Location: United States

Wednesday, February 01, 2006

State of the Lie

NOTE: This post contains an error. Rather than erasing it as if it never happened, I attempt to make amends by reviewing the correct text.

I have to admit that I didn't give the President my full attention last night. However, I did review the test of his State of the Union speech, and I found a lot of platitudes and not a few misleading statements. For example:

America's economy is the fastest growing of any major industrialized nation

I used the World Bank's World Development Indicators for the years 2000-4 and analyzed the following countries: United States (US), United Kingdom (UK), Germany(G), France(F), Canada(C) Australia(A), Russian Federation(R). I also looked at the average for "High Income" countries (HI).

In GDP growth, the average over the last five years is:
US - 2.8%
UK - 2.6%
G - 1.2%
F - 1.8%
C - 3.0%
A - 3.2%
HI - 3.2%

So much for the contention that we're growing faster than anyone else. The UK, Germany, and France are all good peers for comparison based on standard of living, income, general economic strength, etc. Canada and Australia are good peers for comparison because they are the second and third most energy intensive economies after the US. HI countries actually include the US.

But, we're improving. Half of our growth over the last five years has come in the last two.

Of the countries listed, only the UK lags the US in capital formation.

France and Germany have lower inflation, with the other countries slightly higher than our 2% average. Oh yeah, Australia and Canada both have a net positive cash-flow (no deficit). Germany and the UK have a lower deficit and France is about even with us.

We aren't growing faster - we're barely keeping pace.

In the past four years, we have provided tax relief to every person who pays income taxes, overcome a recession, opened up new markets abroad, prosecuted corporate criminals, raised homeownership to its highest level in history. And in the last year alone, the United States has added 2.3 million new jobs.

First, the taxes:

Technically, it's correct. What it doesn't take into consideration is that those tax cuts created a huge federal deficit that the government had to borrow - and pay interest on - to cover. That means we haven't gotten a tax cut at all. We've received a tax deferment. We will pay for the uncontrolled spending. Just not during this President's term.

Next, the "recession":

Here's the definition of a recession: "A phase of the business cycle characterized by a general period of declining economic activity. *snip* A recession is officially designated, by the official designators at the National Bureau of Economic Research, as at least six months of declining economic activity.

Well, if you exam the GDP data compiled by the Bureau of Economic Analysis, we haven't had a recession during the Bush Presidency. In fact, we haven't had one since 1990, when 1990 4th quarter GDP shrank 3.0% and first quarter 1991 GDP shrank 2%. Since Bush took office in 2000, we've had three quarters of negative growth, they were 2000q3, 2001q1, and 2001q3. Between each of these quarters, we had a full quarter of growth. Take a look at this chart of monthly GDP growth. We've barely had two months of negative growth in a row at any time since 2000.

No recession. How can we bounce back from a recession that never happened?

Even if you allow the NBER to fudge its previously firm definition and use their official dates - the last recession ended in November of 2001. It was tied with four others for the third shortest recession in history. I would hope, after four years, that we would be recovered. It's no great accomplishment.

Opened markets abroad? Well, according to the World Bank, our exports have shrunk slightly from 11% to 10% of our GDP. The BEA offers a highlights graph that shows a booming deficit in foreign trade (for 2005q3). They offer this explanation:

The deficit on goods increased to $197.9 billion from $186.9 billion, as goods imports increased more than goods exports.

Ok, how many strikes are we giving again?

Prosecuted corporate criminals?

Ok, they got Martha Stewart. The Enron boys have just started their trial. To be fair, WorldCom did get busted. Everything, except for Martha Stewart's conviction, has been incredibly slow to develop and there has been absolutely no action on corporate accountability.

Home ownership rates?

As you can see, the growth in home ownership is very slight - less than 2%. Compare that to over 3% for Bill Clinton's term in office. Compare that to a net loss of home ownership under Reagan and Bush I. More people own homes, but that's due to a growing population, not growing prosperity.

I don't know where the President is seeing all this wonderful growth he babbling about. Perhaps he needs glasses. Perhaps he needs new advisors that don't lie to him.

We definitely need a new President.


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