So why the pessimism...

[peragro]

... when almost every indicator ever used points to prosperity?

October 19, 2006
Prosperity Amid the Gloom
By George Will

WASHINGTON -- Recently Bill Clinton, at the British Labour Party's annual conference, delivered what the Times of London described as a "relaxed, almost rambling'' and "easy anecdotal'' speech to an enthralled audience of leftists eager for evidence of American disappointments. Never a connoisseur of understatement, Clinton said America is "now outsourcing college-education jobs to India.''

But Clinton-as-Cassandra should not persuade college students to abandon their quest for diplomas: The unemployment rate among college graduates is 2 percent.

Clinton is always a leading indicator of "progressive'' fashions in rhetoric. And every election year -- meaning every other year -- brings an epidemic of dubious economic analysis, as members of the party out of power discern lead linings on silver clouds.

"Worst economy since Herbert Hoover,'' said John Kerry in 2004, while that year's growth (3.9 percent) was adding to America's GDP the equivalent of the GDP of Taiwan (the 19th-largest economy). Nancy Pelosi vows that if Democrats capture Congress they will "jump-start our economy.'' A "jump-start '' is administered to a stalled vehicle. But since the Bush tax cuts went into effect in 2003, the economy's growth rate (3.5 percent) has been better than the average for the 1980s (3.1) and 1990s (3.3). Today's unemployment rate (4.6 percent) is lower than the average for the 1990s (5.8) -- lower, in fact, than the average for the last 40 years (6.0). Some stall.

Economic hypochondria, a derangement associated with affluence, is a byproduct of the welfare state: An entitlement mentality gives Americans a low pain threshold -- witness their recurring hysterias about nominal rather than real gasoline prices -- and a sense of being entitled to economic dynamism without the frictions and "creative destruction'' that must accompany dynamism. Economic hypochondria is also bred by news media that consider the phrase "good news'' an oxymoron, even as the U.S. economy, which has performed better than any other major industrial economy since 2001, drives the Dow to record highs.

The Jack No. 2 well, in deep water 170 miles southwest of New Orleans, recently discovered a field with perhaps 15 billion barrels of oil -- a 50 percent increase in proven U.S. reserves. This news triggered a gusher of journalistic gloom: More oil means more woe -- a reprieve for that enemy of humanity, the internal combustion engine, and more global warming, more air pollution, more highway fatalities, more suburban sprawl.

The recent 20 percent decline of the cost of a barrel of oil, from a nominal record of $78.40 (which, adjusted for inflation, was well below the 1980 peak of $92 in 2006 dollars), has produced an 81-cent decline in the average cost of a gallon of regular gasoline in 70 days. For consumers, that is akin to a tax cut of more than $81 billion.

President Bush's tax cuts were supposed to cause a cataract of red ink. In fiscal 2006, however, federal revenues as a share of GDP were 18.4 percent, slightly above the post-1962 average of 18.2. And the federal budget deficit was $247.7 billion, just 1.9 percent of the $13.1 trillion GDP. That is below the average for the 1970s (2.1), 1980s (3.0) and 1990s (2.2).

It is said that workers' compensation has been stagnant. But to tickle that bad news from the statistics you must treat "compensation'' as a synonym for wages, and then ignore the effect of taxation on individuals' well-being.

Kevin Hassett and Aparna Mathur of the American Enterprise Institute, writing in National Review, say annual wage growth since 2000 has been 0.6 percent, but the annual increase in real hourly compensation, including benefits -- and if you do not include them, why are they called benefits? -- has been 1.3 percent. And taxes -- particularly those paid by middle-class families with children -- have declined substantially.

Furthermore, as Hassett and Mathur write, consumers, by modifying their behavior, protect or enhance their well-being in ways not captured in economic statistics. For example, an American who, prompted by higher energy prices, traded in a Hummer for a Prius has served his or her standard of living. "If I ate 80 apples last year, and the price of apples increased this year to a million dollars, my welfare would not go way down; I would just switch to oranges,'' the authors write.

Finally, today's widening income disparities will be partly self-correcting. Granted, income statistics show the increasing disadvantages of persons with education deficits. But that is the market saying -- shouting, really -- "Stay in school!'' Over time, the voice of the market is rational, credible and therefore a potent instrument for changing behavior.

