April 8, 2008

U.S. Economy: Assessing the whole

..."Statistics and numbers fail to tell the whole story because prescribed methodologies used to derive them are not keeping pace with the new economies..."

It’s been noted with interest that most, though not all our business dailies, web news pages and general online portals, are giving the U.S. economy a fair share of viewer real estate all the while, painting a grim picture. It remains true that the most recent data is not encouraging, least not on the surface. The mainstream’s pre-occupation with the negative, a propensity, if you will, to advance quantities of negative data with little if any mention of the positives (and there are many) only serves to exacerbate matters for a populace whose confidence in their economy is already declining.

While the U.S. is riding a rough patch, if commentators can remain cool, that is, if some of the self-righteous doomsayers can take a few steps back from the numbers, rather than generate a paragraph or two for every tenth of a point fall, the result may heighten the chances of a short and shallow slowdown rather than ayou will not read that word here.

Thus, in the absence of balanced and clear-headed coverage it was refreshing to stumble upon Victor Hanson’s brief assessment, I offer excerpts:

…"Given the vast size of the U.S. economy, we could easily restrain spending and begin paying off our debts at a rapid clip. Inflation and unemployment are still relatively low"

… "Over ninety-four percent of Americans with home mortgages meet their monthly obligations. More Americans own homes than ever before. More immigrants seek out America than any other nation"

… "We have not been hit by terrorists in over six years. And, slowly, both Afghanistan and Iraq are showing political progress and declining violence, despite recent suicide bombings"

... "In a relative sense, our problems pale in comparison to our past world wars and depressions, or those of our current competitors"

… "Unlike the United States, which is funding democratic change in Afghanistan and Iraq, Russia and China offer only brutal solutions to quench Islamic separatists in Chechnya and Xinjiang province. Neither country can square economic progress with human rights. Both have polluted their natural environment in ways inconceivable here. Meanwhile, a shrinking Europe is disarmed in a dangerous world and can't assimilate its growing minorities"

... "We are still the world's third-largest petroleum producer with vast amounts of untouched oil. We have the world's largest coal reserves. Americans could use coal and nuclear power to generate most of our electrical needs and to charge hybrid electric cars"

… "Our universities remain the world's best and we lead the world in cutting-edge technological innovation."

Full marks to Mr. Hanson who concludes, “because the United States is so huge, free, wealthy and dynamic, we can cause enormous problems overnight. But by the same token, we can curb these excesses quickly.”

The nine-letter term I intentionally omitted earlier is quite technical as well as damaging, when printed within nearly every economic scrutiny. This should not surprise, given most of the focus rests on, and is limited to, attenuating figures. Statistics and numbers fail to tell the whole story because prescribed methodologies used to derive them are not keeping pace with the new economies, suggests Michael Mandel, a noted economist on Business Week cover story.

"But what if we told you that the doomsayers, while not definitively wrong, aren't seeing the whole picture? What if we told you that businesses are investing about $1 trillion a year more than the official numbers show? Or that the savings rate, far from being negative, is actually positive? Or, for that matter, that our deficit with the rest of the world is much smaller than advertised, and that gross domestic product may be growing faster than the latest gloomy numbers show? You'd be pretty surprised, wouldn't you?"

"Well, don't be. Because the economy you thought you knew -- the one all those government statistics purport to measure and make rational and understandable -- actually may be on a stronger footing than you think. Then again, it could be much more volatile than before, with bigger booms and deeper busts. If true, that has major implications for policymakers -- not least Ben Bernanke, who on Feb. 1 succeeded Alan Greenspan as chairman of the Federal Reserve."

"Everyone knows the U.S. is well down the road to becoming a knowledge economy, one driven by ideas and innovation. What you may not realize is that the government's decades-old system of number collection and crunching captures investments in equipment, buildings, and software, but for the most part misses the growing portion of GDP that is generating the cool, game-changing ideas. "As we've become a more knowledge-based economy," says University of Maryland economist Charles R. Hulten, "our statistics have not shifted to capture the effects."

