Why the Economy Is Better Than You Think

Newsweak is worried about Obama

Daniel Gross is a partisan Dem, who wrote a book a few years back why Democrats were more popular with Wall Street, especially among the Davos Democrats and their hedge fund friends.

Which is why Newsweak hired him to write the paint-by-the numbers, talk-down-the economy piece. Newsweak is worried their man Obama looking a little thin in the resume so they've got to predictably create "Midnight in America" convincing Americans we have a second Great Depression so their man can win.

Guaranteed, you won't be seeing "Why We're Winning in Iraq" stories or covers on Newsweak any time soon either.

The good news is that at least now in the Internet age, the masks have finally been pulled off of our so-called objective news magazines and revealed for what they are. Democrat cheerleaders who like to shape public opinion to their liking.

And their readership shrinks by the day.

Good riddance, Newsweak.

Daniel Augusto of CA @ Jun 09, 2008 22:28:53 PM

Baloney

1) Yes productivity has risen steadily over the last 2 decades, but most (over 90%) of wage earners have seen their real incomes decline over the same time period. The gains from productivity have all gone to the executives class . Meanwhile, most Americans struggle to get by.

2) Certainly, Wal Mart greeters aren't subjected to the same cyclical pressures as auto workers. So what? Service jobs are by and large crap, and are mostly cost centers, not profit (i.e. wealth producing) centers.

3) Given that the inflation rate has been understated by at least 1% over the last 12 years (due to some now-discredited adjustments to cure its supposed "overstatement"), real GDP growth has been overstated. Since real GDP growth over the last two quarters has been less than 1%, we are technically, if not officially, in a recession.

4) America's balance sheet - its assets and liabilities - is horrendous, especially when measured on an accrual basis.

5) The "free trade" we've had has little to do with comparative advantage; it instead has been used as political cover for letting multinational corporations expand the global sweatshop. The average American gets downsized or laid off, faces higher resource costs (i.e., gasoline and food), and for what - a cheaper DVD recorder? Gee, what a bargain!

The American economy is great for those in the executive class - Fortune Magazine admitted so in an article a few issues ago. How long, though, will China et al continue paying a premium for America as overseer of the global sweatshop? When they finally take over that part of the economy, then America will be toast.

A country's economy is measured by the value of what its citizens produce, not what it consumes or trades. Every civilization that has failed has forgotten this simple fact.

David Minnich of @ Jun 09, 2008 22:00:53 PM

If Gore were president the liberal media would be telling us the economy is healthy and Iraq is his crowning achievement (yes, Virginia, Gore would be there too). But since it's a Republican in the White House the economy is portrayed as in the toilet so that Joe Six-Pack may believe he needs to vote for the Democrat. Only the Liberal Democrat messiah can save Joe Six-Pack from cruel and heartless capitalism.

Jon of @ Jun 09, 2008 21:59:04 PM

The Bigger Picture

The author fails to see the bigger picture: the impressive physical growth of humanity is coming to an end. At best we will make a transition from steady growth to steady state and at worst we will experience overshoot and plunge to a population and well-being far below current levels. Pretending that all is rosy when virtually none of our industrial and agricultural processes are sustainable is childish and, more importantly, leads to the wrong investment decisions. Be my guest, invest in airline stocks and Ford. Good luck with that. I will continue to base my investment choices on "reality" as portrayed at sites such as energybulletin.net, theoildrum.com and the Caltech Today Streaming Theatre (where one can view talks by real scientists on lots of topics including peak oil, global warming, energy research, and water supply).

R. Cook of CA @ Jun 09, 2008 21:31:21 PM

Where do they get these reporters from?

Does this reporter have any understanding of economics?

The evidence he uses to prove his thesis is about as thin as a sheet of paper.

1. A lack of unions means that workers have no wage bargaining power. Great for the executive class, bad for America.

2. The reason we are more service oriented is that all our manufacturing plants are gone. So we run massive trade deficits to buy manufactured goods. Service jobs are lower paying and actually, in a downturn, they will disappear.

