(What’s Left of) Our Economy: No Country is an Island? II


, , , , , , , , ,

Two weeks ago, I wrote about the utter confusion in economics, business, and policy ranks about the spectacle of the United States continuing to grow much more strongly than the rest of the world on average. Unfortunately, the powers-that-be have made exactly zero progress in understanding this divergence and its implications for the United States.

The main problem continues to be an apparent determination to believe in and perpetuate myths about the (fortuitously linked) inevitability and desirability of global economic interdependence, and about the American and other government policies aimed at its intensification.

A recent Financial Times article, for example, illustrated the extent to which these misunderstandings have prevented recognition of fundamental causes of the 2007-8 financial crisis and its dismal aftermath, and therefore keep blinding policymakers to the most important steps needed to restore genuine financial health nationally and globally.

Author Chris Giles noted the uneven nature of the (disappointing) global recovery, which included strengthening American performance. Yet he painted a gloomy picture of U.S. and international economic prospects going forward because emerging markets, especially China, are now allegedly the countries whose successes are “most important for global trends,” and their growth has been slowing most dramatically.

What he – and so many others – have missed is that it was the outperformance of China and the other ostensible emerging markets that helped trigger the crisis, since their own superior vigor overwhelmingly depended on a global version of a Ponzi scheme. They amassed huge trade surpluses by selling to wealthier developed economies (especially America’s) whose factories and other productive, income-producing facilities they were increasingly replacing thanks largely to offshoring-friendly U.S. trade policies. Lending from these low-income and other surplus economies (like Japan’s) was the only way in which the resulting growth could be sustained, and six years ago, this particular global house of cards predictably tumbled down.

In other words, yes, according to some standard versions of counting growth and measuring its sources, the surplus countries led the global expansion before the crisis – and even until this year during the recovery. The trouble is, this has proven to be a disastrously unsound type of growth.

Especially strange: Giles noted that China’s unexpected acceleration in the last few months has been “driven by a resurgent export sector,” which of course reveals the crucial nature of third world net exporters’ markets, not the exporters themselves. Yet his China- and emerging “market”-centric portrait of the world economy remained unaffected.

The Wall Street Journal chipped in with its own version of the current globaloney with an October 21 article titled “Global Growth Woes Threaten to Beset U.S. Economy.” Just like the Financial Times‘ Giles, authors Josh Zumbrun and Chris Timiraos told readers that “Emerging economies, not the U.S., drove global growth for much of the last decade.” They went on to warn that gathering woes in these countries and Europe could “hobble the U.S. economy at a time when the world could use a reliable growth engine.”

The most important part of their article, however, presented evidence showing indisputably that the reality is anything but. Not only has America’s growth actually quickened as the rest of the world has slowed, but its economy is still relatively trade light (despite decades of bipartisan Washington efforts to increase its role). Hmmmm. Any chance that these twos facts are related?

Am I saying that the U.S. economy is out of the woods? Of course not. What I am saying is that America’s capacity for self-sufficiency and its resulting built-in immunity from the biggest international economic trends are invaluable strengths. Further, it is vital to preserve and enhance these strengths in the many industries and commodities where it’s feasible. Just as important is realizing that unless Washington is vigilant, its growth-hungry trade competitors will surely continue taking the path of least resistance by using U.S. openness to imports to grow at America’s expense by adding to their already high levels of U.S. marketshare.

New successes along these lines would spell trouble not only for the United States, but for the rest of the world as well – as it would refuel the same lopsided production, consumption, and lending patterns that helped trigger the last decade’s calamity in the first place. If Washington wants to keep strengthening global interdependence and interconnectedness, it will need to work much more effectively to ensure that the structure of this interdependence is actually durable. If it can’t, or until it can, its best economic strategy unquestionably will be acting unilaterally to speed up and improve the quality of its own growth.

Our So-Called Foreign Policy: With Allies Like These Against ISIS….


, , , , , , ,

It’s lucky for President Obama that ongoing American fears about ebola and most recently yesterday’s shootings in Canada have distracted so much public and media attention from the fight against ISIS terrorists in the Middle East.