[Botnst]

Facts rarely get in the way of a great story.

B

[t walgamuth]

i cant speak for everyplace, but all things that i see indicate a slow economy. home sales and auto sales are way down. two very large indicators, and two very important job sources.

i think anybody bragging about the economy at present is doing so for political reasons.

tom w

[Botnst]

Originally Posted by t walgamuth

i cant speak for everyplace, but all things that i see indicate a slow economy. home sales and auto sales are way down. two very large indicators, and two very important job sources.

i think anybody bragging about the economy at present is doing so for political reasons.

tom w

But not vice-versa?

Come on.

B

[peragro]

Originally Posted by Botnst

Facts rarely get in the way of a great story.

B

I understand the sentiment of your statement. Yet for the last several years at least, the economic indicators show a vibrant economy. You can use these indicators to judge the economy on it's own merit or you can use the indicators as a tool to provide comparison.

I wasn't really going for the comparison, but more the indicator. A question that came to mind is how is it that people who are obviously not poor by any stretch of the imagination still fall prey to the negative propoganda regarding the economy?

For that matter, why the extreme pessimism in almost every progressive platform? Environment - bad, getting worse; economy - bad, getting worse; foreign relations - bad, getting worse - and so on. Usually it's one party to blame, or more specifically one person. In spite of the valid indicators that these things are not getting worse, in actuality, they're improving. Not to mention that the sole progressive cure-all is more tax money to the government, once again in the face of evidence that proves this approach is not a succesful way to approach the ills of society.

It's just kind of perplexing to me that supposedly educated people think this appraoch is logical and workable...

[retmil46]

An old teacher of mine once said "There are lies, damn lies, and statistics". Amazing sometimes how people can take the same set of data, and after a little manipulation, can come up with totally different results to support their particular world view.

From what I've seen personally, in this economic cycle, it really depends what sector and part of the country you're in as to whether it's boom or bust. In this area, if you're getting paid by the hour, wages AND compensation are headed downward.

In Mecklenburg county/Charlotte, which has become of the headquarters of several major banks, you've got a high concentration of millionaires. Go over to the next county, and you've got unemployment rates up between 5 to 10 percent, from plants and other businesses that have closed their doors and moved offshore.

So I can well see how some believe the economy is doing great, while others think it sucks.

[peragro]

Originally Posted by retmil46

An old teacher of mine once said "There are lies, damn lies, and statistics". Amazing sometimes how people can take the same set of data, and after a little manipulation, can come up with totally different results to support their particular world view.

From what I've seen personally, in this economic cycle, it really depends what sector and part of the country you're in as to whether it's boom or bust. In this area, if you're getting paid by the hour, wages AND compensation are headed downward.

In Mecklenburg county/Charlotte, which has become of the headquarters of several major banks, you've got a high concentration of millionaires. Go over to the next county, and you've got unemployment rates up between 5 to 10 percent, from plants and other businesses that have closed their doors and moved offshore.

So I can well see how some believe the economy is doing great, while others think it sucks.

Yes, I understand the manipulability of statistics, however, it's the same statistics that the country have been using for decades (as pointed out by Mr. Will), they're calculated by anyone who cares to wade through the data. It's not as if this is some kind of "hockey stick" data and analysis that's clearly been rigged and the data is not shared.

On a national level the economy is doing great and has been for years. Especially if one compares to previous decades and normalizes the currency. Why the continued pessimism? BTW, same can be said regarding environmental concerns. So why the pessimism?

[Kuan]

I think the pessimism lies in the fact that these numbers are too macro for average Joe to understand. These numbers may represent the economy as a whole but they just don't do justice to the small businesses community which, by virtue of being diversified enough, keeps the economy on an even keel. Consumers are more in tune with their local economies than the state of Walmart. Walk into your local hardware store and it's likely that you'll encounter the owner. Walk into a Walmart, well....

[450slcguy]

Originally Posted by peragro

Yes, I understand the manipulability of statistics, however, it's the same statistics that the country have been using for decades (as pointed out by Mr. Will), they're calculated by anyone who cares to wade through the data. It's not as if this is some kind of "hockey stick" data and analysis that's clearly been rigged and the data is not shared.

