Free Markets, Free People

poverty rates


Is everyone feeling miserable?

The “Misery Index” was invented by economist Arthur Koon, an adviser to President Lyndon Johnson in the 1960′s.  It’s a fairly simple formula really.  Inflation plus the unemployment rate equals the misery index.  Of course since it was first published, we’ve changed the way we compute unemployment so when you see that number today, you have to remember it is lower because of that change.

But still, relatively speaking, it is a good indicator of our economic condition.  Today, the misery index stands at 12.87.  For the past 4 presidents, the index has ranged from a low of 6.05 under Bill Clinton to the high you see today.  Interestingly one term president George H.W. Bush had high index numbers during his presidency (low 10.9, high 11.10).  And we know how that turned out.

Barack Obama’s numbers are the highest of the 4. 

I noticed that some pundits are trying to compare Obama’s approval ratings at this point in his presidency to those of Ronald Reagan.  The misery index gives you an idea of why that won’t fly.

Obama’s index numbers started at 8.92 in 2009.  Reagan had an index of 17.97 his first year in office.  But the second year numbers tell the tale.  In his second year (1982) the index dropped by 2 plus points to 15.87.  And the third year numbers are actually a tick lower than Obama’s at 12.82.  But notice the trend.  It’s down.  Markedly down.

Obama’s is going the other way – from 8.92 to 12.87.  So while you can certainly say they had similar numbers, what you can’t draw from those numbers is the probability of similar results when election time rolls around.  One was trending markedly down and the other is doing the same on the up side.   The only thing that has saved Obama from a much higher misery index is the fact that inflation has been successfully dampened by the Fed to this point.  If that ever breaks loose, we may see an Carter era Misery Index.

Here’s another comparison that isn’t favorable for the incumbent.  The new poverty index numbers are in and they’re not good.  A sample:

Americans below the poverty line in 2010: 46.2 million

Official U.S. poverty rate in 2007, before the recession: 12.5 percent

Poverty rate in 2009: 14.3 percent

Poverty rate in 2010: 15.1 percent

Last time the poverty level was this high: 1993

Another index trending upward that isn’t good news for an incumbent.

So when you see the left trying to put a brave face on the numbers and making comparisons, all you need to remember to understand they’re simply whistling past the graveyard is that at the same point in each presidency, Reagan’s numbers were getting a lot better while Obama’s continue to get a lot worse.  If you’re going to make a comparison to a recent President, Jimmy Carter or even George H.W. Bush are better comparisons – not Ronald Reagan. 

And the key to remember about Bush and Carter is this salient description – “one term president”.

~McQ

Twitter: @McQandO

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