About a month and a half after the president unveiled his strategy to defeat the Islamic army, U.S. air strikes and military aid have for the moment blunted its advance on the town of Kobani near the border of Syria and Turkey, and saved thousands of Yazidi refugees from ISIS massacre or enslavement. But the jihadis continue scoring victories in Iraq, and Mr. Obama has acknowledged that meaningful victory “won’t be quick.

Even more disturbing, however, have been the obstacles Washington has faced in building a viable international coalition to wage the war against ISIS and to prevent the United States from having to reintroduce significant combat forces into the region – a goal that often seems to be the president’s bottom line.

Mr. Obama has spoken repeatedly of how his success in constructing the coalition, and especially bringing regional governments on board, is showing that “the people and governments in the Middle East are rejecting ISIL and standing up for the peace and security that the people of the region and the world deserve.” But today, a senior Treasury Department official made clear just how exaggerated that encouraging claim remains.

In a speech in Washington, D.C., David Cohen, the Treasury official in charge of staunching the impressive revenue streams that have helped make ISIS so formidable, publicly accused “a variety of middlemen, including some from Turkey,” along with “Kurds in Iraq,” of selling and reselling ISIS-extracted and/or refined oil, and helping the organization earn more than $1 million per day from such energy sales.

Turkey, of course, is a NATO ally, and Kurds have been among ISIS’ main targets and victims, as well as U.S. aid recipients. Both Turkish and Iraqi Kurdish officials angrily denied the charges, but as Cohen broadly hinted, active government complicity hasn’t been necessary. ISIS’ Turkish and Kurdish business partners are part of “a long-standing and deeply rooted black market connecting traders in and around the area.”  In other words, these activities have long been – and continue to be – winked at by the regimes in question.

With allies like these, it’s difficult at best to see how the United States can defeat ISIS mainly working through a coalition, and thus avoid large-scale American ground involvement. If Mr. Obama believes that denying the terrorists an Afghanistan-like haven from which attacks on the American homeland ultimately can be planned and launched, he’ll need to adopt the only remaining strategy capable of promoting vital U.S. interests at acceptable levels of cost and risk.

As I’ve advocated, the United States will need to authorize much more extensive air and special forces operations. But the aim would not be to prosecute the kind of open-ended campaign(s) that would be needed not only to defeat ISIS but to contain all the successor and wannabe groups certain to pop up in the Middle East and other failed regions. Rather, the aim would be to keep ISIS (and any others) off balance and unable to turn to nation-building just long enough to enable the U.S. government to enhance further its already considerable energy self-sufficiency and to seal its borders. Thus protected from the only two major threats that Middle East terrorists could pose, Americans would be able to regard this terminally dysfunctional region with the indifference it so richly deserves.

(What’s Left of) Our Economy: Manufacturing’s Low-Road Comeback Strategy is Failing


, , , , , , , , ,

Yesterday’s manufacturing wage data from the Labor Department contains bad news not just for domestic industry’s workforce. The weak results also indicated that, if U.S.-based manufacturers think they can regain competitiveness via what analysts call the “low road” of labor cost cutting, they’re wrong so far. Why so? Because the same Labor Department has also revealed that U.S. Manufacturing’s productivity is faltering as well.

To recap yesterday’s numbers, U.S. manufacturing wages fell by 0.48 percent from August to September after inflation, and are now down 0.38 percent year on year and 2.61 percent during the current economic recovery to date. By contrast, overall real private sector wages are actually up slightly since the recession ended.

But despite the falling inflation-adjusted wages, the rate of manufacturing labor productivity growth has slowed significantly even since the expansion of the 2000s – which no one regarded as a golden age of American industry. During that expansion’s 20 quarters, which of course included the housing and credit bubbles, manufacturing’s labor productivity grew by a cumulative 25.31 percent (1.27 percent per quarter on average). During the current recovery, which has lasted 16 quarters, manufacturing labor productivity has advanced by a total of 14.39 percent (0.90 percent per quarter on average).  (All these figures are calculated from the statistics on the Labor Department’s interactive productivity databases.)

Also of interest: In the 11 quarters that have passed since the Boston Consulting Group published its first prediction of an onshoring-driven U.S. Manufacturing renaissance, in August, 2012, labor productivity in the sector has grown by 4.89 percent. In the 11 quarters before, manufacturing labor productivity increased by 9.69 percent – nearly twice as fast.

