Posted on 04/02/2004 8:30:31 PM PST by Congressman Billybob
John Kerry has based his claim of economic malfeasance by President Bush on the assertion that “three million jobs have been lost” on his watch. The original claim was 2.7 million jobs lost, but the quarrel here is not over the rounding up to an even three million. Ed McMahon has established over the last four decades that the Kerry claim is false.
We’ll get back to McMahon in a moment. First a dose of statistics.
The Department of Labor has a long and well-earned reputation for accuracy in its statistical analyses. But it has three different ways of measuring unemployment in the American economy. The first is the Employer Survey, in which a random sample of employers known to the Department are asked to report their employment changes. The results from the sample are then projected to the entire economy. This survey is the source of the Kerry claim of 2.7 jobs lost permanently (net loss of jobs) during the Bush Administration.
The second source from the Department is the Household Survey. In this a random sample of households are surveyed for information on whether the adults in them have remained employed, changed jobs, or lost their jobs and not yet replaced them. The results from this sample are then projected to the entire economy. This survey concluded that during the Bush Administration, 750,000 jobs have been GAINED. And this was before Friday’s report that in the most recent month, 308,000 jobs have been gained.
Before we get to the third measurement of American unemployment, why should the first two measurements be so far apart in their results? And, which one is more likely to be correct?
Start with this point. The Employer Survey can only reach those businesses that the Labor Department knows to exist. There is necessarily a lag time between a new business being created, and the Department becoming aware of it. Add to that the fact that the smallest businesses, Mom and Pop operations and small businesses just starting up with a tiny number of employees, are below the Department’s radar.
Then add the fact, long noted by such august sources as the Wall Street Journal, that small businesses are responsible for more than half of the total job growth in the United States over the last forty years. And finally, add the fact that small businesses are born at a faster rate than large ones in good economic times. They also and die at a faster rate in bad economic times.
The conclusion is obvious. The Employer Survey will always understate the job losses in bad times, and understate the job creation in good times.
The Household Survey, on the other hand, assuming its random survey is properly constructed, will answer the question of whether people are currently employed by any kind of business, including start-up ones or sole proprietor ones. This survey should give current information. It should not lag behind reality in either direction, of jobs lost or jobs gained.
Therefore, the Kerry claim is based on false information. And anyone whose intent was to state the truth and act on that, rather than make political points regardless of the truth, would know that.
The third measure of unemployment proves the point. And Ed McMahon has nailed the point down for four decades and counting.
Forty years ago, I worked for a firm that dealt, in part, with direct mail advertising. When the Publishers Clearing House began its then-one million dollar giveaway with Ed McMahon as its spokesman, I asked some experts in the field the logic behind giving away a million dollars, plus the payments to Ed McMahon and the phenomenal costs of running the advertisements, in order to promote the sale of magazines from Chain Saw Age (a real magazine) to Barbie Gets a Hickey (a fictitious magazine, just for fun). Here are the reasons:
Prior to the creation of that campaign, folks like the Publishers Clearing House hired thousands of cubicle workers to use phone directories, cris-cross directories, and all other possible sources to build mailing lists. It was their task to find out that Jane Doe had married and her name was now Jane Smith. Or to find out that John Jones had moved across town or across the nation, and what his new address was.
This process was time-consuming, expensive, and always lagged behind current reality on the ground. Enter the Ed McMahon give-away program with its original one million dollar top prize that has since grown to ten million dollars. (In the fine print that campaign points out both that the prizes are paid out over 19 years, therefore a much smaller amount in current dollars than the stated prize. The small print also indicates that “no purchase is necessary.” Many new magazine subscribers miss those points. But I digress.) Why does the McMahon program succeed? Because it is based on the fundamental economic incentive.
It is based on greed.
People who think that sending in their correct name and address might gain them a million dollars or more have the incentive to do exactly that. And furthermore, they will give the address they are moving to in the next few months, if that applies, for the same reason. For Publishers Clearing House, the total cost and accuracy of this method of getting addresses are better than under the old method.
What does the Department of Labor do that is similar to Ed McMahon? It gives away money. (Actually, the money is both state and federal, but the feds control the process.) Sure, it’s not in one large lump to one very delighted family, but in small amounts weekly. But the incentive is the same. People have to give their real names and addresses in order to receive their money. I’m leaving aside the aspect of fraud by applicants, because there is no reason to believe that is proportionally any worse today than it was in the Clinton Administration, or in any administration prior to that.
The current unemployment rate is 5.7% as of last Friday. Coincidentally, that is nearly identical to the average unemployment rate during the Clinton Administration, which the Democrats offer as the shining economic results that we have lost, and therefore ought to return to. If there really were three million people who had lost their jobs and not found new ones, the unemployment rate could not possibly stand at 5.7%. Again, the Kerry claim is proved false.
There is also the point that 5.7% unemployment is, according to most economists, close to the level that will set off inflation as job demand in specific categories or places becomes more than the available employees, driving pay rates up in a bidding war. All economic systems have certain slack rates. It is impossible to avoid. Apartment complexes can approach but never reach, 100% occupancy. The same goes for airlines. And for factory use. You get the idea.
The fall-back position of the Democrats is this, which I heard most recently last week from Congressman Rick Fazio on TV: “Well, the official statistics don’t account for people who don’t have jobs and have given up looking.” The question of whether people have “dropped out” of the job market because of long-term frustration is an important one that has long been studied in detail. A Heritage Foundation report issued last week pinned down the figures on this.
During the Clinton Administration, the “drop out” rate from the job markets was 0.23%. Today it stands at 0.30%. That is a very slight difference, It cannot account for three million people out of work, permanently.
One last point about the Kerry claim on lost jobs. The sales pitch includes the claim that “Bush is as bad as Hoover.” Given the average level of cultural illiteracy among Americans today, the reactions to that statement might be, “What do vacuum cleaners have to do with unemployment?” Or for those who are a little more knowledgeable, “What does the former head of the F.B.I, have to do with unemployment?”
For those who recall that Herbert Hoover was President at the time the Great Depression began, there are still statistical games being played by the Democrats. When Hoover was President, the national population was about 40% of what it is today. And most households had a single wage-earner, the reverse of today’s pattern where most households have two wage-earners.
Bottom line, if the unemployment rate now (Bush) was as bad as it was then (Hoover), approximately 12 million extra people would have to be out of work. Even the Democrats, if pushed, would have to admit the falsity of this claim. By the way, John Kerry reduced his job loss claim to 2.6 million in a statement released on Friday.
There is a line that I didn’t use more than forty years ago when I was debating John Kerry and his views in the Political Union at Yale University. It applied then, but it also applies now. Here it is: “You, sir, are far too intelligent to believe what you just said. I am therefore compelled to conclude that you are a liar.”
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About the Author: John Armor is an author and columnist on politics and history. He currently has an Exploratory Committee to run for Congress.
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©) 2004, Congressman Billybob & John Armor. All rights reserved.
Not quite as good as CB's article, but it is a Republican leader stepping up:
SENATE COVERAGE -- (APRIL '04) - REPORT ON JOBS -- (Senate - April 02, 2004)
Congressman Billybob
I don't mind that smart people want to leave their countries and come here to work. It benefits them, but I think that the US also benefits by having them here. That said, however, I think the H1B visa program has significant flaws. Mainly that it's very difficult for the employee to switch jobs: at that point, the free market stops functioning.
I don't mind looking them up them up myself if you could give me a clue as to what to search of in the FR archives.
I just thought it was a great letter and I would love to use it myself if only I had the stats to back it up.
Really didn't want to put you to too much trouble though.
John / Billybob
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