How to Demagogue the Economy

Want some good news that you probably haven’t heard? The United States has the best economy on the planet!

Here’s the May 15, 2008 story by CNN.Money.com:

GENEVA (AP) — The United States topped world competitiveness rankings for the 15th straight year, but its economy is showing the same signs of weakness that sank booming Japan in the early 1990s, according to an annual survey released Thursday.

Asian tigers Singapore and Hong Kong ranked just behind the U.S., as they did last year. Switzerland jumped two places to fourth, while Luxembourg rounded out the top five most competitive national economies, said the Lausanne, Switzerland-based IMD business school, publisher of the World Competitiveness Yearbook.

“The big question is whether the United States will be No. 1 after this year,” project director Stephane Garelli said, adding that the report was based on 2007 data that do not fully reflect all of the problems in U.S. financial markets. “Everyone is catching up very quickly, but so far the U.S. economy is showing a lot of resilience.”

The study lists 55 economies according to 331 criteria that measure how the nations create and maintain conditions favorable to businesses.

The U.S. position was cemented by its domestic economy, which is the world’s strongest, topping all others in its amount of investments, stock purchases and commercial service exports. The U.S. also ranks as the easiest place to secure venture capital for business development and dominates all other economies in key technology criteria such as computers in use, according to the report.

But Garelli warned that U.S. economic health is vulnerable because of its heavy reliance on the financial sector for corporate profits.

The 2008 report says there are parallels between now and two decades ago, when the business school first started to study competitiveness and “Japan’s competitiveness seemed unassailable, with a strong domination in economic dynamism, industrial efficiency and innovation.”

“Then all hell broke loose,” it added. “The stock market went into reverse in 1989, land prices collapsed in 1992, credit cooperatives and regional banks came under attack in 1994, large banks teetered on the edge of bankruptcy in 1997, and a major credit crunch occurred in 1998. Does this ring a bell?”

While the report called the similarities “frightening,” Garelli said there are important differences between the Japan that stagnated for nearly a decade and the U.S. economy teetering on the brink of a recession now.

Japan’s decision-makers were bureaucrats or politicians who reacted too slowly. The U.S. administration, by contrast, is full of business and financial experts that know when things need to be shaken up.

“The U.S. always seems to find the means to reinvent itself in ways that Japan – and much of Europe – often lacks,” he said.

Rounding out the top 10 most competitive nations were Denmark, Australia, Canada, Sweden and the Netherlands. Slovenia rose eight places to 32nd – a jump matched by Poland, which is now 44th. Greece slipped the furthest, six places down to 42nd.

China and India both dropped two places in the report, to 17th and 29th, respectively. Russia fell four spots to 49th.

Venezuela was ranked last for the third year in a row, immediately preceded by Ukraine, South Africa, Argentina and Indonesia.

The United States economy is rated as the strongest and most competitive in the world for the fifteenth year in a row. This is frankly astounding news, given the fact that we are routinely told that President Bush has horribly mismanaged the economy, that we are in a terrible recession, and that no president has been this incompetent since Herbert Hoover (and go ahead and have one from the Washington Post for the road).

Former Clinton Labor Secretary Robert Reich is actually talking about a depression, proving he’s diminutive in more than just height. Goodness sakes people, it’s really quite remarkable how stupid and irrational people with average to above-average IQs can become when they buy into a completely warped view of the world.

Another interesting story is the economic mythology that we are continually presented about the Clinton years. If you believe what you are routinely spoon fed, you know that President Clinton left President Bush with a budget surplus and a strong economy. False and false again.

First of all, President Clinton did not balance the budget; what he did was fiddle with the numbers by paying off the public debt by borrowing from the intergovernmental debt (particularly from the Social Security Trust Fund). If you think that’s a legitimate way to balance the budget, kindly check yourself in to the nearest mental health facility for evaluation. But even with such shenanigans, the last Clinton budget was $133.29 billion in the red.

It is simply not true that President Bush balanced the budget in anything resembling a meaningful or legitimate sense.

