MEDIA JUST WON'T REPORT ON THIS CRAPPY ECONOMY

FROM NAKED CAPITALISM

THURSDAY, AUGUST 1, 2013

“The Media Just Won’t Report on This Crappy Economy,” Such As 80% of US Adults Near Poverty, GDP Funny Business

Reader Cathryn Mataga complained yesterday in comments about the under-reporting of how bad things are out in the real world where most people live. It’s not hard to find proof of her thesis.

I received an e-mail today about an Associated Press story that ran on July 28, “80 Percent Of U.S. Adults Face Near-Poverty, Unemployment: Survey.” The findings are grim:

Four out of 5 U.S. adults struggle with joblessness, near-poverty or reliance on welfare for at least parts of their lives, a sign of deteriorating economic security and an elusive American dream.

Survey data exclusive to The Associated Press points to an increasingly globalized U.S. economy, the widening gap between rich and poor, and the loss of good-paying manufacturing jobs as reasons for the trend.

The findings come as President Barack Obama tries to renew his administration’s emphasis on the economy, saying in recent speeches that his highest priority is to “rebuild ladders of opportunity” and reverse income inequality.

Notice the framing: the story uses as its hook the contrast between how precarious most Americans’ hold on prosperity is, versus Obama’s rather late in the game efforts to do something to improve the welfare of ordinary citizens.

This piece tells us that things are much worse than most pundits would have you believe, namely, that the overwhelming majority of Americans encounter serious hardship. Now perhaps it was just an accident of happenstance that it didn’t get traction (Huffington Post did feature it, but Obama has told us that you can’t believe everything you see in the Huffington Post, so that doesn’t count). But I wonder if it was politely ignored by many MSM reporters precisely because reporting the survey on a timely basis would undercut Our Fearless Leader’s empty gestures towards what is left of the middle class. As Lambert put it,

“Middle class,” forsooth. It might as well be the Lannisters talking about the “smallfolk”.

Key parts of the Associated Press report:

Hardship is particularly growing among whites, based on several measures. Pessimism among that racial group about their families’ economic futures has climbed to the highest point since at least 1987. In the most recent AP-GfK poll, 63 percent of whites called the economy “poor.”…

While racial and ethnic minorities are more likely to live in poverty, race disparities in the poverty rate have narrowed substantially since the 1970s, census data show. Economic insecurity among whites also is more pervasive than is shown in the government’s poverty data, engulfing more than 76 percent of white adults by the time they turn 60, according to a new economic gauge being published next year by the Oxford University Press.

The gauge defines “economic insecurity” as experiencing unemployment at some point in their working lives, or a year or more of reliance on government aid such as food stamps or income below 150 percent of the poverty line. Measured across all races, the risk of economic insecurity rises to 79 percent.

Marriage rates are in decline across all races, and the number of white mother-headed households living in poverty has risen to the level of black ones.

“It’s time that America comes to understand that many of the nation’s biggest disparities, from education and life expectancy to poverty, are increasingly due to economic class position,” said William Julius Wilson, a Harvard professor who specializes in race and poverty. He noted that despite continuing economic difficulties, minorities have more optimism about the future after Obama’s election, while struggling whites do not.

I’ve been struck at the number of people who’ve shown up in comments vociferously arguing that the threat that someone might rob them justifies shooting, meaning killing, them (Older attorneys have piped up to express their horror that this argument is even being advanced). But economic desperation, and the fallen standing of white people, who once had a presumption of social standing to bolster their dignity, is fracturing social norms. Game of Thrones is looking uncomfortably germane: “Guest rights don’t mean so much as they used to…Some o’ them swinging down by the river figured they was guests too.”

And on a different front, Counterpunch (hat tip Rich) tells us the BEA is coming up with new and more creative ways to goose reported GDP. The usual device, that of using a not-credibly-low (but weirdly hardly ever commented upon) GDP deflator can’t be deployed when inflation is already really low. This change was announced a few month back but this piece gives a good recap. Key sections:

Facing the prospect of a 2nd quarter GDP report showing economic growth less than 1% (some professional forecasting services predict as low as 0.5%), and a year to year growth of the US economy likely to come in at barely 1%–compared to a 2011-12 already tepid 1.7%–today the Obama administration will announce a major revision of how it calculates GDP which will bump up GDP numbers by as much as 3% according to some estimates. That’s one way to make it appear the US economy is finally recovering again, when all other fiscal-monetary policies since 2009 have actually failed to produce a sustained recovery…

Instead of an actual, paltry 0.4% GDP growth rate in the fourth quarter of 2012, a weak 1.6% in the first quarter 2013, and the projected 0.5%-1% for the 2nd quarter 2013—all the numbers will be revised higher in the coming GDP estimate for the 2nd quarter 2013. The true GDP growth rate of the most recent April-June 2013 period, projected as low as 0.5% by some professional macroeconmic forecasters, might not thus get reported..

