Friday, March 06, 2009

Wrecking The Economy:
Your Government and the Media at Work

It’s all gloom and doom, if you believe President Obama. He’s so busy talking down the economy that if you aren’t careful, you’ll fall for his line. The worse he can make you believe things are, the easier time he’ll have explaining why he hasn’t been able to fix it.

The mainstream media is just as bad, for entirely different reasons: They need readers, viewers, and listeners. So every headline is portrayed in the direst language. And, they are all guilty of it, to some extent, even the best, most objective and balanced news outlets.

I’m not arguing that things are sunny and bright, but a little perspective is a useful thing.

For example, we hear the media trumpeting the latest job-loss figures each month, and the overall unemployment rate. In January The New York Times reported that “the unemployment rate, meanwhile, jumped to a 16-year-high of 7.2 percent, the Bureau of Labor Statistics reported on Friday. The growing army of the unemployed, at 11.1 million, is nearly 50 percent bigger than at the start of the recession a year ago.”

Okay. But a year ago unemployment was at its lowest point in years, below 5 percent, and 5 percent is considered full employment.

Is there good news in this situation? Unemployment in January was 7.2 percent. But you know, if 7.2 of every 100 people don’t have a job, that means that 92.3 do have a job, and that is worth noting.

We shrink in horror when we hear that so many people can’t pay their home loans. The Associated Press reported Thursday that “a stunning 48 percent of the nation's homeowners who have a subprime, adjustable-rate mortgage are behind on their payments or in foreclosure … A record 5.4 million American homeowners with a mortgage of any kind … were at least one month late or in foreclosure at the end of last year, the Mortgage Bankers Association reported.”

When you look a little deeper into this, you find that the 48 percent with a subprime loan were risky borrowers to begin with. Should we be surprised that many of them are behind in their payments? Especially after the Clinton administration bullied banks to make more of those bad loans in the early 90s, and the Congress bullied the regulators who tried to blow the whistle on this idiotic situation back in 2004?

Then there is the “5.4 million people.” Notice some of them are only one month late, and only some of them are actually in default. This story would benefit from more information, and so would its readers.

Is there good news in this? Well, 5.4 million is less than 12 percent of total mortgage loans, which means that 88 percent are doing just fine keeping their payments up.

Mr. Obama has said "The cost of health care now causes a bankruptcy in America every 30 seconds.”

Is there good news in this situation?

Yes: It isn’t true.

At that rate there would be 1,051,200 bankruptcies caused by healthcare costs in a year. The number of bankruptcies in November of last year was 931,873, and was estimated to be about 1,000,000 by the end of the year, and that is short of Mr. Obama’s scenario. So even if every one of those bankruptcies was caused by high medical bills, the President was wrong. And when you consider that there are a few other reasons for people declaring bankruptcy, such as loss of employment and poor resource management, his figure was grossly wrong.

Healthcare costs are definitely too high, but they don’t cause as many bankruptcies as Mr. Obama said they do. They are a reason for action, but not a reason to nationalize the healthcare system.

Whether Mr. Obama’s people did a poor job of research or are just lousy mathematicians; whether Mr. Obama stretched the truth to make political hay or whether he just out and out lied to the American people, is difficult to say. But regardless, his statistics are wrong.

The combination of an opportunistic media and a president that either doesn’t understand what is going on around him, or doesn’t really care, so long as he achieves his narrow political goals, has created a perfect storm.

His continued negativism and inability to find a proper solution to this problem threaten the nation’s financial security.

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