The multi-factor productivity data for manufacturing only go through 2012, and are kept annually, not quarterly. But these figures, which take into account all the inputs for manufacturing operations, tell the same story.

From 2001 through 2007 (roughly the time of the previous economic recovery) multi-factor productivity in domestic manufacturing improved by 15.67 percent in toto, or 2.61 percent annually on average. From the start of the present recovery (in 2009) through 2012, it grew by 5.02 percent – 1.67 percent on average each year.

An industry that’s cutting wages and still getting less output per head, along with less output per all inputs, isn’t an industry experiencing an historic comeback. It’s one whose competitiveness by crucial measures looks less impressive all the time.

(What’s Left of) Our Economy: U.S. Wage Inflation Claims Looking Sillier than Ever


, , , ,

It will still be possible to warn of American wage inflation after the Labor Department’s release this morning of September wage data. It will simply be even harder to do so with a straight face. In addition, the new figures should make clear that all future media mentions of a U.S. automotive boom need to be accompanied by a big asterisk-ed “on workers’ backs.” For good measure, the entire manufacturing sector confirmed its status as a major wage laggard during the current recovery, as its after-inflation wages took their biggest monthly tumble in more than two years.

The detailed tables accessible through the Labor Department’s interactive search engine show that inflation-adjusted hourly earnings for the entire private sector dropped by 0.19 percent on month. This decline follows an August monthly gain of 0.58 percent and a July monthly dip of 0.10 percent. At the beginning of the year (January), real private sector wages edged up by 0.10 percent over their December levels.

Wage inflation claims look even weaker when examined year on year. From September, 2013 to September, 2014, real wages rose by 0.29 percent – slower than the August annual gain of 0.48 percent and the complete flatline of July. In January, private sector wages after inflation had risen by 0.39 percent over January 2013 levels. The September year-on-year real private sector wage gain was also less than the 0.88 percent improvement from September, 2012 to September, 2013.

These September (and August) figures are still preliminary, but they leave real private sector wages up only 0.10 percent in toto since the current economic recovery began in June, 2009. During the recession, they actually rose much faster – by 2.79 percent.

But as bad as the typical private sector worker fared in September, the typical automotive worker fared much worse. Real wages in the vehicle and parts sector combined tanked by 1.07 percent from August to September – their biggest monthly plunge since April’s 1.46 percent nosedive. On a monthly basis, real automotive wages also fell by 0.10 percent in August after rising by 0.39 percent in July. In January, they declined by 0.10 percent on a monthly basis.

The year-on-year real automotive wage numbers are considerably better – in September, they were down only by 0.29 percent, and have actually been up strongly for most of 2014. Indeed, from March, 2013 to March, 2014, they soared by 2.39 percent. But the September year-on-year decrease followed a year-on-year September gain of 0.59 percent between 2012 and 2013.

In all, real automotive wages have sunk by 7.03 percent during the current economic recovery – after having fallen by 3.01 percent during the recession. Wage decline in the sector has been so fast that whereas at the start of the recession, real automotive wages were 9.82 percent higher than all inflation-adjusted manufacturing wages, they’re now 2.39 percent lower.

Not that the rest of American manufacturing workers have much to cheer about. Their inflation-adjusted wages fell by 0.48 percent in September – the biggest such drop since the 0.76 percent tumble in August, 2012. Inflation-adjusted wages in the sector had risen by 0.58 percent on month in August – their biggest such improvement since the 0.48 percent rise in November, 2012. But pay in the sector had fallen by 0.10 percent on month in real terms in July, and is down cumulatively since January.

Year on year, moreover, inflation-adjusted manufacturing wages fell by 0.38 percent in September – compared with a 0.29 percent increase in August and no change in July. In January, year-on-year real manufacturing wages increased by a strong 0.96 percent, further undercutting claims of any acceleration. If anything is accelerating on the manufacturing pay front, it’s real wage decline, as the September year-on-year drop contrasts strikingly with a 1.16 percent jump between September, 2012 and September, 2013.