Furthermore, President Clinton left President Bush an economy that was already stumbling into recession.
The GDP declined into the negative range in the third quarter of the year 2000.

Wikipedia points out, “The U.S. economy shrank in three non-consecutive quarters in the early 2000s (the third quarter of 2000, the first quarter of 2001, and the third quarter of 2001).

Using the stock market as an unofficial benchmark, a recession would have begun in March 2000 when the NASDAQ crashed following the collapse of the Dot-com bubble.”

According to the U.S. Department of Commerce’s Bureau of Economic Analysis, the GDP was at a negative growth of 0.5% in the third quarter of the year 2000. There was another 0.5% negative GDP growth in the first quarter of 2001, and a -1.4% quarter in the third quarter of 2001.

A document from the state of Ohio says, “In the second half of 2000, traditional manufacturing has experienced negative growth, which qualifies as a recession using the definition of two consecutive quarters of decline.”

Media Matters, the well-funded liberal hate site and attack operation, has cried foul over the National Bureau of Economic Research’s revision of economic data to indicate that there really was a “Clinton recession” that began in the latter half of the year 2000. But, even if the original figures of negative growth given as March-November 2001, it’s still on President Clinton’s record. The simple reality is that the Bush administration’s first fiscal year did not begin until October 1, 2001. There is simply no getting around the fact that Clinton most definitely did NOT leave Bush a strong economy.

Why is there such an overwhelming belief in things that are simply false?

Because the media – which is and has been firmly on the side of the left – is routinely disingenuous with statistics, which can often be tricky even for people who aren’t trying to lie.

The research confirms it:

During the 2000 election, with Bill Clinton as president, the economy was viewed through rose-colored glasses. According to polls, voters didn’t realize that the country was in a recession. Although the economy started shrinking in July 2000, most Americans through the entire year thought that the economy was fine.

But over the last half-year, the media and politicians have said we were in a recession even while the economy was still growing.

Gas prices are going up. The economy is slowing. Talk of recession is seemingly everywhere. While the majority of people rate their personal finances positively, consumer confidence in the economy has plunged to a 16-year low, well below what it was during the last year of the Clinton administration when we were in a recession.

A Nexis search on news stories during the three-month period from July 2000 through September 2000 using the keywords “economy recession US” produces 1,388. By contrast, the same search over just the last month finds 3,166. Or, even more telling, take the three months from July through September last year, when the GDP was growing at a phenomenal 4.9 percent. The same type of Google search shows 2,475 news stories.

Over 78 percent more negative news stories discussed a recession when the economy under a Republican was soaring than occurred under a Democrat when the economy was shrinking.

A little perspective on the economy would be helpful. The average unemployment rate during President Clinton was 5.2 percent. The average under President George W. Bush is just slightly below 5.2. The current unemployment rate is4.8 percent, almost half a percentage point lower than these averages.

The average inflation rate under Clinton was 2.6 percent, under Bush it is 2.7 percent. Indeed, one has to go back to the Kennedy administration to find a lower average rate. True the inflation rate over the last year has gone up to 4 percent, but that is still lower than the average inflation rate under all the presidents from Nixon through Bush’s father.

Gas prices are indeed up 33 percent over the last year, but to get an average of 4 percent means that lots of other prices must have stayed the same or gone down. On other fronts, seasonally adjusted civilian employment is 650,000 people greater than it was a year ago. Personal income grew at a strong half of one percent in just February.

Despite all that, this last week, Barack Obama proclaimed “As most experts know, our economy is in a recession.” Hillary Clinton made similar staements last fall. Yet, as any economist knows, a recession is two consecutive quarters of negative growth, and we haven’t even had one single quarter of negative growth reported. The economy slowed down significantly during the end of last year, but that was after a sizzling annual GDP growth rate of 4.9 percent in the third quarter.

Housing has obviously been a big drag on the economy, but many other sectors of the economy, such as exports, have been doing well, some extremely well. For example, aerospace exports increased by over 13 percent last year.

