Monday, February 15, 2010

John Stossel sets me straight...

Earlier today I posted the Atlantic article referenced in the post below.  It was outlining the state of things in our society today in terms of unemployment and lack of jobs.  While the author did a fine job of outlining what has transpired in the past 10-15 years to get us to this point, I guess I should have taken the time to read his conclusion.

John Stossel did and put up this post:

Big Government Not A Solution

This month’s Atlantic cover story makes dire predictions about the impact of the recession:

It will likely change the life course and character of a generation of young adults... It could cripple marriage as an institution in many communities. It may already be plunging many inner cities into a despair not seen for decades. Ultimately, it is likely to warp our politics, our culture, and the character of our society for years to come.
The dreary article quotes nearly every liberal economist and concludes that because we are in “such a deep hole,” “solutions—like more-aggressive support for the unemployed, and employer tax credits or other subsidies ...—are straightforward and obvious...

Gee, paying people who don’t work, and complicated tax credits are the obvious solution. Who knew?

The economically clueless, from Malthus to the Peak Oil crowd to liberal media, constantly predict doom.

Despite its remarkable length, the article never mentions that unemployment was worse in 1982 (10.8%.) I didn’t notice that our "life course and character" was markedly changed by that. Few of us even remember that recession.

A National Bureau of Economics study looked at data from 1982 to 1999 and found that students graduating during a recession initially get paid less than those who graduate in good times. But within a decade, they found, the gap disappears entirely.

The Atlantic writer carefully selects years to note that:

Median household income in 2008 was the lowest since 1997, adjusting for inflation.

But here’s the long-term chart:

Of course income is down lately, but it’s up sharply over the long run. The chart actually understates the gains because it doesn't count benefits from new technology. A Kindle may replace a hundred books, but such gains aren’t visible in the government’s data.

As economist Don Boudreaux points out: "the government’s data also underestimates the middle-class’s increasing prosperity, for it ignores the shrinking size of households. In 1967, the average household contained 3.14 persons; in 2006 it contained 2.57 persons. This fact means that the real income for each member of the average household grew."

The biggest threat to our future is the growth of the state. And its debt. Yet somehow, increasing both is the “solution” proposed in the Atlantic:

Concerns over deficits are understandable, but in these times, our bias should be toward doing too much rather than doing too little. That implies some small risk to the government’s ability to continue borrowing in the future; and it implies somewhat higher taxes in the future too. But that seems a trade worth making... We have a civic—and indeed a moral—responsibility to do everything in our power to stop it now, before it gets even worse.

Give me a break. During the Great Depression, Franklin Roosevelt made similar demands:

"This nation asks for action, and action now. Our greatest primary task is to put people to work... I shall ask the Congress for the one remaining instrument to meet the crisis -- broad executive power to wage a war against the emergency..."
That was in 1933. Roosevelt got the big government programs he wanted — but activist government chilled the private sector. Seven years later, unemployment was still at nearly 15 percent.

Let's not try that again.

I am appropriately chastened. -SP

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