The Wall Street Journal: Dishonest Cheerleading (Again)

AmericanEconomicAlert.org (Globalization Follies) ^ | Wednesday, January 04, 2006 | Alan Tonelson

[Willie Green]

For education and discussion only. Not for commercial use.

When The Wall Street Journal hires its editorial writers, is selective economic aphasia listed as a job qualification? We at GLOBALIZATION FOLLIES aren't trying to be flip here. But it's the only possible explanation other than flagrant intellectual dishonesty for editorials like the one published just before New Years on Americans' holiday spending.

Determined to show that the free trade policies it has pushed so zealously have produced only benefits for the U.S. economy, and not sagging living standards (among other costs), The Journal made clear its ability to tune out economic reality in a brief titled "Cheers." According to Journal editorialists, rising holiday sales figures belie the Democrats' efforts "to throw soot on the growth story by constantly saying that median incomes are falling." As the editorial condescendingly explained, "Judging by these holiday sales, somebody must have money."

Of course, it's possible to make this argument with a straight face only by forgetting a little economic and financial concept called debt. Especially relevant for any discussions of holiday shopping, the latest government statistics show that the second and third quarters of 2005 represented the first two consecutive quarters of negative personal savings since quarterly data started being released in 1947. The third quarter of 2005 was also the first since 1947 when net national savings as a whole went negative. Yes, somebody has to have the money to finance the nation's ongoing shopping spree. Increasingly, however, it's not Americans, but their foreign creditors.

Actually, this information was staring Journal editorialists in the face even as they were writing their copy. For what was the source of the data that inspired this paean to cure-all powers of free trade? A credit card company.

(Sources: "Cheers," The Wall Street Journal, December 28, 2005;
"Table 5.1. Saving and Investment [Billions of dollars] Seasonally adjusted at annual rates," National Economic Accounts, Bureau of Economic Analysis, Department of Commerce)

[Mase]

57% of what ??

Owners equity in household real estate is $10.9 trillion. American households own $19.111 trillion in real estate (at market value) and have $8.196 in mortgages.

Federal Reserve: Flow of Funds (page 110)

The dollar is not what it used to be considering easy money.

What did the dollar used to be?

Are you saying that if my house sells today for $500,000, it's really not worth $500,000?

Foreigners are subsidizing negative real interest rates

Huh?

so we are borrowing and consuming like drunken sailors.

If we are borrowing like drunken sailors, how is it our household net worth is now $51 trillion, which is double what it was just a decade ago?

Assertion: Consumption has risen to over 70 percent of GDP, so people are using up their savings.

Response: The rise in consumption per GDP is a long-standing trend for the U.S. economy. There are several reasons for this. 1) Investments are increasingly in the form of education and research, which show up in consumption. 2) For tax and other reasons, people seek capital gains rather than ordinary income. The proceeds show up in savings and consumption but not in GDP, distorting the ratios.

National Review: Assertion, Responses

[Dave Olson]

And the multinational trade agreements promoted by the Bush Administration aren't free trade either.

??? How is freely trading with someone who lives in another country not free trade.

[Willie Green]

How is freely trading with someone who lives in another country not free trade.

It's not free trade because we're not "freely trading with someone who lives in another country", that's how.
Transnational corporations are not a "someone".

[Toddsterpatriot]

You response seems to make as much sense as liberal "logic".

Another example of "Willie logic".

[raybbr]

As the editorial condescendingly explained, "Judging by these holiday sales, somebody must have money."

True. There are a lot of people with money to spend. It's the same as there have always been. One rich guy spends thousands of dollars and "consumer confidence" is up and the recession is over.

[raybbr]

America and Americans have never been more prosperous then they are today with home ownership at record levels and more people employed then ever before in the nations history. Are there pockets of unemployment and economic disruption? Sure there are but this has always been true no matter what period of time one examines.

Is that you, Rush.... Sean...?

[Eagles Talon IV]

"Is that you, Rush.... Sean...?"

Shhhhhh!

[TC Rider]

Yes, somebody has to have the money to finance the nation's ongoing shopping spree. Increasingly, however, it's not Americans, but their foreign creditors.

so China is going to pay my Visa bill?

[ThinkDifferent]

When the savings rate is calculated NONE of the following are used in the calculation; Stocks, bonds, real estate, collectibles of any kind such as art, coins, precious metals, etc. In fact all that is used top compile these savings rates is cash in the bank in the form of savings/checking accounts and cd's.

Right. I was concerned about the allegedly negative savings rate until I looked at what counts as "savings". By that standard I save 0% of my income, when in reality it's at least 30%.

[Eagles Talon IV]

It's amazing that 401s and Iras are not included. Hell it's easier to take money out of the bank, then it is getting it out of an IRA or other retirement account.

[Eagles Talon IV]

"- and home foreclosures at record levels

Record levels? Explain? Is it a record in strictly numerical terms or is it a record as seen in the % of homes in foreclosure. It makes a difference you know.

- and the percentage of home ownership (i.e., how much of the house you actually own) at record low levels"

Like to see some links to your sources, if you have any.

[Dave Olson]

Transnational corporations are not a "someone".

Really? Then who (or what) are they, if not a someone or a collection of someones?

[Willie Green]

Really? Then who (or what) are they, if not a someone or a collection of someones?

They're organizations that utilize their economic resources to corrupt legitimate governments, replacing them with their own puppets.

"Merchants have no country. The mere spot they stand on does not constitute so strong an attachment as that from which they draw their gains."

--Thomas Jefferson to Horatio G. Spafford, 1814. ME 14:119

"I hope we shall... crush in its birth the aristocracy of our moneyed corporations, which dare already to challenge our government to a trial of strength and bid defiance to the laws of our country."

--Thomas Jefferson to George Logan, 1816. FE 10:69

[Dave Olson]

They're organizations that utilize their economic resources to corrupt legitimate governments, replacing them with their own puppets.

All of them? In any case, I didn't ask what they did with their resources. I asked why I can't freely trade with them.

[Fester Chugabrew]

Abramoff is just the tip of the iceberg.

You've got that right.

[an amused spectator]

Most people own only a portion of the home

Not even that. We are merely stewards for the State. We pay the insurance, the upkeep and pay to improve the property under the eagle eye of the REAL owner. If we fail to pay our yearly rent, even after we've finished paying the bank, the REAL owner takes back HIS property.

[hedgetrimmer]

No. Free trade is bad because Abramoff is a criminal.

Thats it in a nutshell.