Friday, March 16, 2012

Magic Ponies and Numbers

I can’t link to the Wall Street Journal piece, which is behind a wall, so I’ll just refer you to the post at Mish’s Global Economics which talks about how numbers in the economy do not add up. It sort of reminds me of a saying by Judge Judy, “When you tell the truth you don’t have to have a good memory.” Our government has a really poor memory.

The issue is that our economy has grown by only 1.7% last year, but unemployment fell from 10% to 8.3% which is a full 17% decrease. How does a 1.7% growth in the economy produce a fall in unemployment that is ten times greater than that? Or, to put it another way, why does such a large drop in unemployment produce such anemic growth in the economy?

Paul Krugman and Dean Baker will tell you, no doubt, that it is because people are paying down debt instead of spending money, but that sort of begs the question because what are all of those newly employed persons doing by way of employment that is not contributing to the economy? Forget about their unspent income (heh), what is happening to the work that they are doing?

Mish adds, “Trimtabs thinks the problem lies in the heavily massaged BLS employment data and the highly suspect BEA personal income data.” No, really? And I love that term, "heavily massaged."

In the same article he shows tax revenue for California, and it appears that California’s economy is not only not growing but appears to be pretty much crashing. In passing the budget last year the legislature was unable to balance the damned thing so they pulled the infamous stunt of increasing their assumptions for economic growth, thereby increasing tax revenue estimates and balancing the budget. That’s called the “magic pony” solution and it seems to be backfiring big time.

And the unemployment picture in California looks a bit bogus in light of that as well, since the state’s unemployment has dropped from 12.4% to it’s present 10.8% level. So while income taxes have dropped by 16.5% and sales taxes have dropped by 12.4% the state’s unemployment has also dropped by 12.9%. How does that make any sense?

Either the drop in unemployment is bogus or there is massive tax fraud going on; with people collecting wages and not reporting them for income tax, and then spending their money and not paying sales tax.

I think our government needs more than a good memory to balance all of these numbers. I think it needs a magician combining the talents of Merlin and Harry Houdini.

1 comment:

bruce said...

or maybe just using real numbers, not "massaged", "adjusted" or whatever ones, and admitting the truth in those numbers.

That's about as likely to happen as Jayhawk riding one of those magical ponies.

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