During the recession, inflation-adjusted manufacturing wages rose by a total of 4.18 percent. Anecdotal evidence at least indicates that much and perhaps most of this improvement was a statistical illusion; an outsized share of the millions of workers laid off appear to have been relatively inexperienced and therefore relatively low paid. Since the recovery’s onset, however, real manufacturing wages are down 2.61 percent – a performance much worse than even that of the rest of a raise-starved private sector.

Im-Politic: Bipartisanship is Plutocratic on Trade and Immigration


, , , , , , , ,

There are now two leading candidates for the “Clueless Commentary of the Week (Year?)” award, and they both owe to the same article. So the question arises – who is more completely out of touch both with the country’s real needs and with its mood, former Clinton White House Chief of Staff Thomas F. McLarty or the op-ed staff of The Wall Street Journal?

It’s hard to tell.  After all, it was the former who wrote an October 20 article arguing that the Democratic President and the Republican leadership in Congress can and should show the American people that they can work together by shafting the working and middle classes on trade and immigration issues.  And it was the latter who clearly thought it made a valuable contribution to the U.S. public policy debate.

In an unwitting sense, however, McLarty and the Journal performed a valuable public service. They reminded Americans that among the few issues that their leaders can agree on is that, during an historically slow recovery when good job creation is paltry and wages stagnant, the nation needs more (a) offshoring-friendly trade deals like the Trans-Pacific Partnership (TPP), and (b) immigration reform legislation that will only flood U.S. labor markets with more low-skill, poorly educated workers. 

Moreover, the McLarty article adds to the evidence that, whoever prevails in the coming offyear elections, the most important Democrats and Republicans in the country are bent on ignoring the spirit of representative government to push through a plutocratic trade and immigration agenda. Whether they plan to act during a lame duck session of Congress, or during that brief subsequent window before the next presidential cycle begins in earnest and such deservedly unpopular policies become politically toxic, the strategy clearly is to minimize the odds that voters will punish elected officials who support them.

On the one hand, it might be fair to conclude that this simply means the U.S. electorate’s memories need to get longer. On the other, given Washington’s skill at creating, prolonging, and even worsening crises, it’s easy to understand how voter outrage could become diffused.

(What’s Left of) Our Economy: Don’t Forget! U.S. Manufacturing Output Could be Overcounted!


, , , , , ,

I’m chagrined to admit that, in the rush to blog in a timely way about economic data, I’ve lost sight of a big orange flag that needs to be waved regarding the U.S. Government’s manufacturing production statistics.

These data deserve special importance, in my opinion, both because of industry’s special importance in creating a genuinely durable American prosperity, and because they represent a gauge of manufacturing’s health that should be relatively uncontroversial (unlike, for example, manufacturing employment, which generates heated debate over whether it’s mainly been falling for worrisome reasons, like declining competitiveness, or ultimately heartening reasons, like productivity growth).

But that doesn’t mean that the manufacturing output figures put out each month by the Federal Reserve are problem free. In recent years, researchers have marshaled impressive evidence that these inflation-adjusted numbers have been considerably overstated by flaws in measuring rapid price declines in information technology hardware. More specifically, because the prices of surging imported inputs (parts and components) in these sectors supposedly are falling much faster than government statisticians can track, the inflation-adjusted production of the American made content of these goods has been growing much slower than Washington has reported. According to the most authoritative investigation, this overcount amounted to as much as 20 percent between 1997 and 2007.

Without commenting on whether this conclusion is fully or partly justified, it’s still revealing to show how profoundly production in IT hardware has affected real manufacturing output since the Great Recession struck.

In this exercise, I’ll use July, 2007 as the baseline – not the recession’s official start that December – because that was the month high tech hardware goods production peaked. From that point, through the end of the recession in June, 2009, inflation-adjusted manufacturing output overall plunged by 20.16 percent. But strip out computers, computer parts, semiconductors, related devices, and telecommunications gear, and the real manufacturing output drop was somewhat greater – 21.48 percent.

The gap between the two has been wider since the recovery began. From June, 2009 through last month, real manufacturing production has grown by 27.41 percent. But if IT hardware is removed, this figure falls all the way to 22.43 percent. That’s not as big a difference as that between manufacturing output and the (so far) booming automotive sector (27.41 percent versus 20.42 percent), which I described last Friday. But it’s significant nonetheless.

