When I wrote about Jeb Bush’s latest gaffe, his assertion that Americans need to work longer hours to get the economy growing, I had no idea the gaffe would grow a stumpy pair of legs. In yesterday’s post at TheMoneyIllusion.com, Scott Sumner thinks that the statement has been misinterpreted, that Bush was generally describing the state of macro labor statistics, and everything Bush said was true.
So let’s have another look at the Jeb Bush quote and then I break it down piece by piece:
My aspiration for the country and I believe we can achieve it, is 4 percent growth as far as the eye can see. Which means we have to be a lot more productive, workforce participation has to rise from its all-time modern lows. It means that people need to work longer hours and, through their productivity, gain more income for their families. That’s the only way we’re going to get out of this rut that we’re in.
And to break it down:
My aspiration for the country and I believe we can achieve it, is 4 percent growth as far as the eye can see.
Which means we have to be a lot more productive, workforce participation has to rise from its all-time modern lows.
True. People who currently don’t have jobs do need to be productive.
The keys here are “Which means…” and “It means…” in the next sentence, which I’ll get to.
It means that people need to work longer hours and, through their productivity, gain more income for their families.
Obviously, if one is jobless, they would have to work longer hours.
That’s the only way we’re going to get out of this rut that we’re in.
Only partially true if not in fact false.
If people tried to work longer hours or to get jobs if they currently have none to work at least some hours rather than zero hours, they are hindered by the general production choices employers make based upon trend aggregate demand. What Bush is talking about here is a labor supply issue, not a demand side issue.
If it were just a matter of work and productivity habits that is a limiting factor to achieving his perceived potential of 4% growth, labor statistics would look different than they currently do because that would imply a shortage of labor. In other words, if there were plenty of aggregate demand and the low growth problem were related to workers not working enough or being productive enough, wages would be rising at a more than healthy clip and we might even see some inflationary pressure. But that’s not what we’re seeing.
The first step in solving any problem is to correctly identify the problem that needs to be solved. And the problem of low growth and low productivity has almost nothing to do with the current habits and or preferences of workers.
A cyclical labor problem has turned structural due to a years-long continuous shortage of aggregate demand. But that is not what he says nor implies.
What he says, to me anyway, really isn’t much different than the accusations of the bubble fear mongers as the NGDP crash was in progress, that the real problem is debt. People in general borrowed too much, spent too much, used their homes as ATMs, etc… The low growth problem is a labor supply and productivity story, not a massive and persistent screw up of the central bank.
And yes, I have a huge problem with a person wanting to be our president being either so incredibly ignorant about macro, or so elitist to assume that the people are the problem and not government. It’s just plain and simple BS.