THE US ECONOMY: Separating The Political BS From The Truth

A new rush of news commentaries hit this pat weekend – describing the “dire straights” of the US economy. (No “dire straights” is not a reference to the 1970’s English Rock Band, but to – “dire straights” – a state of extreme distress, Thanks for the humoress comments referencing the band – I must have a eclectic set of readers) A relatively small number were thoughtful pieces, dedicated to discussing the FACTS and potential solutions. The overwhelming remainder were chockful of incorrect data aimed at achieving political agendas and “lowering expectations” at the cost of helping the average American.

Several major publications carried headlines on this past weekend touting the current economic picture as “the worse ever”, one even claimed that for the first time ever, the US had topped 10 Million in unemployed. The import of the stories? Things have never been this bad ever before. The truth is quite a different matter. Of course we have been here before and in situations much worse than this, in fact we have been here many times ……… and I’m not talking about ancient history.

If you take the time to review the facts, the degree to which the New Administration and its supporters will lie to the public is astounding. The New Administration is already putting its political legacy ahead of the American people …..  and it hasn’t taken office yet.

My reason for these comments – Obama’s willngness to demagouge the issues at the expense of the average American. (Websters: demagouge – a leader who makes use of popular prejudices and false claims and promises in order to gain power.

Lying about the true state of the economy, to serve ones own political purposes, is an act of demogoguery. If the lies falsely inflate the health of the economy, the lies could prevent needed action from being taken. When lies are told to exagerate the problems in the economy, false remedies can be approved with truly unfortunate results to follow. You’d like an example – False claims were made about the “discrimantory” practices of American mortagge lenders – the cure to these lies – NINJA & Liar Loans and the collapse of the banking/finance industry. Obama and his aids are certainly guilty of misrepresenting  the current economy and its true historical perspective. 

Exagerating the ills of the economy for political gain has only negative consequences for the economy and the working people who are affected most directly by the current conditions. Exagerating how bad things are, never created a new job, got someone hired, spurred investment or encouraged someone  to open a new business in the United States.    

The intent of this post is limited – to compare the New Administration’s claims, and those made by its surrogates, with the facts and to ask why the President-elect keeps saying he may not be able to complete his tasks in a “first-term”. After all, his party has control of both Houses of Congress.

The issue of whether his policies are right for America will be discussed another day. Let me simpy make this short suggestion before moving on from that topic – It is my beleif that his polices are not right for America – that America, absent a “dire emergency”, would not agree with many of his proposals – and that is why the New Admninistration is trying to create as many “dire emergencies” as they can manufacture – regardless of whether the “dire emergencies” are supported by facts. In times of emergency people are willing to surrend their rights and surrender their money ….. emergencies are powerful political tools for the dishonest.  

The current economic conditions need immediate attention – but before you can cure the disease – you need to make sure you have the correct diagnosis ……. the wrong medicine can kill the patient quicker than the disease would if the disease were left alone. Or, in other words, pouring kerosine on the fire won’t put the fire out.

You may have seen the following headlines, or very similar headlines, over this past weekend,   

“Government figures released Friday showed that the US Unemployment Rate in October rose to 6.5 percent, its highest level since 1994.”

10.1 Million Unemployed in U.S. – The Gainesville Sun: Saturday, 11-8-2008                 The nation’s jobless ranks zoomed past 10 million last month, the most in a quarter-century ….. About 10.1 million people were unemployed in October, the most since the fall of 1983. “October’s [2008] jobless rate was the highest since March 1994″…………. The jobless rate was 4.8 percent just one year ago [October 2007].             

These articles are aimed at creating a “dire emergency” which will be turned into “political capital” to manufacture support for the New Adminsitrations programs and are not an honest analysis of what the numbers mean or what harm to America’s future prosperity may follow from misusing these numbers. Again, I’d suggest you consider how the banking/financial services mess started – manipulating numbers on loans ….

These same publication were, just weeks ago, extolling the virtues of a return to the economic days of the Clinton Administration – In fact the headlines in today’s papers state, Obama building new team with veterans from Clinton era and “Obama, Candidate of Change, Looks to Old Hands From Clinton Era”.

