Monday, May 16, 2016

American Pessimism

You may not know it, but you never had it so good. So says Gregg Easterbrook, who marshals an impressive array of statistics that paint a decidedly rosy picture of life in today’s America.

And yet, Easterbrook bemoans the fact that, on the right and on the left, American politicians are attracting massive audiences by saying that America is in decline, that America is becoming weaker and poorer, that America has lost its way and that America is suffering from a myriad of social and cultural ills.

To which Easterbrook, suffering from a distinct lack of imagination, responds that if Americans are more pessimistic, the reason must be that optimism has gone out of fashion, that it has become uncool. In so saying he is disrespecting their judgment and pretending that he has a monopoly on truth and reality. 

According to Easterbrook, the fault lies with the mass media and the social media. Where have I heard that before? Better yet, where haven’t I heard that before? It turns out that the media are chock-a-block with stories about all the bad things that are happening. So, people think that things are bad, and getting worse.

They are so pessimistic and so gloomy that they do not even pay attention to the oracle of Omaha, one Warren Buffett, when he tells them that things have never been better and that they are getting better every day. 

To be fair to Easterbrook, I will share some of his evidence. You will decide whether it is dispositive or cherry-picked?

Job growth has been strong for five years, with unemployment now below where it was for most of the 1990s, a period some extol as the “good old days.” The American economy is No. 1 by a huge margin, larger than Nos. 2 and 3 (China and Japan) combined. Americans are seven times as productive, per capita, as Chinese citizens. The dollar is the currency the world craves — which means other countries perceive America’s long-term prospects as very good.

Pollution, discrimination, crime and most diseases are in an extended decline; living standards, longevity and education levels continue to rise. The American military is not only the world’s strongest, it is the strongest ever. The United States leads the world in science and engineering, in business innovation, in every aspect of creativity, including the arts. Terrorism is a serious concern, but in the last 15 years, even taking into account Sept. 11, an American is five times more likely to be hit by lightning than to be killed by a terrorist.

Is the middle class in dire straits, as Mr. Sanders contends? Yes, inflation-adjusted middle-class household income peaked in 1998 and has dropped slightly since. But during the same period, federal income taxes on the middle class went down, while benefits went up. Gary Burtless of the Brookings Institution has shown that when lower taxes and higher benefits are factored in, middle-class buying power has risen 36 percent in the current generation.

Is American manufacturing in free fall, as Mr. Sanders and Mr. Trump assert? Figures from the Federal Reserve Bank of St. Louis show industrial output a tad below an all-time record level, while nearly double the output of the Reagan presidency, another supposed golden age. It’s just that advancing technology allows more manufacturing with fewer workers — a change unrelated to foreign competition.

If the statistics say one thing and you believe something else, well then, we can conclude that one of you is wrong. It need not be you; it need not be the statistics. After all, we recall the old saying, whose author seems to be unknown, apparently first stated in 1891:

It has been wittily remarked that there are three kinds of falsehood: the first is a 'fib,' the second is a downright lie, and the third and most aggravated is statistics. 

Statistics notwithstanding, precious few Americans believe that their nation is on the right track. Precious few are happy with the way things are. Looking at these poll results you should ask yourself whether the statistics are cherry-picked to cover up a reality that people see in their everyday lives.

True enough, the stock market is up. Some real estate is up, but much real estate has not yet returned to pre-crash levels. One would like to know how many people are still under water on their mortgages.

Interest rates are scraping the bottom, but that reflects Federal Reserve policy. But, the nation is being kept afloat on borrowed money, and the Obama recovery has been anemic, at best. Let’s not forget that over the past seven years the nation has lost status and stature and prestige, that Islamist terrorists are controlling large swaths of the Middle East and are now invading Europe, that America itself is suffering an invasion of undocumented aliens, who are welcomed by the current administration and whose presence is surely transforming the culture.

And let’s not forget the cultural tyranny exercised by the current administration, not to mention the constant lies, about Obamacare and about the Iran deal, that have been foisted on the American people.

True enough, Iran is not going to nuke Tel Aviv tomorrow, but the American people understand that the goal of the Obama administration is to run out the clock on foreign relations, leaving others to sort out its messes and, naturally, to take the blame. The American people are not shortsighted. They are not blinding themselves to reality when they foresee the potential disasters that might befall the nation after the Obama presidency.

On the surface, and to the extent that statistics can measure them, things in America don’t look very bad at all. And yet, as other nations are growing in power and influence, America seems to be declining. It seems to be more interested in apologizing and in losing wars than it is in winning. America has suffered serial humiliations on the world stage. If people are demoralized they have reason to be demoralized.

Moreover, America’s social order has been fraying. The number of intact families has been seriously declining. The nation has increasingly been divided according to race. Black Lives Matter protesters have made a mockery of free inquiry and open debate on many college campuses. A bakery was put out of business because it did not want to bake a certain wedding cake. By all appearances, the nation has lost its sense of shame and cannot stop talking about sex. We are not only weaker, with a shrinking military and a lesser reputation. But, we have become a decadent nation, one that cares more for pleasure seeking than for hard work.

