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In order to keep up with the nature of free, spirited debate, I wanted to place the chat feature at the top of the homepage. This ensures people can come here and share their views on anything they wish and not have it be related to any specific discussion. Here, people can share ideas, links, and views "unmoderated" and an their own pace. To me, this makes The Elephant in the Room blog truly a place for debate.

Tuesday, July 10, 2012

On Unemployment, Don't Write Off Barack Obama's Broken Promises

I have been reading (and sometimes corresponding with) the left-leaning blog "The Moderate Left." It also operates I respect the blog; it doesn't simply rant or chant on fringe subjects like #RomneySwissBankAccount. It tends to stick to real economic debate, and I visit it for that purpose. I think, in the spirit of civil debate (something this country is certainly lacking and the main purpose of The Elephant in the Room), it's good to know what the "other side" thinks and feels.

Today, I read the The Moderate Left's post titled "What's Driving Unemployment?" See it here: For the first time in The Elephant in the Room's existence, I felt compelled to write a rebuttal to this post. It is more of an analysis of the ideas presented in the post rather than a counter-analysis of it. In short, here it goes:

First, I would like to say that I do agree with many aspects of the writer's argument. As I go through my rebuttal, I will highlight these, and I will give my responses along the way. I do want to highlight my position, first and foremost, that the argument in ModLeft's post, in my opinion, dodges the key issue surrounding the unemployment debate: Obama's broken promises. Additionally, I think that regardless of unemployment figures, stimulus numbers, tax rates, alleged GOP obstruction, etc., the American public, due to this continual dodging of Obama's economic performance by the left, are not holding President Obama's feet to the fire. He set the standards by which he would be judged, and I think the American public is falling asleep at the wheel by not holding our president to these standards. I continue.

ModLeft (I don't know the author's name, and that's fine, so I'll refer to him as this... and unless notified otherwise, I will refer to ModLeft as "him" and "he" as well) establishes the case that unemployment is typically a lagging indicator of an economic condition. This is fundamentally true. If you step on the gas pedal while cruising at 45 mph, your engine will instantly rev up, but your speed won't get to 60 mph instantly. Speed, in this case, is the unemployment rate. He then goes on to cite various metrics to show that the overall economy is improving, and that yes, the unemployment rate/situation lags behind. He uses technical terms that, in my opinion, are rarely understood by the average American, and that misunderstanding doesn't help the average reader grasp the current unemployment situation. I prefer to keep my arguments simple, and while yes, sometimes it's difficult to keep oneself free of technical "mumbo jumbo," I often like to explain economics in commonly understood scenarios such as the driving one I just utilized.

Modleft cites a few "metrics" to show that the country's overall economic situation is improving, but I question the use and analysis of these values. Highlighting these economic factors to make the case that the economy is improving would lend itself to support the "unemployment situation is one that lags" argument, but if these economic factors don't show an actual improvement, the argument of why the unemployment rate is what it is starts to fall apart. He cites:

"The stock market has returned to 'pre-bubble' levels" - I don't believe this to be true, and I think we need to look at the overall picture here. Some facts (looking at two key measures of the stock market: the broad S & P 500 Index, and the industrially-centered Dow Jones Industrial Average) highlight my position:

- The S & P 500 Index closed at an all-time high on a continuously-upward growth trend on October 9th, 2007 (1,565.15). The Dow Jones also closed at an all-time high of 14,164.53 on this date. While many economists believe the recession didn't truly start until March through September of 2008, this number is significant in that the stock market was on a continuously-upward growth trend. Steady declines (again, who knows when the recession actually started; it wasn't given an official start date) began after October 9th, 2007. This is shown in the figure below (click on the image for an expanded view):

- The current levels for the S & P 500 Index and the Dow Jones are 1,358.97 and 12,809.59, respectively. From the October 9th peak, the S & P is down 13.2% while the Dow is down 9.57%. To me, that doesn't show that we're back to "post bubble" levels.

If we look at the following chart, we will see that the large drop in the markets occurred around September, 19th, 2008. On that day, which some argue was the official beginning of the recession, the S & P 500 Index closed at 1,255.07 while the Dow Jones Industrial Average closed at 11,388.44. See this in the figure below  (click on the image for an expanded view):


Now yes, from September 19th, 2008, the S & P's value has increased by about 8.2% in total, while the value of the Dow has increased by about 11.8%. That seems like a large increase, but it is over approximately 4 years. This means that the S & P index grew at a dismal 1.97% per year, while the Dow only grew at 2.96% average growth rate per year. From an economic standpoint, this is not a recovery, and it is certainly not back to "pre-bubble" levels. To claim that the economy is doing okay and the reason we have high unemployment is because unemployment lags growth and hasn't caught up yet is simply not true. Expanding on this logic, unemployment is no where near ready to come back to reasonably and "healthy" levels (< 5.5%) any time soon.

ModLeft then quotes that as of now, the "GDP continues to grow, and corporations are experiencing record profits." Let's look at both claims:

"The GDP continues to grow" - This argument is akin to the mentioning of the "pre-bubble" stock market growth return. Economists state that the economy is currently growing at a rate of about 1.9%. This is projected to continue through the rest of the year. Yes, this is positive growth, but unfortunately, it is dismal at best. In order to achieve "pre-bubble" growth, the economy needs to expand at about 3.5% and above.

