Wrong Way America?

Drumming up fear and panic.

April 3 (Bloomberg) -- More than 80 percent of Americans are dissatisfied with the direction of the country, the most since the New York Times/CBS News poll began asking the question in the early 1990s, the New York Times reported.

So four out of five Americans think we are heading in the wrong direction as a country?

At first glance, this doesn't seem such a shock.  After all, both President and Congress are enjoying record-setting low approval ratings, the subprime mortgage fiasco is throwing thousands of families out of their homes, and we are heading straight into the teeth of a recession.  Aren't we?

That is certainly what the New York Times and CBS would like you to think - after all, we are coming into an election year and the current president is a Republican.  In keeping with their overwhelmingly liberal views, they want to convince America of what they truly believe - that, thanks to our Republican president, we are going to hell in a handbasket and the only possible salvation is the immediate intervention of a liberal Democrat.

But the amazing thing is that the vast majority of panic and handwringing we see on the news every night is patently false.

Unemployment is up, yes indeedy - it has "spiked" from 4.8% to 5.1%.  Batten down the hatches and open the breadlines; a whole three tenths of a percentage point, smaller than the margin of error!

If you take a quick peek at a historical graph, it's immediately apparent that unemployment is at record lows.  In the recession of 1980, the unemployment rate was twice what it is now.

And as recessions go, that isn't that bad.  The Great Depression had unemployment of 25% - now that would be cause for serious concern.  Our unemployment rate of 5.1% is actually considered to be full employment.

There cannot ever be an unemployment rate of 0 unless we are all enslaved, because people are quitting their jobs and finding new ones all the time.  Sure, there are layoffs and fewer new jobs; definitely, there are specific states such as Michigan which are in deep trouble.  But there are other parts of the country which are booming.  As a nation, we are in no real problems regarding employment.

How about home ownership?  Yes, people are having their homes foreclosed - because they foolishly borrowed more money than they had, at terms they could not afford.

Have we not all heard of the housing bubble, driving prices of real estate up to ridiculous levels?  It's good for prices to drop.  They have to drop.

Otherwise, how can we hope for young people starting out to be able to afford their first homes?  Take a look at another historical graph of home ownership rates, and we immediately see that they are dropping from record highs.  We have now dropped down to rates last seen in 2003, far above the rates seen during the Clinton boom.  No grounds for panic here.

What about the war?  If you already believe the war is lost, we aren't going to be able to convince you otherwise in this article.  Suffice to say that, as wars go, Iraq is a tiddler.

We've lost 4,000 soldiers in combat so far over four years.  While we mourn each and every one of them, consider that during the Civil War, at the Battle of Antietam on September 17th, 1862, approximately 3,650 American soldiers were killed on that one day.

Crime?  Down to lows not seen in forty years.  Taxes?  Down too, generally speaking.  Teen pregnancies?  Drug abuse?  Corrupt politicians, even?  All these things have been far worse in the past, mostly within living memory.

Are we, then, in a recession, and a bit of a rough patch?  Of course we are - how could we not be?

When every news program talks about how terrible things are, reminds us of how we're being clobbered by our foreign competitors, and shows hate and vitriol spewing from every level of the political system, it would be a strong-stomached person indeed who wouldn't feel at all jittery.  In our modern post-industrial consumer economy, where national financial health relies on people being comfortable going out and spending money that they may not have just at the moment, naturally the constant drumbeat of the "nattering nabobs of negativity" is perfectly able to talk fluff and nonsense into a very real recession.

Oh, let's not forget the one other thing that's down - the trust Americans have in the media that's been talking up the doom and gloom.  Could there possibly be a connection?

Petrarch is a contributing editor for Scragged.  Read other Scragged.com articles by Petrarch or other articles on Economics.
Reader Comments
What are you nuts?

Crime is the lowest is 40 years only because our Judges don't put culprits in jail...and our POLICE will accept their paychecks but not infrorce the LAW!

TAXES DOWN?...You obviously don't own your own home!

DRUG ABUSE is at an all time high with our youth!...In fact they're DYING AT A HIGHER RATE THAN EVER!

...and CORRUPT POLITICIANS!...what they can't give away in 'one way' trade policies, they're SELLING...just like the CLINTONS!

And don't even ask me about our SIT-ON-THEIR-ASSES' Congress...what a bunch of 'no-goods'..only thinking of their own pockets and political gains...even with ENEMIES OF THE UNITED STATES!

OUT COUNTRY HAS SPUN OUT-OF-CONTROL...so, our politicians better get rid of the lobbyists and the special interest groups or WE'LL GET RID OF THEM OURSELVES!
April 10, 2008 3:07 PM
You are denying that the USA is heading into a recession? I can't believe it.

