state of the economy; WSJ article

[ladelfina]

came up in the now-closed Palin thread, but I thought it was worth a discussion, not least because I'd already written the response.. I hope we can stay in money territory.

I posted this link, expressing disdain:
Bush Has a Good Economic Record - WSJ.com

ERD50 asked:

Quote:

ladelfina, seriously, where is the bias in that article? I know you cringe at the title and the source, but there are some straightforward facts there, that I could not dispute w/o more research.

ERD50 (and anyone else who wants to chime in), would you say the economy is good?

Assuming the answer is yes.. let's dig in: the one thing that struck me at first was the defense of income inequality: (too lazy so I'll paraphrase) "65 countries have greater inequality bla bla top quintile". That's supposed to encourage us, but there are 190-something countries in the world. I assume the 65 are places you and I would rather not live, like Zimbabwe. I just took this to be a pretty pathetic grasping at straws.

Intrigued by how wacky that was, and ERD50's challenge, I started to run down a few more of the initial points:

Quote:

WSJ- Economic growth. U.S. output has expanded faster than in most advanced economies since 2000. The IMF reports that real U.S. gross domestic product (GDP) grew at an average annual rate of 2.2% over the period 2001-2008 (including its forecast for the current year). President Bush will leave to his successor an economy 19% larger than the one he inherited from President Clinton. This U.S. expansion compares with 14% by France, 13% by Japan and just 8% by Italy and Germany over the same period.

I view this as utter BS because the growth in GDP includes a financial and housing bubble that we will be lucky to recover from in our lifetime.

Financial services are 20% of GDP:
III - Gross Domestic Product
I assume this includes the "production" of things like MBSs: take mtg.s A+B+C and put a bow around them and sell them for greater than the sum of the parts. We know how that's working out.

GDP figures have diverged from CPI:
FT Alphaville » Blog Archive » Preachin’ the GDP good news since ‘78

And if you think inflation is higher than reported, that makes the inflation-adjusted GDP numbers even more suspect. If we look at PPI (producer price index; selling prices producers receive for output) it's 6-8%. Wholesale PPI is now practically 10%. Imported goods are 28% of CPI. Producers can't be selling at a higher price than people are buying, naturally.
US PPI wholesale inflation rate hits 9.8%, a 27-year record high

It's also misleading to look at GDP separate from population growth, which is almost 0.9%/year in the US. It's 0.6% in France, Japan's has been negative, and Germany and Italy flat. Looked at in those terms, Japan is on top for this period, while the US and France are a lot closer to each other, and to Germany/Italy.

Another way to grow GDP is to grow government. Bush's spending has been mind-boggling.. but for the GDP it's all good. In 2004 gov. spending equalled mfg. as % of GDP and I can only imagine that to have continued its trend:
Government now accounts for same percentage of GDP as manufacturing. | North America > United States from AllBusiness.com

So here are four major issues within just this single paragraph.

Quote:

WSJ The latest ICP findings, published by the World Bank in its World Development Indicators 2008, also show that GDP per capita in the U.S. reached $41,813 (in purchasing power parity dollars) in 2005. This was a third higher than the United Kingdom's, 37% above Germany's and 38% more than Japan's.

More misdirection. Does not take into account huge increases in the share of the top 5%, top 1%, and top 0.1% of earners; while growth is nice, any benefits have been concentrated. GDP per capita would be the same number if 300mm Americans perceived zero, and Hank Paulson perceived $13trillion (PPP). But that does not a healthy economy make.

Quote:

WSJ - Household consumption. The ICP study found that the average per-capita consumption of the U.S. population (citizens and illegal immigrants combined) was second only to Luxembourg's, out of 146 countries covered in 2005. The U.S. average was $32,045. This was well above the levels in the UK ($25,155), Canada ($23,526), France ($23,027) and Germany ($21,742). China stood at $1,751.

Consumption fueled by consumer debt. Let's see figures on whether the French and the Germans have negative savings rates, what their debt/income ratio is, and what their avg. outstanding cc balances are. I don't think they have HELOCs, or at least not as a matter of course. Oh.. gee! Household savings rate is 14.4% in the EU:
http://epp.eurostat.ec.europa.eu/pls...2007-EN-AP.PDF

meanwhile:

Quote:

Americans carry $2.56 trln in consumer debt, up 22% since 2000 alone, according to the Federal Reserve Board. The average household’s credit card debt is $8,565, up almost 15% from 2000. ?verage US student emerges from college carrying $20,000 in educational debt. Household debt, including mortgages and credit cards, represents 19% of household assets, compared with 13% in 1980. Share of disposable income that consumers must set aside to service their debt has risen to 14.5% from 11% just 15 years ago. US savings rate, which exceeded 8% of disposable income in 1968, stood at 0.4% at the end of the first quarter of 2008, according to the Bureau of Economic Analysis.

