* Crossposted in CROSSFIRE

(I read this and I couldn't agree with the author more.)

From:
http://online.wsj.com/article/SB123457303244386495.html

Obama's Rhetoric Is the Real 'Catastrophe'
In 1932, automobile production shriveled by 90%.

By BRADLEY R. SCHILLER

President Barack Obama has turned fearmongering into an art form. He has
repeatedly raised the specter of another Great Depression. First, he did so
to win votes in the November election. He has done so again recently to
sway congressional votes for his stimulus package.

In his remarks, every gloomy statistic on the economy becomes a harbinger
of doom. As he tells it, today's economy is the worst since the Great
Depression. Without his Recovery and Reinvestment Act, he says, the economy
will fall back into that abyss and may never recover.

This fearmongering may be good politics, but it is bad history and bad
economics. It is bad history because our current economic woes don't come
close to those of the 1930s. At worst, a comparison to the 1981-82
recession might be appropriate. Consider the job losses that Mr. Obama
always cites. In the last year, the U.S. economy shed 3.4 million jobs.
That's a grim statistic for sure, but represents just 2.2% of the labor
force. From November 1981 to October 1982, 2.4 million jobs were lost --
fewer in number than today, but the labor force was smaller. So 1981-82 job
losses totaled 2.2% of the labor force, the same as now.

Job losses in the Great Depression were of an entirely different magnitude.
In 1930, the economy shed 4.8% of the labor force. In 1931, 6.5%. And then
in 1932, another 7.1%. Jobs were being lost at double or triple the rate of
2008-09 or 1981-82.

This was reflected in unemployment rates. The latest survey pegs U.S.
unemployment at 7.6%. That's more than three percentage points below the
1982 peak (10.8%) and not even a third of the peak in 1932 (25.2%). You
simply can't equate 7.6% unemployment with the Great Depression.

Other economic statistics also dispel any analogy between today's economic
woes and the Great Depression. Real gross domestic product (GDP) rose in
2008, despite a bad fourth quarter. The Congressional Budget Office
projects a GDP decline of 2% in 2009. That's comparable to 1982, when GDP
contracted by 1.9%. It is nothing like 1930, when GDP fell by 9%, or 1931,
when GDP contracted by another 8%, or 1932, when it fell yet another 13%.

Auto production last year declined by roughly 25%. That looks good compared
to 1932, when production shriveled by 90%. The failure of a couple of dozen
banks in 2008 just doesn't compare to over 10,000 bank failures in 1933, or
even the 3,000-plus bank (Savings & Loan) failures in 1987-88.
Stockholders can take some solace from the fact that the recent stock
market debacle doesn't come close to the 90% devaluation of the early
1930s.

Mr. Obama's analogies to the Great Depression are not only historically
inaccurate, they're also dangerous. Repeated warnings from the White House
about a coming economic apocalypse aren't likely to raise consumer and
investor expectations for the future. In fact, they have contributed to the
continuing decline in consumer confidence that is restraining a spending
pickup. Beyond that, fearmongering can trigger a political stampede to
embrace a "recovery" package that delivers a lot less than it
promises. A more cool-headed assessment of the economy's woes might produce
better policies.

Mr. Schiller, an economics professor at the University of Nevada, Reno, is
the author of "The Economy Today" (McGraw-Hill, 2007).

Later,
Sean

//sean{at}nsbbs.info | http://nsbbs.info | ICQ: 19965647

... School ends, but education doesn't.  Unless you're a politician.
--- GoldED/2 3.0.1