"Corporations are experiencing record profits" - Which corporations? To me, this un-linked, not-cited, Occupy Wall Streetesque chant is very hollow. I see it often quoted but rarely proven by the left. Across the aggregate, corporations are not as healthy as some think. Again, the average American, by no fault of their own, wouldn't know this, and the left tends to play on their lack of general knowledge and understanding. As far as record corporate profits, just ask American Airlines, Hostess, and Kodak (to name a few) how they're doing.

To summarize the original position of ModLeft, he claims the economy is recovering nicely, the stock market is back, GDP is growing, and corporations are humming along at record profit levels. He then makes the link that basically it's only a matter of time until unemployment falls in line since it is a lagging economic indicator/condition. His recovery "facts" are roundly inaccurate, and while unemployment typically does lag an economic expansion/recovery, the signs ModLeft cites of this recovery simply do not yet exist.

Going forward, why did I feel it necessary to start by highlighting the holes in the "economy is recovering but employment lags" argument ModLeft takes? I did this because I felt it was necessary for the American people to know that in spite of how the left spins data, we shouldn't be holding our breath. We aren't "almost there," and dismal growth is no where close to where we need to be.

This all starts to become connected in ModLeft's next paragraph. He states (perhaps as a way to let Obama off the hook), "The American public gives presidents too much credit regarding the economy.  Presidents are powerful legislators but they do not control economic cycles given our market-based system. Understanding changes in the job market has more to do with Federal Reserve policies than presidential agendas.   Regardless of what you might think of George W. Bush, his policies had little to do with the banking collapse." I actually agree with this. But here is the rub, and it connects back to my original position: our current unemployment and economic situation is not what President Obama promised.

Again, let me restate this. ModLeft is correct in that the president does not have as much weight in determining the way of the economy as we like to think. Yes, he can push measures, suggest and then sign bills, assemble numerous experts to help him craft policy, use the power of the pen/veto to sign legislation he thinks will help, but a lot of it is beyond the President's control. President Obama, however, promised certain things. He set certain bars and certain goals. The only way we can truly judge a manager, leader, or president is by the success or failure he achieves in accomplishing the goals he set forth. President Obama told the American public that we would be at approximately 5.7% unemployment by May, 2012 if we passed his stimulus package (this falls under the "suggest and then sign bills" part). The stimulus was passed, and we are nowhere close to that promise (see the stimulus outlined in the American Jobs act here: In it is the following graph showing where we should be once the stimulus was passed, and where we would be, according to Obama and his experts, without the stimulus (click on the image for an expanded view):.

As we can see, we are not only well above the projected "with recovery plan" curve for unemployment, but we far exceed the unemployment rate Obama predicted would exist if we didn't pass the stimulus. Again, we are nowhere close. One of Obama's current campaign slogans is "betting on America," but to me, he bet with $787 billion of America's money, and he lost big. 

When will the unemployment rate improve? Who knows? I do believe it will come back when the actual increase in demand for American goods and services solidifies itself and shows employers there exists a need to hire new employees to meet this demand. This can be done by lowering taxes (for both individuals and corporations). Lower taxes means more money in everyone's pocket, and more money in everyone's pocket means they will spend more increasing the demand for goods and services. This is a "suggest and sign bills" plan Mitt Romney would use, and I do agree with it. Would it work? I think so, but who knows? With President Obama's broken promises, perhaps it's worth letting a different guy make the bets and promise the results going forward. That, however, is for another debate.

To some this all up, in spite of all the smoke-screen data twister by liberal spin machines, it comes back to one thing: broken promises. Obama ran on promises and got elected while setting lofty goals. Quite simply, he failed to achieve them. No matter how the left spins it, and in spite of all the technical info they try to confuse the issue with, we cannot continue to overlook the fact that he said, "pick me and you will see these results." We picked him, and the results he promised did not come into fruition. THIS is what the American voter should focus on. THIS should be the defining argument we should be telling our neighbors, coworkers, and friends. Let the left toil around with spinning reality and attempting to divert away from Obama's broken promises. Let the left try to deflect to issues of such as #RomneySwissBankAccount and their fictitious "War on Women." Here on the right... well, at least at The Elephant in the Room, we will continue to bring you truth and reality even through the biggest liberal spins. 


  1. I am truly flattered. Thanks for citing my work -- I know we don't always agree, but I try to be fair. A couple responses:

    The sentences that are the basis for most of your article is, “Using only one measure to judge economic health is not only irresponsible, but laughable. The GDP continues to grow, the stock market has returned to pre-bubble levels, and corporations are enjoying record profits. Like all business cycles, unemployment is a lagging indicator and is the last measure to reflect economic change.”

    I agree that these claims are not factually vetted. Yes the stock market has not returned to pre-bubble levels, but it was close enough for me to feel justified with the claim. We have recovered from the dip and stocks are considered healthy again.

    I agree that not all companies are seeing record profits (again, I’m thinking 80 for the 20), but this has been a very healthy run for most corporations (Ironically I work for P&G, and our shareholders would beg to differ!). Very low interest rates and the policies of the fed have helped with cheap capital, which has been a boon to banks and corporations. I also think your statement “this un-linked, not-cited, Occupy Wall Streetesque chant is very hollow” is not only incorrect (I detest the occupy wall streeters and they do not help our party!) but also cheapens your argument. You are using data to defend, no need for personal attacks. With that being said, I am surprised you would disagree with this statement. I didn’t think claiming the recent successes of Wall Street was controversial!

    I also agree with you that unemployment is not going to come back to the 5.5% anytime soon. Companies have become more efficient, and it will take time to invest in additional human capital given the results.