3. Globalization means that the American worker has to compete with workers making a fraction of our earnings. Net result - our wages will continue to be under pressure.

4. The net impact of the oil price spike and housing value declines has not really hit the economy yet. People are struggling to make ends meet and scaling back. This will hit corporate revenues and profits over the coming year. The real estate plunge is just beginning, expect another 30% loss in home equity in markets like California. The impact on spending will continue to gradually mount over the next year, as Americans begin to fully realize that they have no home equity left, and millions walk away from their houses.

As far as trading our economy for China's, of course we are better off than they are. But they are gaining awfully fast. America will rise again, as soon as we get a Democratic party in charge that demands that corporations invest back into the future of THIS country, rather than investing their high tech production on countries like China and India.

It is time to reward the entrepreneurial spirit and engineering talent that made America great - and stop rewarding Wall Street for selling it off our companies to the highest bidder.

The Republican laissez-faire capitalism is destroying this country. Dont believe their lies.

Lawrence of CA @ Jun 09, 2008 21:17:09 PM

Better or worse off

At first thought nobody would like to trade America for China or India.......unless in the spirit of the article wages drop more and more behind the inflation. It "might" help the economy (read corporations) but will end up making American citizens low-wage workers, like the previously mentioned countries and maybe the people in those countries will be better off in the end.

For the average American the economy is worse then ever, they experience it day by day with less money to spend, more debit, foreclosures, no health insurance.

These are some other figures from the report mentioned:

Index Rank

Subindex A: Basic requirements 23

1st pillar: Institutions 33

2nd pillar: Infrastructure 6

3rd pillar: Macroeconomic stability 75

4th pillar: Health and primary education 34

One of the major contributors to the high ranking was merely the size of America as market.

Johan of ID @ Jun 09, 2008 20:39:33 PM

Not as bad as the 1970's

The economy is better than you think, if you think things are as bad as they were in the 1970's. We're experiencing a downturn, but it just does not compare with downturns of the past. It would still be nice to have an upturn, though.

Robert Kopp of OR @ Jun 09, 2008 20:18:01 PM

Yes and no...

That the economy is better today than in the deep structural crisis is pretty obvious, due to many of the points you mention - productivity, more service oriented economy etc.

But there is a crisis all right, and what you miss - and what is the point in Daniel Gross' article - is some of the changed global dynamics this is playing out in, which the economy needs to adjust to on a medium to long term.

1) Cheap oil, food and raw materials are not coming back. While food production might be able to expand at some costs and with some resilience, this is generally not true for oil. While I'm not on the "oil is going to dry out next year"-waggon new wells can no longer keep up with the ones being depleted and certainly not with the rising demand. The fix of cheap raw materials that all western economies have been high on for decades is gone, and the US is the most oil dependent of them all.

2) Together with the cheap oil fix, the US has been on a credit binge, and this is the hangover. In a credit crunch the indepted is always the one to be hit hardest. Ask Germany 1929, Western Europe in the '70's, Argentina in 2001/02... Adjusting consumption to incomes is going to hurt, even if other fundamentals are ok.

3) While the US economy is not in a general decline, it is not alone in the lead either anymore. Certainly Asia, but also parts of Europe, the Gulf states and Latin America are running fine in spite of falling demand from the US, high oil prices and a very low dollar. The relative weight of the US economy in the world is diminishing and that is robbing the US of some of it's uniqe advantages - like being where the capital automatically flees in times of crisis.

If there is a lesson to be learnt from the '70's it is that the politicians of the day utterly failed in seeing the long term shift in the fundamentals, and that this prolonged and deepened the crisis severely. So did unions. (even though strong unions have since proved an asset here (Denmark), shifting to a strategy of job growth while keeping the politicians out of the labor market and avoiding unflexible legislation.)

So while alarmism is out of place and some short term populist measures, especially on trade, might be out right harmful, complacency is even worse. Adjustments are needed as well as some measures to soften the effects for many people.

Niels @ Jun 09, 2008 17:58:36 PM