One of my favorite items at Instapundit recently is the series called “Dude, Where’s my recession?” (for example, here, here, here and here: I may have missed some).
For those dedicated to presenting all the bad economic news all the time, those columns make for painful reading. Economic Armageddon was supposed to be upon us, but the facts keep forgetting to toe the line. “Consumers boosted their spending at a 1.5 percent pace in the second quarter. That was up from a 0.9 percent growth rate in the first quarter and marked the best. . .” Oh, dear. “Retail sales jump by largest amount in 6 months. . . . Analysts were surprised by the solid increase in retail sales and noted that sales in April were also revised to show a. . .” Why, it is enough to make an hysterical pessimist lose heart.
Of course, it’s axiomatic that the guys out of power believe–or at any rate say–they can handle the economy better than the chaps in power. But that understandable bit of partisan stump-talk has leached into the reporting of the news. No one disputes that there has been an economic slow down; no one disputes that credit has dried up faster than a temperance party of new-minted teetotalers in the Sahara. Exactly why the so-called “sub-prime” crisis should have popped up so suddenly and so virulently is a matter of dispute. Doubtless greedy bankers had something to do with it. But how about the politicians (and guess which ones?) who were insisting that credit be loosened, that “red-lining” certain neighborhoods be outlawed in the name of “equal access” (how to you spell “default risk”?): don’t they also share the blame?
In any event, the novelty of recent years is the barely concealed, and obviously partisan, delight in bad news on the part of those reporting the news. We saw something similar in the reporting on Iraq. Every time a roadside bomb took out an American Humvee, the story was splashed over the front-page of The New York Times and other adjuncts of the Democratic Party before being handed over to the editorialists for moralizing later on in the paper. Somehow, the success stories, when reported at all (which isn’t often) are relegated to a snippet on page B17. The bottom line? They crave failure.
So it is with the economy: how happy falling home prices makes The New York Times. How delighted they are to report that growth has slowed and unemployment risen (not by much, it is true, but they do they best they can with what they have to work with). How thin-lipped about good news they are. You probably have to spend more time than I am willing to do reading The New York Times and kindred organs to appreciate fully the inadvertent humor, not to say hypocrisy, of their reporting. Fortunately, other stalwart souls are there in the trenches wrestling out the delicious nuggets for the rest of us. The excellent web site web Classical Values, for example, offers an illuminating comparison. In a business story about the situation in Europe, a Times reporter described the German economy as “blazing ahead”–blazing, mind you– by 1.5 percent in one quarter even as Forbes (for example: you see similar stories in the Times) found an analyst who assures us that the 1.9 percent growth in the US is evidence of recession: “The fact that there was technical growth in GDP,” he sniffed, “in no way alters our view that the economy has fallen into recession.” Well, that analyst was from Bear-Stearns, so perhaps he should be forgiven for taking a gloomy view of things.
Along the same lines, Matt Welch over at Reason has a splendid analysis of a recent Washington Post story about the economy. Quoth Sebastian Mallaby in the Post:
The upshot is that things are desperate. The unemployment rate in the headlines (which understates the real number) is heading toward 6 percent; home prices are falling hard; and the two forces that have averted outright recession – a timely fiscal stimulus and strong growth abroad – are fading. The Fed has cut interest rates as much as possible given the worry about inflation. Foreign central banks are similarly boxed in. With the world’s inability to agree on anything, there’s no prospect of a coordinated global response – witness the breakdown in trade talks. And so the United States must act using the only tool it has: It is time for a second stimulus.
And Welch comments:
I’m old enough to remember when “unemployment heading toward 6 percent” was a scare phrase when said rate was heading downward, because the Phillips Curve-quoting consensus was that anything lower than 6 percent would trigger automatic inflation. Yet for the past 167 months, unemployment has indeed been lower than 6 percent for all but a seven-month stretch in 2003, during a time when total nonfarm employment increased from 115.2 million to 137.6 million, according to the Bureau of Labor Statistics. Things are desperate!
But wait, home prices are falling hard, right? Yes! All the way down to … 2004 levels. Which were still nearly double 1997 levels in real terms.
As for “outright recession,” yes indeedy that has been averted, to the tune of 1.9% GDP growth in the second quarter. And much as I hate to see global trade talks break down, a “coordinated global response” to allegedly “desperate” economic situations worldwide (think: the 1997-98 Asian flu, or the peso crisis not long before that), are about the collective actions of central bankers, not trade negotiators. And fer cryin’ out loud, how come it’s only spending more guvmint money that indicates “courage,” rather than performing the much-rarer feat of spending less?
More “guvmint money.” More regulation. Bigger bureaucracy. Less free trade. In other words, bring on the socialist interventions. Here we are sitting on the most productive economy in the world. The stock market closed yesterday at nearly 11,800. The dollar has been strengthening significantly against the Euro. But, yes, we have some bad news. Mallaby tips his hand even more in succeeding paragraphs where we discover that 1) “Barack Obama, to his credit, has called for a modest stimulus,” and that 2) the Bush administration’s tax cuts were “crazy” and, by implication, the cause of the budget deficit. Mallaby also likes the idea of the government confiscating and redistributing private assets, so he cheers Obama’s plan to tax (i.e., usurp, expropriate, steal) the “windfall profits” big oil companies have recently enjoyed.