Another way to portray the importance of high tech hardware to domestic manufacturing’s fortunes: U.S.-based industry is 1.73 percent larger as of last month in real terms than it was in July, 2007 – the pre-recession peak for inflation-adjusted IT production. But strip out that IT output, and domestic manufacturing’s real production is down by 3.87 percent during this period.

In July, the Commerce Department, which generates most of the U.S. Government’s raw economic data, announced it would create a “data czar” (my term for its planned “Chief Data Officer”). Everyone concerned with the fortunes of domestic industry should hope that Secretary Penny Pritzker reveals her choice sooner rather than later, and starts getting the position filled. Without better data, too much of American economic policymaking – and analysis inside and outside government – will continue to be based on flying if not blind, then seriously vision impaired.

(What’s Left of) Our Economy: Foreigners’ Still Keep the Faith in King Dollar


, , , , , , , , , ,

It wouldn’t be right to let much more time pass before reporting on the new numbers from the Treasury Department showing how much in the way of U.S. government debt is held by foreigners, including by foreign central banks and other arms of foreign governments.

These monthly data sets are closely followed by finance geeks and some trade specialists because they shed light on critical economic questions (mainly, how much longer the rest of the world will keep on funding America’s habit of living beyond its means) and national security questions (how much influence over U.S. politics and policy might be wielded by creditors whose primary interests are not the well-being of the American people).

That economic question has loomed especially large because even though most outstanding debt is held by Americans themselves, there’s legitimate concern that foreign lenders own than enough to affect interest rates. More specifically, many American leaders and analysts have worried that overseas interests may tire of lending ever more money to an economy that keeps going ever deeper into the red, and will at least start demanding more compensation (i.e., higher rates) for the greater risk they’re being asked to assume.

That kind of tightening would almost certainly slow an already historically sluggish U.S. recovery. Yet if the Federal Reserve held rates steady and simply printed more money to fill the gap, the U.S. dollar could start weakening dangerously, and inflation in America could genuinely take off.

The good news contained in the new Treasury figures is that foreign lenders are more than happy to let Americans’ consumption party continue. Of course, if you’re worried that profligacy can’t indefinitely serve as a national business model, and that continuing huge U.S. international deficits keep threatening to trigger a repeat of the last global financial crisis, that’s also the bad news.

As of August, total foreign holdings of America’s official debt bounced back from a July dip to hit an all-time high of just over $6.066 trillion. Foreign government holdings kept rising month to month, too, and also hit a new record – just over $4.157 trillion.

The figures on some individual countries’ U.S. official debt holdings are noteworthy, too. China is now America’s biggest foreign creditor, which is worrisome in part because of its increasingly aggressive foreign policy in the East Asia Pacific region. It bought $4.8 billion in American government debt in August and raised its holdings to just under $1.270 trillion. That’s below the monthly record Chinese lending hit of nearly $1.317 trillion in November, 2013, but not very far below. In fact, this lending has remained around $1.270 trillion ever since. So there doesn’t seem to be much evidence that Beijing’s stated desire to see its yuan assume a more important role as an international reserve vis-a-vis the dollar is leading it to unload greenbacks.

France has bitterly complained about the dollar’s global predominance for decades, including recently. But France’s dollar holdings also rose in August after dipping in July, and are up more than 13.60 percent since last August.  The BRICS countries (Brazil, Russia, China, India, and South Africa) say they’re so upset about the dollar’s “hegemony” that they’ve formed their own development bank. But as a group, the non-Chinese members steadily keep buying dollars, too.

If there has been a valid reason for concern about foreign dollar buying, it comes from taking a longer perspective. Since March, foreigners’ overall U.S. Debt holdings have increased an average of 6.18 percent year on year. That’s a bit less than the 6.71 percent average for the comparable 2012-13 year-on-year increases. But it’s less than half the 12.74 percent average from 2011-2012.

