Nathan Newman wrote:
>Of course Greenspan and monetary policy play a role in economic prosperity,
>but I do not believe that Greenspan is some how more uniquely smart nor
>solicitious of Clinton than Volcker was of Reagan in the 1980s, yet
>lower-income folks were royally screwed in the 1980s and have seen some
real
>gains in the 1990s. So what explains the difference in how the respective
>booms affected economic inequality and the wage gains of lower-income
folks?
-One answer: the unemployment rate didn't break below 7% until August -1986 - and it popped back up again, only staying decisively below -after November. It didn't break decisively below 6% until a year -later - 5 years into the expansion. The cycle low was 5.0% in March -1989, only about a year before the recession set in. -Tight labor markets raise wages, and can compress the distribution; -loose labor markets keep down wages, and can expand all the premia of -privilege.
Yes, that is WHAT happened. The question is WHY it was allowed to happen. To the extent we grant the Fed the negative ability to kill jobs and employment, why did Greenspan allow interest rates to fall when Volcker would not?
If nothing else, does Clinton get credit - as argued in THE AGENDA - for successfully ransoming lower interest rates in exchange for cutting the deficit? To the extent that Dems care enough about working class folks to make that deal where a GOP Pres like Reagan would not negotiate for that outcome, doesn't that get Dems credit for lower unemployment?
I have made stronger arguments for fiscal policy credit for Clinton, but even that limited realpolitick version of the relation of deficit-cutting to ransom lower interest rates and lower unemployment would give Clinton credit for the breadth of the expansion.
-- Nathan Newman