" . . . the [US] government changed the way they account for employment, inflation, the GDP and other important data in 1982 and again in 1998. Why? So they could tell the average American how wonderful everything is. . . . if the government had calculated inflation in 2007 like it did in 1981, inflation was actually 11.6 percent. . . . if we calculated the nation’s unemployment rate the same way we did in 1981, it would be over 12 percent. Our Gross Domestic Product, if calculated by the official 1981 Federal Standards, has been in negative territory since the first quarter of 2006."
It is how we are educated that solidifies how every generation grows into adulthood aware of our nationality, respectful of authority and theoretically able to function cohesively as a unit to keep our society intact and vibrant. As children we are taught to stand in line (quietly) and given history lessons to give us a sense of what being an American means; all the while, teachers become trusted authoritarian figures in our lives. What is not taught in public school is everyday critical thinking — possibly because some human brains are not wired to test the validity of basic underlying assumptions. Moreover, because most children are trusting, we tend to come of age still not questioning what authority figures are telling us.
This system as laid out is the only thing that gives millions of young people a sense of being Americans, a sense of respect for others in our society and, one hopes, a sense of personal responsibility. The problem is that as most of us age, we no more question authority figures than we did our history teacher when being taught the Civil War. We simply accept whatever is said as fact.
Be Quiet and Rejoin the Herd
The easiest way to demonstrate that our education system is designed to create order instead of embracing creative chaos is the morning traffic jam. Let’s take the people traveling on Interstate 35 E into Dallas: Every morning they’ll find that starting somewhere in Oak Cliff the traffic will come to a virtual standstill, until the last 3 or 4 miles into Dallas often turns into a 20- to 30-minute drive. And every morning you will find thousands upon thousands of drivers wasting gas, fuming in their cars that something needs to be done about congestion. Yet there is an easy answer: All they have to do to zip into Dallas quickly is take the South Marseilles exit, go 1.5 blocks north and turn right on E. Jefferson Boulevard. It’s that simple.
Crossing the Jefferson Street Viaduct with the 30 other drivers who have made that same quick critical decision to improve their morning commute, you can look south and see, extending for miles, a traffic jam that avoiding took you only two quick turns and cut 15 minutes off your commute. So why do thousands of intelligent people each and every day go through the same frustrating and wasteful ritual, when an easy and satisfying answer to the problem has always been there? That’s how we were taught.
Stuck in your car, waiting impatiently in traffic is exactly like being in sixth grade when your class filed into the cafeteria; you were told to stand there quietly without complaining, no matter how hungry you were. It’s this ingrained habit of non-critical thinking and unquestioning acceptance that makes morning traffic jams worse than they need to be. It makes ideology — obedience to a concept, as opposed to reasoning through a solvable problem — the basis for our daily decisions.
But DoubleSpeak Sounded Right
This uncritical obedience extends into today’s modern economic world. After all, when the discussion turns to what is ailing Detroit, politicians of both parties and the media will lay the blame on automakers’ lack of outstanding products, on high labor costs and so on. Detroit, they’ll say, created its own problems; and so our automakers should either solve them by themselves or fail. The problem with that line of logic is that today it is patently untrue. Detroit has some of the most outstanding products it’s ever offered; and the wage structure negotiated in the latest UAW contract pretty well ensures that the next generation of automotive workers won’t qualify as middle-class Americans.
Now, when Jim Press quit leading Toyota in the U. S. to move to Chrysler, he was reportedly guaranteed over $50 million to switch companies. That is a high labor cost.
Contrast that with Wall Street, where a Nov. 19, 2007, Bloomberg article stated, "Shareholders in the securities industry are having their worst year since 2002, losing $74 billion of their equity. That won’t prevent Wall Street from paying record bonuses, totaling almost $38 billion."
It gets better; the article specifically states that the bonuses will go to workers at Goldman Sachs, Morgan Stanley, Merrill Lynch, Lehman Brothers and Bear Stearns! So: Shareholders in securities lost $74 billion, but the people whose complete incompetence lost their money for them were paid $38 billion — and Bear Stearns was about to go under. Contrast that to Chrysler’s $1.6 billion in losses and the media’s opinion that Detroit’s demise is related to some assembly line worker making $27 an hour.
