The Top 5 Myths about the US Economy

I thought it would be a good idea to carry the content of yesterday’s related post forward, and then to add more links and enhancements.

I put the original post together in advance of my appearance last night on Pundit Review Radio.

Here goes.

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Myth Number 5. The “need” for universal health insurance, or at least near-universal insurance for children.

Universal, government-paid, single-payer insurance is not needed, not wanted (even in uber-liberal Oregon, which rejected it 79%-21% in 2002), hasn’t worked in other countries, and appears to be well on its way to not working in Massachusetts. As to current national legislation, the congressional majority has shown that it is less interested in covering those who are currently uninsured than they are in expanding the numbers of people whose health care is paid for by the government. Current federal legislation that was supposedly about health care for poor children, legislation that vetoed by the President, did not focus on ensuring that the children of the working poor would be covered, but rather was all about expanding government-paid children’s health care to families annually earning as much as $60,000, $80,000, or more — and often even to adults. This is part of an agenda to create a government-run, coercive system. Polling on the topic has been fundamentally dishonest and deceptive.

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Myth Number 4. America is de-industrializing, and manufacturing is dying.

This is no more true than if someone in the 1950s had decried “de-agrification”; manufacturing has almost never stopped growing, although at a slower rate than overall GDP, because other economic sectors have exploded.

The number of people working in manufacturing is going down for the same reason that farm employment fell so dramatically after World War II (from 16% of American workers to less than 2% today) — significant and consistent improvements in productivity. That’s okay, because the employment statistics show that, in general, people who are losing their jobs are finding another job elsewhere, and there is transitional assistance (unemployment compensation, employer severance pay, etc.) during the adjustment period.

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Myth Number 3. We are in a recession (not heading for one, actually IN one).

A recession is, by definition, two negative quarters of economic growth. No matter how you feel about the economy, you can’t say it is in a recession until this has taken place, or until you’re sure it will. The economy has expanded during the last 24 consecutive quarters. In the two most recent quarters, Gross Domestic Product growth has been an annualized 3.8% (2nd quarter final) and 3.9% (3rd quarter advance, subject to revisions). The manufacturing and service sectors of the economy both expanded in October. Despite all of this, and because of the constant economic gloom and doom spread by Old Media, CNN reported in October that 46% of Americans think we’re in a recession.

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Myth Number 2. Most people are just scraping by.

A new report this month from The Conference Board on discretionary income definitively says otherwise. 63.5% of Americans have discretionary income — a big improvement over just 3-4 years ago. The percentage of Americans with discretionary income was in the 50s during the three previous periods reported (1997/199, 2002, and 2003), and in the low 30s during the 1980s. About twice as many Americans, percentagewise, have discretionary income compared to a quarter-century ago. Some “scrape.”

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And the Number 1 Economic Myth in the America Today Is ….. Income inequality is growing, the rich are getting richer, and they aren’t paying their fair share of taxes.

FACT: Income inequality is actually leveling off — The Census Bureau’s Gini coefficient, their official measurement of income inequality, has risen from .462 to .470 from 2000 to 2006 (a higher figure means increased inequality; 2006 figure is from Page 5 of latest Census Bureau report [PDF] on income and poverty). During the 1993-2000, the index went up by .029, or more than three times as much.

FACT: American workers and families on the whole are actually movin’ on up — A nine-year study of economic mobility just released by the Treasury Department shows that Americans are moving up the economic ladder as fast or faster than they ever have, even from the bottom levels. Real income gains of 24% during the nine years studied (1996-2005), most of which probably took place in the final 3-4 years, were over double the 11% achieved during the previous nine years (1987-1996). Wages are not stagnant, AND (surprise!) wage growth is outperforming the 1990s.

FACT: The rich are reporting more income, and paying more in taxes than ever — As of a couple of years ago, the richest 0.1% of Americans, representing about 136,000 tax returns (out of a total of 136 million), paid 15% of all federal income taxes. The bottom 50% of tax returns, netted together, pay virtually nothing. The people in the bottom half can’t possibly make the argument en masse that paying nothing is “fair,” so they’d be we’ll-advised to stop yapping about how the other half carrying all of the weight is “unfair.”