"The statistical wizards at the Bureau of Economic Analysis in Washington can whip up a spreadsheet showing how much the railroads spend on furniture ($39 million in 2004, to be exact). But they have no way of tracking the billions of dollars companies spend each year on innovation and product design, brand-building, employee training, or any of the other intangible investments required to compete in today's global economy. That means that the resources put into creating such world-beating innovations as the anticancer drug Avastin, inhaled insulin, Starbuck's (SBUX ), exchange-traded funds, and yes, even the iPod, don't show up in the official numbers."

Read the whole piece here

Perhaps it would be wise to embrace the President’s words while giving the latest Government stimulus checks time to work.

So should we be concerned? Yes, we should, growth is anemic, GDP increased only marginally in the October to December quarter, consumer confidence and spending, both critical factors is declining, and home prices are in correction mode. However, as Michael Mandel suggests, “economies evolve while the number used to capture them remain the same. Globalization, outsourcing, and the emphasis on innovation and creativity are forcing businesses to shift at a dramatic rate from tangible to intangible investments.”

The only counter I would offer here is that we need to be wary of not confusing U.S. companies that operate internationally with the actual state of the U.S. economy but aside from this, maybe the American economy is more robust than popular wisdom would suggest.

What do you think?

17 comments:

Z said...

Thanks for your last sentence, particularly, but also the rest of this excellent piece.
You see, I've been saying for weeks that the media has talked America into recession. (I know the housing situation is real and I am not suggesting there are NO problems in the economy but..)EVERY good indicator has been diminished in the mainstream media. EVERY one. What's humorous is this ridiculous check we're going to get very soon, ALL of us.....You have to think Bush was shamed into this by leftist economists when most of the conservative ones call it a calamity (philosophically and fiscally) but, BUT, I recently heard a quick radio clip saying "And Mr. Bush's checks, costing XXXXXX GAZILLION DOLLARS, are going out soon BUT polls say this will not help the economy because most Americans are going to save the money they get." First, who believes AMericans aren't going to look at this as 'free funny money' and not spend it on something they've been longing for but just couldn't quite afford? SAVE IT? Ridiculous..but effective to the listener .."Bush goofed AGAIN" when he was put up to this by these very naysayers.
Don't get me started! (oops, too late!) z

Layla said...

Excellent piece Otto! I tend to agree with you, but after a conversation I had with my elderly Aunt earlier this evening I would say things do not look as bright as the President proclaims. My Aunt should sell her home because of mounting costs for up keep and settle into a Condo, but she cannot sell her home for its full worth and or value - plus as she put it best, "there is no one in the market buying nowadays." She is 76 and will have to eat a lot of the upkeep and cost. My mother, 74 still works part time and my father soon to be 78 still does electrical work side jobs to keep extra cash flowing.

I do not think the economy is glowing when our seniors struggle so hard. But on the bright side it could be worse, but my question is for who? Seems to me that the WWII generation is paying a huge price and not enjoying their golden years as once promised them because of a declining economy.

I just blame D.C. greed.

WomanHonorThyself said...

maybe the American economy is more robust than popular wisdom would suggest...No doubt it may well be Otto!

David Schantz said...

I'd like to think things are looking up but then I click on a link in "My Favorites" and see the National Debt, $9,444,206,346,886.92, that changed/grew while I was posting this, depressing. Great post!

God Bless America, God Save The Republic

The Liberal Lie The Conservative Truth said...

Excellent post Otto. Much of the anquish about the US economy is media and liberal driven. The media does not want to admit anything that Bush does is a success and the libs want the economy to fail so they can say, "I told you so, " in November.

When you look a the mortgage fiasco, rising energy prices and a country at war that must be funded, any one of which would have collapsed a weak economy, and then measure that against the continual growth in the US economy, the situation is not the woe is me scenerio that is being protrayed.

Imagine how strong this economy would be without any ONE of the factors that I mentioned. Yet despite these major set backs and the necessary cost of the war the economy still grows and all key indicators are still running in the positive.

Even the use of the , "R, " (recession), word has not had the impact that is usually does. For an economy to be in recession economic indicators are in the red and the economy is shrinking. Both of which are not happening.

Additionally the gloom and doomers especially the oil speculators have been driving many indicators in the economy. I believe that if reporting was given in a positive mode rather than reporting even good economic news and then preaching gloom and if oil speculators would actually , 'speculate, " in accordance to the market and not world politcs then this economy would be booming in ways almost unimagionable!

