Friday Freeper Financial Fiction

This appeared in the Bucks County Courier Times yesterday, and the author is some idiot named Jay Ambrose.

(Note: You have to register at the Sacramento Bee's web site to read this, but it really isn't worth the trouble.)

It has now become obvious that Democrats want another Great Depression, the era of their most robust ascendancy. If the facts won't give them one, they will do what Sen. James Webb of Virginia did in his response to President Bush's State of the Union speech: They will invent one out of thin air.

First of all, here is a link to a Wikipedia article on The Great Depression (and this links to some additional history including photographs from that period).

As you might expect, scholars and economists disagree on what exactly cause The Great Depression (which was worldwide, by the way), but it was precluded by speculative excess on the part of businesses in this country in the prior decade (according to FDR, and that makes sense to me), along with the Smoot-Hawley Tariff Act of 1930 (a shock treatment of sorts after the 1929 stock market crash that started the whole thing in this country) along with Britain’s decision to return to the gold standard, among other factors.

You could argue about the value of Roosevelt’s alphabet soup of government programs as a response to the depression, but they served both the practical need of providing employment for awhile to those who could not find work and the emotional need of uniting this country in a common cause against this scourge. Also, this ushered in the era of government deficit spending, which can be good if managed responsibly. And you could even go further still and note that the depression did not officially end until this country had entered World War II.

However, for Ambrose or anyone else to try and scare people into believing that the Democratic Party wants to see the return of “Hoovervilles” and other blights of poverty from that era is both laughable and sickening at the same time.

They will tell you, as he did, that the middle class "is losing its place at the table," that wages and salaries are frighteningly low and that our "manufacturing base is being dismantled." About the only thing they leave out is references to bread lines.

Here is something that might surprise you, and would certainly surprise Webb, assuming that he was as sincere as he looked: The middle class has seldom had it so good.

Here is a link to Crooks and Liars that presents both the video and the transcript of what Webb said, by the way.

And even though Ambrose discounts this later (see, we must never allow anything to interfere with the finely-tuned machinery of American business as far as Ambrose is concerned), I want to highlight this paragraph from Webb’s response…

When one looks at the health of our economy, it's almost as if we are living in two different countries. Some say that things have never been better. The stock market is at an all-time high, and so are corporate profits. But these benefits are not being fairly shared. When I graduated from college, the average corporate CEO made 20 times what the average worker did; today, it's nearly 400 times. In other words, it takes the average worker more than a year to make the money that his or her boss makes in one day.

And if Ambrose doesn’t want to believe Webb when he points out that “our manufacturing base is being dismantled,” fine. Believe Paul Craig Roberts, then, who worked in the commerce department of the administration of Republican President Ronald Reagan…

Job growth over the last five years is the weakest on record. The US economy came up more than 7 million jobs short of keeping up with population growth. That’s one good reason for controlling immigration. An economy that cannot keep up with population growth should not be boosting population with heavy rates of legal and illegal immigration.

Over the past five years (2001-2006) the US economy experienced a net job loss in goods producing activities. The entire job growth was in service-providing activities--primarily credit intermediation, health care and social assistance, waiters, waitresses and bartenders, and state and local government.

US manufacturing lost 2.9 million jobs, almost 17% of the manufacturing work force. The wipeout is across the board. Not a single manufacturing payroll classification created a single new job.

The declines in some manufacturing sectors have more in common with a country undergoing saturation bombing during war than with a super-economy that is “the envy of the world.”

But don’t worry – Ambrose is about to indulge in more fairy tales…

The economic columnist Robert Samuelson has reported that the percentage of families with inflation-adjusted, before-tax incomes of more than $50,000 was 35 percent in 1980, 40 percent in 1990 and 44 percent in 2003. A progressive policy group economist, Stephen Rose, has reported that over a 25-year period ending in 2004, there was a 13 percent increase in adults between 25 and 59 in households with real incomes more than $100,000 and a 14 percent decrease of this age group in households with real incomes of less than $75,000.

I talked to Rose for a column last year after reading some other of his statistics about Americans in their prime working years. The median income of this group, he found through U.S. Census research, was $63,300. He also discovered that the median in this group for two-earner households was $80,000.

As for wages, they zoomed in 2006. According to the New York Times, they increased for rank-and-file workers by more than any year "from the late 1970s to the mind-1990s." The economic commentator Lawrence Kudlow shares an economist's finding that wages went up more during "the first five years of the Bush expansion" than over the first five years of the expansion that occurred under the presidencies of his father and Bill Clinton. Unemployment is an extraordinarily low 4.5 percent, with a record number of jobs, 146 million.

Lawrence Kudlow writes for the National Review Online, by the way, so that should tell you all you need to know about him.

