Top Secret: America's Fabulous Economy
Are you down on the economy? I assume so. But do you know the source of your pessimism? I do:
Bush's economic challenge
WASHINGTON — As President Bush spoke about the state of the nation's economy recently in the century-old Grand theater in New Albany, Ind., his words were as cheery as the vaudeville acts that once played there.
Gasoline? More than $3 a gallon in most of the country, up more than 85 cents from a year ago. Housing prices? Falling. Mortgage payments? On the rise. Financial markets? Up, down, up, down. The dollar? Down. Way down.
The president acknowledged the economic woes, calling them "serious challenges." But he pointed out that the nation's job growth was on a record-setting 50-month run, unemployment was "a low 4.7%" and in the third quarter the economy grew at "a vigorous rate of 3.9%." He spoke of "economic vitality" and the 8.3 million jobs created by "American entrepreneurs and dreamers and doers."
"This economy of ours is resilient. And that's important for the American people to understand," Bush said, bright words on a dreary day in an aging Indiana suburb across the Ohio River from Louisville, Ky.
The message reflected the president's campaign to calm fears about the economy with a sunny outlook as the nation heads into the election year that could prove troubling to a Republican Party burdened with his unpopular leadership. In the last six weeks, he has made at least five speeches in which he talked up the economy.
But it is an increasingly difficult pitch for Bush: Polls show that Americans are growing more pessimistic about the economy, with more saying it is doing poorly than at any other time in the last five years. And the projections of private economists and the Federal Reserve Board suggest that pessimism is well-founded.
As you can see, the sky is falling. What you fail to appreciate is that it's always that way. In fact, the sky has been falling for every single quarter of the Bush administration. Or have you already forgotten about the "jobless recovery" we were supposed to have? My guess is that you have, indeed, forgotten all about it and that you have simply moved on to the next economic catastrophe that supposedly awaits us. The reason why you are a worrywart is that you let the mainstream media do your thinking for you. Never do that.
As I am sometimes prone to do, I took a tour through the basic economic indicators complied by the International Monetary Fund. This is a useful exercise because it shows where we have been during the disastrous Bush years (the years during which you firmly believed that the sky was falling). Let's briefly walk through the data. First, annual GDP growth:
All my charts will be like this. The first half shows the Clinton years (back when you felt so very good about the economy -- as well you should have), and the second half shows the Bush years (the years during which well-meaning but hopelessly misguided liberal reporters have trained your willing mind to believe that the sky really is falling). For comparison purposes, I show the corresponding numbers for the G6 (i.e., the nations of the G7 -- the advanced industrialized nations of the world -- excluding the U.S.). What you see is what every economist, but few Americans, know: GDP growth is generally stronger in the U.S. than it is in the other industrialized nations. You can see the recession that started at the end of the Clinton years (due to the stock market crash), but GDP growth in the U.S. is typically stronger than it is elsewhere. This year (2007), the U.S. may fall slightly below that of the other G6 nations, but I doubt it. The 2007 value is an estimate, and it will probably turn out to be wrong. GDP growth in the U.S. for the first half of 2007 has been unexpectedly strong and will have to drop to close to 0 in the second half for the projected value to be correct. It will almost certainly drop due to the subprime mortgage crisis, but I'd be surprised if it dropped to 0. In any case, the point is that post-recession GDP growth under Bush has been strong (though it was admittedly even stronger under Clinton).
That first chart is messy, so the economic advantage accruing to people living in the U.S. is hard to see. The next chart is the one you should memorize. It tells the story you really need to know. The measure of interest is per capita GDP:
At the start of the Clinton years, the average person in the U.S. was about $5000 ahead of the average person in the G6. By the end of the Clinton years in 2000, the lead had increased to $7800. That increase was partly due to an unsustainable increase in the value of the stock market, but it was mostly due to a strong economy. As I said, the economy did well under Clinton. I can appreciate that fact because I'm not suffering from Clinton Derangement Syndrome. In 2007, toward the end of the Bush years, the lead will have grown to $10,300. In other words, on a per person basis, the U.S. continues to put increasing distance between itself and the rest of the industrialized world. Yet you think the sky has been falling. You think that way because you don't think for yourself.
Next, let's look at inflation:
As you can see, it's low everywhere, though it's slightly higher in the U.S. This was true of the Clinton Years and the Bush years. And it has been slightly worse during the Bush years. Is that tiny increment in inflation the source of your profound angst? If so, that's weird. I know you are capable of looking ahead and detecting an inflation disaster (everybody has a statistic that they believe will finally do us in), but my point is that you should look back and see where we were during years in which you mistakenly thought that all was lost (economically speaking).
Next, let's look at the unemployment situation to see how that "jobless recovery" is going:
Better in the U.S. than elsewhere, and at least as good in the Bush years as the Clinton years. So, forget that predicted disaster and pick a different one (if you want to be a worry wart, that is).
