Scott Sumner responded to my post on him vs. Schiff by saying he hoped I was joking.
No, I’m not. I actually think it’s weird that so many right-wingers endorse Scott’s argument. (To remind you, Scott argues that if price inflation were a lot higher than the government’s numbers, that would mean the economy is doing much worse than is plausible.) For what it’s worth, Scott doesn’t just take the BLS’ word over the experience of average Americans; he also trusts the Chinese government’s numbers over the perceptions of the people.
OK, let’s step back for a second and think about this. In recent years, the government run an annual deficit that hit 10% of GDP (the highest since World War II). The Fed took over AIG and engaged in what Jeff Hummel calls “central planning” by intervening in specific asset markets (while tripling its balance sheet). We had a huge move toward government takeover of the health insurance sector. The Treasury literally took ownership (some argue effectively at gunpoint) of major banks. They also bailed out the Detroit automakers. There are currently proposals floating around to institute a several trillion dollar (scored over the first decade) carbon tax, i.e. tax on energy (given current infrastructure).
So: If all of the above just causes some sluggish growth in the economy, such that Peter Schiff doesn’t even pass the “laugh test” for suggesting we’re still in a bad recession, then why the heck are so many of us interested in free-market economics? It clearly doesn’t make that much of a difference, right?
Try this. The chart below looks at the official total GDP number (red), versus the private domestic investment component (blue). Although the former is easily at an all-time high, the latter hasn’t exceeded 2007 levels (just eyeballing it).
The other line (right hand axis, green) shows total nonfarm private employment; this is the total absolute figure, i.e. bodies, not adjusted for population growth or anything like that. Just eyeballing it, it’s currently lower than in the late 1990s.
So you tell me: Is it really that outlandish–such that we just guffaw and don’t even bother responding–when someone says that maybe the government’s official numbers are understating how bad the economy is?