Are the Republicans cruel or do they just have bad luck? There have been nine recessions in America since 1950. Eight occurred under Republican presidents and the Democratic recession, under Jimmy Carter, was the shortest and least harmful of them.
Now, Republican hopes and exaggerations for the current economy are taking another hit. Just as wages and family incomes are gaining ground, we find out productivity didn't grow at all last calendar quarter. In fact, it grew only a little more than one percent since last year. That compares to growth of roughly three percent a year since 2000.
This is one number that matters. It is the source of our rising standard of living. Workers generally can't get a raise unless their companies can produce more Corn Flakes or Buicks or retail sales or transportation services per hour of work. But if productivity--output per hour of work--rises, there is money around for raises and profits.
Since 2001, however, workers didn't get the money higher productivity generated. It largely went to business profits. Why? Economic theory, at least as it is practiced by most mainstream economists today, can't explain it. The economics mainstream has mostly said that this incongruity would right itself soon.
But there may be no more soon left in the expansion. Today, we found out job growth in October slowed down. Even after upward revisions in the two earlier months, Americans are experiencing the slowest job creation since the Great Depression. GDP growth is slow. Housing is on its back, and the consumer is therefore likely to stop borrowing as much and slow down spending.
So it could well be the expansion is running out of steam before workers get their due. And if productivity doesn't bounce back, you can bet the Federal Reserve will step on the economic brakes by raising interest rates more--and eventually too much. They fear rising wages without offsetting productivity growth will result in higher inflation.
Is anyone looking out for workers? More mainstream economists are beginning to speculate that without serious worker protections, corporate power has swung too easily against the common man. Obvious enough, but in these times, it's still virtually a radical thought.
In fact, productivity growth of the last few years may not be kind we count on--the result primarily of new technologies, management techniques and growing markets. The Wall Street Journal quoted Northwestern economist Bob Gordon, who attributed it to "savage cost cutting," as executives tried to boost profits, to which their own compensation was linked, soon after the stock market crash five years ago. In other words, a lot of it came out of the hide of workers.
Will a new Congress redress the balance? Gordon's a mainstreamer, but he's pretty good at putting his finger to the wind. Maybe there's actually room for a few new--and serious-- policy ideas inside the beltway. And, yes, inside the ivory towers of those university economics departments.