On a national level the economy is doing great and has been for years. Especially if one compares to previous decades and normalizes the currency. Why the continued pessimism? BTW, same can be said regarding environmental concerns. So why the pessimism?

Things looked pretty good in 1929 too. It wouldn't take a whole lot for all those stats to go down the toilet in a year. Handle with care, we are in a fragile economy with much uncertainty on the horizon. It can happpen again.

The U.S. Economy in the 1920s
Gene Smiley, Marquette University

The interwar period in the United States, and in the rest of the world, is a most interesting era. The decade of the 1930s marks the most severe depression in our history and ushered in sweeping changes in the role of government. Economists and historians have rightly given much attention to that decade. However, with all of this concern about the growing and developing role of government in economic activity in the 1930s, the decade of the 1920s often tends to get overlooked. This is unfortunate because the 1920s are a period of vigorous, vital economic growth. It marks the first truly modern decade and dramatic economic developments are found in those years. There is a rapid adoption of the automobile to the detriment of passenger rail travel. Though suburbs had been growing since the late nineteenth century their growth had been tied to rail or trolley access and this was limited to the largest cities. The flexibility of car access changed this and the growth of suburbs began to accelerate. The demands of trucks and cars led to a rapid growth in the construction of all-weather surfaced roads to facilitate their movement. The rapidly expanding electric utility networks led to new consumer appliances and new types of lighting and heating for homes and businesses. The introduction of the radio, radio stations, and commercial radio networks began to break up rural isolation, as did the expansion of local and long-distance telephone communications. Recreational activities such as traveling, going to movies, and professional sports became major businesses. The period saw major innovations in business organization and manufacturing technology. The Federal Reserve System first tested its powers and the United States moved to a dominant position in international trade and global business. These things make the 1920s a period of considerable importance independent of what happened in the 1930s.

National Product and Income and Prices
We begin the survey of the 1920s with an examination of the overall production in the economy, GNP, the most comprehensive measure of aggregate economic activity. Real GNP growth during the 1920s was relatively rapid, 4.2 percent a year from 1920 to 1929 according to the most widely used estimates. (Historical Statistics of the United States, or HSUS, 1976) Real GNP per capita grew 2.7 percent per year between 1920 and 1929. By both nineteenth and twentieth century standards these were relatively rapid rates of real economic growth and they would be considered rapid even today.

There were several interruptions to this growth. In mid-1920 the American economy began to contract and the 1920-1921 depression lasted about a year, but a rapid recovery reestablished full-employment by 1923. As will be discussed below, the Federal Reserve System's monetary policy was a major factor in initiating the 1920-1921 depression. From 1923 through 1929 growth was much smoother. There was a very mild recession in 1924 and another mild recession in 1927 both of which may be related to oil price shocks (McMillin and Parker, 1994). The 1927 recession was also associated with Henry Ford's shut-down of all his factories for six months in order to changeover from the Model T to the new Model A automobile. Though the Model T's market share was declining after 1924, in 1926 Ford's Model T still made up nearly 40 percent of all the new cars produced and sold in the United States. The Great Depression began in the summer of 1929, possibly as early as June. The initial downturn was relatively mild but the contraction accelerated after the crash of the stock market at the end of October. Real total GNP fell 10.2 percent from 1929 to 1930 while real GNP per capita fell 11.5 percent from 1929 to 1930.

[peragro]

Originally Posted by Kuan

I think the pessimism lies in the fact that these numbers are too macro for average Joe to understand. These numbers may represent the economy as a whole but they just don't do justice to the small businesses community which, by virtue of being diversified enough, keeps the economy on an even keel. Consumers are more in tune with their local economies than the state of Walmart. Walk into your local hardware store and it's likely that you'll encounter the owner. Walk into a Walmart, well....

That's an interesting perspecitve, which I agree with. The statistics of concern are national statistics and thus apply to the nation, not the locale. If you (generic third person you) think your economy is bad locally, perhaps you should look to the local conditions as to why that is rather than place blame on a national level. Although the good fortune of the nation as a whole is better to the locale than if it were in the crapper.