    With that being said, I am now going to challenge your data. You claim that President Obama promised 5.7% unemployment with the passing of the stimulus package. I read the report you linked but have some issues with the claim. This was not a report used by Obama to guarantee levels of unemployment. It was used as a recommendation. Projecting unemployment numbers > 1 year out is borderline guessing, let alone 4 years. Remember, after this report was published an additional 500,000 more jobs were lost before the stimulus package was even passed. The report does not accurately reflect the marketplace when the stimulus passed as the unemployment rate rose above 8% before President Obama signed.

    Politifact did a nice job breaking down the claim here:

    In all honestly I wish you would be just as diligent with your complete analysis on both sides of the argument. A report written by financial forecasters barely amounts to a hardened promise. In my profession we constantly see 3-5 year forecasts and make decisions on this data. I can count on one hand how many of these forecasts actually came to fruition.

  2. Matt - Thank you for writing back. I will try to respond to you addressing each paragraph along the way.

    You said that I used your opening paragraph as the "basis of my article" and that's fine. In that paragraph, you say, "the stock market has returned to pre-bubble levels," but then in the next line you say "yes, the stock market has not returned to pre-bubble levels." Additionally, they have returned to a level that is greater than the September 19th crash date, but not anywhere near their high. I also addressed the claim that stocks are "healthy." I'm not sure what you're basing that on. As I pointed out, stocks have averaged around 2.0% growth or less per year. That's nowhere near "healthy" considering stocks have averaged > 10% yearly growth since the great depression. I think you're opening your "healthy" stocks claim to scrutiny on a quantifying vs. subjective basis. With 23 million people out of work, low yearly stock growth, more people that ever on government social programs, I'm not sure what you're definition for "we have recovered from the dip" is. Please help me understand this.

    In the next paragraph, ("I agree that not all companies..."), there was no personal attack there. A personal attack would have been attacking YOU, not your argument. You make an argument, I have the right to shoot it down. Your claims of "record profits" has been unbacked twice (this being the second after the "end oil subsidies" debate.) It is now the third claim you've made when you said "but this has been a very healthy run for most corporations." Which are you referring to? Again, yes, without examples, this seems hollow. "Most" and "very healthy" run are subjective, and to me, unbacked talking points. And yes, to claim "corporations are making 'record profits'" to me, is OWS-eqsue considering it's not seen in the business world, and you're not providing any proof. I'm a huge "back what you say" person, and you've now made the claim with no backing. So yes, in my opinion, it's a hollow claim, and definitely not cheap. It is never cheap to ask someone to back what they say. Until then, and it's nothing against you personally, and it's not a personal attack, but I definitely will say it's unfounded.


    1. continued -

      It's true; unemployment will not come back. But I tend to think it's that there lacks a fundamental economic demand for goods and services to warrant more hiring. I respectfully disagree that companies have become more efficient all of a sudden. If this was the case, they would have done it a long time again.

      With challenging my data, that's fine as it is your prerogative. But it sounds that you're just going on semantics. It seems that you want to debate between "promise" and "projection." I think, that in an executive position, when you endorse something, push for something, and then physically sign something, you stand behind it. Whether it is a "projection" is irrelevant. We were told this by Obama advisers, they published a report, Obama signed a bill, so Obama stands behind it. Again, as with my original claim that the left is deflecting away from reality, it appears you're trying to do this. The fact is, in Obama's signed and sponsored bill, that the report shows should yield certain results, an unemployment rate was projected, and we aren't even close. You are claiming that it's a mistake in projections, that longer termed projections are difficult, and there was a large margin of error. With all due respect, I can't simply write it off as that. Is it really the case that we can just say, "well, 23 million people don't have jobs, we are 43.8% above our unemployment rate projection, but, well, there was a large margin of error, it really wasn't a promise, and long-term projections are tough?" I don't think that is a fair and business-smart assessment to make. Given that the president did sign this, push for this, and it's an utter failure, should he really be given a second term?

      I think that's a slap in the face to the American people to vote for him. Like him or not, realistically, it's time to go in a new direction. Just as I said here:

      Thanks again, and I hope to hear back from you.

  3. Hi LME - and thanks for 'dumbing down' all the economic highbrow stuff for me : )

    As I've said before, I'm not an economist, but I AM the one who does the grocery shopping, pays the bills etc. Since Obama took office, my overall grocery bill is up by an overall 25%... and we don't need to talk about the utilities and gas prices.

    Obama pushed for Stimulus I and Son of Stimulus with the PROMISE that we'd have >5.7% unemployment by now. It did NOT happen. Instead he's demonized those who ACTUALLY work and racked up another $4T+ in debt - in wasted 'green energy' fiascoes, expanded entitlements etc.

    Our Southern border's overrun with illegals, who's DEM backers laugh at us and SPIT in our faces while the aliens overrun/overtax our school systems, medical facilities, etc, etc, etc. grabbing all the tax-payer funded 'freebies' they can get their hands on... and ALL Obama can talk about is 'fair'.

    How is ANYTHING Obama's doing FAIR to those of us who've played by the rules, lived within the law AND our means, paid our taxes and raised our kids to do likewise. All to leave a better country for our grandkids. HA! fat chance! Under The Won's plan - my GREATgrandkids will toil to pay off the DEBT he's accumulated - in a mere FOUR years.

    S.S. (already teetering) now has a whole new 'welfare class' of people who have turned to S.S. Disability when their 99 weeks of unemployment ran out.

    And now The Won is back to his worn out, tired, lame, disgusting 'tax the rich' mantra, as though THAT would even make a DENT in undoing the mess he and his Socialist cronies with their Socialist agenda - have created.


