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Lies, Damn Lies and Statistics

Posted by DENNIS SANDERS in Economy, Politics, Society.
Feb 10th, 2009 | Comments

The following graph has been getting a lot of play on the web. It was put out by the Office of Speaker Nancy Pelosi:

As you can see, it shows that in comparison to the two most recent recessions, we have lost a bunch of jobs. The graph has “focused the mind” of some bloggers like Andrew Sullivan:

This graph sure does concentrate the mind and reveals, to my mind, the surrealism of the current GOP. They spent the last eight years spending like FDR in a boom and now they’re born again fiscal conservatives?

And Justin Gardner:

One note…I’ve seen some comparing Obama’s selling of the stimulus to Bush’s selling of the Iraq war. While I acknowledge that when Obama talks of dire consequences there is a twinge of Bush in it, I think we can all look to the graph above and see the trouble is real…and that wasn’t the case with Iraq.

But the graph is not telling the whole story. Yes, we have lost a lot of jobs in this recession and when compared to the last two recessions, it looks pretty bad.

However, some information have been left out of this graph. That is, the other two recessions prior to the 1990 recession which were far more severe than the 90-91 recession and the 2000-01 recession.

Justin Fox over at Time shows the comparisons of the last five recessions. The result is that this recession in on par with the ‘74-’75 recession and the ‘81-’82 recession, two very severe recessions.

What do we learn? So far the fall in employment is comparable to that in 1974-1975 and 1981-1982. If the comparison holds, the declines should end within the next four or five months. But we of course have no idea whether the comparison will hold. Past performance is no guarantee of future results.

We don’t really know how this recession will play itself out. It could make the big recessions in the 70s and 80s look like nothing. This also doesn’t mean that we should not do nothing in light of all this.

That said, the graph tends to use fear to get the public to support the current stimulus plan. Okay, but then show all the info, not just the stuff that will support your argument.

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greenschemes

The result is that this recession in on par with the ‘74-’75 recession and the ‘81-’82 recession, two very severe recessions.

I agree that we need to do something. That we need to nurse this economy. Stop the bleeding but............ in those five recessions the US recovered and went on her merry way WITHOUT spending 1 trillion dollars in so called freakin stimulus.

This stimulus is nothing more then the Democrats seeking an unprecedented power grab in an attempt to control big business. Something they have hated for years and now is their opportunity to legislate them punitively and the end result is most likely going to be job loses due to stringent regulation and punitive workers rights forced upon these companies.

This is a recession. IT must play itself out. We are not to do nothing but it is NOT a catastrophe as Barka Obama is FEAR MONGERING us with. He is fast becoming the greatest fear monger since.....since George W. Bush and FASTLY painting the GOP or opposition as obstacles to YOUR WELFARE.

elrod

The difference between this recession and the other pre-1990 recessions is: 1) The problems in the financial system and 2) The global nature of this recession.

The steepest recession was the post-WWII recession of 1946. The answer was the Marshall Plan, which begun the process of exporting American goods to a ruined Europe.

Also, the the recessions of the 1950s-70s were steeper initially because they affected the much-larger manufacturing system primarily - where employment was much more concentrated. On the flip side, those recessions were reversed much quicker. They were the classic oversupply recessions solved by lowering inventories.

The 1974-76 recession was a different breed because it was connected to a global event - the oil embargo. But when OPEC lifted its embargo, the economy was able to rebound (though inflation continued apace).

The 1982 recession was a governmentally-created recession designed to stop inflation.

This recession is different than the others because it was precipitated by a meltdown in the financial sector - something we haven't seen since 1930-33.

It's not fear-mongering to point this out. The numbers really are that bad, even with the updated graphs.

DaGoat

If you buy into the concept of capitalism, then yes the correct response to a recession might be to do nothing. Even if you don't buy into that, I still have trouble understanding how the solution to a recession exacerbated by spending like drunken sailors is to spend like drunken sailors.

The partisan bickering from both sides does little to help. If you buy into a moderate mindset then there is a right answer to this problem that is not strictly GOP or Democrat. The majority of the editorials and comments I read seem more focused on assigning blame than settling on a solution. Unless we get past that, the stimulus will be less effective than it could be.

elrod

DaGoat says, "If you buy into the concept of capitalism, then yes the correct response to a recession might be to do nothing."

That is incorrect. If you but into the concept of COMPLETE, LAISSEZ-FAIRE capitalism then, yes, the response is to do nothing. But America has never had a full laissez-faire system - even back in the 19th century. In those days it was a governmental tariff policy that openly encouraged some industries while protecting them from British competitors. In the 1890s and onward the Federal government regularly intervened to prevent the formation of monopolies. And in 1913, the Federal government created a central bank with the power to control the money supply.

DaGoat

Actually I agree with that, elrod. I think the way capitalism works in the US is more "managed capitalism" where the government provides an environment that allows capitalism to work in a controlled form. The question is if the stimulus bill is necessary and adequate to facilitate that environment.

Ideally the bill should do as little as possible to restrict capitalism while at the same time providing the supports it needs to succeed, sort of like setting the ground rules then getting out of the way. To me this bill seems bloated with a lot of items that don't have much to do with facilitating the recovery, and in the long run that may actually delay the recovery.

greenschemes

The United States is a CONSUMER driven free market society which makes it unique.