It seems strange that the media has long extolled the brilliance of Wall Street and praised the financial gods that are today steering us into new and incredible economies that will make all Americans wealthier. That’s not reality. Future autoworkers will have their pay cut in half — so much for the promise of prosperity for all — and most Americans believe that’s OK, because ideology has beaten it into our heads for 30 years that unions are destroying America. Yet it’s a proven fact that Wall Street managed to completely collapse our banking system and lost shareholders $74 billion in securities last year, while paying themselves $38 billion in bonuses. Yet no one questions that scenario at all.
What is wrong with this picture?
Punishing The Intelligent
The Federal Reserve couldn’t open the floodgates fast enough to dump (as of April 22) $360 billion to save those New York-based investment banks and financial institutions. The Fed loaned money to investment banks for the first time since the Great Depression — to the tune of $38.1 billion a day during one particular week. At the same time it’s been lowering interest rates, which effectively punishes individuals who are in fact good at saving their money, and those living in retirement whose incomes are based on saved earnings, which now pay out lower interest rates. That’s punishing the smart to save the stupid.
The Fed’s reducing interest rates is also one of the primary causes of the current rush into commodities, which has caused everyone’s oil and food prices to rise — which in turn keeps everyone from being strong consumers of durable goods, such as automobiles. I wonder how much Detroit could change the automobile world if Washington had shelled out $360 billion to them in the last four months.
Now it’s time to expose the big lie.
Whenever it considers reducing interest rates, the Fed is supposed to be mindful of the effect the rate cuts will have on inflation. After all, if your paycheck is static, any rise in the costs of items you cannot get out of buying can hurt your family’s financial well-being. But the Federal Reserve continues to maintain that inflation is still under control — giving them the green light to lower rates even more. And yet, although you hear over and over again that inflation is under control, your checkbook stubbornly contradicts that. You know something is wrong, but those in authority repeatedly tell you that no problem exists.
How could this be?
It’s because the government changed the way they account for employment, inflation, the GDP and other important data in 1982 and again in 1998. Why? So they could tell the average American how wonderful everything is.
The Third Kind of Lie
When the Department of Labor reported that in 2007 inflation was only 4.1 percent, it almost sounded reassuring. But, if the government had calculated inflation in 2007 like it did in 1981, inflation was actually 11.6 percent. Just like your checkbook told you. The same is true for unemployment, which we’re being told is at near historical lows. That statement never rang true, because extremely low unemployment rates force wages up, but wages have fallen slightly in the last eight years. Now, if we calculated the nation’s unemployment rate the same way we did in 1981, it would be over 12 percent. Our Gross Domestic Product, if calculated by the official 1981 Federal Standards, has been in negative territory since the first quarter of 2006.
What is troublesome is that recently officials have trashed any suggestion that today’s economy is anything like the 1970s. And as proof they trot out the GDP figures, inflation and unemployment numbers. They never mention that they changed the way they do their accounting, so the figures are completely meaningless.
Some 300 million Americans are being told that we are living in a period of near unprecedented prosperity, yet automobile sales and incomes struggle to match their record volumes of just a few years ago. The Wall Street Journal told people last week to rush out and clear out supermarkets before food prices go any higher (Really! How stupid!). Experts know there’s no supply and demand problem in oil today, but prices keep setting record highs, while the nation’s refiners have intentionally cut back production — to boost their already ample gasoline profits. (Conoco complained at making only $500 million in the first quarter on their refinery operations. What, $2 billion profit a year isn’t enough?)
To fix Detroit, you have to fix what ails America, and you can’t do that if you don’t know where we really stand — and apparently that’s the last thing Washington wants you to know. While most think the battle for the future of America hinges on which political ideology wins the election, our real future depends on our winning the battle for truth. And truth has been in really short supply for a very long time.
Ed Wallace is a recipient of the Gerald R. Loeb Award for business journalism, given by the Anderson School of Business at UCLA, and is a member of the American Historical Society. He reviews new cars every Friday morning at 7:15 on Fox Four’s Good Day, contributes articles to Business Week Online and hosts the talk show, Wheels, 8:00 to 1:00 Saturdays on 570 KLIF. E-mail: wheels570@sbcglobal.net.
Re:Are You Better Off?
