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October 19, 2006
Economic Hypochondria

George Will has an excellent column in today's Washington Post that touches on the most frustrating aspect of national election coverage -- the economy. He uses a perfect phrase, "economic hypochondria", to describe the irrational gloom that pervades the coverage of a massive economic expansion:

"Worst economy since Herbert Hoover," John Kerry said in 2004, while that year's growth (3.9 percent) was adding to America's gross domestic product the equivalent of the GDP of Taiwan (the 19th-largest economy). Nancy Pelosi vows that if Democrats capture Congress they will "jump-start our economy." A "jump-start " is administered to a stalled vehicle. But since the Bush tax cuts went into effect in 2003, the economy's growth rate (3.5 percent) has been better than the average for the 1980s (3.1) and 1990s (3.3). Today's unemployment rate (4.6 percent) is lower than the average for the 1990s (5.8) -- lower, in fact, than the average for the past 40 years (6.0). Some stall.

Economic hypochondria, a derangement associated with affluence, is a byproduct of the welfare state: An entitlement mentality gives Americans a low pain threshold -- witness their recurring hysteria about nominal rather than real gasoline prices -- and a sense of being entitled to economic dynamism without the frictions and "creative destruction" that must accompany dynamism. Economic hypochondria is also bred by news media that consider the phrase "good news" an oxymoron, even as the U.S. economy, which has performed better than any other major industrial economy since 2001, drives the Dow to record highs. ...

President Bush's tax cuts were supposed to cause a cataract of red ink. In fiscal 2006, however, federal revenue as a share of GDP was 18.4 percent, slightly above the post-1962 average of 18.2. And the federal budget deficit was $247.7 billion, just 1.9 percent of the $13.1 trillion GDP. That is below the average for the 1970s (2.1), 1980s (3.0) and 1990s (2.2).

The deficit numbers Will uses are suspect, but in a bipartisan manner. Neither party has acknowledged the massive entitlement burdens that exist in current policy, because neither party wants to have to address them either through taxation or reduction of benefits. The deficit calculation Will uses is the one Washington has consistently used, which makes his comparisons valid for his point. However, the real deficits should cause concern, and that certainly would not be economic hypochondria.

That aside, however, Will hits the nail on the head. Taxes have declined, and wages have grown, in real dollars. Tax revenues have increased through more substantial investment and massive job growth, with over 6.6 million jobs added to the economy in the last three years. Oil prices, which spiked upwards during a perfect storm of Middle Eastern instability and two Gulf Coast hurricanes that dented American refining capacity, have driften down significantly, and the discovery of a massive Gulf Coast reserve promises more stability in pricing in the future.

Do we hear much about that? No. Instead, as Will points out, we get treated to breathless coverage of Democratic complaints. Bill Clinton told British audiences that America outsourced college-education jobs to India, but the coverage failed to explain that American unemployment among college gradutes is two percent. That, as Will notes, should tell people to stay in school and get their education, not despair at the thought of graduation. Pelosi and the Democrats have run three elections on the notion of an economic stall, and that seems to be getting the most media traction in the one election it applies least.

Welfare-state proponents cannot stand prosperity, in a very real sense. The more prosperous a nation becomes through capital investment and reduction of federal burdens, the more desperate they become to sell gloom and doom to end it. Their raison d'etre disappears when market economies are allowed to function normally. They sell dependence on managed economies, and in order to survive politically, they have to paint the worst possible picture of economic success that comes outside of central management.

In a rational world, this desperation would be considered satire. Unemployment has dropped to near record lows, and all the Democrats can do is to treat the economy as if it were the Second Coming of the Great Depression. The reluctance of the media to respond with the economic facts turns this from satire to farce.

UPDATE: Speaking of satire, Scrappleface has its own unique take on the election.

Sphere It Digg! View blog reactions
Posted by Ed Morrissey at October 19, 2006 6:33 AM

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