    Okay... end of rant : )

  4. Matt, good evening. I don't think I have seen you on here before, so nice to meet you.

    I would like to defend LME's point that you are challenging. You said, "You claim that President Obama promised 5.7% unemployment with the passing of the stimulus package. I read the report you linked but have some issues with the claim. This was not a report used by Obama to guarantee levels of unemployment. It was used as a recommendation."

    The report that LME linked to on page 5 of 14 in the pdf viewer(the report says page 4 in upper right hand), shows Table 1. It shows "Effects of Package" and "Increase jobs by 3,675,000". Right below that the author states, "The table shows that we expect the plan to more than meet the goal of creating or saving 3 million
    jobs by 2010Q4." The chart (showing unemployment rates) is right below that and referred to as Figure 1.

    Now, back in February of 2009 President 0bama gave a speech about the Stimulus bill after signing the bill. The transcript of the speech is here:

    From the 5th paragraph of 0bama's transcript:

    "What makes this recovery plan so important is not just that it will create or save three and a half million jobs over the next two years, including nearly 60,000 in Colorado."

    His economic advisers put together the report for him and he quoted it word for word in his speech. While he did not specifically come out and say "Unemployment will be at 5.7% by May 2012", he did quote word for word from that very report his team used to sell the need for the passage of the Stimulus bill, which projected that unemployment would be 5.7% by May 2012. I would have to rate that as mostly true instead of mostly false like politico did.

    1. I think LME and slim have this argument won. As LME pointed out, we have not recovered, and matts claims of corporate profits is unproven. When challenged, slim came in with a brilliant "back what you say" link (as LME likes to put it) to show that Obama did in fact quote and endorse the report. Challenged accepted and won. This round goes to the right.

  5. Good morning,

    Ahhh I missed this yesterday! Catching up.

    I have to disagree with at least your point on the stock market.

    I feel in your assessment this comes more off as a case of looking only at the numbers in your favor while missing some key elements (no offense meant at all). You said:

    “Now yes, from September 19th, 2008, the S & P's value has increased by about 8.2% in total, while the value of the Dow has increased by about 11.8%. That seems like a large increase, but it is over approximately 4 years. This means that the S & P index grew at a dismal 1.97% per year, while the Dow only grew at 2.96% average growth rate per year. From an economic standpoint, this is not a recovery, and it is certainly not back to "pre-bubble" levels.”

    But you’re completely discounting the fact that the market dropped by more than 40% in the meantime, as the largest monetary swing in the stock market to date in history (by an exponential factor).

    It’s incredibly disingenuous to only look at two data points before and after and attempt to make a factual assessment of the level of recovery just from that. By your own sources you can verify that it in that very period we had one of the largest stock market rallies in our history. From the lowest point of the S&P (just in the first months of Obama’s term) to the highest point 3 years later in 2012, we have a year-over-year averaged growth of 27%. Which is absolutely insane.

    Looking only at the figure of 27% doesn’t tell the whole story of course, but neither does looking at your figure of “a dismal 1.97% per year.” I’m sure though that if I tried to base my argument around the 27% figure, you would attempt to bring me back to the ground with your figures. But the reality is the in-between, in that you really can’t effectively downplay this recovery as ‘meh’ and nor could I attempt to base an entire argument around it being the second coming of Christ.

    Additionally, you refer to ‘pre-bubble’ levels as if it’s something that we’re shooting for in the short-term. But the whole idea behind something being defined as a bubble is that the numbers were inflated far higher than what they should have been at the time. This is what a bubble essentially describes, and is why it eventually becomes unsustainable and ‘pops.’ Judging our current economy and index ratings on whether or not we can surpass this amount of inflation in the short-term past isn’t an accurate way to go about this.

    That would be like saying that home prices aren’t truly recovered unless we surpass the home prices at the peak of the bubble immediately. That’s just wrong. If anything, that would indicate another bubble and serious economic concern more than it would indicate a healthy recovery/economy.

    This similarly applies for the stock market (though it of course recovers and moves far more quickly than housing prices). We don’t judge a recovery from a bubble by immediately surpassing the levels of that bubble. While yes, we of course do strive to do it eventually, the numbers shouldn’t be used as if they are accurate representations of economic health/recovery, as they were wrong and overly inflated (hence the popping of the bubble).

    Regarding broken promises, I only hope that this same level of judgement is held against the GOP. Making high political/campaign promises in hopes of being elected and appearing to be a strong president isn't unique in any sense to Obama or Democrats.

  6. Also, regarding the 'unsubstantiated' claim of corporate profit recovery:

    It would of course be wildly exaggerated and inaccurate to say that on a case-by-case basis very corporation has broken records since the crash, but so would it be to say that most haven't more than recovered.

    At the very least, the overwhelming majority are at or past levels leading up to the crash. Many are past it, and a large number have experienced record breaking growth and/or profits.

    And, regardless of the case-by-case, in a general overall assessment of profits the fortune 500 companies are higher than they have ever been.

    "The Fortune 500 generated a total of $824.5 billion in earnings last year, up 16.4% over 2010. That beats the previous record of $785 billion, set in 2006 during a roaring economy."

