Archive for December, 2010

Economic Statistical Hackery

Sunday, December 19th, 2010

Economies are gigantic beasts, growing, shrinking and wreathing in sometimes unexpected ways. Government policies can have a profound effect on employment and growth, but the best policies can be thwarted by external effects or the natural business cycle. Similarly, the winds of growth can mask even the poorest steering of the ship of state. Part of the skill of political operatives is to spin economic statistics to make political opponents look foolish and political allies appear wise. The creative use of economic statistics is often internally inconsistent and often unintentionally humorous.

A comparison of the Democratic rhetoric during the President Bush and President Obama Administrations is illustrative. The graph below shows the actual non-farm payroll from the tail end of the 1990’s to the present.

A equitable description these data was that strong economic growth during the Clinton years drove employment numbers steadily upward. This growth was buttressed by the Internet “Dot Com’’ boom. This boom collapsed at the end of Clinton’s term. During the early months of the Bush Administration, a recession began. The recession was exacerbated by the uncertainty following the 9/11 attacks. Whether because of the Bush tax cuts or not, a couple of years later employment, a lagging economic indicator began a steep rise. This rise continued unabated until 2008. The severe financial crisis associated with collapse of the housing market and credit default swaps initiated the steep decline we are in now. When President Obama came into office we were still in a steep decline. The employment numbers stopped their drop, but there has yet to be significant increase. Whether Obama’s policies accelerated or abated this decline is not directly answered by the graph.

Judging presidents by the change in economic conditions as measured from the moment they entered office is usually not fair. Most times the earliest time a president can directly impact an economy is his first year budget, which will not go in effect until October following inauguration in January. New tax law usually does no go into effect until the following January. The consequences of the policy will take some time to be felt through the economy. Even though Barack Obama had his stimulus package enacted in February after inauguration as an emergency measure, one would still expect there to be some lag time before effects are observed.

In light if the graph above, it is interesting to return to 2003 to see what Democrats were saying about Bush’s economic policies. According to the Democratic Senate Staff Budget Committee:

“Under the Bush administration, we are seeing the slowest economic growth of any administration in 50 years. Economic growth has averaged an anemic 1.6% since the President took office.’’

Measuring, as the Senate Staff Budget Committee did, from the beginning of the Obama Administration as the Democratic Senate Committee, we could note that the Obama Administration achieved even slower growth average of 1.3%.

That same committee wrote in 2003:

“Disturbingly, 3.1 million private sector jobs have been lost since January 2001, and more than 300,000 jobs have been lost in five consecutive months of decline from January 2003 to June 2003. Between January 2001 and June 2003, the unemployment rate has climbed by 2.3 percentage points. The Bush administration is on track to be the first administration in 70 years – since Herbert Hoover during the Great Depression – to experience a decline in private sector jobs over its term in office.”

If we were to indulge in similar hackery we could accurately write that: Under Obama, the unemployment rate as climbed to a high of 2.4% above what is was when he entered office and remains 2.1% above what he inherited. A total of 3.9 million jobs have been lost (more if we count only the private sector). The US will have to experience extraordinary economic growth for the Obama Administration to achieve a net increase in jobs over this term.

Perhaps it is unfair to pick on the Democrats in this regard, except for the fact that they often generate the factoids that are picked up uncritically by the press. The Democratic Senate Staff Budget Committee was certainly aware that they were deliberately spinning the facts in an unfair way. There is no excuse for such hackery for either party.

Palin Derangement Syndrome Spreads

Sunday, December 12th, 2010

In his book Up From Liberalism, the late and sainted William F. Buckley observed that most liberals were sane and nobel souls, unless one struck upon their mania. He wrote, “that in most respects the Liberal ideologists are, like Don Quixote, wholly normal, with fully developed powers of thought, that they see things as they are, and live their lives according to the Word; but that, like Don Quixote, whenever anything touches upon their mania, they become irresponsible. Don Quixote’s mania was knight errantry. The Liberals’ mania is their ideology.’’

In the last Administration, commentator and lapsed board-certified psychiatrist Charles Krauthammer coined the term “Bush Derangement Syndrome’’ (BDS). This new Liberal mania, as defined by Krauthammer, is “the acute onset of paranoia in otherwise normal people in reaction to the policies, the presidency — nay — the very existence of George W. Bush.’’ This condition is probably rooted in lingering anger over the perceived lack of legitimacy with regard to Bush’s presidency. Bush was never forgiven for winning the 2000 election with a majority in the Electoral College, but not in the popular vote. This anger and BDS persisted, indeed intensified, after Bush won the presidential election over Senator John Kerry, this time with a popular majority as well.