IF people choose not to consume then the economy suffers. Right now people are choosing not to consume because the Freaking oil gouging hit us so hard that we are staggering around the ring. (I personally know people who have several thousand dollar credit card debt because of gasoline prices.) Companies bought oil futures that guarantee that they have to purchase oil next year at a price of 145 dollars a barrel while right now the price of oil is 40 dollars per bbl.

FUTURES..............OIL...............This is the main reason the economy is reeling. Until these futures run their course then we will continue to have companies being frugal, shedding jobs to make ends meet. Until this has run its course we will continue to have consumers cautiously spending and saving as much as they can and thus negating the power of our economy which is CONSUMER DRIVEN>

The thing that Infuriates me is that the Democrats were in control of congress when the price of oil starting going thru the roof and they did nothing because they wanted a horrible economy to get back in power.

Now that they are in power they are fear mongering. The GOP wants a bad economy to continue till they can get back into power and so they are appearing to be obstructionist.

The GOP fear mongered us with the war and terrists.....The democrats are fear mongering us with the economy and big business.....

Will this freakin cycle ever end in politics?

YES.........if we as a nation institutue term limits.

Pete Abel

Good post, Dennis, and helpful information. Thanks.

Jim_Satterfield

Actually Elrod is the one who is correct on this one, Dennis and Pete. None of the people attacking Pelosi's office or pointing to a different graph from Marginal Revolution are acknowledging the core differences between this recession and every other post WWII recession.

CStanley

It's still intellectually dishonest to not show all of the data, Jim. That there are other factors to be considered is true enough, but that information should be given as well, instead of truncating the data to better suit your argument.

DLS

Where is the comparison of this slump with the Great Depression, which remains far worse than this slump has been so far?

Rambie

I agree with CStanley, when I first saw the graph last night my first thought was, "What about the previous recessions of the 80's?"

I also agree with Elrod, even with the 70's and 80's recessions added, it still shows we're in a bad recession. This is also the first recession preceded by a financial sector greed induced implosion since the 1930's.

Agree DLS, why not compare all recessions from 1930 to now.

Is doing nothing the answer? I don't think so

Is this stimulus plan going to work? I don't know, but I do think investing in upgrading our infrastructures: IT/Data, Transportation, Energy grid & generation, and education are all worthy investments that will pay for themselves and provide jobs in the interim.

DLS

"FEAR MONGERING"

Appeals to emotion rather than to reason and exploiting the weaknesses of their core have been the Dems' routine for ages.

If it really were bad (actually, I believe it is, but note the Dems' blatant selectivity here, and yes, fear-mongering), the Dems would have no problem doing what they normally would do when defending deficits and debt, expressing these as a percentage of GDP. (They won't show unemployment percentages all the time, even though they'll zero in on the worst place, Elkhart, and have Obama repeat this name to a nauseating extent, as he did in the well-managed press conference last night, because the Depression's unemployment percentage was much worse than the case today.) The fact is, the Dems in the House in particular are lunging at this opportunity and showing their typical lack of discipline as well as of morality, in rushing to throw vast sums of money to everything and everyone they can possibly reward or buy the votes of. They're so self-centered, arrogant, and power-mad as well as undisciplined they aren't even reserving money to spend later on longer-term, buy-votes-for-longer-time-periods projects in the future when the time comes again to spend more money.

Once the Senate votes on its own super-bloated bill, then it goes back to the House to be bloated even more to secure House approval.

DLS

"Is this stimulus plan going to work? I don't know, but I do think investing in upgrading our infrastructures: IT/Data, Transportation, Energy grid & generation, and education are all worthy investments that will pay for themselves and provide jobs in the interim."

The amount of money is climbing to the point where it might be better just to do a large per-capita "citizen's relief payment" which would be so large, people would spend in addition to saving and retiring debt. That's how large the expenditures have already become. There is no discipline, even though so many of us knew there would be the temptation despite the unusually great attention and transparency (among the non-ignorant).

I would actually act as you advocate rather than dedicate all the money to short-term relief, the object of the "purists." With electricity, it would be for me transmission now, generation later (because transmission is deficient even more than generation, arguably, and has definitely been neglected -- a common view in industry is that there was a choice made in earlier years to remedy the generation deficicies rather than the transmission deficiencies). We also need bridge repairs or replacements and new as well as repaired highways. (Los Angeles metro could use two 30+ mile eight-plus-lane all-new highways to fill gaps in its system, for example, and the Bay Area has been decades overdue for a Southern Crossing, despite what the stupid "anti" activists have shrieked.)

Rambie

"The amount of money is climbing to the point where it might be better just to do a large per-capita "citizen's relief payment"... "

"I would actually act as you advocate rather than dedicate all the money to short-term relief..."

Oh my, am I and DLS in agreement? (wink)

It's easy to think a large relief payment for every tax payer would be nice, I sure wouldn't turn it down. There is enough people who are (lets say) financially-shortsighted who'd spend most of it on frivolous items which would drive up consumer spending for a short time and even the ones who pay off bills or even just put in in savings would still be putting the money back into the economy just in a different way.

However, I still think investing is infrastructure improvements is also important.

I'd like to think those two would be better for the economy long term than what this stimulus bill has turned into.

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