CREEPY

Gratiano speaks an infinite deal of nothing, more
than any man in all Venice. His reasons are as two
grains of wheat hid in two bushels of chaff: you
shall seek all day ere you find them, and when you
have them, they are not worth the search.”
Merchant of Venice by William Shakespeare Act I, Scene I.

President Nixon established the famous Committee to Re-elect the President for the 1972 election cycle (a committee which was later found to be involved in the Watergate scandal); this committee was given the all-too-appropriate acronym CREEP. Like in 1972, this election cycle has a CREEP of its own — oh, but you probably won’t find it under the name of CREEP, instead try the Committee for the Deliverance of Puppies from Danger; or the Reference Forum for the Making of Resolutions in the Lower Parts of Northern America to End the Abuse of Goldfish. Modern politicians are much more careful than they used to be, and CREEP is much too obvious. Due to its similarities, we can simply say that this election cycle is becoming rather CREEPY.

For one thing, the unemployment rate dropped 0.4% in November — excuse me, dropped sharply — from 9% to 8.6%. The White House is happy, as expected. “Today’s employment report provides further evidence that the economy is continuing to heal from the worst economic downturn since the Great Depression,” Said Alan B. Krueger on the White House Blog. “While the U.S. economy is healing, the world economy continues to be in a fragile state and all economies are linked through trade and finance.  In this environment, the President’s American Jobs Act is the right medicine to sustain and strengthen the recovery.”

The American Jobs Act? That’s interesting. It was true, of course, that Obama was calling his “plan” by that name when he gave the speech before Congress. But, seeing that no such American Jobs Act had ever actually been submitted before Congress, Representative Louie Gohmert (R-TX) “borrowed” the name. The American Jobs Act is now a reference to H.R. 2911, a plan to Amend the IRS code of 1986 and repeal the corporate income tax. Thus, Krueger is absolutely right when he says that the American Jobs Act will do loads of good for our economy. But, the President’s American Jobs Act? I had no idea the President wanted to cross the isle and take credit for such a masterpiece.

Anyway, we can all get over the soft and cuddly everything’s  going to be alright feeling engendered by a 0.4% drop in unemployment when we assess some real employment data. As I have written on before, the official number used for unemployment from the Bureau of Labor Statistics is the U-3. This number is described as the total unemployed as a percentage of the civilian labor force. This number excludes those “marginally attached to the labor force” (which means citizens who are unemployed and have stopped looking for work; as you can easily guess, these people are equally unemployed, but simply not counted in the “total unemployed” number). For a full look at economic situation, one can instead view the BLS U-6. This number takes the total unemployed, plus those “marginally attached,” plus those employed part-time who would otherwise be employed full-time, as a percentage of the labor force. For November, the unemployment rate under the U-6 is 15.6%. Granted, last month it was 16.2%, so one could say that the “real” drop in November was 0.8%; but neither of these numbers paint as rosy a picture as the U-3. In fact, according to Gallup’s unemployment measurements the unemployment situation has gotten worse than even the U-6 records. According to Gallup’s statistical equivalent to the U-6, unemployment has gone up from 17.5% last month, to 18.2% this month. You get what you measure.

Yet, none of these numbers give quite the same insight as the labor force participation rate. This economic measurement is the percentage of working-age individuals (16-64) who are either employed, or unemployed and looking for work. In other words, this number measures a nation’s possible workforce. If you are employed, obviously you are a member of the workforce, if you are unemployed and looking for work you are a part of the possible workforce. To give you an even better idea of our economic situation, take a look at the labor force participation rate for the last ten years:

Graph from the Bureau of Labor Statistics

In October of this year, the labor force participation rate was 64.2%; but in November, the number is 64.0%. Thus, the possible labor force has gone down 0.2% in one month. This makes it easy to say that unemployment is going down since the possible workforce has also gone down. Especially when (as in the case of the U-3) those who have stopped looking for work are not counted. All of those wonderful little articles about how Obama is saving the planet are really just a masterful demonstration of how skillfully the media can pull the wool over our eyes. A little mathematical prestidigitation, and presto. As Krueger so adroitly instructs us, “The monthly employment and unemployment numbers are volatile and employment estimates are subject to substantial revision. Therefore, as the Administration always stresses, it is important not to read too much into any one monthly report.” Paraphrasing Krueger: Yes, yes. Broad strokes, broad strokes. Big waves, big waves. Don’t dig in here, just know that everything is getting better.

It’s all those broad strokes and big waves that keep us from back-tracking and remembering the old promises.

And this graph even uses the U-3 numbers. Can any one say CREEPY?

There is still more to be said here, but I fear that any more numerical pain inflicted upon my readers would render them no reader at all. Yet, you may view all the numbers presented, the tricks played on us by our government and media, and begin wondering when solutions come into the equation — you know, that number on the right side. Andy Stern, former President of the Service Employees International Union (SEIU) and current senior fellow at Columbia University’s Richman Center, has found us a solution — he likes to call it China.

I was part of a U.S.-China dialogue—a trip organized by the China-United States Exchange Foundation and the Center for American Progress—with high-ranking Chinese government officials, both past and present. For me, the tension resulting from the chorus of American criticism paled in significance compared to reading the emerging outline of China’s 12th five-year plan. The aims: a 7% annual economic growth rate; a $640 billion investment in renewable energy; construction of six million homes; and expanding next-generation IT, clean-energy vehicles, biotechnology, high-end manufacturing and environmental protection—all while promoting social equity and rural development. . . .