The media’s focus on the negative side of everything surely helps explain people’s pessimism. In a recent interview Fox’s Neil Cavuto claimed this bias “is all part of the media’s plan to get a Democrat in the White House.”

Indeed, research has indicated that media bias is real. Kevin Hassett and I looked at 12,620 newspaper and wire service headlines from 1985 through 2004 for stories on the release of official government releasing numbers on the unemployment rate, number of people employed, gross domestic product (GDP), retail sales, and durable goods.

Even after accounting for how well the economy was doing (e.g., what the unemployment rate was and whether it was going up or down), there was still a big difference in how positive or negative the headlines were. Democratic presidents got about 15 percent more positive headlines than Republicans for the same economic news.

Yet, the hysteria created by this coverage can have another cost. It creates pressure for government to “do something,” even if that rush to do something actually ends up hurting the economy. For example, Obama’s promises last week “to amend our bankruptcy laws so families aren’t forced to stick to the terms of a home loan” will only further drive down the value of mortgage-backed securities, making any unstable financial institutions that hold them even more likely to fail. In the long term, who is going to want to loan money when the contract can be rewritten at a later date?

The news media have generated a lot of fear. Ben Stein has a point when he says “The actual economic conditions are not that bad. I think if we have a recession, if we have a serious recession, a great deal will lie at the media’s feet.” Hopefully a little perspective will enter the picture before even more harm is done.

John Lott is the author of Freedomnomics and a senior research scientist at the University of Maryland.

In particular we can see the fudging of economic perception by one particular media outlet – CNN – in a recent poll they did.

Fox News reported the story this way under the title, “The “R” Word“:

It appears that CNN has decided the U.S. is in a recession even though the economic data do not support that claim.

On its Web site, CNN posted the exit poll results from Tuesday’s West Virginia primary which asked voters if and how the “recession” has affected their family. All the major television networks use the same exit poll questionnaire.

And, while that generic survey asked voters, “Has the current recession or economic slowdown affected you and your family?”

Other networks, including this one, used the term “economic slowdown” when reporting the results. A recession is defined as at least two consecutive quarters of negative economic growth. The last quarter of 2007 and the first quarter of 2008 were marked by slow, but positive economic growth.

A blogger is a little angrier about this bias, and backs his temper up with solid data:

Adolph Hitler described the propaganda technique known as the “big lie” in his Mein Kampf as a lie so colossal that no one would believe that someone “could have the impudence to distort the truth so infamously.”

The liberal American media have mastered this technique in a way that would have had Nazi Minister of Propaganda Joseph Goebbels slapping his forehead and saying, “I should have thought of that!”

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2 Responses to “How to Demagogue the Economy”

  1. Thomas Jackson Says:

    The big lie, eh?

    How about WEAPONS OF MASS DESTRUCTION?

    That’s just the most famous one.

    Our economy suffers from an inequity in the distribution of wealth and income. It also suffers from the stubborn refusal of corporate leaders to move ahead with new abundant resource technologies, clinging to old, scarce resources technologies because it profits them more.

    Our economy also suffers from an inequity in the power to make decisions, and that problem stems from the dominance of corporations in our economy which are governed with anti-republican, abusive practices.

    These things need to change.

    Revisionist attacks that suggest that things were much worse before George Bush accelerated the problems in our economy, is going to be a feeble argument this election.

  2. Michael Eden Says:

    Snopes list comment after comment by liberal Democrats regarding weapons of mass destruction, which should serve to show how completely irrational your view is:

    http://www.snopes.com/politics/war/wmdquotes.asp

    So let me add your name to the list of liberal demagogues who fabricate reality in a deceitful, despicable, horribly partisan way.

    And you do it again when you decry Republican ties to corporations. Corporations are currently giving significantly more money to Democrats than Republicans:

    http://www.nytimes.com/2006/10/28/us/politics/28hedge.html?ex=1319688000&en=38d8adcc6979e27c&ei=5090&partner=rssuserland&emc=rss

    I’ll take my “feeble arguments” over your blatantly false ones any day.

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