"President Barack Obama has turned fearmongering into an art form. He has repeatedly raised the specter of another Great Depression. First, he did so to win votes in the November election. He has done so again recently to sway congressional votes for his stimulus package.
AP
In his remarks, every gloomy statistic on the economy becomes a harbinger of doom. As he tells it, today's economy is the worst since the Great Depression. Without his Recovery and Reinvestment Act, he says, the economy will fall back into that abyss and may never recover.
This fearmongering may be good politics, but it is bad history and bad economics. It is bad history because our current economic woes don't come close to those of the 1930s. At worst, a comparison to the 1981-82 recession might be appropriate. Consider the job losses that Mr. Obama always cites. In the last year, the U.S. economy shed 3.4 million jobs. That's a grim statistic for sure, but represents just 2.2% of the labor force. From November 1981 to October 1982, 2.4 million jobs were lost -- fewer in number than today, but the labor force was smaller. So 1981-82 job losses totaled 2.2% of the labor force, the same as now.
Job losses in the Great Depression were of an entirely different magnitude. In 1930, the economy shed 4.8% of the labor force. In 1931, 6.5%. And then in 1932, another 7.1%. Jobs were being lost at double or triple the rate of 2008-09 or 1981-82.
This was reflected in unemployment rates. The latest survey pegs U.S. unemployment at 7.6%. That's more than three percentage points below the 1982 peak (10.8%) and not even a third of the peak in 1932 (25.2%). You simply can't equate 7.6% unemployment with the Great Depression.
Other economic statistics also dispel any analogy between today's economic woes and the Great Depression. Real gross domestic product (GDP) rose in 2008, despite a bad fourth quarter. The Congressional Budget Office projects a GDP decline of 2% in 2009. That's comparable to 1982, when GDP contracted by 1.9%. It is nothing like 1930, when GDP fell by 9%, or 1931, when GDP contracted by another 8%, or 1932, when it fell yet another 13%.
Auto production last year declined by roughly 25%. That looks good compared to 1932, when production shriveled by 90%. The failure of a couple of dozen banks in 2008 just doesn't compare to over 10,000 bank failures in 1933, or even the 3,000-plus bank (Savings & Loan) failures in 1987-88. Stockholders can take some solace from the fact that the recent stock market debacle doesn't come close to the 90% devaluation of the early 1930s.
Mr. Obama's analogies to the Great Depression are not only historically inaccurate, they're also dangerous. Repeated warnings from the White House about a coming economic apocalypse aren't likely to raise consumer and investor expectations for the future. In fact, they have contributed to the continuing decline in consumer confidence that is restraining a spending pickup. Beyond that, fearmongering can trigger a political stampede to embrace a "recovery" package that delivers a lot less than it promises. A more cool-headed assessment of the economy's woes might produce better policies."
http://online.wsj.com/article/SB123457303244386495.html
Showing posts with label presidential rhetoric. Show all posts
Showing posts with label presidential rhetoric. Show all posts
Monday, February 16, 2009
Saturday, February 14, 2009
Obama's politics of gloom, despair and salvation
"President Barack Obama has turned fearmongering into an art form. He has repeatedly raised the specter of another Great Depression. First, he did so to win votes in the November election. He has done so again recently to sway congressional votes for his stimulus package.
In his remarks, every gloomy statistic on the economy becomes a harbinger of doom. As he tells it, today's economy is the worst since the Great Depression. Without his Recovery and Reinvestment Act, he says, the economy will fall back into that abyss and may never recover.
This fearmongering may be good politics, but it is bad history and bad economics. It is bad history because our current economic woes don't come close to those of the 1930s. At worst, a comparison to the 1981-82 recession might be appropriate. Consider the job losses that Mr. Obama always cites. In the last year, the U.S. economy shed 3.4 million jobs. That's a grim statistic for sure, but represents just 2.2% of the labor force. From November 1981 to October 1982, 2.4 million jobs were lost -- fewer in number than today, but the labor force was smaller. So 1981-82 job losses totaled 2.2% of the labor force, the same as now.
Job losses in the Great Depression were of an entirely different magnitude. In 1930, the economy shed 4.8% of the labor force. In 1931, 6.5%. And then in 1932, another 7.1%. Jobs were being lost at double or triple the rate of 2008-09 or 1981-82.
This was reflected in unemployment rates. The latest survey pegs U.S. unemployment at 7.6%. That's more than three percentage points below the 1982 peak (10.8%) and not even a third of the peak in 1932 (25.2%). You simply can't equate 7.6% unemployment with the Great Depression.