    1. RKen - Good morning! Yes, you missed a good one. I will try to answer your comments here.

      First, I'm not sure why you disagree with my assessment of the stock market. ModLeft's case was "the stock market was back to pre-bubble levels." I'm not discounting the fact that it's up since the lowest valley in it's dip. I'm saying that that's nothing to brag about. If the S & P dropped to 1.00 on September 19th, 2008, and the level was now at where it was today, in that 4 year growth, it would have grown immensely. This would be meaningless. Sure, "newer" investors would have benefited, but the vast majority (this is a qualitative thing) would see virtually no change in their wealth in the last 4 years. Yes, the market dropped by nearly 40%. I never said it didn't. But the case of, "the economy is coming back; we are back to pre-bubble levels in the stock market" doesn't look at the fact that we barely are, and the growth since that bubble drop has been dismal. To take it further, to be healthy again, in my opinion, would be closer to the peak and the path we WERE on around heading towards October 9th, 2007. I also don't discount that as a bubble. I highlighted the growth trend leading up to that date. It seemed very "normal" from any investment account.

      It's not disingenuous at all to look at the data in the way I have. I'm looking at the argument of "the market is back" and saying, "well, not really." "Back" is looking at where we are vs where we were, and quite frankly, the market barely beat inflation. Yes, it dropped 40%, but any president would look like a genius if he came in at the bottom of the valley and championed the success of the increase since that valley (bringing people merely back to when it started) as a huge accomplishment. Again, the see saw on that argument goes to the fact that most people aren't recent investors. In fact, I would argue that there are fewer recent investors that have benefited from the market's climb out of the valley. Again, to claim we are "back" is very disingenuous, especially when I'm only looking at the claim in that way.


    2. continued - with regards to promises, I never said the GOP wasn't to be held accountable. But Mitt Romney's plan, for example, is a new alternative. Obama (and his economic advisers) championed this. We didn't get nearly the results that were "projected" or "promised" so it's time to change direction and management. If Mitt Romney comes in and pitches a plan (I do agree with his way of doing it... I'm more for cutting taxes and spending than a stimulus - again, side debate) and it fails in the time he sets that it would, then I would have the same opinion of him then as I do of Obama now. But the fact remains: Obama's plan isn't working. It simply isn't. And we should start looking at a new direction.

      With regards to the links, I've noticed a huge trend in most of them: the lack of context. Both you and ModLeft have done this extensively (again, nothing personal). Record profits means nothing. If Exxon made $20 billion in profit in a month, that would be a record. If it spent $1 trillion to make that $20 billion, that's a 2% profit margin, and that would be incredibly slim. Only the last link you provided even talks about profit margins. It seems that the argument by many on the left (and yes, the Huff Post does this, being on the left) is to wow people with the "record profits" headline. In my example, we could look at Exxon and say, "wow, look at those record profits." But again, that's irrelevant. Profit margins are what matter. It's that simple. Looking at uncontexualized "record" (nominal) profits, the sheer flat, bottom-line number, isn't fair and very inaccurate. The first set of graphs, for example, are merely graphs with very little contextualization. Is inflation or the value growth of the dollar over time even accounted for? The second one is the Huff Post - I've already addressed my issue with that. The third is CNN money (via Fortune), but it addresses revenues, not profit. Revenues can be very positive while profits can be negative. Additionally, after that dip for the recession, the colors of the companies in that chart actually return to the same trend (again, contextual) as prior to the dip. If they would have turned vertical very sharply, then maybe there is something to it. But all they do is merely return their revenues to where they were. The fourth one does the same thing the Huff Post does - no contextualization, AND it blends causation and correlation. Profits are "up"... Okay? How? Profit margins? Relative to employment? Maybe. But is that a correlation or a causation? The last link does talk about some contextualization (in a year to year basis - showing the growth from one to the next) but again, no margins. To say profits increased "19.4%" sounds wonderful... what if costs increased too and while the profit margins shrunk, these companies just say a TON of sales increase?

      In all, I don't want to seem like I'm attacking you, and I'm being hostile. Trust me, RKen, I have nothing but the utmost respect for you (I'm just saying this because I can see if my tone seems hostile). Trust me... I'm just debating and there are no hard feelings whatsoever :-) Sometimes you and I agree; sometimes we don't. In this case, I'm probably as far from you as I can get. But I never perceive you as attacking me, and I always appreciate your civility. Just please know that no matter how much I disagree with you, there is no attack or personal negativity from me to you :-)

    3. I'm definitely addressing the stock market as a whole over the past 5 years, as opposed to very specific, pointed aspects of it. But that kind of speaks to my original point in that if you deal only in extreme specifics and leave out all of the other details, you can make anything look good or bad.

      In the same sense of your "market is back" argument, couldn't I arbitrarily choose to look at the S&P index on the day of Obama's inauguration and compare it to the S&P now? And then boast about the 20%+ growth average year over year since he took office? Why is this any less different/effective of a comparison?

    4. I'm not really sure what the issue is. The original case that was made is that "the market is back." All I did was point out that:

      1. Back to what? There is no definition of what the original was. I gave examples - 1 of how it was much higher than it is now (October 2007), and one of how it is back (and slightly exceeds) to about where it dropped from at September, 2008, but that the amount it exceeds that level by is a small yearly growth.

      2. It doesn't show any substantial economy is back analysis to look at the two major stock market indexes and claim we are back when we've barely exceeded where we were at one point, and are nowhere close to where we were a year prior to that point.

      I'm not sure where the issue is. In my assessment, the market is "back" isn't an accurate statement at all, and I've given more than a few examples of how that's the case. I think it's disingenuous to claim it is by merely looking at two points as the author did (looking at where we are now and looking at where the original Sept 2008 drop was). I think my approach quantifies, with numerous options, how we aren't back in much of a reality at all. If we look at is as a whole over the past 5 years as you have said, October, 2007 is about 5 years ago, and we are certainly way behind with regards to that. I'm not looking at anything in one point of time. I'm looking at it in the way it was presented: that we are "back" which requires end to end analysis. I've done that, and this is what I concluded. Please tell me where I'm incorrect.