You guys seems to enjoy the Economist... There is a British newspaper that seems to favour the only republican remaining in the presidential race. This week's Economist is entitled "The Great American Slowdown." See for yourself: economist.com.

Even the IMF expects a recession.

But ok, here at Scragged you don't trust anything but the numbers (which you often abuse). Unless maybe they say something we can misinterpret. So how about the numbers then?

Well, for the fourth month in a row, employment in the USA went down. Economists suspect that might continue into next year even. Even one month of significant job losses can be a bad indicator when population is growing as fast is it is. Would a whole year convince you that the economy is ill? These lost jobs mean that less people are earning money that they could have spent on various things and thereby improved other peoples' bottom lines as well.

Housing prices are falling significantly, there is no arguing about that, but why? Well, house prices kept going up while the economy was good, but as soon as things started getting a little rocky people's income stopped rising as much. Demand lessened, and people finally took a step back and realized that prices were getting pretty high. Lowered demand means prices fall.

You stated that falling prices are good. Let's look at that situation; A lot of people bought their houses in 2006 when the economy was doing great. How can you lose when the price of that house is rocketing, and your wages are going in the same direction? Well, when the price falls instead of rises. If you buy a house for $2,000,000 and the price soon falls to $1,500,000 what is to stop you from defaulting on the mortgage and buying a house that you can pay off in 15 years instead of 25? Maybe even the same house.

Great deal, eh? Ok, what about when millions of people have the same thought? Suddenly the banks are losing billions of dollars. And as we know, when a business suffers that means that all of it's costumers, shareholders, and employees suffer. And when all of those people suffer, they spend less money other places.

House prices also have an effect on consumer spending. A high house price gives the owner a sense of confidence. When that house price falls, he will spend much less because of economic uncertainty.

All of these things are happening. Consumer confidence is falling. Spending is falling. In the USA, 70% of GDP is from consumer spending. When consumer spending falls, more people are certain to lose their jobs.

No, doesn't sound like a recession to me either. Certainly a boon that more folk can afford a house. Happy days!
April 11, 2008 4:08 AM
Jason, the point here - one that I agree with - is about the macro view. Individually, your points are sound. But macro view, the economy is NOT bad. Self correction is not only good for the market, it is NECESSARY. Look at the numbers when REAL recession happened (early 80s, Great Depress.) and you'll see the point. Most of what we have now is the media driving a recession by talking about it. The NBC, CBS and CNN pundits are so convinced that we are "in the middle of a massive, horrid recession with no end in sight" that it's ALL they talk about. No one looks at the big picture. Macro view, this is nothing more than a slight dip in what is really (again, macro view) a very good set of back-to-back decades.
April 11, 2008 8:35 AM
The commonly accepted definition of a recession is two consecutive quarters in which the GDP shrinks. You can scream "big picture" all you want, but there is a good chance of that happening this year, and that means that use of the word recession is warranted.
April 11, 2008 5:45 PM
Of course there's a recession on the way, like the author said. The points raised were 1) it's a mild one, certainly not worthy of the "panic" sort of reports we see on the news, and 2) in large part it's caused, and made worse, by those very same panic reports, not by desperately bad economic fundamentals. That doesn't make it any less real, or any less painful to those who have a hard time, but it's at least an attempt to keep things in perspective.
April 11, 2008 6:32 PM
This is right on the money. I have been debating this issue with others that are interested on the topic. One of THE BIGGEST factors that must be considered in "recessions" is what is actually happening (from a 6 month, 1 yr, 3 yr, 5yr and 10yr mark) versus what people SAY is happening or about to happen. Just because the mainstream media hounds are SAYING this downturn is a recession does not mean it is. Recession is a very strong work which most people do not truly understand.
April 16, 2008 4:37 PM
Heh... Looks like the McCain campaign may have finally caught on to this. Sen. Phil Gramm, McCain's economics adviser, 'referred to the economic slowdown as "a mental recession," and referred to the United States as "a nation of whiners."'

July 10, 2008 9:00 AM
Heh... Looks like the McCain campaign may have finally caught on to this. Sen. Phil Gramm, McCain's economics adviser, 'referred to the economic slowdown as "a mental recession," and referred to the United States as "a nation of whiners."'

July 10, 2008 9:04 AM
Heh... Looks like the McCain campaign may have finally caught on to this. Sen. Phil Gramm, McCain's economics adviser, 'referred to the economic slowdown as "a mental recession," and referred to the United States as "a nation of whiners."'

July 10, 2008 9:37 AM
I'm inclined to agree. But that's only going to cost him votes. Voters don't like being told they are bad people.
July 10, 2008 9:58 AM
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