Other economic statistics also dispel any analogy between today's economic woes and the Great Depression."
http://online.wsj.com/article/SB123457303244386495.html#printMode
In his remarks, every gloomy statistic on the economy becomes a harbinger of doom. As he tells it, today's economy is the worst since the Great Depression. Without his Recovery and Reinvestment Act, he says, the economy will fall back into that abyss and may never recover.
This fearmongering may be good politics, but it is bad history and bad economics. It is bad history because our current economic woes don't come close to those of the 1930s. At worst, a comparison to the 1981-82 recession might be appropriate. Consider the job losses that Mr. Obama always cites. In the last year, the U.S. economy shed 3.4 million jobs. That's a grim statistic for sure, but represents just 2.2% of the labor force. From November 1981 to October 1982, 2.4 million jobs were lost -- fewer in number than today, but the labor force was smaller. So 1981-82 job losses totaled 2.2% of the labor force, the same as now.
Job losses in the Great Depression were of an entirely different magnitude. In 1930, the economy shed 4.8% of the labor force. In 1931, 6.5%. And then in 1932, another 7.1%. Jobs were being lost at double or triple the rate of 2008-09 or 1981-82.
This was reflected in unemployment rates. The latest survey pegs U.S. unemployment at 7.6%. That's more than three percentage points below the 1982 peak (10.8%) and not even a third of the peak in 1932 (25.2%). You simply can't equate 7.6% unemployment with the Great Depression.
Other economic statistics also dispel any analogy between today's economic woes and the Great Depression."
http://online.wsj.com/article/SB123457303244386495.html#printMode
Thursday, February 5, 2009
Obama's rhetoric is keyed to the election cycle
With an array of voices from which to choose, President Obama has opted for the apocalytic approach.
"This recession might linger for years. Our economy will lose 5 million more jobs. Unemployment will approach double digits. Our nation will sink deeper into a crisis that, at some point, we may not be able to reverse," Obama wrote in a newspaper piece titled, "The Action Americans Need."
His urgency is understandable. With every day that passes, more and more Americans find out what's in his pork-laden $900 billion payoff bill for the Democrat party's clients, laughingly referred to as an economic stimulus package. The more pressure he can exert on Congress to pass it sooner, rather than later, the better the chance it will pass.
Another consideration also may be coming into play. His presidency so far has been marked by one pratfall after another. A long recession might be a deal-breaker that makes him a one-term president. If the economy has failed to recover two years from now, his party may look for another candidate for the 2012 election.
A sustained recovery might, in fact, be the best course for most Americans. The economy, in all likelihood, would cure itself as it works off the distortions created by the government-inspired boom, and subsequent bust, in the housing market.
But that course does not serve the interests of the Democrat Party, which lie in a government-stimulated recovery that serves the election cycle. If the past is prologue, the party in power will over-stimulate, resulting in a spike in inflation.
Inflation, however, is less lethal to the incumbent party than recession.
Presidential rhetoric coincides more closely with the demands of the election cycle than with the obective condition of the economy. Nothwithstanding the apocalyptic rhetoric, it is Obama's presidency, more than the economy, that is headed for the ditch.
"This recession might linger for years. Our economy will lose 5 million more jobs. Unemployment will approach double digits. Our nation will sink deeper into a crisis that, at some point, we may not be able to reverse," Obama wrote in a newspaper piece titled, "The Action Americans Need."
His urgency is understandable. With every day that passes, more and more Americans find out what's in his pork-laden $900 billion payoff bill for the Democrat party's clients, laughingly referred to as an economic stimulus package. The more pressure he can exert on Congress to pass it sooner, rather than later, the better the chance it will pass.
Another consideration also may be coming into play. His presidency so far has been marked by one pratfall after another. A long recession might be a deal-breaker that makes him a one-term president. If the economy has failed to recover two years from now, his party may look for another candidate for the 2012 election.
A sustained recovery might, in fact, be the best course for most Americans. The economy, in all likelihood, would cure itself as it works off the distortions created by the government-inspired boom, and subsequent bust, in the housing market.
But that course does not serve the interests of the Democrat Party, which lie in a government-stimulated recovery that serves the election cycle. If the past is prologue, the party in power will over-stimulate, resulting in a spike in inflation.
Inflation, however, is less lethal to the incumbent party than recession.
Presidential rhetoric coincides more closely with the demands of the election cycle than with the obective condition of the economy. Nothwithstanding the apocalyptic rhetoric, it is Obama's presidency, more than the economy, that is headed for the ditch.
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