The article above does note that, “October’s [2008] jobless rate was the highest since March 1994” ……. well 1994 was smack in the middle of Clinton’s first term as President. A term when the Democrats controlled the White House, Senate and House of Representatives. It was during this “Congress” that President Clinton and the Democrats approved the changes that led to NINJA & Liar Loans. 

Exactly how bad was 1994, that we are now comparing the “worst economic picture in our lifetimes” to that year. (I believe 1994 falls within “our lifetimes”). When 1994 came to a close, the Anuual unemployment rate for the year was 6.1%. Current projections suggest that when 2008 comes to a close, the annual unemployment number for the year will be 5.6 % – one full point higher than last year and 1/2 point lower than in Clinton’s 1994. (Translation – The unemployment percentage was 11.2% higher in 1994 than it is projected to be at the end of this year -2008).  

For those who might be curious about the remaining years of Clinton’s first term – here is the data;

1993 – Clinton Year 1: Unemployment 6.9% (A yearly average, 1/2 point (0.5%) higher than our currently monthly number).                                                                                                                                                            1994 – Clinton Year 2 – 6.4% – a yearly number nearly identical to the current monthly number, if the current “monthly” unemployment rate indicates immediate and “dire consequences”, how should we describe  1994.                                                                                                                                                                                                      1995 – Clinton Year 3 – 5.6% – a number identical to the projected unemployment rate for this year. (2008)                                                                                                                                         1996 – Clinton Year 4 – 5.4%.

The Average Annual Unemployment during Clinton’s first term in Office was 6.08 %. 

My point in making this comparison – I’m not contending the Economy in Clinton’s frist term was great, nor did that Economy reflect any type of “dire emergency” that warranted trillions of dollars in bailouts that the taxpayers would have to repay – back then the economy didn’t reqiure the socialization of American, did it? I’m not contending that the Bush economy is in stellar shape, it isn’t, the economy needs a change of direction – but, considering the fact that Bush’s detractors discuss the success of the Clinton Administration with one breath and denounce Bush with the next – I’m suggesting the data doesn’t support that type of comparison or hype. They are, after all, bringing back many of the Clinton Management Team.

Some of you may be asking, “Wasn’t the economy “better” during Clinton’s second term (1997 – 2000)? The unemployment numbers during Clinton’s second term were; 1997 – 4.9%, 1998 – 4.5%, 1999 – 4.2%, 2000 – 4.0%. The Average Unemployment number for Clinton’s second term – 4.4% representating a substantial improvement over his first term. The unemployment number for Clinton’s second term is simply, incredible. He deserves a great deal of credit, but remember President Clinton shared power – during Clinton’s last 6 years in office the Republicans controlled the House of Representatives and the Senate. He still deserves credit.  

How does Clinton’s second term compare to the last 4 years under Bush (2005 – 2008). 2005 – 5.1%, 2006 – 4.6%, 2007 – 4.6%, 2008 – 5.6% (projected) Average Unemployment in Bush’s second term is 4.9% a full half point higher (0.5%) than Clinton’s second term and a 1.1 % lower than Clinton’s first term. Bush’s first term averaged 5.5% unemployment: (2001 – 4.7%, 2002 – 5.8%, 2003 – 6.0, 2004 – 5.5%).  

The head to head comparison between Clinton & Bush on the economy and unemployment rates, based on facts, not political spin – looks like this:

1st – Clinton’s first term, 1997 – 2000,  4.4% average unemployed                    

2nd – Bush’s current term, 2005-2008, 4.9% average unemployed                             

3rd – Bush’s 1st term, 2001- 2004, 5.5% average unemployed                                         

4th – Clinton’s 1st term, 1993- 1996, 6.1% average unemployed 

Clearly, the current economic conditions come nowhere near replicating the Great Depression, in fact, right at this moment, things are not quite as bad as they were at the end of Clinton’s first term in office, nor are they as “good” as at the end of Clinton’s second term. The current economic conditions reflect, roughly, an average day in the Clinton administration.

If in 4 years Clinton could turn things around from a 6.1% unemployment at the end of his first term to a 4.4% at the end of his second, (he did so working with a Republican Congress) why is it that Obama can’t get it done while working with his fellow Democrats who are in control of the House & Senate?  