At the same time, clearly U.S. investors have more than stepped in, and helped keep U.S. Treasury yields low. Moreover, these new August figures precede September and October, when global worries about rising geopolitical tensions and slowing growth in China and Europe in particular triggered a major flight into dollars that pushed the exchange rate way up and interest rates another leg down. Unless foreign investors almost completely avoided the temptations of the dollar’s well established safe haven status, expect the next few sets of monthly Treasury figures to show their dollar holdings strongly on the rise again.

Im-Politic: Why the Mainstream Media is an Ebola Lapdog, Not a Watchdog


, , , , , , ,

Although I’m neither a doctor nor a biologist nor a public health expert, I keep writing on Obama administration’s response to the ebola outbreak. For the president’s continued opposition to a travel ban to fight the disease speaks volumes about the political and governing establishments’ devotion to dogma about the virtues of completely Open Borders, economic globalization, and political correctness, and about the evils of any kind of nationalism, at the expense of public safety. I return to the subject today to deal with another angle – the mainstream media’s (MSM) role in upholding this establishment line.

No doubt many of you have already come up with reasons why: e.g., the reflexive internationalism and political liberalism of the MSM, along with its close social ties with these ruling elites – ties which have only intensified as journalists, public officials, and other political figures increasingly move back and forth among these occupations.

But recent commentaries have revealed another source of the MSM’s determination to banish support for an anti-ebola travel ban from the realm of respectable opinion: an uncritical worship of credentialed expertise.

At first blush, this claim sounds absurd. Doesn’t the MSM make its living by exposing official wrongdoing and ineptitude, as well as pretensions of public spiritedness, competence, and omniscience? Isn’t skepticism about authority practically the sine qua non of the journalistic personality, and of any reporting worth its salt?

Yes and No – but arguably for the most part No. There’s the aforementioned blurring of occupational lines reflecting the MSM’s growing tendency to come from the same backgrounds of affluence and elite schools as members of other sectors of the American establishment. As a result, they inevitably tend to marry one another, live in the same neighborhoods or the same kinds of neighborhoods, and/move in the same overlapping professional and social circles. Thus it’s not surprising that they share many of the same social and cultural norms and perspectives, even though their party politics often differs.

One natural result is the MSM’s strong support of the most important elements of the status quo – the existing structures, systems, and values that organize society, politics, and the economy, and give them purpose. And one of the most popular values (or myths – take your pick) in the United States entails the existence and superiority of a meritocracy.

Of course, the privileged lives led by most of the MSM powerfully incline its members toward meritocratism. A more conveniently self-serving way to explain its evident success – which consists not only of wealth but prominence and influence – is hard to imagine. Why, then, shouldn’t the MSM assume the same excellence in those anointed as experts by society in other fields of endeavor? Even those that are not personal friends neighbors of MSM members have passed the same test and been vetted by the same kinds of institutions.

In fact – and here I’m revealing one of its dirtiest, most important secrets – the MSM is even more inclined even than other successful Americans to lionize credentials in other occupations and especially professions. The reason? Despite the degrees conferred by schools of journalism, the professional-like societies they have created, and the multitude of awards they hand out to each other, journalists generally recognize, at least subconsciously, that theirs is not a genuine profession. Excelling requires the mastery of no body of technical knowledge – at least none that can’t be achieved in literally 15 minutes, like the standard form for writing a hard news story.

Hence the MSM’s built-in respect for those whose titles do require long years of study of famously complicated subjects, like the workings of the human body or centuries-old, constantly growing masses of statutes and jurisprudence. But it’s important to note the MSM’s inordinate regard for other pseudo-professions as well (like “public affairs”) and for pseudo-sciences (like economics).

Not that the MSM is incapable of skepticism. But the record seems to show that it usually reaches critical mass only after a group of experts has brought on disaster. Thus very few MSM members questioned the conventional wisdom among national security experts that a light was visible at the end of the Vietnam tunnel, or economists who insisted that the unprecedented indebtedness of American households and the equally unprecedented surge in home prices were signs that This Time It Was Different, not that dangerous bubbles were inflating. In other words, the MSM watchdog too often barks only after the break-in has succeeded.

Indeed, although skepticism skyrockets for a time after disaster strikes, MSM idolatry of expertise is so strong that, once the rubble clearing begins, reporters and commentators as a rule return to relying overwhelmingly on these proven failures as sources of information and analysis.

