True Facts About the Economy


September 18, 1992|By BEN WATTENBERG

WASHINGTON — Washington. -- The economy is the big political issue. But, shockingly, not all things candidates say about the economy are what Casey Stengel used to call ''true facts.''

Voters should try to sort it out. I recommend a slender book

about true economic facts: ''An Illustrated Guide to the American Economy'' by Herbert Stein and Murray Foss. It is credible and objective, yielding comfort in hard times.

The credibility comes from the experience and mission of the authors. Mr. Stein, 76, is a former chairman of the Council of Economic Advisers. Mr. Foss, 74, was editor of the ''Survey of Current Business.'' Jointly, they have worked the tangled vineyard of statistical economics for a hundred years.

They are now my colleagues at the American Enterprise Institute. I would describe them as eclectic liberal conservative economists, or perhaps the reverse. In the 1980s, Mr. Stein publicly hammered Reaganomics and supply-side economics with clarity, wit and gusto.

But that's not the idea in the current work. In clean prose, with charts that tell stories, Messrs. Stein and Foss lay out ''A Hundred Key Issues,'' (the subtitle of the book). They write: ''We have tried not to make a book of Republican or Democratic, conservative or liberal, optimistic or pessimistic data. . . . We have not looked for things that would surprise the reader, although . . . some things did surprise us.''

Me too. I had no idea how common deflation has been: From 1865 to 1940 price levels generally fluctuated downward. (Will it happen again?) I wouldn't have guessed that Alabama has a higher median income than West Germany.

Nor had I realized how much serious economists do not know. The volume is studded with cautionary phrases: ''it is not clear whether . . . ,'' ''. . . to some extent,'' ''economists do not have a good understanding of . . .''

Of today's essential question they write: ''Economists have been grappling with the problem of why productivity growth has slowed down but have been unable to come up with satisfactory answers.'' That noted, they offer related material: Productivity did increase mildly in the 1980s; the rate prior to 1948 was about the same as now; the 1948-73 years may be a poor benchmark because of high post- war demand.

Campaign issues are illuminated. Jobs in the growing ''service'' sector are not typically bad ones; they include doctors and lawyers. Median duration of unemployment has been less than seven weeks. More than half the unemployed left their last job voluntarily. ''The underclass'' involves 1 percent to 3 percent of the population.

Messrs. Stein and Foss are concerned, not alarmed, by the deficit: In the 1980s deficits neither aborted economic growth nor induced inflation. Nor do Stein-Foss buy the ''debtor nation'' complaint: ''net foreign debt . . . is only a statistical aggregate without any economic significance.'' They say the rise in family income has slowed, but data showing a decline in real wages ''give an inaccurate picture.''

They show that America, by European standards, is neither overtaxed nor overgoverned, and that, by many measures, federal government activity is not increasing.

They deflate large egos: ''One frequently hears . . . that . . . 'economic policy' has created 'x' number of jobs. . . . This assertion is misleading. . . . Jobs are created by persons willing to work at a wage justified by their own productivity.''

There is solace to be derived from senior wise men who aren't working political angles. We are calmly told of the inexorable flow of the business cycle: ''When sales and orders are increasing, xTC business spirits become buoyant, at times giving rise to beliefs that the expansion will continue indefinitely. Excesses may develop. Investments that look profitable when first undertaken turn out to be highly unprofitable when markets weaken.''

Sad, but it works itself out, positively: ''The U.S. economy, like other industrial economies, fluctuates around a rising long-run growth trend.'' In the hothouse atmosphere of an election year we should, above all, remember that. It is a true fact.

Ben Wattenberg is a fellow at the American Enterprise Institute.

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