The budget deficit. That's always an interesting topic. Reporters have relentlessly harped on the fact that we've had "record deficits" during the Bush years. That's false, and it only seems otherwise because reporters are not very smart (but they seem to think they are). They almost always report the value in absolute terms, which is meaningless when an economy is growing. Expressed as a percentage of GDP, we've never been close to record deficits. Moreover, the deficit is quite small right now:
We had a stock-market-induced surplus during the Clinton years that evaporated when the market crashed, but, by and large, the deficit measure during the Bush years has been quite good (despite the wars in Afghanistan and Iraq). The G6 is doing fine on this measure as well. I know, I know: a deficit disaster looms in our future. In fact, it's always that way, and it always will be. But just so you know: the predicted catastrophe is much worse for the other nations of the G6 than it is for the U.S.
What about net national debt? Reporters are always harping on this, and being the uninformed dolts that they are, they always present a meaningless absolute figure that runs into the trillions of dollars. Here is the real story:
The Bush years look a lot like the Clinton years, and the U.S. is in much better shape than the rest of the G6. That's mostly because of Japan, but if you take that country out of the equation, the U.S. stills beats the G5 (though it's a closer contest). No reporter realizes this, yet they write stories on the topic anyway. It's a bizarre phenomenon.
Look at my charts and let them guide your thinking about the state of the U.S. economy under George Bush. The second chart above (per capita GDP) is the most important summary chart. It's the one that most clearly shows how wrong you have been about the state of our economy during the Bush years.
My last chart shows the one statistic where the U.S. economy seems badly out of kilter. This chart shows the trade deficit:
The rest of the G6 enjoys a trade surplus (on average). The U.S. trade debt has been increasing relentlessly, and the trend began during the Clinton years. I don't know that this is such a terrible thing, but it seems worrisome. To me, it's a sign that the dollar -- for reasons unknown to me -- is way too "strong" relative to other currencies. As you know, the dollar has been "weakening," and I believe that this is a necessary and healthy trend. It is a mistake to think of the value of a currency in terms like "weak" and "strong." It's better to think of it in terms of "export encouraging" (what you call "weak") and "import encouraging" (what you call "strong"). The value of the U.S. dollar has been "import encouraging" for a long time. That's changing now, and it is starting to offset our gigantic trade deficit (because foreign imports are getting more expensive and U.S. exports are becoming more attractive to the rest of the world). And if you think the strong euro is a great thing for Europe, then read this:
Airbus fears 'weak-dollar death'
The weak dollar is threatening the survival of European planemaker Airbus, chief executive Tom Enders told workers in Hamburg on Thursday.
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"The dollar's rapid decline is life-threatening for Airbus," Mr Enders said in the speech to employees.
"The dollar exchange rate has gone beyond the pain barrier," Mr Enders added.
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Airbus is already shedding about 10,000 jobs and selling plants as part of its Power8 restructuring plan after delays to its A380 superjumbo drove the planemaker into a loss last year.
The dollar has hit new record lows against the euro this week, something which Airbus says favours its US rival Boeing.
You see? The "weak" (i.e., "export encouraging") dollar is good news (not bad news) for Boeing. And the "strong" (i.e., "import encouraging") euro is bad news (not good news) for Airbus. That's why some are celebrating the decline in the value of the dollar:
The dollar's in decline. Great news!
Critics think it's in a crisis, but in reality America is in decent health
Americans paused at Thanksgiving yesterday for the traditional annual audit of their blessings. If they'd been listening at all closely to the morose lucubrations of their opinion leaders, however, it would have been pretty slim pickings.
The pundits have finally run out of bad news to report from Iraq, where, unmolested by the morbid fascination of misery-seeking reporters, the locals actually seem to be belatedly enjoying the first fruits of their liberation. So attention has turned again, as it has tended to do from time to time these past 50 years, to the inevitable collapse of the American economy.
The declining dollar is for many an ominous indication that the long period of US economic supremacy is at an end. In the past month especially, a nation that usually remains in blissful ignorance of the daily fluctuations of the foreign exchange markets has been repeatedly reminded that the dollar now buys a fraction of what it used to — down 35 per cent against the pound in the past six years and 40 per cent against that fledgeling monetary superpower, the euro.
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For the historically short-sighted, let's remember we have been here before. Between 1985 and 1995, the dollar declined by 43 per cent against the world's big currencies — somewhat more than it has in the past six years. That period was also marked by dire proclamations of the end of US economic power. But it turned out that in those years the foundations were laid for the strongest period of US economic growth in the past 35 years.
Read the whole thing, and then count your blessings (even though I know that the future is terribly grim, just as it always has been and always will be).
POSTED BY ENGRAM
engram-backtalk.blogspot.com |
