Remember back when Bush was President and we were “high on the hog” economy wise?
Remember the media breathlessly reporting any economic information that could be construed as bad to be “the sky is falling?”
I said from the very beginning of our current economic downturn that I believed that the media was a major factor in causing it.
You see, I believe that consumer confidence…as ephemeral and fickle as that can be, is the major force that keeps the economy ticking.
When I was growing up, a friend of my father’s (who happened to also be our insurance agent and a fellow church member) used to keep a small, smooth rock in his pocket that he called his “million dollar rock”.
He contended that his rock was worth a cool million dollars and, as long as he had it in his possession, he was a millionaire. If you asked him why it was worth a million dollars he’d reply “because I won’t accept less than a million dollars for it. As long as that’s the minimum value I demand for it, that’s what it’s worth”.
I think that captures a critical aspect of our economy.
Why is gasoline worth $2.36 a gallon in this area (discounting taxes, of course)? Because that’s what people are willing to pay for it and what the providers are willing to sell it for.
What makes a couch that costs a couple of hundred dollars in material and labor worth the $1500 price tag at the local (SALE, SALE, SALE, THESE ARE THE LOWEST PRICES EVER AND YOU’LL NEVER SEE THEM AGAIN) furniture store?
Because that’s what people are willing to pay and the furniture store is willing to sell it for.
It’s actually a very fragile and delicate balance that can be upset by some of the strangest and most unpredictable things.
For instance…when the media breathlessly claims (long enough and loud enough) that the economy is going south, it shakes the confidence of the public. They begin to feel that, if the economy really is worsening, perhaps I should prepare for it…cut out some unnecessary spending and sock some money away in case I lose my job or some other financial hardship hits.
So they pass on the new car and decide to make the current one last a few years longer. They cut out a few dinners out and eat at home instead. They drop the extra-super deluxe movie-channel package and go with basic cable. They decide they don’t really need to drive to Florida for vacation when they can just take in some of the local attractions this year instead…heck, I haven’t been to Yorktown, Jamestown or Williamsburg in years anyway…etc etc etc.
No big deal right.
Until half of the population cuts back in that way…then, all the sudden, hotels are losing money, televisions and cars and vacation packages aren’t being sold, company profits start to decline and…the economic downturn that the media was hyping becomes a self-fulfilling prophesy.
And once the process starts, it’s like the proverbial snowball rolling downhill. As profits decline and companies begin tightening the belt, the layoffs begin, then people REALLY start to take the problems seriously and cut back…even those who’s jobs are unaffected…because who knows how LONG their jobs will be unaffected. And it gets worse and worse.
What brought this to my mind tonight?
This story (or, rather, analysis of a story) about revised third quarter economic growth numbers.
First, the growth numbers were revised down from the initial numbers (which were touted by a media desperate to find anything about their messiah’s administration to laud as the salvation of our economy). The new estimate? 2.2 percent growth; down 37% from the initial 3.5 percent first estimate and 21 percent from the second 2.8 percent estimate.
Second, the third quarter numbers included two temporary measures that “stimulated” an equally temporary surge in spending: The “cash for clunkers” program and the home buyers tax credit.
Finally was this astounding revelation:
The ugly reality, however, is that with the government being 30% of the economy and up 8%, the government’s “pump” was responsible for 2.4% GDP “growth” – or more than the entire claimed increase.
In other words, the expansion of government spending included in the GDP (how government spending other people’s money can be considered a “product” is a bit beyond me…but I digress) masked an actual 2% DECLINE in the non-government economy…even with the temporarily and artificially stimulated auto and home sales.
Why is this important? I believe this is a concerted effort to reverse the trend that began with the media’s badmouthing of the economy to discredit Bush. I think that there is a feeling in some quarters that if they can even half-way credibly claim that the economy is improving, people (the ones who are still employed that is) will begin to buy into the cooked numbers and media hype and begin to feel more secure in their futures; If that happens, they will go out and buy that new car, big screen TV, extra dinner night out, etc. Business profits will begin to go up and they will begin to hire new employees and the economic crisis will reverse.
And then they will be able to claim that the “stimulus” and Obama’s (and the Democrats’ in general) brave leadership saved the day…hopefully just in time for the election cycle next year.
The problem is that, even if it’s successful, it’s nothing more than smoke and mirrors.
It’s the million dollar rock in our collective pocket.
Eventually, the bills that the current administration and congress are piling up (as well as those piled up by previous administrations and congresses) are going to come due. You can’t just keep piling credit card on top of credit card…at some point the collectors are going to come calling.
And then the whole house of cards is going to come down.
And it’s not going to be too far in the future.
I don’t believe the media INTENDED to destroy our economy. I think they were just desperate to discredit the president that they so despised. They wanted to taint his legacy and do whatever they could to get the Republicans out of office. Destroying the economy was an unintended consequence.
If the Bush and Obama administrations had not reacted by hocking the family jewels, the current effort to reverse the trend by countering their false claims of an unhealthy economy under Bush with false claims of a healthy economy under Obama might actually have worked.
If frogs had hand-grenades, snakes wouldn’t screw with them.
Even if we vote every incumbent in DC out next year and make Obama a one hit wonder in 2012, the damage is already done. Even if we balanced the budget next year, it will take generations upon generations to pay back the staggering debt that we’ve accumulated…and what are the odds of balancing the budget any time soon no matter who’s in office? Heck, we’ve got medical care to dispense and cow flatulence from which to save the world!!!
I truly believe that our way of life as we know it is coming to an end…it’s just a matter of time. And all these rosy stories about the recession ending and the economy growing are nothing more than short sighted, self-interested, deluded attempts to manipulate public opinion and mask dire reality.
I’ve been trying not to post about these things because I’ve been feeling so cynical and negative about them for so long now. I really don’t want to inflict my pessimism on everyone else; but I truly have very little hope for the future, regardless of which flavor of statist authoritarians we have lording it over us in Washington. I really believe that this short lived and historically insignificant experiment in self-governance and liberty has failed. Our forefathers risked all, bled and died to secure us this opportunity, and we did not live up to the challenge. And for that I am deeply ashamed.
Now back to your regularly scheduled sullen silences and intermittent facile commentary about inconsequential articles I stumble across in the “news”.