Have you noticed that by prefixing the adjective “windfall” to the noun “profits” you convert a good thing into something deserving of government pillage? Why adding a good thing (windfall: “a sudden and unexpected piece of good fortune”) to another good thing (a profit) should result in a bad thing is part of the mysterious alchemy of socialist intervention. No one understands it, but socialistically-inclined politicians have lost no time in exploiting it. Depressing, isn’t it?
While I have my own serious concerns about the state of the economy, I do believe that the negativity is vastly (and melodramatically) overstated. I saw some network news report the other night that made passing reference to “…with the economy now in recession…”
Well, it’s technically not, of course. But why let facts get in the way of a good story, especially one that will help the Democratic party?
As for the housing crisis…well, plenty of blame to go around there. A couple of years ago, I had the hobby of reading an online forum for mortgage brokers, and I simply could not believe how that business was being run; people I wouldn’t have lent a dollar were getting jumbo mortgages based on no documentation at all. There’s no way that was going to have a happy ending, and it’s a long way from over even now.
More work, less whining will get the economy moving better than any new tax-and-spend-and-spend government initiatives.
As for “windfall profit tax”, there’s another word for it–stealing. But that’s one of government’s specialties, isn’t it?
Scott
Roger,
You probably missed in the comments of that Classical Values post by Simon, that he improperly compared the US first quarter growth rate of 1.9% per annum to the German first quarter growth rate of 1.4% per quarter. Apples to apples, US growth rate of 1.9% per annum in the first quarter compares to a German growth rate of 5.6% per annum in the first quarter, which is actually “blazing” for a first world economy.
With reference to Tom Cuddihy’s comment: here’s what I found at the site referenced:
http://powerandcontrol.blogspot.com/2008/08/blazing-economies.html
“vantastic5 in the comments advises me that the German economy really did grow a blazing 1.5% in the first quarter. What happened? They got a years worth of growth (for Germany) in the first quarter. After that the economy was and will be essentially flat. The Financial Times reports:
Germany’s economy has performed robustly compared with other industrialised countries, with 2.5 per cent growth last year and 1.5 per cent quarter-on-quarter growth in the first three months of 2008.
However, second-quarter growth is expected to be significantly lower, the German finance ministry conceded this week, owing to high energy prices and inflation, the strong euro and the weak international economy.
Industrial production fell in May by 2.4 per cent – its largest monthly drop in a decade – and a second-quarter contraction in gross domestic product of 0.4 per cent was likely, according to an economists’ poll published on Wednesday by Reuters.
The German government has forecast that growth will fall to 1.7 per cent this year and 1.2 per cent in 2009.”
Roger, today’s article in AP on this very subject confirms your point in the post and in response to Tom C. Note the reporter’s words “healthy growth” in describing a 1.3% rise in the first quarter.
German economy shrinks in 2nd quarter
By GEIR MOULSON, AP
BERLIN -The German economy shrank for the first time in nearly four years in the second quarter as consumer spending and capital investment declined, according to government figures released Thursday.
Europe’s biggest economy contracted by 0.5 percent in the April-June period compared with the previous quarter, the Federal Statistical Office said. It was the first decline since the third quarter of 2004.
However, it was less sharp than the 0.8 percent decline economists had predicted. The government said it was sticking to its forecast for full-year economic growth of 1.7 percent.
The contraction in gross domestic product contrasts with healthy growth of 1.3 percent in the first quarter _ revised downward Thursday from the 1.5 percent initially reported…
Great write Roger !!!
Here are my 2 Cents . With my own past ReCon Marine to Wealth all by myself .
My Teacher was Common sense , reason and PhD in as a ReCon Marine .Life was easy after those years as was the Animalism , take no Prisoners top of the furniture Industry .
Since the very Foundation of America was Founded on paying the price for Success though hard work , real caring , A positive attitude , Dealing with difficulty , Job skills and education in your chosen fields that supports your own Self and Family .
Individually , Ethically, Financially and morally and Yes I know a bad word now a days and laughed at by Hollywood and the Media elite . Real ‘success’ is no more of a accident than is a sure guarantee staying Drunk or on Drugs and driving will end in killing your self or worse others .
A higher education feeds you Ideals and Theories and is wonderful but a great Job skill feeds your family and pays your house payments and rising taxes and cost of living yearly . Given the Present needs I pick eating and paying my house payments over the theory of why Marxism is better than Capitalism . Debated in American Colleges since his death 81 years ago even though 160 Million were murdered and starved to death with those same theories . Somehow today Marxist theories makes sense and are Progressive and doable ?
‘Success’ wears the simple old well used Hat of I tried and tried and will never stop trying . Continued Failure wears the same old Hat of You do it for me because you told me rich others should do it for me while I lived the same unhappy self year after year .
I listened to you so I continued to be angry and of course continue to fail because of Rich successful white men ?
Neither you or I ever wondered why somehow since I kept voting for you to change me and others just like me .
You never did nor did I believing in your idealism that never gave me realism other than my continued Failure .
That was real just as much today as my needs were the first day I ever met you many years ago telling me you could help me If I just voted for you .I did for many years as did my neighbors and you didn’t .
I’m reminded of the old vaudeville joke, immortalized by Woody Allen in “Annie Hall.” Two old maids die and go to heaven. After a week, they bump into each other and the first one remarks, “You know, Sadie, the food is here is terrible.” To which Sadie replies, “Yes, and the portions are so small!”