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Spinning economic growth without spurring growth

The Obama Administration has had one consistent triumph in regard to economic policies - it knows how to spin the numbers. The fact that this has been one of the slowest recoveries after a recession would normally indicate that the economic policy chosen has been lacking, but for the Obama Administration it somehow justifies plowing ahead as long as the headlines sound good.

A critical example of this has been the unemployment rate. As the headline grabbing percentage has decreased there has been huge cries of economic policy success. Sadly these cheers of the headline data fail to provide even a glimmer of the true economic snapshot.

Since the recession started, there has been a non-stop decrease in the participation rate. The current participation rate is 62.8%, a low not seen in decades. It means that there are fewer Americans working than at any point since the 1950's. The benefit of this (politically) is that the headlines show a decrease in unemployment when the reality is that there is an increase in the number of people no longer being counted in the calculation. We recently reviewed the underlying data from the Bureau of Labor Statistics in the article 6.1% Unemployment Rate: celebrate the headline, fear the facts

We also spoke about that trend in January 2013 - 6.8% Unemployment – another rose colored report – repost 1/10/14

"Since November 2008 there has been a continuous decrease in the number of people working in the nation. In that time there has been a drop of 3.1% in the participation rate, with no signs of improvement in the BLS data [http://www.bls.gov]. Yet, with a lower participation rate, the unemployment figure has decreased in December 2013 – because 400,000 people just don’t count anymore."

But this game of hide-and-seek with the pertinent underlying economic data is hardly the sum total of the Obama Administrations attempt to claim success where there is none. The latest example is a bit of a shell game, where the general impression is an improvement that does not exist.

On July 12th, the Obama Administration announced the SupplierPay initiative. The plan is that some private companies, like the federal government, will pay smaller companies that provide goods to the larger company in a faster timeframe. The target goal is payment for goods and services in 15 days.

"The White House said that program [QuickPay - federal version] has accelerated more than $220 billion worth of payments to federal contractors..."

Note the wording. Accelerated payments. Not new payments or sales. How does this spur growth?

  • Company X sells 15 widgets for $1000. Company X sends a bill for the sale to their Client, who normally pays in 30 days. But due to the Obama initative SupplierPay (or QuickPay) Company X has their money in 10 days. Should Company X start hiring new employees?

Of course not. Company X did not make a larger profit. Company X did not get new sales. The cost of raw goods and production has not been affected. Nothing has changed for Company X - so the result is NOT economic growth. It does circulate money through the banking system, but that is not the stated goal and a subject for a different discussion.

Yet it sounds like this is a massive positive. It sounds like Company X has more money, even though they only have exactly the same money they expected to have.

Much like the unemployment rate headline hiding the real problem in the participation rate, the headline of paying small companies faster does not directly create economic growth in those companies. This is the economics of headlines. There is no substance. There is no improvement.

Once again we suggest that President Obama, and the Congress, work to lower the corporate tax rate. A bi-partisan idea that has been trotted out every election year and then packed away without being addressed. It is one economic policy that has yet to be tried, and the one with an actual history of effectiveness.

If economic policy for the nation is to be anything more substantive than a headline, our Government must seek out effective policies that actually affect growth. That means that both the President and Congress must work together. It means that attempts to placate the American people - and the deception via obfuscation of facts - must cease. Spinning headlines does not create jobs or improve the economy, even when President Obama is doing the spin.

America's economy and people deserve better than spin as policy.