Des Moines Register Spreads Consumer Confidence Lie

Consumer ConfidenceOn Saturday, the Des Moines Register endorsed Mitt Romney for president. It is kind of a big deal, because Iowa is a swing state. But this is not why the endorsement is getting a lot of news. Mostly, people are focusing on the weakness of the case the paper has made for Romney. Michael Tomasky at The Daily Beast called the endorsement “little more than a practical joke.” And he went on to say that it had all the hallmarks of a dictate from the top, “Our idiot publisher forced this tripe down our throats, and we’re counting on you the more knowledgeable readers to understand this.”

But one part of the endorsement really caught my eye. They went beyond full-tilt Confidence Fairy:

Consumers must feel more confident about their own economic futures to begin spending on the products and services that power the economy. A renewed sense of confidence will spark renewed investment by American companies. Industry will return to full production and hiring will begin again.

I’ve written many times before about this pernicious Job Creator myth. For the hundredth time this months: businesses hire because they cannot handle their work load with their existing personnel; they do not hire out of the goodness of their hearts or because they feel “confident.” (Ever hear of “temporary workers” and lay-offs?)

But there is another myth that is much more important in the Des Moines Register endorsement: consumer spending. This is something that Dean Baker hammers on over and over and over. Yet no one seems willing to believe it. Americans are spending at the same rate they were spending before the dot-com and real estate bubbles. Here are the data via the Bureau of Economic Analysis via Beat the Press:

<%image(20121031-consumerspending.png|450|279|Consumption as a Share of Disposable Income)%>

This chart is actually a little frightening. If anything, Americans are not saving enough. But it is certainly ridiculous to suggest that the problem with our economy is that Americans are spending too little.

These kinds of myths are hard to kill because of the way they hide in plain sight. Anyone reading the Register endorsement is likely to just accept the claim that consumer confidence is low; it is stated as a fact inside a larger argument; no one (Not even the writers!) even notice it. This is how we get to the point where “everybody knows” stuff that just isn’t true. Luckily, this doesn’t happen in foreign affairs, otherwise we might go to war for no good reason. Wait…

Update (31 October 2012 6:51 am)

Dean Baker picks up on the endorsement this morning, Des Moines Register Endorsement of Romney Flunks the Which Way is Up Test on Economics. He goes into much more depth about it than I do. Check it out.

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About Frank Moraes

Frank Moraes is a freelance writer and editor online and in print. He is educated as a scientist with a PhD in Atmospheric Physics. He has worked in climate science, remote sensing, throughout the computer industry, and as a college physics instructor. Find out more at About Frank Moraes.

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