The school system and the great universities have become, in many cases, indoctrination mills. The nation is awash in diversity preferences, for everyone except white males. We are engaged in a great debate about transgendered restrooms… and you think that everything is great in America.

It might look good on the surface, but the social order and the culture are rotting from within.

One might say that things in France looked pretty good during the reign of Louis XV, but his mistress, the Marquise de Pompadour foresaw the future when she reportedly said: Apr├Ęs nous le deluge.

For all we know and for all Easterbrook knows, the people who are pessimistic about America’s present and America’s future know something. Rather than trot out a bunch of statistics that make them all look like fools, we should consider that they might all be right. I am not saying that they are necessarily right, but disrespecting their judgment about their experience merely makes you look like an arrogant twit.

One understands that today’s cognitive therapists have decided that it is good to look at the world through rose colored glasses. Having discovered that people who are depressed tend to be pessimistic, they have declared the cure to be optimism. And they want to generate such optimism by collecting data that would tend to show that things are not as bad as they appear to be. It makes some sense.

Sadly enough, they have misunderstood the basis for cognitive therapy. The homework exercises that Aaron Beck concocted to treat depression do not tell you to write down all the facts that would disprove a pessimistic attitude. They tell you to write down both the facts that would give credence to your pessimism and the facts that would give credence to optimism. The key is to find balance, not to blindly face the future with a “What Me Worry?” attitude. It’s not about happy talk and about generating good moods, but about being judicious in one’s judgment, seeing the good and the bad and acting accordingly.

7 comments:

Ares Olympus said...

I'm not sure I'm ready to defend optimism!

I do recall reading somewhere that when pollsters ask people about their personal optimism things look good, while if you ask them about the country things look bad. So that dichotomy suggests mass media holds some responsibility for gloom and doom.

On pessimistic side, I'll agree record low interest rates (and record low returns on all our pensions and retirement funds) is a problem, and a demonstration that we don't know what "new normal" we should expect, and rather it does look like we're at the tail end of history, with the economics future possibly something completely different and unknown.

Basically our current fiat money system is based creating on ever growing debt to keep old debt from imploding into defaults, and so economic growth is required to keep everything going, and if an honest business cycle doesn't support the growth needed for our debt demands, we fail, debts default, asset values crash on debt margin sellers, retirement funds crash, and the only way to fix it is to add another zero on the amount of public debt, so we can get 8 more years of fake growth.

So I'll agree all the "money printing"/"credit creation" has created a world that is awash with temporary easy money looking for quick profits and has created asset bubbles that are still going strong, and with stocks at all-time high, on a THIRD peak since 2000, it looks like the downside risks far outweigh the upside potential. In my mind NO ONE should be invested in ANYTHING now, because any fear stampede can leave your investments 20 or 40% poorer in the matter of months or weeks, and its impossible to time when to leave the market. But everyone with a 401(k) however diversified is sitting on a similar cliff like 2008.

And whatever risks the U.S. has, the risks seem much greater in China which went into a much greater debt binge after 2008 than we did, so given so much of our things are now made in China, you can imagine chaos in China might temporarily create price deflation on imports, it'll soon become price inflation, and all the new parts for things that can still be fixed will suddenly become unavailable, and sold to the highest bidder for whomever can corral the last toner cartridges or whatever mass produced item you happen to need that we can't make. Who knows what "bottleneck" items will threaten our economic activity?

If I were to look for optimist I might attempt it in the direction Easterbrook. That is I acknowledge fear is contrary to creativity, and can as easily encourage wasteful hoarding and paralysis. If you don't know what the future holds, if you know every investment has a larger downside than upside, what do you do?

If businesses are using their surplus profits to buy back stock rather than investing in future profits, they can hold stock values high for just as many years as it takes for the execs to sell off their holdings before the crash.

The only real point of optimism in all this most of the rest of the world is much more vulnerable than we are, and Trump is right - we can do economic warfare better than anyone else, and as long as the world accepts the dollar as the currency of trade, we can create $14 trillion dollars tomorrow if we had a reason, and erase the national debt, and since most of that debt is owned by the ultra rich who have nothing to spend it on, inflation can actually stay low. Or at least if the problem we're facing is asset price DEFLATION, then paying off all the treasury debt would instantly give the wealthy more liquid cash to bid asset values back up again, and our pension and 401ks are saved again!

But if we accept there is an endgame to our madness, how do we transition to what will replace what we have without destructive economic chaos or political chaos or even violent revolution?

And unfortunately its likely that the U.S. will have the LEAST of these problems for the longest period of time, because of our special status in global trade.

Ignatius Acton Chesterton OCD said...