Yet, it seems that a great deal of this country misses or ignores the prosperity that this country has and has made. Rather they ( again, generic third person) would spend thier time criticizing and finding fault rather than seeing the good. I don't see this so much as a political statement as it is a lack of thought or maturity. It reminds me, more often than not, of my spoiled 13 year old stepson who is deep in the thrall of adolescence and can't think past his own nose.

[Kuan]

Originally Posted by peragro

That's an interesting perspecitve, which I agree with. The statistics of concern are national statistics and thus apply to the nation, not the locale. If you (generic third person you) think your economy is bad locally, perhaps you should look to the local conditions as to why that is rather than place blame on a national level. Although the good fortune of the nation as a whole is better to the locale than if it were in the crapper.

Everytime my FIL sees one of these numbers like employment or even Dow records, he asks out loud (in crabby old man fashion) something like "well where the hell's my check?"

[Botnst]

Let's say you're a kid and nobody has a car except the very wealthy. You grow-up thinking that cars are a sign of wealth. You get to be an old guy, saym 29, and you can buy a car. Are you wealthy? Maybe. Or it maybe that some external factor has resulted in cars now being in your price range.

By the time you're 40 nearly every family that wants a car has a car. But very few, except the wealthy, have two cars. Your children grow-up thinking cars are the normal possession for a family and only wealthy people have 2 cars. It doesn't matter that you tell your kids that trolleys, buses and subways work just fine. Form them a car is a normative possession. In your fifties you buy a TV and your kids (and perhaps grandkids) all come to visit to see the silly thing. The grandkids think only wealthy old farts have a TV.

What I'm saying is that we have become accustomed to a certain rate of increase in affluence in the USA from generation to generation. But past performance is no guarantee of future earnings. The world is far, far more competitive now and most Americans are simply NOT accustomed to working their asses off, dawn-to-dusk, to earn enough money to keep starvation from the door. They think of a job as a necessary evil that interrupts a "normal" life of leisurely self-indulgence.

Expectations are unrealistic and so we externalize the responsibility for failure to meet those unrealistic expectations.

B

[peragro]

Originally Posted by Botnst

Let's say you're a kid and nobody has a car except the very wealthy. You grow-up thinking that cars are a sign of wealth. You get to be an old guy, saym 29, and you can buy a car. Are you wealthy? Maybe. Or it maybe that some external factor has resulted in cars now being in your price range.

By the time you're 40 nearly every family that wants a car has a car. But very few, except the wealthy, have two cars. Your children grow-up thinking cars are the normal possession for a family and only wealthy people have 2 cars. It doesn't matter that you tell your kids that trolleys, buses and subways work just fine. Form them a car is a normative possession. In your fifties you buy a TV and your kids (and perhaps grandkids) all come to visit to see the silly thing. The grandkids think only wealthy old farts have a TV.

What I'm saying is that we have become accustomed to a certain rate of increase in affluence in the USA from generation to generation. But past performance is no guarantee of future earnings. The world is far, far more competitive now and most Americans are simply NOT accustomed to working their asses off, dawn-to-dusk, to earn enough money to keep starvation from the door. They think of a job as a necessary evil that interrupts a "normal" life of leisurely self-indulgence.

Expectations are unrealistic and so we externalize the responsibility for failure to meet those unrealistic expectations.

B

Yes, I agree. But at what point do you stop being a child and look at things from the adult perspective that things could be, and have been much worse? BTW, I don't think the American work ethic quite involves working one's ass off to keep from starvation - especially when obesity is very much a poor person's problem nowadays. I do think self-indulgence has watered down our society. It's one reason I'd rather be hanging out with the "Nascar crowd" rather than the NYT crowd if the poo hits the oscillating device.

[t walgamuth]

Originally Posted by Botnst

But not vice-versa?

Come on.

B

no... i have political purpose too. i want the current controllers out. i never said i had no political purpose.

and no matter what party is in at present i want them out. if it were the dems i would want them out too. things are going the wrong way for the majority of folks imho.

we will see soon if the majority sees it the same way.

tom w

[450slcguy]

[QUOTE=peragro;1307921]... when almost every indicator ever used points to prosperity?

This sums it up pretty well, from our own forum link:

http://www.economyincrisis.org/?content=eicad1&gclid=CKCU0NHBhogCFRAMHgodx0DrCg