Average US household credit card debt is $8,565 IT Facts

Hmmmm.. let's review that $32,045 US consumption figure that makes Americans look so rich. Let's take away 14.4% (or more) to account for the extra amount Europeans save. Now reduce again by the higher amount paid in debt service (in Germany it is around 6.5% vs.14.5%).
Morgan Stanley - Global Economic Forum
14.4%+8% = a correction of 22.4%. Now you have a figure of just under $25k.. much closer to the lower-debt countries.

Another way to look at it is that if consumer debt is up 22% 2000-2008 then that certainly does its 70% part in contributing to the GDP being up roughly the same amount.

Quote:

WSJ - Health services. The U.S. spends easily the highest amount per capita ($6,657 in 2005) on health, more than double that in Britain. But because of private funding (55% of the total) the burden on the U.S. taxpayer (9.1% of GDP) is kept to similar levels as France and Germany. The U.S. Census Bureau reports that 84.7% of the U.S. population was covered by health insurance in 2007, an increase of 3.6 million people over 2006. The uninsured can receive treatment in hospitals at the expense of private insurance holders.

This was a real howler. The writer seems to feel that the people indicated in "per capita" are some mystery population distinct from taxpayers. Taxpayers are the ones who are putting in the "private funding" AS WELL AS bearing the tax burden for state-provided or publicly-insured care. The uninsured only get emergency treatment, not continuing care for cancer or diabetes or whatever.

The 9.1% the writer is talking about seems to be gov. spending only from the way he phrases the sentence, but may just be some fantasy number he made up, since if 9.1% = 45%, then that would imply total hc spending is an even larger percentage of GDP (20%!!) than those listed officially here:

Quote:

After expenditures are converted into purchasing-power parity international dollars (PPP$), Switzerland spent only 68 percent as much on health care per capita in 2001 as the United States.3 Neighboring Canada, with a health care delivery system and medical practice styles fairly similar to those in the United States, spent only 57 percent as much per capita as the United States. PPP-adjusted per capita spending in the median OECD country was only 44 percent of the U.S. level (PPP$2,161). Finally, the median percentage of GDP absorbed by health care in the non-U.S. OECD countries in 2001 was only 8.3 percent, compared with 13.9 percent in the United States. Although that percentage remained more or less constant during the 1990s, during the previous two decades the average annual growth of health spending exceeded the growth of total GDP by 2.5–3 percent.4 U.S. government actuaries now project that during 2003–2013 U.S. health spending will revert to its traditional, long-term trend. They project the annual growth in U.S. health spending to exceed the annual growth in GDP once again by about two percentage points, and total national health spending to absorb as much as 18.4 percent of U.S. GDP by 2013.5

U.S. Health Care Spending In An International Context -- Reinhardt et al. 23 (3): 10 -- Health Affairs

OECD states 2005 US hc spending as 15.2% of GDP (2006 15.3%)
2005 spending for France and Germany 11.2% / 10.7% of their GDP
2006 spending for France and Germany 11.1% / 10.6%.

In France and Germany, though, everyone is covered, a far better deal for the money.
But you wouldn't expect a WSJ writer to point that out, necessarily.

Excel download with many stats here:
http://www.irdes.fr/EcoSante/DownLoa...uestedData.xls

too tired to take on the rest.. I have to hand it to whoever wrote this, though, for their sheer capacity to shoehorn so many lies and misrepresentations into such a small space.

[Abreutime]

Couple points:
1) This guy seems to agree with you, arguing that the growing private debt of US consumers is NOT fuel for long-term growth in the same way that business debt could be used for investment and growth. I like the idea that debt service should be accounted for, but I'm not sure it's appropriate. Is debt service currently counted in the consumption numbers?

2) I don't have an inherent problem with an increase in the Gini coefficient and changes in income distributions. I don't know the "optimal" level, and neither do you.

Edit: top income earners pay increasing share of taxes:


3) The official US savings rate has been falling for decades, and is a behavioral change independent of Bush policy. What is not mentioned is the savings that are excluded from these numbers: most assets, like 401K, brokerage accounts, and home equity. See this article for discussion.

[ERD50]

thanks for taking this on ladelfina. I won't have time to post any detailed reply for a while, but I did want to acknowledge it.

And just to be clear, I didn't claim that it was *not* biased, I was just reacting a bit to your automatic dismissal of it, just because it was published in the WSJ.

I will try to analyze it a bit more, but at least, I don't think we have any cases of the author chopping up a quote, and putting the person in a different time/place so as to give the reader a completely different impression of reality. But that does not seem to count as 'bias' in your world.

