Friday, July 14, 2006

The Good Economy

Someone continually telling you things are "A" when everyone knows that things are "B".

Bush Administration: The sky is green.
America: No, it's blue.

We always called this "blowing smoke up your *ss". I'm not sure where the expression originated, and honestly, it doesn't make any sense literally. But that's what the Bush Admin is doing.

Bush Administration: "We lowered taxes."
America: "Yay!"
Reality: "The money's gotta come from somewhere. You think prices are high *now*? Ha! You ain't seen nothin' yet... [cue music]"

Gosh! Would a politician tell us something we know is untrue?

What I find amazing is how many *economists* look at the disparity and don't think, "Whoa! We need to re-examine our numbers and methods" but instead tell everyone, "America just doesn't get it. Why?"

America: "Duh!"

It makes sense that politicians will continue to spew this babble. Sure, many people will spot the disparity between the current admin's view and reality and say, "Yeah, right". The politicians gain, however, those that A) many don't know better and B) some actually *are* doing better. So long as the number of people convince (and via bad logic deduce that the politician in question is doing "a good job") is larger than the number of people that get pissed being lied to, the pol can be better off.

But why economists? Possibilities come to mind:

1 The economist doesn't want to believe that all the work he/she has been doing is wrong and/or for naught.
2 The economist inquestion already has an assumption in mind and sub-conciously picks and massages data to match the foregone conclusion.
3 They're just incompetent.
4 They've got a hat in the ring.

My generous side picks 2. Its a very common human foible. Occam's Razor, if you will.
My skeptical of modern media side picks 4.

Economist's View

Selling the Economy

The administration continues to be frustrated that the public does not report satisfaction with the economy. For example, here's Al Hubbard, director of the National Economic Council from the New York Times:

"Obviously, it's frustrating to us that the American people don't recognize how well the economy is doing," Mr. Hubbard said.

Since the administration is used to relying on sales as much as results to achieve success in the policy arena, it's understandable why they would be frustrated that the sales job on the economy is not working. The problem is, it's a lot harder to sell people on something that's directly observable through their own experiences such as their day to day economic circumstances.

People know when they are better off or worse off, at least we assume they do when formulating basic building blocks in economics such as preference relationships, and when you ask them directly if they are better off, here's what they say:

Explaining Why People Are Pessimistic about the Economy, by Karlyn H. Bowman, American Enterprise Institute: Why do Americans seem so down about the economy, when many economic indicators are positive? Gallup points to the answer, in a poll that asked Americans how things have changed for them over the past year.

The May poll found that 99 percent of respondents said that the price they paid for a gallon of gas has gone up. (Who are the 1 percent?) In addition, 82 percent said the amount they pay for utilities has gone up, 73 percent said the price they pay for food has risen, 70 percent said their local property taxes have climbed, and 64 percent said the amount they pay for health insurance and the amount they pay out-of-pocket for health care or prescription drugs has gone up.

At the same time, only 38 percent report that their take-home pay after deductions has increased. That, and the pall the Iraq war is casting over things, goes a long way to explaining Americans' pessimism.

Are You Better Off ... ? In a June 24-27 Los Angeles Times/Bloomberg poll, 21 percent said their own family's economic situation is better because of President Bush's economic policies over the past five years, while 27 percent said it was worse off, and 48 percent said it was about the same. ... The Gallup poll cited earlier found that 42 percent said their federal income taxes had gone up over the past year, while 49 percent said they had remained the same. The local property tax bite was more severe. Seventy percent reported it had gone up, with 28 percent saying it had remained the same...

So 75% of the respondents do not feel their economic situation has improved, or it has deteriorated. The New York Times reports:

[A] poll released last month by the Pew Research Center found that just 33 percent of respondents approved of Mr. Bush's handling of the economy, while 54 percent disapproved. And a June survey by the University of Michigan, which tracks consumer confidence in government economic policies, found that 39 percent said Mr. Bush was doing a poor job, while 13 percent said he was doing a good job, and 47 percent rated him as fair.

Administration policy seems to be:

Administration: You're better off due to our economic policies.

Public: No we're not.

Administration. Yes you are.

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