    5. More than anything I'm addressing the point you made here:

      "Now yes, from September 19th, 2008, the S & P's value has increased by about 8.2% in total, while the value of the Dow has increased by about 11.8%. That seems like a large increase, but it is over approximately 4 years. This means that the S & P index grew at a dismal 1.97% per year, while the Dow only grew at 2.96% average growth rate per year. From an economic standpoint, this is not a recovery..."

      My point centers around the statement you're making there, rather than what you're addressing overall in regards to what ModLib said. My argument is that you can't fairly make an assessment on whether or not a period of time has a meaningful recovery, particularly from an economic standpoint, while only observing/simplifying it to two data points. I realize that ModLib's perspective appears to do this as well, and I equally feel the same for that if so.

    6. Allow me to say I don't understand what the problem is either. LME did exactly what he said he was doing:

      "I'm not really sure what the issue is. The original case that was made is that "the market is back." All I did was point out that:

      1. Back to what? There is no definition of what the original was. I gave examples - 1 of how it was much higher than it is now (October 2007), and one of how it is back (and slightly exceeds) to about where it dropped from at September, 2008, but that the amount it exceeds that level by is a small yearly growth.

      2. It doesn't show any substantial economy is back analysis to look at the two major stock market indexes and claim we are back when we've barely exceeded where we were at one point, and are nowhere close to where we were a year prior to that point."

      He did that. He backed it. You say your point centers on the statement LME is making. What statement is that? That facts show we are not recovering. That we are at a lower growth rate yearly than any recovery needs to be when looking at the original year? That we haven't even come close to our alltime high? I'm a little confused. So far, I hate to sound bias (of course I am :) ) but this is one of LME strongest pieces yet. The counter cases you and Matt (who admits himself he didn't vet the numbers and also admits that we haven't recovered to pre-bubble levels even though he originally claimed we did) are very weak, and it appears you're merely trying to shoot something back because LME is conservative while you and Matt aren't. So far, this is a pretty air-tight case for LME. Just sayin'

    7. And allow me to say also that I'm not just some a$$ kisser. In this argument, the case is well laid out and strong. I don't always feel that way, but for this one I've been thoroughly impressed.

    8. I’m not sure what’s difficult to understand about my last post?

      “You say your point centers on the statement LME is making. What statement is that?”

      Did you not see the quote from LME I had in my post, where I directly said “this is the statement I’m addressing”?

      “That facts show we are not recovering. “
      That’s exactly part of the point I’m debating. You can’t choose two points of data, ignore everything else, and then say that “this shows beyond all other interpretations/facts/analysis that it is not a recovery” on something as big as our economy/markets. That is not how the reality of this situation and economics work. LME didn’t necessarily do this as his point was more to discredit ModLeft’s use of this idea, but my point still is that it isn’t a proper way to make an all-encompassing assessment of the health or progress in the markets. You will never find any economist that believes or tries to argue otherwise, and I invite you to provide proof if you feel that isn’t the case.

      This argument is getting a bit silly. In my last two posts I’m not even debating as to whether this is really a recovery or not; I’m simply saying that you can’t base an absolute assessment (whether you conclude it is a recovery or not) on only two data points.

      Knowing that I find it odd you accuse me of a biased approach here, when I’m not even discussing whether it is a recovery or not at this point.

  7. Re: Second post -

    No worries about the tone, I'm not taking any of this as hostility :) (likewise I hope you aren't either). Just a very engaged debate! And thanks for the comments.

    As far as corporations, I think that the message is getting a bit mixed up here. The primary idea of this ‘left talking point’ is that the corporations are doing very well; and far better than the middle class is in this recovery. Whether or not they truly are breaking meaningful records or not is irrelevant to this being main take-home message here.

    Millions lost their jobs (and still haven't got them back), and/or have given up on their job search, and/or are underemployed, and/or are having their budgets get tighter, and/or lost and have still yet to recover most of their savings, and/or haven’t seen a meaningful pay increase in years or longer.

    Major corporations on the other hand, are nearly the opposite.

    As far as your stress on profit margins and sources, this is as high-up as a source gets:
    From which, the Bloomberg also created a graph:

    Which shows that corporate profit margins are way up (and even elaborates further that they are so far up that it even seems unsustainable).

  8. RKen -- I agree with your analysis. One of the reasons I never responded back to LME's comments was because I was baffled. I didn't think I was stirring the pot with the pre-bubble comment (if you really want to get technical, pre-bubble could be defined as anything pre-2007) or the record profits comment. I read the Journal. I watch the stocks and the earnings reports. I am an investor. I work for a Blue Chip.

    LME asked me for specific examples of record profits and I felt like this was a waste of time. I could come up with 100 companies that have seen dramatic swings in profits (and profit margins), and LME could point to 10 disproving my claim. It was not worth the hassle. Just look at LME's graphs and be amazed at the market swing over the past several years. I am scratching my head because I feel like LME is validating my claim! Besides -- isn't the stock market a fantastic indicator of corporate success?!

    Either way I still believe what I wrote, and the president's impact (or lack of) on the economy is not a partisan view (I feel, and wrote, that GWB should not be held accountable for the housing crash).

  9. Please, Matt. Spare me the hyper dramatic "I was baffled" junk. After all this back and forth, to which you and Rken have obviously tried to confuse every issue, let's go back to the main points.