And it’s funny how Ambrose doesn’t mention anything about wages versus inflation or cost-of-living adjustments (COLAs) here or energy costs (and perish the thought that he would discuss the effect of offshoring in holding down salaries).

Luckily, Paul Krugman gets into some of that here…

Because employers don't have to raise wages to get workers, wages are lagging behind the cost of living. According to Labor Department statistics, the purchasing power of an average non-supervisory worker's wage has fallen about 1.5 percent since the summer of 2003. And this may understate the pressure on many families: the cost of living has risen sharply for those whose work or family situation requires buying a lot of gasoline.

Some commentators dismiss concerns about gasoline prices, because those prices are still below previous peaks when you adjust for inflation. But that misses the point: Americans bought cars and made decisions about where to live when gas was $1.50 or less per gallon, and now suddenly find themselves paying $2.60 or more. That's a rude shock, which I estimate raises the typical family's expenses by more than $900 a year.

You may ask where economic growth is going, if it isn't showing up in wages. That's easy to answer: it's going to corporate profits, to rising health care costs and to a surge in the salaries and other compensation of executives. (Forbes reports that the combined compensation of the chief executives of America's 500 largest companies rose 54 percent (in 2004).)

The bottom line, then, is that most Americans have good reason to feel unhappy about the economy, whatever Washington's favorite statistics may say. This is an economic expansion that hasn't trickled down; many people are worse off than they were a year ago. And it will take more than a revamped administration sales pitch to make people feel better.

Back to Ambrose...

Our manufacturing base is not being dismantled. Alan Reynolds of the Cato Institute quotes a Federal Reserve document as observing, "Over the 12 months ending in December, total industrial production increased 3 percent to a level that was 112.4 percent of its 2002 average."

I’m not going to play the game of trying to decipher Ambrose’s numbers (to tell the truth, I know my own household finances of course, but I’m certainly not a financial expert in the class of Krugman or Roberts). Instead, I’ll link to this ThinkProgress post that references an American Progress story noting the following (including the 2002 period mentioned by Ambrose – sorry if any of this stuff is mind-numbingly repetitive)…

– Job growth is the weakest on record. Job growth during the current business cycle, beginning in March 2001, has averaged an annualized 0.5 percent per month, the lowest of any business cycle since the Great Depression. In fact, this is less than a quarter of the average of all prior business cycles since World War II.

– Sharp spike in costs for necessities. From March 2001 through June 2006, prices for the five largest consumption items–medical care, housing, food, household operation, and cars–grew more than twice as fast as they did for the smallest five consumption items. At the same time, college costs continue to soar.

– Wage gains have been minimal. Real wages have barely moved during the recovery or since the period when the economy stopped losing jobs in August 2003. Between March 2001 and December 2006, real hourly wages grew at an average annualized rate of 0.5 percent, and real weekly wages grew at an average annualized rate of 0.4 percent.

– Families spent all of their disposable income and then some. For the first time since the Great Depression, the personal saving rate became negative in 2005. In the third quarter of 2006, the saving rate was -1.2 percent, the sixth quarter in a row with a negative saving rate.

Back to Ambrose again...

Webb is playing a demagogic game when he additionally says the benefits of high corporate profits and a booming stock market are "not being fairly shared." Sharing fairly as a matter of governmental coercion is a socialist program that forever fails while free markets have done more to produce prosperity and lift people out of poverty than any economic scheme ever. Corporate profits tend to profit everyone.

Oh really?

Primarily because of obscene corporate profits and the overall consolidation of wealth of the investor class, it is harder for non-rich Americans (re: most of the country) to meet day-to-day expenses, to say nothing of splurging on luxury items of one type or another, as pointed out above.

How the hell is that “profiting everyone”?

But no, Webb conjures up the robber barons and "dispossessed workers" of the early 20th century, takes a shot at soaring CEO salaries and worries about an America "drifting apart along class lines." As I've noted, the middle class is more than holding its own, and those getting richer are not just the rich. Whatever you think of CEO salaries, they are not the cause of poverty increases, which are rather a consequence of immigration that also holds down low-range wages.

Whenever you point out that the American people are doing well relative to where they have been in the past, people accuse you of callousness, as if facts were signals of insensitivity.

The Webb remarks, echoing other Democrats, are laden with hints of an interventionism unwarranted by circumstances and that could be hugely counterproductive. If the Democrats get this wrong, they could ultimately produce something approximating the Depression-type horrors they have created in their politically inspired imaginations.

Ambrose does a good job of recycling freeper propaganda spoon-fed to him by his handlers. Of course, who can say how he’d fare if he actually had to go out and compete for work as most of the rest of the middle class of this country is forced to do.

I didn’t know that the splendid, scenic airy mountain vistas of Colorado where he is based could have the effect of dulling someone’s brain to the point where they started living in an alternative to reality.