A Brief Note on Slower Growth

June 2nd, 2011 at 11:18 am

Someone asked me to comment on the recent reports that suggest the already not-fast-enough growth rate of the economy may be slowing.

I’ve got two words for you: excess capacity.  Look at the figures in that post, and I’ve got more coming in a forthcoming study I hope to get out soon for the CBPP.

And I got four numbers for you: 1-9-3-7 as in don’t make the mistake of going for fiscal and monetary contraction too soon.   While there’s no reason not to plot the path toward fiscal sustainability today, the target right now must be the jobs deficit, not the budget deficit.

Finally, I’ve got one other number for you: 2.96–yesterday’s closing yield on the 10-year Treasury bond.  That is a very low number.  It means a) budget deficits are not leading to higher interest rates, b) investors are worried about growth, not deficits, c) the cost of borrowing is telling us budget math supports the jobs target noted above (DeLong has the details).

The indicators are speaking to us, they’re singing in one melodious voice, though in a minor key: don’t just stand there fretting, screwing around with the debt ceiling, threatening aggressive spending cuts and fiscal austerity…do something, do something!

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8 comments in reply to "A Brief Note on Slower Growth"

  1. Sandwichman says:


    In response to your Odds and Ends post a few days ago, I put together a chart comparing the energy intensity of GDP with the energy intensity of employment over the 60-year period from 1949 to 2009 (BLS household data and EIA energy consumption stats).

    The picture is pretty scary. In 2009, the U.S. consumed 30% MORE energy per civilian employed person than in 1973. If one of the main reasons for promoting economic growth is to achieve full employment, then we’re losing ground and have been for nearly 40 years.


    • Dave Roberts says:

      The energy intensity of employment is an interesting insight, but sixty years ago there were less than a hundred computers in the United States. Energy intensive industries like steel employed thousands of workers to do things that dozens of workers manage today using automation.

      A clearer picture of energy consumption can be seen in California’s significantly lower electrical consumption per capita over the last four decades. There are many reasons for it, but state manadated building and lighting efficiency standards play a part. So do the incentives for our big utilities to earn money for their stockholders by participating in energy conservation measures.

    • Sandwichman says:

      Oops! I did the math upside down on the energy intensity of employment. Although the picture is not quite as bleak as I first reported, it is still bleak enough to take note. To make a long story short, since 1986 the energy intensity of employment has hardly budged and what movement there has been, say in the last two years, could be attributed to cyclical factors in labor force composition. I’ve posted a corrected chart and revised commentary.

  2. general c. san desist says:

    …bringing back the fairness doctrine would put a dent in the whole conservative scam. Imagine if Lush had to verify each & every comment or give equal access…of lying Ryan dumping his Heritage swill & getting a pass by the media. Fact check does not make it.

    It’s been 35 years since conducting Economic seminars at the local college…the only change I see is the vitriol involved in this skirmish. This is not a battle of philosophy for the numbers just don’t support the conservative brotherhood. There are not two viable schools of economic teaching, period. To suggest otherwise is sheer trickle down junk.

    As with Camillo in The Winter’s Tale…any treachery was fair which sent them back to their native land. A creed the religicants heed. Where is the outrage?

  3. Dave Roberts says:

    Do something isn’t even complicated. Think Progress’s latest Joe Romm post on energy efficiency identifies $700 billion worth of cost effective investments that save energy and money while creating jobs. Why can’t we use our full faith and credit to borrow the money (at 2.92%) to invest in these projects.


  4. jonathan says:

    I’ve tried to point out to people that we could eliminate the entire federal government – all the non-defense discretionary part – and that wouldn’t be the $4T demanded and that wouldn’t balance the budget right now. There’s a fundamental logical disconnection, an adherence to wholly irrational positions despite facts. You can point to the bond yield an infinite number of times but it doesn’t matter. You hear about “billion price index.” You point to that and note it isn’t saying anything bad either and you hear that headline inflation is up. You point out that it’s going down now, that headline inflation is volatile, and you hear that the dollar is going to crash. You point to bond yields and you hear about the billion price index. You point to that index and you hear the dollar is going to crash. It’s insane denial of reality. Then the morons say, “You’re spouting liberal nonsense,” which I don’t even understand because I’m not a liberal; I can just add and subtract better than a 1st grader.

    • Dave Roberts says:

      Adding and subtracting better than a first grader clearly disqualifies you from being a journalist or conservative politician today. We decry illiteracy, but innumeracy is rampant in Washington. (No offense to the millions of Republicans who do understand math and don’t know what in hell their representatives are doing.)

  5. Kevin Rica says:

    The key deficit is the current account deficit and the useless foreign savings that other countries dump here to finance their surpluses. Until we face that, we will endure a never ending saving-investment imbalance and fiscal policy will only compensate.