March 26 2013
The Illusion Economy
One of the reasons put forward for giving President Obama a second term was that the economy was finally beginning to improve. A very slight dip in the unemployment numbers was heralded as the beginning of a robust recovery by the Obama campaign and the media.
Of course, it was politics talking but it worked. But this kind of talk that doesn’t reflect reality is the stock in trade of the Obama administration. Who needs a good economy when you can talk up a bad economy?
Real estate and media mogul Mort Zuckerman, who voted for Obama in 2008, addresses this issue in a Wall Street Journal piece this morning headlined “The Great Recession Has Been Followed by the Grand Illusion.” If you can read only one thing today, this has to be it.
The Great Recession is an apt name for America's current stagnation, but the present phase might also be called the Grand Illusion—because the happy talk and statistics that go with it, especially regarding jobs, give a rosier picture than the facts justify.
The country isn't really advancing. By comparison with earlier recessions, it is going backward. Despite the most stimulative fiscal policy in American history and a trillion-dollar expansion to the money supply, the economy over the last three years has been declining. After 2.4% annual growth rates in gross domestic product in 2010 and 2011, the economy slowed to 1.5% growth in 2012. Cumulative growth for the past 12 quarters was just 6.3%, the slowest of all 11 recessions since World War II.
And about those improving jobs numbers:
February's headline unemployment rate was portrayed as 7.7%, down from 7.9% in January. The dip was accompanied by huzzahs in the news media claiming the improvement to be "outstanding" and "amazing." But if you account for the people who are excluded from that number—such as "discouraged workers" no longer looking for a job, involuntary part-time workers and others who are "marginally attached" to the labor force—then the real unemployment rate is somewhere between 14% and 15%.