There now appears that some Liberals are suffering under an analogous “Palin Derangement Syndrome’’ (PDS). The best guess is that this mental condition is the result of the fact that Governor Sarah Palin is an attractive women, who has clearly managed to juggle successfully work and a family, is a Conservative Republican. This fools the internal barometer of Liberals who believe that such women are the natural constituency of Democrats. Their only explanation is that she must be an hick from the sticks. She had no right to run for vice-president.

One measure of the severity of this condition, is how normally clever and learned people make foolish mistakes whenever the subject of Sarah Palin comes up. For example, Richard Wolfe, MSNBC commentator and Oxford graduate made smug fun of the statement by Sarah Palin that she receives divine inspiration from reading C. S. Lewis. Perhaps Wolfe had forgotten that Lewis was a famous though deceased member of the Oxford faculty. Perhaps Wolfe had forgotten the Chronicles of Narnia was not just a series of children’s book made into modern moviesbut a religious allegory. Perhaps Wolfe had forgotten that C. S. Lewis had written Mere Christianity a classical work of Christian Apologetics. The only plausible explanation is that in his hurry to prejudge Palin as somehow shallow he reveal that he was only up to his ankles in the literary pool.

Not be out done, MSNBC’s Chris Matthews dissed Palin for reading for the news. (He excused her for reading the Wall Street Journal.) Though Newmax has a clear, strong Right-ward tilt, it is no further Right than MSNBC is Left. Moreover, if Matthews ever ventured to the Newsmax site, he would realize that a large section is devoted to straight AP News releases. I dare say if one read only Newsmax daily, they would likely be better informed than if they only watched MSNBC.

One may like or dislike TLC’s television series Sarah Palin’s Alaska but the Huffington Post’s Aaron Sorkin, famous for his production of the Left-wing fantasy television series West Wing can’t distinguish Sarah Palin hunting a caribou from a “snuff film.’’

Now I am sure that Wolfe, Matthews, and Sorkin are smart likable people who even pet their dogs at night when they return home, but Palin has made them bananas. The irony in all this is that such symptoms of Palin Derangement Syndrome are likely to make Palin more popular. Nothing pleases Conservatives so much as see Liberals angry and befuddled and Palin seems the bring those qualities.

Unemployment Unabated

Sunday, December 5th, 2010

The unemployment rate is a lagging economic indicator. When the economy enters a downturn, employers are reluctant to let go of workers. As the economy recovers wary employers, the pain of releasing workers still fresh, are slow to re-hire until they are certain the economy is in recovery.

The unemployment rate is also affected by the fact the only workers who are actively looking for employment are counted. As the economy picks up, more formerly discouraged workers enter the labor pool. Ironically, a recovering economy, in the short term, can face increased unemployment rates.

Despite these caveats, the current monthly increase to unemployment to 9.8% is worrisome, and suggests that current economic policies are not sufficient. Unemployment rates seems flat with little signs of significant reductions in the near future. Current employment rose rapidly in 2009 about has remained stubbornly high for about two years. Usually, when the unemployment rate rise quickly, it retreats quickly. This is not the case for this recession.

Consider the included graph. It represents the monthly unemployment rate for the current recession and the last recession with similar unemployment rate in the early 1980s. We have shifted the time so the month 17 represents the peak unemployment rate. The current recession has shown a flat unemployment rate, while at this point in the recession of the early 1980s, the unemployment was rapidly falling.

By most measures, the recession of the early 1980’s occurred under less favorable economic conditions. Inflation was at double digit levels. To reduce inflation the Federal Reserve had to impose double-digit interest rates. Currently, both inflation and interest rates are at historically low rates. The economy ought to be primed for a much faster rebound than occurred in the 1980’s.

The difference is that in the 1980’s recession, President Ronald Reagan slashed taxes and tried to easy regulatory restraints on growth. By contrast, the current Administration simply spent nearly $1 trillion dollars and focused its attention to health care reform. Whatever, the merits of the Democratic health care changes, its institution during a recession has introduced so much uncertainty that hiring for small businesses has been frozen.

If newly elected Republicans can manage to keep tax rates low, and at least mitigate the worst effects of Obama’s health care legislation, they may help the economy sufficiently recover that it will insure an President Obama re-election. If the Left has its way, and tax rates increase and spending continues unabated, and “Obamacare” is implemented unchanged a one-term Obama presidency will probably be secured.