American Interests.blog said...

geeeez: I got you going z!!!Thanks for expressing yourself here...

Layla: Thanks for sharing the very real circumstances that many face...Trouble with commentators - myself included - is that oft we focus on the macro. This is fine but it overlooks the real pain some are feeling...What we do not want is for MSM making matters worse than they may already be; one of the points of my piece...God bless you and your folks Layla...

American Interests.blog said...

Angel: Thank You!

David: National Deb't...that's a whopping number! No doubt larger still since you commented...one of the real negatives..stay positive david...

American Interests.blog said...

Liberal Lie the Conservtive truth: Kudos Ken! Great comments; a post in itself..Here's a link for ya, http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/11/12/ccview112.xml

subadei said...

What's interesting to me is the fact that the term "recession" seems to carry some apocalyptic measure along the lines of "nuclear holocaust" or "Helen Thomas naked."

We're less than a decade from the last recession that the American economy suffered. There's little logical reason (though there's a pant load of subjective and hysterical hollering) to suggest that even if America suffers another recession it will somehow not manage its way out of it.

American Interests.blog said...

Thank you Subadei! Of course you are correct, it's the way the term has been baked by some sections of the media...It shouldn't have any apocalyptic connotations! Afterall, it simply refers to negative economic growth...You have a handle on this, many common folk do not... Great comment!

Aurora said...

Otto, I like your optimism. It's always amazing to me to see how 'blessed' America really is. The founding fathers arrived upon a land that was literally flowing with milk and honey. Fertile plains to put their cattle and even huge wells of oil for a future time when they would need them. The only problem is, will the PC rabble 'allow' America to use those vast oil and coal reserves?
I agree with you that there is still, at any given moment, a way to remedy the current situation. It will take a paradigm shift, but it's certainly not impossible.

Tapline said...

Otto, I read a while back, if we have a recession it will be the fault of the MSM and their negative reporting... I kept saying look at the employment percentage.. It isn't high. It is either below the norm or in the norm..... Excellent post.....stay well.......

Seane-Anna said...

Thanks for this balanced assessment of our economic situation, Otto. I must admit I was beginning to succumb to some of the doomsayers' rhetoric. Now I can put things in better perspective.

PS

Thanks for stopping by my blog and leaving a comment. Appreciate it.

American Interests.blog said...

Aurora: Yea, they call me the eternal optimist, which is perfect...

Tapline: MSM will surely lubricate the downward process...

seane-anna: Glad the piece helped, my pleasure...

MK said...

It's Bush otto, whatever he does, the MSM must present through their half-empty prism. He has his problems, but not everything he does is crap. VDH says it pretty well, he is critical where it's necessary but he's not completely biased like the rest of the crowd.

Brian, aka Nanoc, aka Norski said...

First, thanks for another insightful post.

Second, a comment or two.

"It’s been noted with interest that most, though not all our business dailies, web news pages and general online portals, are giving the U.S. economy a fair share of viewer real estate all the while, painting a grim picture."

No surprises here. There's a presidential election coming up, and I strongly suspect that the people who run the (traditional) news media in America believe that the American people need to be (educated?) about what a rotten job that idiot (their view) Bush has done, and how it's Time For A Change.

I agree that America today isn't the booming mess that it was in the post-WWII 1950s.

Of course, if there were a boom, we'd be told that Americans should feel guilty: because it's due to Bush's war, or Bush's oil policies....

I'm getting surly. Sorry.

As for the 'struggling' people? Most of the WWII generation I know or know about are doing quite well, between pensions, a Social Security check here and there (the dollar amounts are non-trivial), and other benefits that came from being born in the thirties.

And, I like to read details in the news stories. Like the one where a disadvantaged urban youth, crushed by poverty through (yada, yada) was caught because he was wearing his LED-flashing running shoes. I think they were Nikes, but might be wrong.

I can't afford flashing high-end running shoes, but that's okay.

Point is: America hasn't changed much since the sixties, when some iconoclast pointed out that if Harlem (perhaps the most abysmally poor, economically bankrupt, slum in all of racist America) withdrew from the Union and joined the UN, it would be a comparatively wealthy country, based on GDP, and certainly based on income.

This country isn't perfect, but I wouldn't want to live anywhere else.

And, yes: I check out alternatives every ten years or so.

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