Wednesday, February 08, 2006

A guy on a train, TV political pundits, and economics

Reference: Why are people so dissatisfied with today’s economy? At the Economic Policy Institute.

I was on the train late Sunday night traveling from the suburbs to Chicago. It was obvious that everyone in my car was going to work except me.

A man started talking rather loudly about how he was working more hours and making less money. He gathered a sympathetic audience to what he was saying.

That leads to a question: if the economy is doing so well, then why are so many people bitching and dissatisfied with it?

Another question of related interest is why are so many TV political pundits of all political stripes so willfully ignorant of the basics of economics—the kind of ignorance that could be corrected by reading a few short articles on economic literacy.

It would seem that almost every TV pundit is in awe of a big number. The administration says they created 4.6 million jobs in five years. Golly, that is a big number, so things must be great. How does it compare historically to other periods? Short answer, it sucks.

The TV pundits are totally fixated on what appears a decent unemployment rate. How does that rate compare historically? Short answer, it sucks. Also, the participation rate in the labor market has dropped over the past five years. That means that there are millions of Americans who have become discouraged and are not even looking for a job. Those numbers are not included in the unemployment rate. If they were, we’d be looking at an unemployment rate of around 7-8% which sucks.

Another simple number readily available is how people are doing as far as wage growth. During the past three years, for people in the 20th and median percentiles it is down. For those in the 95th percentile it is up. How does this compare to other economic cycles? Short answer, it sucks.

One concludes that either TV pundits are willfully ignorant of the things they claim to know about and discuss, hiding their knowledge because they feel uneasy about their expertise, or just plain obfuscating the facts for political agendas.

So, when I net it all out, I would rather take the word of a stranger on a train than the word of a TV political pundit. And, of course, when I am in dire need of information, I can always go and look up the numbers that are readily available all over the place.

I, however, realize that many TV political pundits are too busy thinking great thoughts to be slowed down by searching for the facts.

2 Comments:

At 3:08 PM, Blogger -epm said...

That leads to a question: if the economy is doing so well, then why are so many people bitching and dissatisfied with it?

Because the way we measure the economy has nothing to do with how well people are doing, but how much people are spending out and companies are taking in.

We really need to measure economic goodness by factoring in median family income and consumer debt along with GDP.

 
At 1:07 AM, Blogger Devang said...

We're partly almost being forced to spend more because of energy price inflation, Annotated life had a chart about how personal savings being down exactly correlated with the earlier.

The 20th percentile can't seem to save up enough for retirement, much less hear bush keep talking about 'ownership society'. Your post after reading the budget pointed out some good things too.

 

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