The economy may not be voting for John Kerry after all. The employment figures for March, released on April 2, were as surprisingly strong as the previous months' had been weak. Nonfarm payroll jobs rose by 308,000. Most analysts had been predicting around 100,000. For good measure, the earlier figures were revised upward a bit as well. The presumptive Democratic presidential nominee instantly looked wrong-footed: Kerry's first remarks after the numbers were released stuck grimly to the "jobless recovery" theme that had, up to then, seemed to fit the facts just fine.
Many other recent indicators have also been good—meaning, for the junior senator from Massachusetts, bad. The Conference Board's new reading of overall business confidence, announced this week, is the strongest in 20 years. So far as employment prospects are concerned, the news was even better: Roughly half of the bosses responding said they expected employment in their industry to rise, against only 12 percent who said they expected it to fall. This is the best result since the question was first put to managers in 1976.
All such numbers are, of course, erratic. They may yet sag again. If the Bush administration is wise, it will be guarded in the welcome it gives to such findings. (The new setbacks in Iraq are likely to keep the Bush campaign from crowing too loudly. Exploiting those setbacks, on the other hand, does present Kerry with difficulties of its own—chiefly, that of explaining what he would do if he were in charge.) Whatever else happens, though, if the figures for the economy, and above all for employment, keep moving up, Kerry and his advisers will have some hard thinking to do.
Because if that happens, they will have placed a political bet and lost. The failure of the payroll figures to show big gains before March had been a puzzle and a concern to the administration and to many market analysts, because so many other kinds of data were signaling a robust recovery. Gross domestic product grew at an annual rate of more than 6 percent in the second half of last year. Gregory Mankiw, chairman of the president's Council of Economic Advisers, pointed out in a speech last month that this was America's best half-year performance for nearly 20 years, and faster growth than achieved in any other big, rich economy within that period. Productivity growth was strong as well—as it had to be, to account for the failure of employment to grow as quickly as it would have in the past, given GDP growth as speedy as that.
By both these measures, the economy was doing very well, even before the job numbers turned. Attacking President Bush on the economy was therefore a risk.
Of course, that very mismatch between output and employment was what made the "jobless recovery" rhetoric irresistible. Spare us your insensitive celebrations over GDP and productivity, goes the argument; what use is growth if it does not put people back to work? This posture combined very helpfully, from Kerry's point of view, with the recent concerns over "offshoring" of service-sector work. Yes, the Kerry team said, profits are surging and the economy is recovering just fine, but foreigners, not Americans, are getting the good new jobs. And nowadays, it is not just manufacturing jobs that are at risk, but jobs in services, too—and jobs in services account for 80 percent of the labor force.
Calls to put the national interest first are always welcome at election time. So are populist denunciations of greedy capitalists. And in this case, such rallying cries have the extra virtue of pointing to an apparent failure of policy. Which is to say, America's economic problems are no accident. In times like these, trusting the market is of no use. To do so is either plain negligence, if you take a generous view of the administration's motives, or else, if you are less forgiving, an actual conspiracy to boost the profits of robber corporations at the expense of America's working men and women.
If market forces are delivering growth but no jobs, then demand in the economy must be carefully redirected by the intelligent hand of government so as to create new employment at home. And Kerry offers suggestions about how exactly that might be done—notably, by ending what he describes as the tax breaks that encourage treacherous American companies to export jobs.
The economic argument that claims to justify this position was nonsense all along. Rising productivity at home, not offshoring, has been the main brake on new job creation. And rapid growth in productivity is a good thing, not a bad thing. It is the only sure way, in fact, to deliver lasting and broadly based improvements in living standards.
What about offshoring as an issue in its own right? It poses problems, to be sure, but it needs to be thought of in the same way as downward pressure on employment caused by imports of goods. Both of these forces hurt people, and the government ought to consider ways to lessen the harm. But it is all too easy to make matters worse.
Curbing imports of goods by erecting trade barriers can shore up the existing pattern of employment for a time, but it does not raise the overall level of employment in the long term. And it achieves even that dubious goal only at the expense of pushing up the prices that consumers must pay for goods. In just the same way, it would be possible to devise barriers to offshoring that might fix, at least for a while, the existing structure of some service-sector employment. But this would not affect the overall level of employment, and the advantage of a slower pace of structural change, if it is an advantage, would come at the cost of more expensive services—at the cost, in other words, of lower real incomes for American workers.
This is why one of America's finest postwar economists, the late Rudiger Dornbusch, coined the maxim "Protect the worker, not the job." Companies should not be told, nor encouraged Kerry-style through the government's tinkering with the tax code, to spurn opportunities to make themselves more competitive or more profitable. Instead, workers who lose their jobs or suffer falling incomes because of such efforts to improve profits and efficiency should be cushioned as far as possible from the consequences, with help for retraining or relocation or with other kinds of assistance.
One great political virtue in placing the emphasis in that way is that, aside from being good policy, this approach sits happily with an essentially optimistic worldview. It sees the problems posed by economic change as the unfortunate side effects of a fundamentally beneficial process—the side effects of progress. The pessimistic alternative is to see economic change as fundamentally harmful—something that needs to be resisted in its own right. On the whole, America is an optimistic country. Given its history, it has every reason to be. It believes in progress, it believes in change, it wants plenty of both, and it is suspicious of politicians who set their face against those ideals.
This is something Bill Clinton understood very well. Intellectually and instinctively, Clinton was a free-trader, a believer in globalization—an economic optimist. In responding to voters' concerns about the growing pains of international capitalism, he was usually guided by Dornbusch's maxim. He took the concerns seriously, but he emphasized the opportunities that economic growth offered for individual and collective advance, and he cast his interventions in trade and economic policy as efforts to seize those opportunities.
Bush, evidently much less committed either intellectually or instinctively to liberal trade, nonetheless sees political advantage in a similar approach. He has spoken up lately for enterprise, competitiveness, and growth, saying in effect that America has nothing to fear from global competition, and proposing, as he did again this week, policies that help workers to change and move on, rather than policies that express fear of change and a desire to block it. Given the administration's actions on trade, much of this approach is doubtless sheer hypocrisy—but it is nonetheless good politics.
Kerry's economic platform, especially so far as trade is concerned, lacks Clintonian optimism. It contemplates the international economy fearfully. It sees poor countries such as India becoming less poor, and trembles: There are foreigners out there looking to steal American jobs, and traitorous American corporations are in league with them. Seen this way, the forces of economic change are not to be celebrated and harnessed, but hobbled. The "jobless recovery" might have made this approach seem plausible enough for long enough for Kerry to win in November. Without that cover, Kerry's current view of America's prospects just seems timid and gloomy.
There is time yet for the numbers to move back on his side. A better bet might be to start paying attention right now to the economics of Dornbusch and the politics of Clinton.
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