Tuesday, April 10, 2012

Seven Charts That Tell the Truth

A while back, James Pethokoukis put up a post at the Enterprise Blog entitled "The Seven Most Illuminating Economic Charts of 2011." On reviewing the charts some four months later, I think they are even more relevant to correcting the misinformation put out by President Obama, as he tries to convince the voters to give him another four years -- to wreak even more of the same destruction that has brought us to the present point. These seven charts tell quite a tale.

The first one tells the truth about Obama's claims regarding the unemployment rate -- I am reliably informed that Democratic leaders hate to be reminded of this chart (click to enlarge):

But that first chart tells only half the story, because it reflects the administration's policy of not counting, among the unemployed, those who have long ago given up trying to find a job. Here is a chart that shows the unemployment rate with those people taken into account (again, click to enlarge, and keep this chart in mind to compare with chart no. 6 below):

The next two charts help explode the populist mantra that "the rich are getting richer, and the poor are getting poorer." This implies that the middle class is remaining stagnant, while the extremes move farther apart. The trouble is, it's simply not true. New research shows that “median income and consumption both rose by more than 50 percent in real terms between 1980 and 2009":

Not only is the middle class much better off than it was in 1980, but the top percentage of wealth distribution has remained remarkably constant over the same decades. (Total wealth is a better measure of inequality than is income, which can fluctuate widely with economic events.) This surprising fact, which contradicts all of the populist, "Occupy-Wall-Street"-based class envy which the media has been promoting, is shown clearly in this next chart, which tracks the percentage of total wealth in the last century enjoyed by the infamous "1%", who supposedly are hogging more and more of the share of the "99%" (it shows that share is slowly, but steadily, decreasing):

Next, from The Economist, we have two charts which compare the anemic "recovery" under President Obama to all those which have come before, since the Great Depression eighty years ago:

The last chart is published by the Congressional Budget Office (it's in the full document downloadable at the link), and presents an unvarnished depiction of where President Obama's current spending and borrowing policies could take us by 2035, under three different sets of assumptions. The first set assumes that current federal policies, involving ever-increasing borrowing, will have no effects on the economy; the second and the third assume that the effects of the government's cumulative borrowing will have moderate to strong effects, respectively:

The numbers on the scale represent the total amount of federal debt projected to be held by the public as a percentage of Gross Domestic Product. So under the best scenario (no long-term effects), total federal debt will be 175% of GDP by 2035, while under more realistic assumptions, the total would be as much as half again higher -- over 250% of GDP.

To translate those projections to household numbers, they are saying that if the U.S. Government in 2035 was the equivalent of a household of $50,000 in income, it would owe somewhere between $100,000 and $125,000 -- with the amount of debt continuing to increase every year. No country has ever lasted long under such conditions.

Indeed, as the last chart shows, we are currently borrowing almost as much as we produce -- debt will equal GDP by the end of the next presidential term of office, if current policies are not reversed. And for debt to go from that ruinous level to more than two-and-a-half times as much in just eighteen years from that point shows what a sickening spiral of debt it will be.

The madness will have to end someday -- better now than later. For the life of me, I cannot understand how any rational person could support a platform that proposes to continue doing what we are doing now. But then, we know the human capacity for denial (remember those who went back to bed after hearing that the Titanic had struck an iceberg).

The next time you encounter someone who is hiding his/her head in the sand, please have them take a look at the above charts, going from first to last. Ask them how the country can borrow $50 if it is only earning $20 (that's borrow $50 trillion against an income of $20 trillion, but most people can't even imagine what $1 trillion looks like). Ask them how it can hope to get out of debt with such high unemployment, and whether they would loan money to someone who has no job, and who owes two-and-a-half times what he receives in benefits and subsidies.

And then ask them how they can vote for more of the same that we have now.


  1. Does anyone really believe things would be much different if John McCain had been elected? Does anyone really believe things will be much different if Mitt Romney is elected? Join the Million Vote March!

  2. Interesting charts, but even they do not fully depict the magnitude of the difficulty. I say this because it is my understanding that Gross Domestic Product (GDP) is currently defined as including all (or at least all Federal) government spending.

    It seems to me, and to a fair number of economists whom I respect as having their heads on straight, that the production by government of final products having a measurable dollar value is closer to vanishingly small than it is to worth being measured. At any rate, the exclusion of government spending from the calculation of GDP would make the situation appear even more unsatisfactory, and the difference in the statistics would be proportional to the ratio of Government spending to the non-government portion of GDP.

    Unless I am misinformed about the inclusion of government spending in GDP (and I am neither an accountant nor a specialist in financial matters), those charts are non-trivially optimistic about our recent economic conditions.

    Pax et bonum,
    Keith Töpfer

  3. Santorum was my preferred choice, but I will vote for Romney. Another 4 years of Obama would just hyper-accelerate the disaster already deepening.