« Reply #1 on: 2008-05-10 18:37:02 »
Quote:
To fix Detroit, you have to fix what ails America, and you can’t do that if you don’t know where we really stand — and apparently that’s the last thing Washington wants you to know. While most think the battle for the future of America hinges on which political ideology wins the election, our real future depends on our winning the battle for truth. And truth has been in really short supply for a very long time.
Wallace's point above is fair. Ideology aside, however, at least one of the candidates for president, John McCain, simply lacks the economic understanding necessary to ever address the truth in the first place.
Quote:
Punishing The Intelligent
The Federal Reserve couldn’t open the floodgates fast enough to dump (as of April 22) $360 billion to save those New York-based investment banks and financial institutions. The Fed loaned money to investment banks for the first time since the Great Depression — to the tune of $38.1 billion a day during one particular week. At the same time it’s been lowering interest rates, which effectively punishes individuals who are in fact good at saving their money, and those living in retirement whose incomes are based on saved earnings, which now pay out lower interest rates. That’s punishing the smart to save the stupid.
The Fed’s reducing interest rates is also one of the primary causes of the current rush into commodities, which has caused everyone’s oil and food prices to rise — which in turn keeps everyone from being strong consumers of durable goods, such as automobiles.
John McCain: “The issue of economics is not something I’ve understood as well as I should.” "I'm glad whenever they cut interest rates. I wish interest rates were zero" http://www.youtube.com/watch?v=EaR1CnfyrEo
Re:Are You Better Off?
« Reply #3 on: 2008-07-20 16:13:35 »
Since the latest message from John McCain's economic brain trust, Phil Gramm's claim that the US is a nation of whiners and that we are merely in a "mental recession", I decided that it was worth resurrecting this thread again. This "psychological" explanation of the bad economy has been part and parcel of both McCain's and Bush's economic messages of late. There is nothing different in Gramm's message except he translated it into the condescending asshole language he normally uses.
In any case it is another result of the propagandizing of intelligence. In this case the intelligence is economic, and the propagandizing began most systematically in the Reagan administration and has continued through each succeeding presidency (previous presidencies only tried to fudge one aspect of the statistics rather than the whole system). Once again I provide some material from Shadow Stats revealing that the ones truly out of touch with reality are the Bush administration and its McCain allies.
In 1996 -- the middle of the Clinton economic miracle -- the Kaiser Foundation conducted a survey of the American public that purported to show how out of touch the electorate was with economic reality. Most Americans thought inflation and unemployment were much higher, and economic growth was much weaker, than reported by the government. The Washington Post bemoaned the economic ignorance of the public. The same results would be found today.
Neither the Kaiser Foundation nor the Post understood that there was and still is good reason for the gap between common perceptions and government reporting: government data are biased in politically correct directions and increasingly have diverged from common experience and reality since the mid-1980s. Inflation and unemployment reports are understated, while employment and other economic data are overstated, deliberately.
For several years, I conducted surveys among business economists as to how they viewed the quality of government economic data. The following were actual comments:
· The senior economist of a major retail company told me, "Quality varies. The retail sales numbers are terrible, but money supply data are great."
· The senior economist at a major bank offered, "There's a problem with money supply, but I think retail sales are pretty good."
The point is that when an economist knows a sector well, he also recognizes the limitations and distortions of related economic reporting. Gathering and reporting accurate information on a timely (one-month) basis for components of the U.S. economy is nearly impossible. Nonetheless, most career government statisticians in Washington work diligently to provide the best information possible within the limits of the existing reporting system. A number of reporting distortions, however, are not accidental.
What follows is brief background on the reporting system and how the numbers can be viewed. Separate installments will address the specifics of employment, inflation, GDP and budget deficit reporting. Other areas will be addressed upon request.
The first regular reporting of now-popular statistics such as gross national/domestic product (GNP/GDP), unemployment and the consumer price index (CPI) began in the decade following World War II. Modern political manipulation of the government's economic data began as soon as practicable thereafter, with revisions to methodology often incorporating positive reporting biases. As a result, investors and most economists, relying on the government's data, often miss underlying economic reality. Consider:
· During the Kennedy administration, unemployment was redefined with the concept of "discouraged workers" so as to reduce the popularly followed unemployment rate.