I apologize for repeating myself, but the #1 civil rights issue in America today is public education in non-affluent areas. I am opposed to a form of economics that is labor arbitrage( disguised as "free trade") until we are able to educate and prepare our young people for the real world they will enter. Instead, we ignore them, coddle them, tell them they're special, and put them in a bubble for as long a time as possible, despite what international test scores show: mainstream American public education is a disgrace. The Democrat Party is a wholly-owned subsidiary of the teachers unions, public sector unions, and trial lawyers who make this great institutional mediocrity possible (read: NOT the taxpayer, who is paying through the nose for this nonsense). Until we get that figured out, I am opposed -- indeed I think it immoral -- to send high-wage manufacturing jobs offshore to places where the people earn $1.22 per hour with no benefits, few safety rules, and an entirely different regulatory environment. Curious... I wonder where Trump and Bernie came from? Probably because everything is SO GREAT!!!

priss rules said...

Identity-Roots-History-Culture-Spirituality.

That is the formula for meaning and morality.

But we only have PC, Pop Culture, and alternative cultures of hedonism.

Sam L. said...

"Job growth has been strong for five years, with unemployment now below where it was for most of the 1990s, a period some extol as the “good old days.” " Nailed both feet with a 10-guage shotgun right off the bat.

Ignatius Acton Chesterton OCD said...

Here's a part of Easterbrook's analysis that I love:

"It’s just that advancing technology allows more manufacturing with fewer workers — a change unrelated to foreign competition."

The "fewer workers" point is the point! We have made employing people vastly more expensive and inflexible. We are sending jobs overseas to chase foreign labor rates that are a mere fraction of our minimum wage. Foreign labor competition is the issue, and automation is driving the ability of high-tech manufacturing to remain in the United States and remain competitive. Consider the huge costs of freight from Asia and other emerging economies, and it is still much, much cheaper to produce stuff over there than it is here. He is not factoring the costs of labor rates, regulation, work rules, etc. To say these issues are "unrelated to foreign competition" is to cast aside the reality that we have made our own labor force uncompetitive with ancillary costs related to employment. I do not think this is a bad thing, indeed I think America's working environment and standards are quite good. But we are placing ourselves in competition with countries at stages of economic development that do not have these burdens. This is not just relics like the textile industry, we're talking about automobile, appliance and other forms of consumer goods manufacturing. The remaining manufacturing jobs are specialized, and carry high wages along with the demand for greater skills. That's supply and demand. But our mainstream public schools do not enforce the rigorous curriculum and discipline that these jobs require. So Apple sets up its manufacturing partners in China, where there are the proper number of engineers with the needed specialties. Those jobs could be American jobs, but we cannot keep up with labor rates and skills availability. That's foreign competition, folks!

And I'm not some trendy pessimist. The truth is that manufacturing creates wealth. Engineers create infrastructure. These are assets! And we are letting our "undesirable" manufacturing capacity go to Mexico, like the Carrier and Ford plants... just over the border. That's labor arbitrage, and it offers no protections to people who are not educated. And yet the band plays on in our horrid public schools. What opportunity does our nation offer to such people? Welfare? Bogus SSID claims? Free phones? Free healthcare? That's not pessimism, that's reality. We are building an entitlement society, which definitionally is that one believes that one has a right to something of value, without the need for exchange. That relies on the creativity, capital and labor of another person. That's not justice, that's organized theft. That is dangerous... very dangerous. People need opportunities to work and earn a living, and some people just aren't smart enough to do differential equations and complex statistical modeling. What do we do with them? The elites in our country -- both Republican and Democrat -- seem to think we should throw them away, or throw them a bone so they'll shut up. All those bones are adding up!

Anonymous said...

OT, Stuart.

Just came across Philip Rieff's "My Life Among the Deathworks".

A brief read on Google books had a very interesting framework for viewing the culture wars.

http://tinyurl.com/j9n2mk4

Thought you and some of your readers might enjoy it.

- shoe

Ares Olympus said...

IAC: People need opportunities to work and earn a living, and some people just aren't smart enough to do differential equations and complex statistical modeling. What do we do with them? The elites in our country -- both Republican and Democrat -- seem to think we should throw them away, or throw them a bone so they'll shut up. All those bones are adding up!

Are you interested in degrees of protectionism? Like raising tarrifs and trade barriers against imports from countries that can pay their workers $2/day and outcompete our "working class" jobs that need $20/hour to raise a family?

Henry Ford had something right - manufacturing shouldn't employ people who can't afford to buy the consumer products they are making.

I wonder how much our agricultural harvests that still need hand-picking would cost if we gave migrant workers say $15/hour for picking them for us? I wonder how many second generation Americans would be willing to take the place of our current Mexican-imported labor?

I don't know serious answers to these questions. Or my primary answer is we need an economy where you can afford to be poor without being destitute. But also its a delicate question which is worse, being in cash-only poverty with a roof over your head compared to middle class suburban indebtedness.

And the biggest false promise is that diversified investments will allow people to save money during their working years and live off it after 65, while all safe investments have returns below inflation.

Today I met a man who just put his mother, age 91, into a nursing home charging $7600/month for care. I didn't get a chance to ask him how they're paying for that. If there's reason for pessimism about our future, it's right there.

Now-a-days lucky people perhaps will get a quick incurable cancer at age 75, and maybe soon we'll make assisted sucide legal so parents can die in dignity and still pass on something to their kids and grandkids.