s year-on-year performance has been modest, although it did rebound from its summer lows by more than 10%.
Still, it becomes tedious to hear the “sluggish” mantra mindlessly repeated in the media, when the most cursory comparative analysis shows the U.S. economy performing robustly by international and historical standards. That’s especially so when the same folks who carp about a supposedly sluggish U.S. economy advise us to adopt European-style labor regulations, tax rates and environmental standards, and to expand the government’s reach into health care. At least in Europe there’s a broad recognition that consistently low growth is the price to be paid for lavish social benefits.
Which brings us to a final point. To look closely at international economic data is to be reminded that countries with comparatively low tax rates and regulatory burdens consistently outperform countries with high ones. Of course it’s nice to know that America’s “sluggish” economy remains a world-beater. It’s even better to know why.
PTBC was founded by Mr. Johannesen in 2000.
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