It may very well be the case that the data he cites is not a good measure of our economic health. I'm not sure there is a good agreement on what the measure of that should be. Very likely some cherry-picking going on there.

But since you like anecdotes so much, my retirement has all been under the current admin, my net worth has increased in that time, my living standard has improved, I have health care, my kids go to good schools, the ones seeking employment have found it, and no one has interfered with my personal freedoms.

-ERD50

[JustCurious]

Abreutime, I think you are wrong about the savings rate excluding 401k contributions and brokerage accounts. I read the entire article that you cited, and it does not say that.

[Abreutime]

Quote:

Originally Posted by JustCurious Abreutime, I think you are wrong about the savings rate excluding 401k contributions and brokerage accounts. I read the entire article that you cited, and it does not say that.

I wasn't treating that article as the evidence for that, but as background in general. In any case, from that article:

Quote:

Originally Posted by NYTimes Last year, financial assets rose to $36.8 trillion from $34.1 trillion. Time deposits and savings accounts - money sitting in the bank - rose 10.6 percent in 2004, to $4.29 trillion. Because asset building has grown faster than debt, the improvement in households' balance sheets has been substantial in the last few years. A big chunk of the rise in assets since 2002 can be ascribed to the stock market's performance in 2003 and the booming housing market. Mr. Malpass laments that given the way the Bureau of Economic Analysis calculates savings, the changing asset values haven't affected the national savings rate.

Business Week article:

Quote:

Originally Posted by Business Week Perhaps more surprising, increases in the value of assets such as stocks and homes don't count as savings either. That means the wealth of Americans can go way up without any increase in savings.

[FinanceDude]

Quote:

Originally Posted by ERD50 But since you like anecdotes so much, my retirement has all been under the current admin, my net worth has increased in that time, my living standard has improved, I have health care, my kids go to good schools, the ones seeking employment have found it, and no one has interfered with my personal freedoms.-ERD50

You forgot about NO terrorist attacks on the USA since 9/11/01. However, I am sure "someone" on here will be able to refute that momentarily.........

[haha]

Quote:

Originally Posted by ERD50 But since you like anecdotes so much, my retirement has all been under the current admin, my net worth has increased in that time, my living standard has improved, I have health care, my kids go to good schools, the ones seeking employment have found it, and no one has interfered with my personal freedoms.

But governemnt agents have gone over to Italy and done nasty things to Ladelfina.

Ha

[ladelfina]

yep, haha, that "strong dollar" policy is working out really well for me.. how can I complain!?

ERD50, I'm glad you're doing well.. but please consider you may be in the minority, even among the wealthiest of us who have money to invest. (Aren't the Dow/S&P essentially flat?)

The Big Picture | 100 Year Dow Jones Industrials Chart

of course it would be unfair to lay the entire blame on the current admin. (despite concrete choices like war and deficits that are not going to help).. BUT the WSJ is being absolutely absurd -just completely lacking in all credibility- to try and sell the line that Bush's economic record is a strong one, presenting 'evidence' that can so easily be de-bunked by any layperson in their spare time, for free.


FD, leaving aside the question of what GWB did to thwart bin Laden in the nine months BEFORE 9/11. you're right, I can refute that with one word... anthrax. This is not talking about GWB's performance in the GWOT.. it's about the economy. If you want to make your own terror thread, knock yourself out.

The economy is not good.
WSJ saying otherwise does not change this.

[Spanky]

Quote:

The economy is not good. WSJ saying otherwise does not change this.

Agreed. How can anyone say the economy is in good shape when unemployment rate is at all time high while the financial sector is in turmoil?

[mews]

when unemployment rate is at all time high
======

You are joking, right, Spanky??

Pls go Google 'unemployment' and '1933'

k, ta,
mews

[travelover]

How did this one escape the soap box? Someone grab a butterfly net!

[ERD50]

Quote:

Originally Posted by Spanky Agreed. How can anyone say the economy is in good shape when unemployment rate is at all time high while the financial sector is in turmoil?

wow Spanky. I suggest you recluse yourself from this discussion until you put some thought into an answer. Let's keep the signal to noise ratio up please. 'all time high' :confused:

Quote:

Originally Posted by travelover How did this one escape the soap box? Someone grab a butterfly net!

Hmmmm, a discussion about the relative state of the economy, and about bias in the reporting of the data? Sounds relevant to me. A couple comments had to do with how the OP likes to present anecdotes over data, I think we can drop that now.

-ERD50

[Spanky]

Quote:

Originally Posted by mews when unemployment rate is at all time high ====== You are joking, right, Spanky?? Pls go Google 'unemployment' and '1933' k, ta, mews

I stand corrected -- it was over 10% back in 84 (not as high as that in 1933). Anyway, here is a graph of unemployment rate:

[Spanky]

Quote:

Originally Posted by ERD50 wow Spanky. I suggest you recluse yourself from this discussion until you put some thought into an answer. -ERD50

Thank you for your sage advice that no one should pose anything unless he/she has done extensive research and deep thinking.

