Saturday, February 14, 2009

Obama's Fearmongering: Bad History, Bad Economics; Historically Inaccurate and Dangerous

President Barack Obama has turned fearmongering into an art form. 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. Mr. Obama's analogies to the Great Depression are not only historically inaccurate, they're also dangerous.

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 (see chart above).

~Economist Bradley Schiller in
yesterday's WSJ


At 2/14/2009 12:16 PM, Anonymous Anonymous said...

At worst, a comparison to the 1981-82 recession might be appropriate

It is ironic that this recession is already worse than the 1981 recession when it comes to the 3.2% payroll job losses in the private sector. Payroll public sector jobs have increased by a little less than 2%. I suppose that stat will change this year as the stimulus package does not provide much in the way of block grants to the states.

At 2/14/2009 12:17 PM, Blogger QT said...


Thanks for posting a reality check.

At 2/14/2009 12:19 PM, Anonymous Anonymous said...

At 2/14/2009 12:38 PM, Anonymous Anonymous said...

Geeeez, stop it already. How is Obama going to impose the new socialism if you kepp undermining the "end of the world" meme?

At 2/14/2009 1:33 PM, Blogger BillOGoods said...

What's the difference between jobs lost as a percentage of the labor force ("-LF") and the unemployment rate ("UR")?
I'm guessing that the UR is people looking for employment, but can't find it, as a percentage of all persons working and all persons looking for work, i.e., the "labor force." I'm guessing that -LF is, what? . . . The jobs the economy had on day X compared to the labor force.


At 2/14/2009 2:35 PM, Anonymous Anonymous said...

That's basically right, BillOGoods.

The unemployment rate is derived from the Household Survey.

Schiller's employment data is just picking any 12 month period in each of the recessions and comparing it rather than picking the business cycle peak and then tracking cumulative job losses.

The best chart I've seen on the cumulative decline in the Establishment Survey (payroll employment) is from Polley.

Altig of macroblog, an economist at the Atlanta Fed, compared declines in both household and establishment data and seems to prefer the latter.

At 2/14/2009 9:48 PM, Blogger Realist Theorist said...

This graphic shows a similar perspective of how unspectacular job-losses have been up to now.

At 2/14/2009 10:56 PM, Anonymous Anonymous said...

Anonymous - where do you get your facts? Are you on Nancy Pelosi's staff.

See this analysis for why you're wrong, wrong, wrong:

Change in unemployment in recessions

At 2/14/2009 10:56 PM, Blogger OBloodyHell said...

Democrats are taking the Wednesday Addams approach (see #8): "Wait."

At 2/15/2009 12:05 PM, Anonymous Anonymous said...

Sheesh, Kevin, are you on John Boehner's staff?

Eric Dummy Tyson says at the end of his piece: Of course, we don't know what the final numbers will be on this recession. I didn't now that the recession was over, Kevin. When there are zero job losses in a month, get back to me.

Apparently, your omniscient wag exceeds your reach.

At 2/15/2009 7:46 PM, Blogger rbblum said...

Undoubtably, the attractive and charismatic Barack Obama presented a positive vision of 'hope and change' along the path of being elected out President.

However, it was day one, upon being sworn in as our President, that he become the bearer of horrible, catastrophic news facing our once great nation.

Is there any doubt that the truly great orator will present the tale of bringing our nation out of the depths of economic ruin and will coast with ease to a second term as US President . . . no matter, no matter what the facts may be.

A true politician can sell sunshine to a family bereaved.

Bring back the statesmen.


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