Thursday, October 19, 2006

Economic Cheerleading, Economic Misleading

The economic cheerleading continues, this time from George Will:
Every election year -- meaning every other year -- brings an epidemic of dubious economic analysis, as members of the party out of power discern lead linings on silver clouds.
GDP growth has been strong, Will writes. The federal budget deficit is low. Oil prices are down in recent months. And weak measures of labor compensation (such as those that I showed you the other day) are simply due to measurement problems, according to Will.

It's one of those pieces that makes me lose heart a bit. Every single one of the points that Will makes is misleading, disingenuous, beside the point, or all three. Just where should I begin in explaining how wrong Will is?

Do I start by mentioning that the federal budget deficit, while relatively low this year - so long as one includes the larger-than-expected Social Security surplus - is actually (thanks to the Bush tax cuts) still worryingly high when properly accounted for, and is set to go far higher in coming years?

Do I start by noting that he's comparing oil prices today with the very worst of the oil shock in 1980 (a period of time that we definitely don't want to come even close to resembling), that oil prices have only been relatively low for only a couple of months, and that could just as easily go all the way back up in another month or two?

Should I begin by explaining that the point Will raises about individuals constantly shifting their consumption patterns away from more expensive items and toward cheaper things is an obvious phenomenon that economic statistics already account for?

Or should I begin by noting that the tax cuts, which Will argues have put much more money into the pockets of average people but which went overwhelmingly to the wealthiest Americans, actually had only a tiny impact on average Americans - only on the order of a couple of hundred dollars per taxpayer per year?

No. Instead, let me just make one far more simple point. If the economy is so good, why do so many middle-class American's think that it's so mediocre?

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