[ladelfina]

Just as inflation has been reported differently over time, so has unemployment. Six different rates are sampled by BLS:

Table A-12. Alternative measures of labor underutilization

U6 (a measurement similar to that employed when some speak of Europe) would be 10-11%.



This treats the difference in German vs. US measurements (towards the middle):
Beat the Press Archive | The American Prospect

Quote:

Germany is actually running a substantial current account surplus, which means that it is lending money to the rest of the world. By contrast, the United States has a current account deficit of more than 5 percent of GDP, which means that it is borrowing money from the rest of the world. The position of the United States is clearly unsustainable, as nearly all economists would agree. The article also misleads readers on the extent of Germany’s unemployment rate. It reports that the rate has fallen to 9 percent, implying Germany still has very high unemployment. In fact, this is the official German measure of unemployment, which counts part-time workers as being unemployed. The OECD measure for German unemployment (which uses essentially the same methodology as the U.S.) is 6.4 percent. Since unemployment is still concentrated in the areas that were formerly East Germany, the unemployment rate in the areas that were formerly West Germany would be approximately the same as in the United States. There is no legitimate reason for using the official German unemployment rate, which is not comparable to the U.S. rate, without explaining the distinction to readers. This is especially inappropriate since the OECD rate is so readily available.

[ERD50]

ladelfina, I will try to get back to this now. One thing though, since the discussion is basically about whether that article is heavily biased or not, can we address that in a more organized fashion? It might just be me, but your OP seems to jump from point to point, skipping others, and I'm not sure we'd ever come to any overall conclusion that way.

Here are the bullet items I saw, in order:

#1) - Economic growth.

#2) - Household consumption.

#3) - Health services.

#4) - Income and wealth distribution

#5) - Employment.

#5) - Debt interest payments.

Right off the bat, I'm sure it would be tough to get anyone to agree that those are *the* measures of the economy, but just so we can move forward, can we accept them as a fairly reasonable list? If so, then let's look at each one, and grade it. A = factual; B = mostly true, some spin & distortion, maybe cherry picking; C = Very questionable on facts and presentation; D = mostly false, major spin & distortion; F = facts are just wrong.

As a side note: I also want to point out, that for the most part, I don't accept a direct cause/effect between the economy and the administration. Sometimes, they were just there at the right/wrong time. To attribute cause/effect, I'd need to be shown some specific administration actions that could be shown to be responsible. So I'll take that headline as 'his economic record', but not necessarily as ' his economic accomplishments or lack thereof'. Fair enough?


If so, then here we go, in order:

Quote:

#1 - Economic growth. U.S. output has expanded faster than in most advanced economies since 2000. The IMF reports that real U.S. gross domestic product (GDP) grew at an average annual rate of 2.2% over the period 2001-2008 (including its forecast for the current year). President Bush will leave to his successor an economy 19% larger than the one he inherited from President Clinton. This U.S. expansion compares with 14% by France, 13% by Japan and just 8% by Italy and Germany over the same period. The latest ICP findings, published by the World Bank in its World Development Indicators 2008, also show that GDP per capita in the U.S. reached $41,813 (in purchasing power parity dollars) in 2005. This was a third higher than the United Kingdom's, 37% above Germany's and 38% more than Japan's.

How do you grade that for bias and why?

-ERD50

[ERD50]

Quote:

Originally Posted by Spanky Thank you for your sage advice that no one should pose anything unless he/she has done extensive research and deep thinking.

Awww c'mon Spanky.

There is a big difference between asking for 'extensive research and deep thinking' in every post versus someone posting that the 'unemployment rate is at all time high', in a thread about bias in reporting.


Just admit to us that you were drunk when you posted it, and we can put it all aside.

Relax.

-ERD50

[Spanky]

ER50,

Okay. I was in a hurry.

Spanky

[travelover]

Quote:

Originally Posted by ERD50 ...................Hmmmm, a discussion about the relative state of the economy, and about bias in the reporting of the data? Sounds relevant to me. A couple comments had to do with how the OP likes to present anecdotes over data, I think we can drop that now. -ERD50

Sorry, I should have just used the ignore function - back to your "discussion".

[Abreutime]

Quote:

Originally Posted by travelover Sorry, I should have just used the ignore function - back to your "discussion".

Sick burn.

Edit: It's sort of annoying when someone posts in a thread saying "this thread sucks" using slightly different words, when it is very easy to simply close the thread and go to one you find interesting. This isn't aimed at just you, but it is something that I find slightly grating.