Over the weekend, Barry Ritholtz over at the Big Picture blog had one of the most thought provoking posts I have read. It's titled "Investing in a Post-Fact Society (a/k/a, Were the Good Times a Mirage?)." It is a post I will be chewing over for quite some time. I asked him if I could use it to riff off of and he said yes (Being a good lawyer, I still have the email!). Below is part of the post and then some of my own thoughts.
One of the concerns we have expressed here over the years is that there was much more -- and less -- to the post 2001 recession recovery than met the eye.
Several years ago, this was a controversial position. We first suspected we were on to something, however, when the many critics of this view found it much easier to use epithets (negative, naysayer, perma-bear) than to do the credible critiques of our positions, or any kind of critical analysis. It reminded me of an old lawyer's joke: "When the facts go against you, stress the law; when the law is against you, emphasis the facts; when your case has both the law and the facts against it, call the other lawyer an asshole."
As of March 22, we are still in the early stages of any sort of widespread understanding about this post-recession recovery cycle. Many people are just starting to realize how much fertilizer has been spread around.
Many of the stated economic gains have been a false ghost. Whether it was overstated job creation (NFP), understated inflation (CPI) or "inflated" growth (GDP), a shocking amount of the debate about the economic expansion has been primarily spin.
That's what attracted me to this book by Farhad Manjoo: Learning to Live in a Post-Fact Society. That such a book is even necessary boggles the mind. Consider the myriads of benefits and standards of living improvements we have seen from the reality-based community -- and by that, I mean Scientists (Physicists, Biologists, Medical Doctors) and Engineers (Technology, materials and mechanical). Why so many people would turn their backs on this belief system leads me to Arthur C. Clarke's 3rd law: "Any sufficiently advanced technology is indistinguishable from magic."
Philosophically, I want to explore -- beyond the legitimate gains mentioned above -- a nagging question about the spin and artifice. Why have we as a nation been increasingly reluctant to confront objective reality? What is it about the present social mood, political leadership, and economic environment that has so totally led us to a world of denial? Up is down, black is white, good is bad -- its all very Orwellian.
I have long railed against superficial headline data that belied the weakness underneath. There were a parade of syncophants and cheerleaders who, despite knowing better, continued to cheerlead punk data. These pundits, politicos and pinheads are now confronting the ugly reality they can no longer ignore. Consider the progression the motley crew of fools and liars went through: First they denied what was happening, then we got the whole contained thingie, then they blamed da Bears. Now, they have unwittingly embraced Marx, and have successfully pled for the central planners to rescue them from their own stupidity.
Here's my question: Are we stuck with these fantasists? Has Truthiness replaced Truth? Are we going to be saddled forever with these damaging, hallucinatory hacks?
This is something I have experienced as well. There are three sets of data have led me to continually question the strength of the latest economic expansion.
First, there is debt. Although there was continued talk of the budget deficit narrowing, the US government continued to issue record amounts of debt. Currently, total debt outstanding is $9,392,204,908,953.75. Here is a table of total debt outstanding, at the end of the federal government's fiscal year.
09/30/2007 9,007,653,372,262.48 09/30/2006 8,506,973,899,215.23 09/30/2005 7,932,709,661,723.50 09/30/2004 7,379,052,696,330.32 09/30/2003 6,783,231,062,743.62 09/30/2002 6,228,235,965,597.16 09/30/2001 5,807,463,412,200.06 09/30/2000 5,674,178,209,886.86
First, I must give a huge hat tip to Calculated Risk who originally pointed this fact out.
Secondly, something about the story that "the deficit is decreasing" and record amounts of debt didn't add up. Simply put, how could a country that is borrowing this amount of money actually be balancing the budget? The real answer is the budget is nowhere near balanced and hasn't been for some time.
Secondly, there is job growth. Simply put, the total amount of jobs created in this expansion is the lowest of any expansion since the end of WWII. Yet, we kept being told this economy was the "greatest story never told."
Finally -- and in correlation to the jobs issue -- wages have been stagnant for this expansion. Here is a graph of real (inflation-adjusted) income from the the Census Bureau:
If things are so good, why is real median income stagnant?
All of the above points -- debt, jobs and income -- are all readily and publicly available verifiable data points. Whenever I have brought them up in analysis no one has ever told me I have my facts wrong. Yet there are people who completely ignore these facts and continually argue for policies that would make these facts worse. What in the hell is going on here?
I have a pet theory which is pure conjecture.
Since 1980 the US has implemented a very conservative to centrist economic program. Under Reagan, Bush I and Bush II we had a "conservative" agenda. By conservative I am referring to "
supply deny-side" economics along with massive financial deregulation. Under Clinton we have a centrist economic program (Clinton was center left and Gingrich was center right making the program pretty centrist). In other words, conservative economic policies have been implemented in one way or another for a continual period of time. Yet the latest expansion -- and the last 9 months in particular -- have highlighted the fact that conservative economic policies are not the panacea they were advertised as. In fact, they create some pretty serious problems (so to extremely liberal policies, but those policies create different problems).
The Right Wing Noise Machine is well aware of these facts. They can read numbers just like us. Larry Kudlow (and other Republican economists) knows where the St. Louis Federal Reserve's website is. But that doesn't matter. They can't believe that their wonderful policies actually created the current problems. So they engage in spin rather than analysis.
Compounding this problem is the Republican dominance of the AM radio dial. I live in Houston Texas and all be have on AM radio is Republican talk radio all day long. All day long. Once those folks get on theme, they all repeat it ad infinitum until it becomes fact. I swear to God, if Rush Limbaugh said "the sky is purple today" within four days there would be a discussion on all the Republican talk radio shows about how the Democrats caused the sky to turn purple.
The point I'm getting to is the right wing noise machine has a lock on certain types of "information" distribution. And they use it to maximum advantage. They have dumbed down the conversation in multiple ways and done incredible harm to this country's political dialogue.
And I have no idea how to stop it.