As Andy Grove so presciently articulated in the July 1, 2010, issue of Businessweek, the economies of China, Singapore, Germany, Brazil and India have demonstrated ‘that a plan for job creation must be the number-one objective of state economic policy; and that the government must play a strategic role in setting the priorities and arraying the forces of organization necessary to achieve this goal.’

The conservative-preferred, free-market fundamentalist, shareholder-only model—so successful in the 20th century—is being thrown onto the trash heap of history in the 21st century. In an era when countries need to become economic teams, Team USA’s results—a jobless decade, 30 years of flat median wages, a trade deficit, a shrinking middle class and phenomenal gains in wealth but only for the top 1%—are pathetic. This should motivate leaders to rethink, rather than double down on an empirically failing free-market extremism.” –Andy Stern with The Wall Street Journal, December 1, 2011

Stern salivates at the prospect of the emerging Chinese economy. In this article he promotes the adoption of a Chinese, authoritarian capitalist regime — as opposed to our democratic capitalist model. He appears as the journalist Lincoln Steffens who, after a trip to Soviet Russia in 1921, said, “I have seen the future, and it works!” The future caved in under great economic burdens seventy years later.

If the United States were to adopt “China’s superior economic model,” we would have one workers union run by the government, forced labor, terrible working conditions, extreme poverty, a one-child policy and elitism — not class warfare, just elitism. But who says it’s a bad economic model? As Jonah Goldberg with National Review writes, “You can hit your building quota a lot more easily when you can shoot inconvenient people and trample property rights at will.”

Goldberg makes the defensible argument that, “[T]he core problem with China envy is not economic but moral. To the extent that China’s economic planning ‘works,’ it does so because China is an authoritarian country.” While this argument is legitimate, there is also an argument to be made for the unsustainability of the Chinese model. Jim Walker, the economist who predicted the 1997 Asian Financial Crisis, sees many problems with China’s economic model. For example, easy credit and their government’s stimulus plans are propping up droves of companies; many Chinese companies don’t even make a profit; not to mention account imbalances, unrealistic currency exchange rates, and capricious lending. And more recently, the Wall Street Journal‘s investment site made it clear that China is facing a “crisis of confidence” because of their dependency on exchange with shaky European markets, and because of rising loses. (Is that an oxymoron?)

In fact, the Chinese government has announced plans to build 20 cities every year for the next 20 years. This may sound like prosperity, but similar cities to the ones they plan to build are completely empty. They build roads no one will drive on, trains no one will ride on, and homes no one will live in. And the reason these towns are empty is because no one can afford to live in them. But at the same time, China can boost their Gross Domestic Production, and make themselves look like a thriving nation, by building these empty cities. The free market would never build such cities, but the Chinese government planners do. Thus, on all most all counts, China’s “prosperity” is hallow and unstable.

Stern seems to credit China’s five-year plans for their prosperity — even though China had five-year plans long before they became an emerging economy. Goldberg makes the point proficiently, “[R]apid economic growth always makes government planners look like geniuses when the reality is that the planners are more like self-proclaimed rainmakers who started dancing only after it started raining.” It was not the planning that spurred the Chinese economy into growth, it was the change to a capitalist economic system; and then later the stimulus, propping up of companies, and lending which have made it unstable. Capitalism made the Chinese economy strong, and Chinese authoritarian schemes and elitist interests are what will bring it down.

Thus, the argument against the Chinese model is the strongest because it is both economic and moral. Stern isn’t calling for a change in economic systems, rather a political change. A change from the republic our Founders created to an authoritarian regime that controls a quasi-capitalist market. We already have the capitalism, Stern wants us to adopt the authoritarianism. He gives not a fleeting thought to the Founders, our system of government, or the fact that we have been one of the freest nations in the world. To him it doesn’t seem to matter what freedom means, as long as the economic system works. And even there he has identified the wrong victor to credit with the Chinese success. It isn’t the government, but freedom, which creates a healthy economy.

Stern calls the American system “pathetic” because of flat median income and the middle class gains dropping while the “1%” experience gains. Not only is the claim false that the rich get richer while the poor get poorer (a topic for another piece), but even if true, these problems would be peanuts compared to the problems that would be engendered by copying China. Some of the most authoritarian countries in the world are also the poorest.

Andy Stern holds the record for most visits to the White House. He visited President Obama fifty-three times in Obama’s first year alone. It is more than reasonable to assume that in many of those visits Stern would have spoken to Obama on “China’s superior model.” This would have inevitably prompted Obama to consider many regulations, more stimulus packages — to put everything in an authoritarian state of mind. It is very possible that many of Obama’s policies were influenced by Stern. Upon this, I equally find it possible that much of America’s recent, negative economic circumstances are the result of China-like policies; the result of Andy Stern’s “solution.” His reasons for changing to the Chinese model are as two grains of wheat hid in two bushels of chaff. . .

What the U.S. has been doing in recent years with regulations on personal freedom, stimulus plans, more spending, and impending inflation one cannot with a straight face call democratic and free capitalism. In recent years, America’s economy has been more and more like that of Europe and China. Government is not the solution to the problem, government is the problem.

We have tried the future, and it failed.

-Ben

One comment

  1. great post! keep them coming! enjoyed the read, ill be checking back for more!

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