Tuesday, September 16, 2008

Meanwhile, On The Supply-Side

In a desperate attempt to distract attention from how ridiculuos the recession denial of him and other supply-siders now look, Mark Perry says that there is no need to worry because the unemployment rate is significantly below the level of the 1930s.

Which is of course true, but first of all, a crisis can be very serious without being fully as serious as in the 1930s. And secondly, few if any have claimed that things are as bad as in the 1930s. What many instead argue is that it is the worst crisis since the 1930s. "The worst since the 1930s" is not the same thing as "as bad as the 1930s". And thirdly, unemployment is usually a lagging indicator in a crisis. The increasingly severe financial crisis which is certainly the worst since the 1930s could by contrast be characterized as a leading indicator of a much more severe economic downturn than the relatively mild recession seen so far.

Meanwhile, taking the price for the most ill timed, and also one of the most misleading, article this year, Don Luskin assures us again that there is nothing wrong with the U.S. economy. This was published just before not only the financial meltdown of the last few days, but also just before the news that industrial production plunged by 1.1% in August.

He presents various misleading statistics, such as the phony 3.3% growth number for the second quarter and the second quarter savings rate which was temporarily boosted by the tax rebates, while saying the financial crisis isn't so bad because the number of failures so far is fewer than in previous periods of crisis (overlooking that the failures this time involves very large companies, as opposed to the small local Savings & Loans banks of previous periods of crisis) while omitting the overwhelming number of statistics (such as the sharp increase in the budget deficit and unemployment, the falling real wages and plunging corporate profits) which clearly indicates a recession. That clearly indicates that he is not stupid, as Brad DeLong claims, but is instead dishonest.

But despite being a clever con artist, he will end up hurting McCain by presenting himself as a McCain advisor making assertions that are so out of touch with the experience of most Americans, indicating that he cares more about promoting himself than promoting McCain.


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