Saturday, May 31, 2008

The Economy: A Reality Check

Michael Barone provides it at I comment below the star line.

Barone begins - - -

"It's the economy, stupid," James Carville famously said during the 1992 campaign, when a young Bill Clinton was running against the other President Bush. The same could be said during this presidential campaign.

The headlines are full of economic bad news -- mortgage foreclosures, the collapse of an investment bank, higher gas and food prices and lower home prices. Voters routinely list the economy as their chief concern, and consumer confidence has sunk to low levels. (A recent poll found almost 2/3rds of those responding said America was already in a recession. - - JinC)

Yet at the same time, the economic numbers are not so bad. A recession is defined as two quarters of contraction. But we haven't had one yet. The gross domestic product has grown, albeit only by 0.6 percent, in the last two quarters.

As my U.S. News colleague James Pethokoukis blogged after the most recent numbers came in, "Dude, where's my recession?"

By any historic standard, our economic numbers are good, though possibly headed in a negative direction. April's unemployment was 5 percent -- a figure that once upon a time was considered full employment.

The Consumer Price Index was up 3.9 percent, largely due to price rises in energy and food. "Core inflation" was 2.3 percent. Productivity was up 2.2 percent.

Those are numbers that would have been taken as a sign of very good times when I was growing up. Then, we had recessions every four or five years and bad bouts of inflation in the 1940s, 1950s and 1970s, and unemployment sometimes surged to 10 percent nationally and to 15 percent in industrial states like Michigan.

In contrast, we've had only two mild recessions since 1983, with a third now possible but not yet in view. . . .

The rest of Barone's column is here.



What Barone is saying is very different from what Sens. Hillary Clinton and Barack Obama are saying. Listening to them all I hear about is how down at the heels Americans are as we face the housing crisis, the mortgage mess crisis, the gas price crisis, the cost of food crisis.

One of the crises that most concerns me is the one created by politicians who've been weakening the free market system, expanding the role of government, and doling out what are called "entitlements."

In the 1930s we started with what we were told was just some short-term emergency relief to family farmers facing a depression. Seventy-five years later the depression's gone and the family farm all but gone, replaced by agribusiness farming.

But that "short-term emergency relief" goes on and on and out to the high rolling agribusiness people to the tune of billions each year.


Anonymous said...

Off Topic:
George Soros still stinking up the joint--He needs to MoveOn.Out

Scott McClellan's [kiss-and-smell] betrayal funded by George Soros-

American Thinker, by William Tate

Soros Publisher 'Shaped' McClellan's Hit Job: Other publishers don't recognize it as the same book...

An examination of published reports reveals that Scott McClellan's [kiss-and-smell betrayal] of George W. Bush is a far cry from the book McClellan started out to write and was shaped into an offensive tome by a [publisher with close ties to George Soros.]

Anonymous said...

John -

Just for the record, the two-quarter rule you cite is a rule of thumb. The National Bureau of Economic Research actually uses other measures to determine if we are in a recession. Thus, the recession in 2001 did not have two sequential quarters of negative GDP growth, nonetheless the NBER declared it a recession.

You should know that a couple of days ago, the Bureau of Economic Analysis raised the GDP growth in the first quarter from 0.6 to 0.9 percent (a weak dollar has very positive effects on our trade balance). If the labor market continues to have around 5% unemployment, and shipments and orders continue strong, we should avoid a recession.

What is true is that the housing market has got a problem. That is a problem brought on in no small measure by government pressure on lenders to issue mortgages to people who were simply incapable of paying them. (This was all aided and abetted by the emergence of complicated collateralized debt obligations which the rating agencies appeared to have been unable to rate properly.) In any event, this will no doubt straighten itself doubt with time.

It is of course in the interest of the Democrats and their toadies in the MSM to bray about how bad the economy is, and that it is the worst economy since the Great Depression, etc., etc. As I have pointed out, and you have presented in your posting, John Lott, Jr., had a column indicating that there has been avalanche of bad news in the MSM about how bad the economy is, even when it was relatively good. So, don't be surprised if the MSM keeps yelling recession, recession and there is no recession.

Jack in Silver Spring