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reed magazine logoWinter 2008

Peter Goodman '89


Hard Times

Peter S. Goodman ’89 is national economic correspondent for the New York Times. He has been a staff reporter at the Sacramento Bee, Anchorage Daily News, and Washington Post, and has covered business, politics, civil conflict, and international crises in the United States, Asia, and the Middle East. This interview was conducted by Reed editor Mitchell Hartman on January 14, 2008.

Reed: The dominant economic story at the moment is that we’ve come abruptly to the end of a long period of good times: a booming real estate market, low unemployment, low prices for consumer goods, technological advancement. Do you see the story that way?

Peter Goodman: We went through what people considered to be a mild recession in 2001, the economy lost some jobs that it never got back, and now, before we’ve gotten back to previous peak employee levels, we seem to be headed down again. For people who don’t have jobs, it can be harder than ever to get back into this economy. For most Americans, this so-called expansion that we now appear to be at the end of didn’t expand a whole lot. Real wages and living standards declined for a lot of people.

There’s also the issue of inequality. The rich and poor in our country are now divided by a greater gap than we’ve seen since the 1920s. We see unemployment climbing faster for blacks, and Hispanics, and young people. These are all things to keep an eye on if the economy is really headed down.

Economists have their own ways of determining whether the economy is in a recession. How do you know as a reporter that there’s a recession on?

There are already parts of the American economy that are in recession by any reasonable definition. Go down to Florida, visit communities that have seen housing prices drop by 15 percent to 25 percent in a year, after going up 35 percent to 40 percent a year—you’re in a recession. Wages are plummeting, people are going bankrupt, there are massive foreclosures. Or, if you go to manufacturing communities in the Midwest or parts of the South that have lost jobs that are simply never coming back.

Nonetheless, the national unemployment rate is historically low: around 5 percent. Doesn’t that suggest things aren’t so bad?

Unemployment is a very problematic statistic, in that it doesn’t take into account the quality of jobs… The other thing is, the unemployment rate is calculated based on people who say they are employed or are unemployed but looking for jobs. It doesn’t take account of people who have given up on finding a job.

So if you look at the number that I’m obsessed with, which is the employment:population ratio—the ratio of people who say they’re employed to the number of people in the country—that’s down fairly significantly as a long-term trend. Some of those people, that’s a happy story: dot-com millionaires, early retirees, one spouse staying home to take care of kids in a family that’s comfortable enough to do so. But for a lot of those people, it’s because this economy just hasn’t been creating high-quality jobs in sufficient numbers.

Economic booms can seem eminently logical when you’re in them, and then seem like mass delusion when they’re over.

Yeah, and I’m living in one now. I’m amazed that people in New York seem to think that New York real estate is the last unassailable bastion. I still think people don’t get that ultimately, even for something that’s worth a lot and for which there is great demand, the laws of supply and demand still hold…

I think it’s been a very destructive period that we’ve lived through, and I don’t distinguish between the two bubbles so much. I see the housing bubble as a direct outgrowth of the tech bubble, and they both go back to one central idea that was very carefully marketed to us as consumers: “Why not just buy it now? Work is for suckers. Saving is for suckers.”

A lot of people blame places like China and India—and their low-wage workers—for our economic woes. Is that reasonable?

Most of what ails us in this country, and most of the threats facing American workers, are home-cooked. We don’t compete with China, except in a very limited sense. If we jack up the value of the Chinese currency, and Chinese workers are making $1.25 an hour as opposed to $1.00 an hour, we’re not all of a sudden going to start making tube socks in North Carolina for a living and prospering.

I think that when the Democrats, in particular, essentially demagogue the trade issue and pin the blame for problems with the American economy on trade, they are disingenuously avoiding the solutions that would be complicated and expensive, namely, large-scale public works projects funded by the government to create good jobs, job training, making education a whole lot more affordable, universal healthcare, affordable housing. The Republicans, by the same token, have this dogmatic devotion to free trade, and they’re being disingenuous in not acknowledging that there are all sorts of problems that result from globalization, and markets create winners as well as losers. It’s ultimately an issue of domestic policy how we address the losers.

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