“When it becomes serious, you have to lie.” — Jean-Claude Junker, President of the European Commission.
Normally, I would not bring a European politician into a discussion about the U.S. economy. But in this case, European Commission President Jean-Claude Junker has “let the cat out of the bag.” In an unguarded moment, Junker let slip the working principle that guides politicians everywhere.
Think about it.
Is there any more serious issue for U.S. politicians than convincing you to give them your vote? You know that most voters in our intervention-addicted world credit politicians for prosperity they enjoy during their time in power. Just as primitive tribes credit the local chief or high priest for prosperity — or blame his sins when bad weather or pestilence make living conditions difficult.
Is there any more serious issue for you than understanding how you can preserve and build your capital in an uncertain world? Without capital, you are in danger of sinking to the level of the billions of Indians and Chinese whose livelihoods depend on their ability to rent their time. Not a happy prospect.
A crucial characteristic of the world that could make both the politicians’ dreams of power and your dreams of secure retirement come true would be the resumption of rapid economic growth — as reflected in both GDP accounting and employment reports.
Unhappily, the news on that score is far from encouraging…
In fact, a close reading of the data suggests that economic growth is negligible, and the real unemployment rate is about 23%.
That is the Shadow Government Statistics alternative unemployment rate for May 2016. Quite a contrast with the headline “official” unemployment rate of 4.7%.
But upon inspection, you can see that the alarming 23% ShadowStats unemployment rate is merely unemployment calculated as it was until the Kennedy administration, when out-of-work Americans who had suspended an active search for jobs — primarily because none could be found — were relabeled “discouraged workers” and dropped from the tally of the unemployed.
The Clinton administration widened the memory hole further.
In 1994, the Bureau of Labor Statistics (BLS) redefined the workforce to exclude all but the small percentage of the discouraged who had been seeking work for less than a year. The longer-term discouraged — some 4 million U.S. adults — disappeared into a statistical black hole.
Clinton also reduced the sample-sized employed in the household survey that determines the unemployment rate — excluding a disproportionate share of inner-city households who were less likely to have jobs.
Over the years, American politicians have used statistical sleight of hand to protect themselves from the angry mobs of voters in a way that the witch doctors and high priests of the past could only envy.
In the old days, when the rains didn’t come and the crops failed, the high priests could not fool anyone by merely issuing a proclamation thanking the gods for bumper crops.
Today, Obama proclaims a “vigorous recovery” and The New York Times pretends to believe it.