· If Lyndon Johnson didn't like the growth that was going to be reported in the GNP, he sent it back to the Commerce Department, and he kept doing so until Commerce got it right. The Johnson administration also was responsible for gimmicking the accounting that hides most of the federal deficit.
· Richard Nixon had a highly publicized war with the Bureau of Labor Statistics on the unemployment data. Nixon wanted to report the unemployment rate as the lower of the seasonally adjusted or unadjusted number, at any given time, but not specify same to the public. While that approach was unconscionable at the time and never used, basically the same methodology was introduced in 2004 as "state-of-the-art" by the current Bush administration.
· The Carter administration was caught deliberately understating inflation.
· Systemic changes were introduced during the Reagan administration to boost reported GNP/GDP growth on a regular basis. The wildest manipulations, however, happened at the time of the 1987 liquidity panic. In addition to intervention in the futures markets by the New York Fed to help prop the stock market after the October 19th crash, direct and heavy manipulation of the trade deficit data, under the direction of the Federal Reserve and U.S. Treasury, was used in conjunction with massive currency intervention to help bottom the dollar and to contain the currency panic at year-end 1987.
· The first Bush Administration began efforts at the systematic reduction of the reported rate of CPI inflation, and worked an outside-the-system GDP manipulation aimed at helping with the failed 1992 reelection bid.
· As former Labor Secretary Bob Reich explained in his memoirs, the Clinton administration had found in its public polling that if the government inflated economic reporting, enough people would believe it to swing a close election. Accordingly, whatever integrity had survived in the economic reporting system disappeared during the Clinton years. Unemployment was redefined to eliminate five million discouraged workers and to lower the unemployment rate; methodologies were changed to reduce poverty reporting, to reduce reported CPI inflation, to inflate reported GDP growth, among others.
· The current Bush administration has expanded upon the Clinton era initiatives, particularly in setting the stage for the adoption of a new and lower-inflation CPI and in further redefining the GDP and the concept of seasonal adjustment.
As a result of the systemic manipulations, if the GDP methodology of 1980 were applied to today's data, the second quarter's annualized inflation-adjusted GDP growth of 3.0% would be roughly three percent lower (effectively netting to zero percent or below). In like manner, current annual CPI inflation is understated by about 2.7% against the pre-Clinton CPI methodology (would be about 5.7%), and the unemployment rate is understated by about seven percent against its original design and what many people would consider to be actual unemployment (would be about 12.5%).
As to the financial results of federal operations, the application of accrual accounting and generally accepted accounting principles to federal operations shows an actual fiscal year 2003 deficit of $3.7 trillion, as reported by the U.S. Treasury, versus the reported cash-basis $374 billion.
The above was written in 2004, but the Shadow Stats site continues keeps the economic data as measured by the less politicized pre-1981 methods. By these measures we have actually been in a recession (consecutive quarters of negative economic growth) since 2006, and have experienced double-digit inflation since 2005 with only a brief respite in the begining of 2007. In summary we've already had almost two and a half years of stagflation. Shadow Stats provide some helpful graphs showing this.
According to neo-con anti-logic if you recognize this reality instead of swallowing the cooked-up economic propaganda of the administration you are just a "whiner". And who wants to be a whiner?
By DEVLIN BARRETT – July 19th, 2008 NEW YORK (AP) — Former Texas Sen. Phil Gramm resigned Friday from his role as GOP presidential candidate John McCain's campaign co-chairman, hoping to quiet the uproar that followed his comments that the United States had become a "nation of whiners" whose constant complaints about the U.S. economy show they are in a "mental recession."
Gramm, a past presidential candidate, made the remarks more than a week ago. McCain immediately distanced himself from the comments, but they brought a steady stream of criticism just as McCain is trying to show he can help steer the country past its current financial troubles.
response from MoveOn.org
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Late last night, McCain's campaign co-chair Phil Gramm had to step down because of controversy over his comment that we were in the middle of a "mental recession." But the the truth is, McCain himself has repeatedly said our problems are merely "psychological"—Gramm was just more openly condescending about it.
Gramm's gone—but so far, the media's giving McCain a free pass for saying similar things. So we made a video. It's short, and funny, and it'll help spread the word. Please check it out, then pass it on!
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