Thankfully, the United States so far has escaped an ebola disaster – so the MSM has energetically denounced anyone dissenting from the judgment of physicians and public health officials that a ban on visitors from West African hot zone countries would be not only ineffective, but counterproductive. Typical has been this lead from NBC News: “There are reasons the U.S. hasn’t enacted a travel ban on countries where Ebola has broken out: It wouldn’t work and could actually make things worse, health officials say. Still, that’s done little to quell the calls for a ban.”

And this lead from Politico: “The political momentum for a travel ban on West African nations continued to swell Thursday, but health and transportation experts were uniform in saying it wouldn’t stem the spread of Ebola — and could do more harm than good. That hasn’t stopped politicians and pundits — ranging from House Speaker John Boehner to former Obama press secretary Jay Carney— from calling for a travel ban.” And this headline from HuffingtonPost: Lawmakers Ignore Experts, Push For Ebola Travel Ban.”

Indeed, so strong is the MSM’s expertise worship that it’s even overcome Ana Marie Cox, a Daily Beast contributor who first gained fame through reporting on a sex scandal that titillating the publicly prurient Washington, D.C. branch of the chattering class. This proudly sauciest of wenches sternly admonished viewers of Fox News’ Media Buzz program, “There is an empirical answer to that question – there is an empirical, scientific answer as to what we should do to prevent the spread of ebola. If you have an ‘R’ or a ‘D’ after your name, you should not be talking about this. If you have an ‘MD’ after your name, you should be talking about this.”

Apparently Cox has never heard of a doctor blowing a diagnosis. Or of practitioners of the far softer art of “public health” mishandling an epidemic. Which perhaps points to additional problems with the MSM’s deference to authority: First, nothing could be clearer in recent weeks than the fallibility of so-called medical experts leading the fight against ebola. Whether neglecting the virus’ latest outbreak in West Africa or creating “protocols” for treatment that were in some cases not only flawed but fatally flawed, the experts themselves have acknowledged the kinds of mistakes that haven’t induced much humility on their part, but that rightly have cost them the confidence of many Americans.

Second, the ebola consensus in the healthcare community is not nearly as solid as the MSM typically suggests. Support for a travel ban is anything but nonexistent, and some researchers have even cautioned that knowledge about ebola’s transmission mechanisms could be substantially incomplete. Put differently, the science surrounding a disease discovered 40 years ago is anything but “settled.”

Combine the MSM’s pro-credentialed-expertise instincts with its clear political leanings on globalization- and political correctness-related issues and you have the scandal that constitutes its ebola travel ban coverage. Thanks to the emergence of alternative media, the public interest is increasingly likely to survive this dereliction of duty. But its declining audiences and worsening financial fortunes indicate that may not be true for the MSM.

Im-Politic: This was Paul Krugman’s Finest Hour


, ,

Having been slimed by him in print (debating an issue on which I was right!), I’m no fan of Paul Krugman’s. I also disagree with the Nobel Prize-winning economist and New York Times columnist on any number of economic and other issues, and strongly object to his habit of dismissing nearly all those differing with him as ignoramuses and/or toadies of America’s plutocrats. (Not that there aren’t lots of commentators and analysts falling into one or both categories.)

But I believe Krugman richly deserves praise for a recent display of intellectual honesty that urgently needs to become a lot more common in America these days: He admitted he didn’t know enough about a subject to warrant writing about it extensively. Thus Krugman didn’t dwell much on President Obama’s foreign policy record in his recent Rolling Stone article defending the president’s overall record. His explanation?  The truth is that I have no special expertise here….”

Let me be clear here. I am not saying that Krugman – or anyone else lacking academic training, professional experience, or any other obvious qualification – lacks the right to opine on foreign policy, or on any other subject. Foreign policy and national security, in particular, have only the scantest claim to be seen as academic disciplines, and certainly many practitioners have turned out to be complete incompetents, whether academically trained or educated in the school of hard knocks.

Nor am I saying that expertise in one field is never transferable to another. Moreover, “It’s a free country.” In fact, I wish everyday Americans would speak out more on major public issues, and that the political, economic, policy, and academic establishments would pay them more heed.