One explanation is that Gross Domestic Income (GDI) has been running well ahead of GDP (Gross Domestic Product). GDP is supposed to measure the value of goods and services produced in the US, while GDI is a measure of the income generated in the US. They are supposed to be about equal, with some adjustments for capital consumption and foreign net income flows. The idea is whatever is produced in terms of goods and services generates a roughly equivalent income. However, it appears income (GDI) is rising faster than GDP output. The BEA revisions therefore appear aimed at raising GDP to the higher GDI levels.

But income is rising faster because investors, wealthy households (2%), and their corporations are increasing their income at an accelerating pace from financial securities investments—that don’t show up in GDP calculations which consider only production of real goods and services and exclude financial securities income like stocks, bonds, and derivatives. So instead of adjusting GDI downward, the BEA will raise GDP.

And these revisions play directly into upcoming policy moves:

For one thing, it will make it appear that US federal spending as a share of GDP is less than it is and that US federal debt as a share of GDP is less than it is. That adds ammunition to the Obama administration as it heads into a major confrontation with the US House of Representatives, controlled by radical Republicans, over the coming 2014 budget and debt ceiling negotiations again in a couple of months. It also will assist the joint Obama-US House effort to cut corporate taxes by hundreds of billions of dollars more, as legislation for the same now moves rapidly through Congress in time for the budget-debt ceiling negotiations.

Revising GDP also enables the Federal Reserve to justify its plans to slow its $85 billion a month liquidity injections (quantitative easing, QE) into the banks and private investors. This ‘tapering’ was raised as a possibility last June, and set off a firestorm of financial asset price declines in a matter of days, forcing the Fed to quickly retreat. But the Fed and global bankers know QE is starting to destabilize the global economy in serious ways and both, along with the Obama administration, are looking for ways to slow and ‘taper’ its magnitude—i.e. slow the $85 billion. Redefining GDP upward, along with upward revisions to jobs in coming months, will allow the Fed to revisit ‘tapering’ after September, when the budget-debt ceiling-corporate tax cut deals are concluded between Obama and the US House Republicans.

Now there’s a long and proud tradition of manipulating and redefining official statistics for political ends. When I started blogging in 2006, the dubious state of officials numbers was, perversely, a hotter topic than it is now, and you also had some bloggers dedicated to parsing some of them (such as Brad Setser on the Treasury International Capital report). One of the reasons may be that the BEA went on a concerted campaign against John Williams of ShadowStats (I was at an economics conference that had a panel from the BEA patiently and geekily debunking some of the things Williams had said). My impression has been that Williams did and continues to do a good job of recording the changes in various official reports over time. But for some measures, he’s also tried publishing his own versions and his methods for some of them (like adding a fixed number to the Consumer Price Index) and that set him up for attack.

I didn’t want to short change Mataga on her remark from yesterday:

The media just won’t report on this crappy economy — that is until we get a Republican president.

I have to take issue with her on that. The dot-bomb period, which took place early in the Bush administration, was most assuredly presented as better than it was. I was barely watching the economy back then, and I recall seeing one GDP release (maybe first quarter 2002) and recall that I was so incensed at how ridiculous it was (2% ish) that I called everyone I knew (as in people who had real economy contacts outside NYC in various parts of the US) and asked them if they saw any growth. None did. By the time the final revision came in, the GDP for that quarter was under 1%. Similarly, the period before the crash was depicted in the media as being a period of good growth when it was by many measures not all that hot.

The fact is that business advertisers don’t can’t take very much reality, and so you’ll always see the business press represent the economy through rose-colored glasses, but not so much as for them to lose credibility. But with ordinary people, aka the consumers who drive the American economy, under more and more stress, it’s also getting harder to make the normal Panglossian media treatment look credible.

Read more at http://www.nakedcapitalism.com/2013/08/the-media-just-wont-report-on-this-crappy-economy-such-as-80-of-us-adults-near-poverty-gdp-funny-business.html#QrsZKIiFgiwvi44b.99