A little perspective please


The economy isn't as bad as you have been told
Don't get me wrong, there are some major economic problems today. Most of them brought on by government action, but don't believe all the press.

Thanks in part to journalism of that caliber, consumers are more apprehensive than they have been in decades. Consumer confidence is at a 16-year low, and more Americans than ever, 84 percent, think the country is headed in the wrong direction. The New York Times devoted one-fourth of Saturday's front page to illustrating ways in which the economy is mired in "A Slowdown With Trouble at Every Turn" - and continued the gloom for a full page inside.

Voices of reason keep trying to point out that conditions are not nearly as bad as they were the last time consumers were this despondent. That was in May 1980, during the final year of the Carter administration, when the "misery index" - the sum of the inflation and unemployment rates - hit an excruciating 21.9. Inflation was then at 14.4 percent; unemployment was 7.5 percent. The numbers today are 5 and 5.5 respectively.

But voters don't want to be told to buck up. When former senator Phil Gramm, an economic adviser to John McCain, said last week that America had "become a nation of whiners" and described the current slowdown as a "mental recession," the backlash was immediate. McCain repudiated Gramm's remarks and quickly issued a statement assuring voters that he "travels the country every day talking to Americans who are hurting, feeling pain at the pump, and worrying about how they'll pay their mortgage."

Well, that's politics. Politicians who want to get elected genuflect to what Bryan Caplan, in "The Myth of the Rational Voter" calls the pessimistic bias: the "tendency to overestimate the severity of economic problems and underestimate the (recent) past, present, and future performance of the economy."

I'm amazed that despite seven years of constant carping against Bush, the economy is in as good shape as it is.

Hat tip Cafe Hayek.

— NeoWayland

Posted: Mon - July 28, 2008 at 01:31 PM  Tag


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