Government and Growth

A recent study by two Swedish economists shows quite clearly that the growth of government inhibits economic growth. The negative correlation is clear: a ten percent increase in the size of government results in 0.5 to 1.0 percent lower annual growth rate. The study also shows that societies characterized by high levels of social trust are able to bear the costs of big government better than those that aren't, and that governments that impose high levels of taxation on businesses are able to mitigate the effects to some extent by promoting pro-growth policies in other areas.

Read the study here.

What Recovery?

Dick Morris on the subject of the Obama Recovery that the MSM is trumpeting:

The economic data that portend recovery are totally and completely inventions of Obama’s political operation. The reality is that no recovery is taking place!


Economist James Fitzgibbon, of the Highlander Fund, explains how cooked the economic statistics on which the president bases his claims of recovery really are.

Begin with “gains” in the stock market. Fitzgibbon explains that they are no indication of changes in the public mood because the public isn’t doing the investing anymore. He notes that HFT (high frequency trade computers) now “account for 80 percent [of the market's] daily business. No one else is left because they lost their money in 2008 and the public has fled the market … Total NYSE volume is 67 percent lower on average than in 2008. Volume is 29 percent lower this year compared to 2011. The prices [have] no serious meaning.”

Have consumers, as alleged, started borrowing again? Not really. Fitzgibbon explains that “credit use has surged only because the Obama administration changed the student loan program to a direct program and those loans are now counted as part of this metric. It is not comparable to anything prior to 2011.” And, he adds ominously, “massive credit card use as measured against actual verifiable sales shows the increase is in borrowed funds to pay for food! Not my idea of a healthy sign.”

How about lower unemployment figures? Fitzgibbon says they are a “joke.” He says that the Bureau of Labor Statistics has “completely changed the … metrics as of January 2012. None of the current percentages are relatable to anything prior to 2012!” He points out that the January unemployment data are heavily adjusted for “seasonal variations.” He notes that “the actual data [show that the economy] lost 2.7 million jobs in January.” And that’s just the numerator. For the denominator — the number of people in the workforce — the data “also shows about 1.2 million people magically left the workforce.” He says one has to go back to the early 1980s to see labor force participation as low as it is now.

Auto sales? He says “auto sales are when the manufacturer dumps cars and trucks on a dealer. Inventory stuffing! It has no relationship to actual sales to a consumer. Thanks to Obama, GM dealers are drowning in product no one wants to buy. It is a meaningless data point. Only dealer-to-consumer data is useful. It is not showing any growth at all.”

Housing? He says positive news in this sector is unreliable. “The raw data we get shows it is worse than last year and in some regions [the] worst ever since the ’60s.”

So it appears that Obama’s reelection strategy hinges on asking people to believe the data he puts before them rather than the evidence of their own eyes. It won’t work.

So who to believe? Morris is not an economist, and the opinions of credentialed economists vary widely. He does, however, know politics and how things are spun. I certainly hope we are in recovery, but like most people I won't take the word of the credentialed experts affiliated with the administration as filtered through a news media that is sympathetic to Obama. I'll have to wait and see.

The Surprise Index

The predictions of "experts" are often wrong, sometimes disastrously so. This is particularly true of economists, whose model-based predictions seldom conform to reality. Think, for instance, of how often press stories on the economy are accompanied by the word "unexpected". Just how erroneous economists' projections actually are can be seen in a graph compiled by Citygroup called the "Economic Surprise Index". It measures the gap between expert predictions and reality and it shows that economic predictions are, in Derek Thompson's words, "almost always wrong". Check out the index for the past three years here, and remember it the next time some politician or news person tells you that he or she knows what is going to happen in the economy in the future.

Bush's Economic Miracle

Bizzyblog reports on systematic misreporting of economic news in the MSM. Specifically, he points out attempts to obscure the fact that federal tax revenues have risen much faster than
predicted and that the budget deficit has declined significantly as a result. Some economists are predicting that the budget will be in balance by Spring of 2008. [here]

The problem is that when major media outlets like the NYT and the AP blatantly misreport information so as to make President Bush look bad and to obscure good news this misinformation is picked up and rebroadcast throughout the nation with the result that the public gets a miserably incorrect view of the economy and of the effectiveness of the administration's policies. Bush's record on economic matters, as I have pointed out time and again, is as good as that of any president in the nation's history, yet he is seldom given credit for it.

Hat tip, Instapundit.

IBD ticks off Bush's accomplishments. He inherited an economy spiraling into depression and, for the first time in the nation's history, an administration had the foresight and administrative acumen to take appropriate and timely action, cutting taxes on the investing class. The result:

Since the last round of cuts in 2003, we've had the quietest, and most significant, boom in wealth, income and profits in our history. This explains why the economy, to the surpise of economists and the chagrin of liberal pundits, keeps humming. We've gone over the numbers before, but they bear repeating. Since 2002:

• Real gross domestic product has soared $1.64 trillion, or 16.5%, during a five-year stretch that has yet to see a downturn and that has witnessed average annual growth of 3%.

• Disposable personal income — what's left after taxes — has jumped $2.16 trillion, or 29%, to $9.68 trillion.

• Productivity, the fuel for future standards of living, has improved 14.3%.

• Overall employee compensation has expanded 4% a year.

• Net wealth, the amount people would have after paying off their debts, has swelled $15.2 trillion, or 38%, to $55.6 trillion. That gain in just five years is more than the total wealth amassed in the first 210 years of America's existence — an unprecedented surge.

• About 69% of Americans now own their homes, an all-time high.

• The jobless rate, now at 4.4%, remains below its 40-year average. Since August 2003, 7.8 million new jobs have been created.

• Tax receipts have surged 43%, or $757.6 billion, again thanks to economic growth.

Read the whole thing here.

But will Dubya get credit? Don't hold your breath.

George W. Bush's economic miracle is both real and sustainable. Too bad he won't get credit for it until the current generation of biased journalists and academics has retired.

More here.

More here.

And, let us not forget for six years and counting President Bush has kept this country safe from those who are attempting to destroy us.

Journalistic Irresponsibility

Alan Reynolds notes that

A recent Gallup poll found that only 41 percent of respondents approved of Bush's handling of the economy, compared to 55 percent who disapproved.

Read it here.

This is insane! Reynolds' article goes on to compare the Bush boom with that of Clinton and notes that under Bush the nation has achieved a level of prosperity comparable to that of the 1990's despite having faced much more difficult challenges [a recession, a bursting speculative bubble, Katrina, 9/11, a worldwide rise in energy costs, war, etc.]

I have argued many times that there is a good case to be made for considering the Bush administration's economic management to be the best of the past century and, were it not for Alexander Hamilton's genius, perhaps the best in our nation's history.

And still the idiots complain!

Reynolds notes this disparity between perception and reality and writes:

Because polls reflect perception rather than reality, the suspicion arises that many people wrongly believe the U.S. economy is in bad shape because that is what they keep hearing on TV or reading in the newspapers.

There's more than a suspicion involved here. The insane Bush-hatred that informs so much of our political commentary these days has seeped over into the economic realm. The MSM are and have long been engaged in a systematic disinformation campaign aimed at delegitimizing and denigating the accomplishments of the current administration. In doing so they are not serving the country or the American people well.