It truly is remarkable, that somehow the Washington Post somehow, for whatever strange reason, still gets noted as a 'Liberal' paper by people who probably should know better. With such luminaries as Fred Hiatt, Michael Gerson, Bob Novak, Dean Broder, and the like populating the majority of their Op-Ed pages every day, as well as their insipidly faux-'balanced' political coverage, it really is very much the standard bearer for general Beltway myopia.
So I shouldn't be terribly surprised that lo and behold, with Economy the top concerns of most Americans, and further concerns about our job market, energy woes, etc., that they would raise the corpse of the career of one of the more insipid Economic hacks in Donald Luskin to tell us "Shut up, the Economy is fine!!" Because that line did Phil Gramm SO well...
This is the same Donald Luskin that, when Paul Krugman sounded the alarm on a possible mortgage crisis many moons ago, claimed he was an 'Emperor With No Clothes', and continued to harangue Krugman for what would become prescient concerns. (more after the break)
The same Donald Luskin that, along with Douglas Feith, continues to compete for the title "Stupidest Man Alive"
In any case...I was half amazed to see that he still had a career, forget enough of one that he'd get prime paper time in both the WSJ and the WaPo. But here we are, years later after he routinely mocked the kind of economic worries that have only amplified today. And what does he say?
Well, firstly, he blames Obama squarely for all these economic worries, and all but calls him a Chicken Little...
Patient zero in this epidemic is the Democratic candidate for president. As it would be for any challenger, it's in his interest to portray the incumbent party's economic performance in the grimmest possible terms. Barack Obama has frequently used the Depression exaggeration, including during a campaign speech in June, when he said that the "percentage of homes in foreclosure and late mortgage payments is the highest since the Great Depression." At best, this statement is a good guess. To be really true, it would have to be heavily qualified with words such as "maybe" or "probably." According to economist David C. Wheelock of the Federal Reserve Bank of St. Louis, who has studied the history of mortgage markets for the Fed, "there are no consistent data on foreclosure or delinquency going all the way back to the Depression."
So what does he respond to that with?
The Mortgage Bankers Association (MBA) database, which allows rigorous apples-to-apples comparisons, only goes back to 1979. It shows that today's delinquency rate is only a little higher than the level seen in 1985. As to the foreclosure rate, it was setting records for the day -- the highest since the Great Depression, one supposes -- in 1999, at the peak of the Clinton-era prosperity that Obama celebrated in his acceptance speech at the Democratic National Convention late last month. I don't recall hearing any Democratic politicians complaining back then.
Even if Obama is right that the foreclosure rate is the worst since the Great Depression, it's spurious to evoke memories of that great national calamity when talking about today -- it's akin to equating a sore throat with stomach cancer. According to the MBA, 6.4 percent of mortgages are delinquent to some extent, and 2.75 percent are in foreclosure. During the Great Depression, according to Wheelock's research, more than 50 percent of home loans were in default.
Moreover, MBA data show that today's foreclosures are concentrated in that small fraction of U.S. homes financed by subprime mortgages. Such homes make up only 12 percent of all mortgages, yet account for 52 percent of foreclosures. This suggests that today's mortgage difficulties are probably a side effect of the otherwise happy fact that, over the past several years, millions of Americans of modest means have come to own their own homes for the first time.
Right. It's just standard operating practice, essentially. And it's just a side effect that people can actually own homes now, it's really a good thing!...
Which is why so many of those mortgaging outfits are being forced into highly publicized and rather unprecedented government bailouts. Of course that's not a real concern. It's just a... "happy side effect".
Of course, it's all a media exaggeration to him.
But what about the media's?
A housing "slump," a housing "crisis"? A "severe" price decline? According to the latest report from the National Association of Realtors, the median price of an existing home is up 8.5 percent from the low of last February. And according to the U.S. Census Bureau, the median price of a new home is up 1.3 percent from the low of last December. Home prices may not be at all-time highs -- and there are pockets of continuing decline in some urban areas -- but overall they've clearly stopped going down and have started to recover. So why keep proclaiming a "crisis" after it's over?
"Turmoil" in the debt markets? Sure, but we've seen plenty worse. According to the FDIC, there have been a total of 13 bank failures in 2007 and so far into 2008. There were 15 in 1999-2000, the climax of the Obama-celebrated era of Clintonian prosperity. And in recession-free 1988-89, there were 1,004 failures -- almost an order of magnitude more than today. Since the Great Depression, the average number of bank failures each year has been 94.
Despite highly publicized losses in subprime mortgage lending, bank equity capital -- the best measure of core financial strength -- is now $1.35 trillion, more than the $1.28 trillion level of mid-2007, before the "turmoil" even began.
Now see..."core financial strength". We're still good!
Still...while I may not be an economist, somehow, the idea that our 'core financial strength' seems to not be much comfort, when we're seeing prices go up for everything, half due to inflation, half due to rising energy costs, etc.
I mean....from the article, Luskin seems to miss one of the big things about our little petty economic woes...
The ones who are hurting are the ones without the means of investment, who don't have the option of government buyouts to prop them up, the ones whose debts are further driven by the excesses of our financial institutions.
Oh...and without fail, he praises Gramm, echoing his 'whiner' remarks, labeling Americans 'a nation of exaggerators'.
And the ending....
What does it say about our nation that it has become political suicide to state the good news that our economy is not in recession?
Whatever the political outcome this year, hopefully this will prove to be yet another instance of that iron law of economics and markets: The sentiment of the majority is always wrong at key turning points. And the majority is plenty pessimistic right now. That suggests that we're on the brink not of recession, but of accelerating prosperity.
Maybe this will turn out to be the best of times -- at least since the Great Depression.
Really...accelerating prosperity...
When will us unwashed masses get to see that prosperity, Mr. Luskin?