    - Your article claimed that the economy was doing well (and that unemployment was what it was simply because it was a lagging indicator).
    - You cited 3 main reasons for it doing well:
    1. Stocks are back to healthy, pre-bubble levels
    2. "Record profits" by corporations
    3. GDP growth

    Again, sparing the "I was baffled" ploy, these three claims ARE NOT ACCURATE. LME answered these. He said (and yes, I'm going slow here for a reason):
    1. Stocks are not back to healthy levels. They have only come back to a level that is about 8% above what it was 4 years ago, and down relative to it's peak. There is much volatility in the market, and there is no steady growth. As of late, gains are taken out by losses. Now, you made a point, LME refuted it, you have failed to refute his claims. In fact, in your first comment, your very first response on here, you didn't even address it. It wasn't until Rken came on here and said something that you have not dropped back it. So I pose to you (again, hitting the pause button and getting back to your original claim), what measure are you going by to show that stocks are doing well? What is your proof? Yes, the stock market is typically an indicator of corporate success... but in what world is the stock market doing well?

    2. Record profits by corporations. You can show LME 100, right? I can show you 1000 that are doing poorly. In fact, LME has brought up great points that you still refuse to acknowledge: it's not about the bottom line number, it's about PROFIT MARGIN. He has even given examples of this. You don't refute it one bit. You keep shouting "record profits" but as someone who supposedly knows this stuff, you are either intentionally ignoring the argument that IS THE PROPER WAY TO LOOK AT IT (there are no two ways about it) in profit margin, or you really don't know anything about this at all. So go ahead, keep on with your "record profits" claim, and you will continue to look silly when you fail to acknowledge that you're just repeating unproven rhetoric. "Record profits" - where? Show me the 100, I'll show you 1000. We can play this game back and forth, or you can show that you understand it's about profit margins, which, in the economy as of now, across the aggregate, are nothing to write home about.

    3. GDP growth. Did you forget this one. It's bad. It's terrible. You want to talk about economists? Tell me one that thinks we are at a healthy economic level of GDP growth right now.

    So, while you want to claim you are "baffled" (poor thing), you really have been destroyed in this argument. You claimed unemployment was what it was because of 3 things you cited to show the economy was doing fine, but in reality, they aren't. You were rebutted quite strongly. Instead of coming to the table with a counter to the rebuttal, you went "omg, I'm so baffled." It's as if you tried to hide your lack of economic acumen with a hyperbolic false reaction. At least Rken came here to refute some things based on positions and facts. You still came with "well, I can show you some random number of companies experiencing record profits, but of course I won't cite any proof" and "hey, the stock market is doing just fine." So in the end, unemployment is high, the president and his magic crack squad invested a lot of my money, and we didn't get results. Keep trying to dance this one away. He owns this economy, no matter how much people like you want to spin it.

    1. Some of the confusion here is that many seem to think I'm arguing the same exact points or making the same overall statements as Matt. But I haven't made any statement anywhere saying whether I truly agree or disagree with either of Matt or LME's main points.

      It's a bit unfair to lump us both together, just because we're the only ones not in full 100% agreement with every word/implication of this post. :P

      My main original gripe was purely about attempting to make factual, accurate economic statements and analysis of a period of time while only looking at two points of data (which ironically enough, works partially against Matt’s credibility as well). You will never find any reasonable economist, or economical analysis that does the same. And I've invited anyone here to prove otherwise.

      Aside from that, on a more minor note I also provided proof/evidence of the corporate profits point; which included an analysis of increasing profit **margins** from the government bureau of economic analysis itself. Not sure what other evidence/level of credibility would be needed?

  10. Texas,
    Let me again respond to my three claims (im not doing this again):
    1. Stocks are back to healthy, pre-bubble levels:

    In April 2012 Dow, NASDAQ, and S&P had doubled since March 2009 and are equal or better to March 2007 levels. This is CORRECT and you can fact check that claim.

    2. "Record profits" by corporations

    Why do you think stocks have doubled? Do you think market cap has grown dramatically due to poor earnings? And yes, this includes profit margin (I look at PNLs everyday -- I get the relationship). I do not have time to have a company by company discussion on this point. I am correct and the fact we are debating this point is again, baffling. Since you like RKen's response better than mine, go back and read his with the links he provided. He covered this point in some detail.

    3. GDP growth

    GDP growth was at 3% in 2010, and has fallen in 2011 to 1.9% (but still growing). All I said was the GDP is growing. And as long as there is not a negative sign in front of the GDP number, I am correct.

    And Texas Tea -- stop with the trolling. You are not helping your arguments.

    1. Matt - let me show you how you are false.

      1. Stocks are still way down compared to their highs. We have not actually recovered. Yes, stocks are up since the low point you picked, but why don't I just go back to the 1930 and say "wow, stocks are way up." Fact: they are down since the correctly-pointed out time in the first chart. We were experiencing steady growth and then the market fell away. The peak pointed out in the graph is where we should be judging our drop from. Are we close to that? No. Are stocks recovering? Yes. But they are still far from being close to where we need to be (and at a growth rate - 8% in 4 years - that is way too slow). LME pointed this out correctly. And yes, Rken, the analysis IS correct. LME did not just use "two data points" as Rken have tried to say. He even showed trend analysis. So no, simply looking at "these 3 indexes have doubled since some convenient low point is not a case for recovery. It is correct. Stocks have doubled. It is incorrect: we are still far from where we need to be to even have broken even in the last 5 years. How can you say we are in a healthy stock market time (5 years is NOTHING in an investment horizon) when we are still net negative over the last 5 years?