The News Media articles are based on the following statement, which is accurate, “The unemployment rate rose by 0.4 percentage point to 6.5 percent in October, and the number of unemployed persons increased by 603,000 to 10.1 million.  Over the past 12 months, the number of unemployed persons has increased by 2.8 million, and the unemployment rate has risen by 1.7 percentage points.” [From 4.8 to 6.5%] The article does not mention the substantial number of people who became unemployed due to the weather. Yes, the weather. Hundreds of thousands have been temporarily unemployed due to Octobers Hurricanes. You will see an improvement in the jobless numbers, without any underlying substantial change in the economy, when people return to work after the strom damage is repaired.   

Additional unemployment data follows for your consideration. One piece of additional background data that needs to be considered before a “fair” or “meaningful” comparison of any of this data can be made is the US population totals over the last several decades. The population of the US continues to grow substantially every decade. Many of the new Americans are immigrants. How might population growth affect how we view unemployment numbers? It takes a smaller percent of the population to reach 10 million every decade. As America gets bigger and bigger, 10 million gets smaller.           

US Population Totals

1970 – 203 Million People

1980 – 236 Million People

1990 – 248 Million People

2000 – 281 Million People

2008 Estimate 305 Million

2010 Estimate 315 Million

2020 Estimate 356 Million

There are approximately 80 Million more Americans living in the US in 2008 than in 1980. That is an increase of 35%.  

In 1990 the US Population was 248 Million people, today it is 305 Million, an increase of 57 Million or  23%. The point I’m trying to make, a fair and meaningful comparison of the total number of people who are unemployed should take into the consideration the total number of people in the population.  10 Million in 1983 is equivalent to 13.5 million today. 10 million in 1990 is the equivalent of 12.3 million today.  

It is fundamently wrong to dismiss the need to consider population growth. Example A: If President-elect Obama is elected to a second term, at the end of his second term the US population is projected to be 356 million. If President Elect Obama’s economic strategies are successful and they produce an unemployment rate equal to the best single year ever achieved by President Clinton (4.0% in 2000) it will still be likely that even given that great success, there will be 10 Million unemployed at the end of Obama’s second term. Is the number, 10 Million, by itself, a fair or meaningful way to measure  whether the next President has a remarkable accomplishment, or is a total failure? Population growth must be part of the equation.  

Unemployment – Annual Averages – Total Unemployed:

1970 – 1974 Average Unemployed – 5.4% (7.6 Million Unemployed) – Inflation Rate 6.6%    

1975 – 1979 – Average Unemployment – 7.9%  (Average 11.2 Million Unemployed) – Annual Average Inflation Rate 8.1  

1980 – 7.5% – Unemployment – high month of 10.5 Million and low month of 8 Million –     21.4 Million people were unemployed at some time in 1980.

1981 –  First half 1981 7.4% – 10.48 Million Unemployed –

1981 – Full year average – 7.6% – 10.76 Million Unemployed  – 

1982 – 7.2% – On Average 10.2 Million people were unemployed during 1982. Peaking at 12 Million unemployed in December 1982. (a monthly number – like the one quoted in the article)

1983 – 9.6% – Unemployment rate drops 2.5% to 8.2% in December 1983 [from 10.7% in December 1984 –  7.5 %   11 Million “full” unemployed, 7 Million more “partially unemployed” –     

1985 – 7.2%, 1986 7.0%  ( – Over 10 Million unemployed in both years.

1987 – 5.9 % – 8 Million Unemployed –

1st half 1988 – a 14 year low of 5.5% –  7.45 Million Unemployed

1988 Full Year – 5.5% –

1989 – 5.3%, 1990 – 5.6%, 1991 – 6.8%, 1992 – 7.5%.              

1993 – 6.9%, 1994 – 6.1%, 1995 -5.6%, 1996 – 5.4%, 1997 – 4.9%, 1998 – 4.5%, 1999 – 4.2%,  2000 – 4.0%, 2001 – 4.7%, 2002 – 5.8%, 2003 – 6.0%, 2004 – 5.5%, 2005 – 5.1%, 2006 – 4.6%, 2007 – 4.6. 2008 – (projected) 5.6%


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