A Visitation for America

By Michael Fumento

The Philadelphia Inquirer, December 30, 2011
Copyright 2011 Michael Fumento

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Bah, humbug! The laws of economics don't apply to the U.S!

This holiday season, the American public and economy could benefit from being visited by three ghosts - or at least one politician willing to assume their role as blunt bearers of bad news as well as hope for a brighter future.

When Ebenezer Scrooge asks the Ghost of Christmas Present how sick Tiny Tim is, he gets not the answer he wants to hear, but the one he needs to hear: "If these shadows remain unaltered by the future, the child will die."

Contrast that with what Americans are routinely told about the economy: that all apparently bad news has a sterling silver lining; that laws of economics somehow don’t apply to the United States; and that there’s plenty of time to deal with these problems later. All of this is as dangerously false as it is soothing.

Labor Department figures last month showed that unemployment had declined very slightly, from 9.1 percent to 9 percent. The number of new jobs created, 80,000, was a fifth less than predicted by surveyed economists. But Bank of America Merrill Lynch economist Michael Hanson told the British newspaper the Guardian, "Those are pretty good signs. We’re hanging in there."

Where? The gallows? As the newspaper noted, "It takes a gain of about 125,000 jobs a month to keep up with population growth, more to bring down the unemployment rate." So real joblessness - as opposed to the government’s analysis of unemployment claims - must have increased.

A more accurate indicator of joblessness, also tracked by the government, is the employment-to-population ratio. It’s currently at 58.5 percent - exactly where it was two years ago.

Furthermore, for the first three quarters of 2011, U.S. gross domestic product grew at an annualized rate of only about 1.2 percent - well below the 2 percent required to reduce real unemployment - and job growth fell below population growth every month.

Irrational exuberance

Just a "soft patch?" The result of a natural disaster in Japan? For most Americans, incomes have been dropping for decades.

The single greatest threat to the United States today is what former Federal Reserve Chairman Alan Greenspan called "irrational exuberance ." He was referring to the mass economic hysteria that caused the disastrous dot-com bubble of the late 1990s, which was followed by the mass economic hysteria known as the real estate bubble .

Such thinking has now become the accepted "wisdom" about the U.S. economy as a whole - within the country, that is. Outside it, where I’ve resided the past five months, it’s seen as foolish and potentially harmful to other economies.

Consider that the Fed in 2009 predicted growth this year could reach 5.5 percent - well above the 3.72 percent growth rate of the "Roaring ’20s ." Irrational exuberance is also evident in the widespread use of such terms as "soft patch" and "economic recovery." They imply a merely temporary and self-correcting state, rather than an acceptance that the nation’s economic ills, like those of poor Tiny Tim, are long-term and degenerative.

The litany of excuses for this alleged "soft patch" grows increasingly ludicrous. Many have even blamed this year’s earthquake and tsunami in Japan; never mind that Japan’s third-quarter growth was 5.6 percent!

Christmas presents

Consider the evidence that ours is no short-term disaster:

Politicians only want to be the ghost of Christmas presents - more government goodies, with no tax hikes. That’s what the public wants to hear, not what it needs to hear.

Some presidential candidate must assume the tough job of Dickens’ spirits and tell Americans that this economic situation will end in disaster without quick and severe action, requiring serious sacrifices by all.

Scrooge initially wants the Ghost of Christmas Past to leave him alone . But the ghost replies that his very "reclamation" requires him to "take heed."

Indeed, take heed. For if these shadows remain unaltered by the future, America as we know it will die.


Read Michael Fumento’s additional work on government, on laws, and on economics.