      2. Record profits. Stocks have doubled for a number of reasons. If you're seriously trying to make the connection that they've doubled because of "record profits," you're just showing you really don't know what you're talking about. I read Rkens links, and like LME said, there was a lot of holes. Profit margins are NOT addressed. For the last time, stop with the "record profits" claim if you're just going to talk about nominal profits and not rate of return or profit margins. You say you work in this field, but you clearly don't understand the differences here. The RATE is what matters, not the sheer number. Rkens links didn't even talk about rate.

      3. GDP growth. Sure, negative GDP growth for 2 consecutive quarters = recession. We get that. But 1.9% and being stagnant or slowing. Come on. "All I said was GDP is growing???" If that's you're attempt to back your claim, you're pretty weak.

      HAHAHAHAHAHAHAHAHAHAHAHAHAHAH Trolling? Please. Again, spare me the drama. Your argument is defeated pretty handily. Your assessment of a "healthy stock market" is shortsighted since you're failing to address the lack of "return" to the normal upward trend LME correctly highlighted. Your record profits is an arbitrary claim considering you have absolutely no way to back this. It would absolutely be thrown out. Your GDP is growing is weak at best. You're the racing team manager that says "well, our car is going forward" while everyone is passing you. Again, your arguments are shot down, and in a mode of desperate fashion, you say I'm trolling? HAHAHAHAH even Rken and all the other liberals that come on here that know me know there is no trolling here. I'm surprised you went down that path. But again, I'm not surprised because your arguments tend to be poorly-thought and without merit anyway. Why would this be any different? Good day. You might want to change professions.

    2. And don't let me have to repeat this again. Read my three points, realize how yours are hollow and mine are, well, pretty much superior, and just admit it (kind of how you admitted you didn't vet the numbers and yes, stocks are not back to pre-bubble levels) like you did here:

      I agree that these claims are not factually vetted. Yes the stock market has not returned to pre-bubble levels, but it was close enough for me to feel justified with the claim. We have recovered from the dip and stocks are considered healthy again.

      Game over.

    3. TexasTea:

      I think you must’ve missed the post, as I specifically posted sources with numbers of **profit margins** created with data from **the bureau of economic analysis**

      You can't fairly dismiss that or accuse it of "having holes" with no facts/evidence to speak otherwise. That would be like me trying to refute LME’s use of the IRS data on taxes paid by the rich with nothing more than my opinion (‘the IRS data has holes! The rich really don’t pay 70% of the taxes! I don’t need sources/evidence!’); it’s silly.

      There comes a point where this turns from debate, to simply just being stone-walled in a mindset of beliefs and not acknowledging or working with other ideas/evidence. I’ve at the very least attempted to do my due diligence here in research and providing some sort of sources/evidence to back my claims.

    4. I'm trying to be totally fair here. I went to that link (for the BEA) for like 45 minutes, and could not find what you found. You're always well-thought, and you research your sources well, so I doubt you put it out as a "if I just link this important sounding place/doc, he will automatically assume the data is there without checking." Can you please direct me to how to get to what you're referring to through all those links in case I am missing something? That way, I might be able to see what you're seeing and understand your position so I can come up with my own counter position (naturally) :-)

    5. Ha, happy to specify for you Tea. :)

      Start here:

      The main page says "U.S. Economic Accounts."

      In that section, under the "National" heading, click the "Corporate Profits" link.

      From there you can access just about all the possible information available on this topic, at least on a broad level (no case-by-case here of course).

      The bloomberg article I linked referenced the "News Release: Corporate Profits" link, and the tables/PDF of the full news release (links found on the right side to all of the data and reports). Corporate profits section goes into some other details, page 13-15 of the PDF has all the statistical information on the profits/cash flows/revenues/GDP, etc, that Bloomberg referenced in the table they produced.

      From that main page though, you can go to the interactive tables (which is where my original link leads) and navigate through/display the information in a custom format. GDP & Personal Income tab contains most of the corporate numbers (slightly misleading tab name, yeah).

  11. I have nothing more to add. The data is the data. This entire thread has reaffirmed my positions. Thanks for the debate.

    1. You are right, Matt. The data is the data. No one can get around that. But the problem is, your analysis of the data and the conclusions you draw from it are not backed by much. If I was in a jury, and you were presenting a case versus LME's case, I would side with LME. His analysis, in my honest opinion, has more backing to it than yours does. You seem to fall back on the notion of "I say it is this way, so it's this way (especially with the record profits thing)" but you're not as poignant in backing it. I'm a mechanical engineer, so unlike you or LME, I don't dabble in this stuff daily. But, as an outsider to the world of finance, I have to say that it appears LME's case is a little stronger than yours. Even if it was tied, and there was a final "tie breaker" if you will, I think the tie breaker is a simple "look at the country around you." We can't keep making excuses, and I don't care who it is, if it was a republican in the White House, this failure to bring about real change has to be addressed, and we need new management. You and LME and Texas and RKen can debate the current status of our recovery all day; I will continue to focus on how to fix it. Can you not agree that one guy tried, he was elected fairly and squarely four years ago, and his projections and levels of success he established have not been met, so it's time for a new direction. You work in the corporate world, and I work for an engineering firm. But management in your world, in my world, and in the presidency is the same. If my manager failed to bring about the results he was charged with doing, don't you think he would be let go? I think that's the overall point that LME was trying to make. Sure, he doesn't think we are "there yet" and I don't think you or anyone (including any other economists other than LME) do either. Isn't it time for a change of management?