At the same time, it should be clear that we’ll have the most useful national debates if those with legitimate expertise or experience in certain fields don’t simply assume that these qualifications entitle their views in other fields to any special status. Indeed, more often than not, because their privileged lives tend to undermine their common sense, experts speaking out of school tend to produce the worst of all possible analytical worlds. As a result, it should also be clear that the media must start exercising better judgment in seeking commentary.

But few of the high and mighty demonstrate any self-discipline, and the media keep  uncritically worshipping any form of prominence, no matter its source, and so we have the constant spectacle of valuable ink and airtime eaten up by know-nothing celebrities discoursing on any number of national and international issues with make-or-break potential for America and the entire world.

That’s why Krugman’s admission in Rolling Stone is so noteworthy. Even better, it shows he has a learning curve, for he wasn’t always so self-effacing. And maybe the biggest blessing of all is his modesty’s appearance in a magazine widely read in the entertainment world. Maybe Rosie O’Donnell and Ben Affleck will take the hint?

(What’s Left of) Our Economy: Can U.S. Manufacturing’s Rebound Continue Without Automotive?


, , , , , , ,

If you harbor any doubt that the automotive sector has been driving domestic U.S. manufacturing’s fortunes since the Great Recession began, and into the current historically weak recovery, throw them overboard.

I’ve just finished giving my blazing new laptop a workout by doing a deep dive into yesterday’s industrial production report from the Federal Reserve. The new figures make absolutely clear that, so far, as goes automotive, so goes manufacturing – and whatever valid hopes for a renaissance are still justified. Moreover, they indicate that the next few months may go far toward determining whether manufacturing’s rebound from an horrific recessionary downturn can continue much longer.

Certainly this pattern has held since the U.S. economy’s most recent woes began in earnest. From the recession’s December, 2007 onset through its official end in June, 2009, overall manufacturing production fell by 20.48 percent in inflation-adjusted terms. But strip out autos and parts, and the downturn was somewhat less dramatic – 18.14 percent.

You can follow along here by clicking on the seasonally adjusted January 1986 to present link here at the homepage of the Fed’s interactive production databases.  Warning!  Major eye strain could result! :)

Since the recovery began, overall manufacturing has grown by 27.41 percent after inflation. But without vehicles and parts, this real growth sinks to 20.42 percent. Put differently, manufacturing production is now up by 1.31 percent in real terms over the nearly seven years since the recession began. But without the booming auto sector, it’s actually down by 1.42 percent.

The trend shows some signs of slowing – but only some. For example, look at the numbers this year since March (to avoid the distortions caused by the severe winter). From March through September, overall manufacturing production has grown by 1.86 percent post inflation. Without automotive, the real growth rate has been only 1.61 percent. That’s a 13.50 percent difference.

During the recovery, the growth gap was nearly twice as big – 25.50 percent. But from March, 2013 through September, 2013, the gap was smaller – 10.11 percent.

One big consequence of automotive’s lead role in the last few months is that its volatility has helped produce big swings in real manufacturing output. During July, a monster 9.39 monthly jump in real automotive output helped boost overall monthly manufacturing production up 0.82 percent – its best performance since the final stages of the recovery from winter in March. Without that increase – the biggest in percentage terms since September, 2009, when production was in its early post-recession bounce – manufacturing grew by only a negligible 0.13 percent.

The automotive sector took a breather in August, as real output sank by 6.98 percent – the worst monthly performance since April, 2011. The rest of American industry eaked out a 0.01 percent inflation-adjusted output gain. But the automotive falloff pushed overall production down by 0.46 percent – its worst since the winter-aided 1.03 percent plunge in January.

The automotive slump continued in September, as production after inflation decreased another 1.40 percent. The rest of manufacturing managed to expand by a solid 0.58 percent. But autos and parts dragged overall real production down to 0.47 percent.

The last two months’ worth of data of course indicate that after leading the manufacturing rebound, auto and parts production is now holding it back. Whether the rest of U.S. industry can keep growing satisfactorily without robust auto output, or whether recent automotive struggles will extend to the rest of manufacturing, will shape not only domestic industry’s future, but the entire economy’s.


Get every new post delivered to your Inbox.

Join 1,977 other followers