February 19, 2009

Dear Mr. President, Have the Guts to Be an Optimist

First, I have not been taking a break. I have quite literally poured through the stimulus bill looking for the goods and the bads. I went to Dallas last week for a very good conference discussing the market, economy, etc. Finally, I have been listening to the media, President Obama, his administration, the Democrats, and the Republicans absolutely slam the economy.

Last week, several of the speakers (former financial media correspondents, economists, and mutual fund managers) all said that the bashing of the economy by the media and politicians has created a complete lack of confidence just when we need confidence. I am not saying that everything is rosy, but this is not The Great Depression.

I understand and do feel the pain of all of those workers and their families that are unemployed and struggling, so please do not see me as being callous. What I am trying to say is that The Great Depression talk should end. The economy is more like that of the early 80's now and not the depression (I'll post some charts later showing this). Talking about a bad economy helped pass the stimulus bill, but it is now done. Start preaching to the masses about the recovery.

This has been a huge topic of conversation in my office, with my clients, neighbors, and friends. It affects all of us, and it is time to move forward.

Below read a really good blog post from Mark McKinnon of The Daily Beast. Mr. McKinnon is obviously a conservative, but his comments push towards the lifting of America and the economy. At my conference last week, both Democrats and Republicans alike had much of the same feelings.

Dear Mr. President, Have the Guts to Be an Optimist
by Mark McKinnon
Posted: February 18, 2009 - 10:15pm

As Obama prepares for his first major speech next week, he should take a page from FDR, Reagan, and his own campaign instead of constantly trying to manage expectations. It sure isn’t helping the stock market.

OK, Mr. President, enough with the doomsday talk already. We get it. Things suck. And they’re going to get worse before they get better.

And we get how it important it was for you to level-set expectations out of the gate, as they were stratospherically out of whack.

We are all in economic rehab now, clear eyed and sober. If we’re not out of work, we know friends and family who are. And those of us lucky enough to have jobs are being showered with resumes. Really good ones.

You were elected because you are a walking, talking hope machine. Plug that sucker back in and crank it up to ten.

So now we want to know that there is light at the end of this bleak, black tunnel.

It’s time for less mope and more hope. You were elected because you are a walking, talking hope machine. Plug that sucker back in and crank it up to ten.

There has been some debate in the opinion pages about whether the FDR or Ronald Reagan approach to a bad economy is the best remedy. Putting that aside, there is one thing they had in common: They were unblushing optimists. And they communicated their enthusiasm until their half-full cups ranneth over.

It’s time to cut the talk about similarities to the Great Depression. First, it sure as hell doesn’t help the markets. Second, it’s not true. Not yet anyway.

Bradley Schiller, an economics professor at the University of Nevada, straightens out the facts for us: “This fearmongering may be good politics, but it is bad history and bad economics. It is bad history because our current economic woes don’t come close to those of the 1930s. At worst, a comparison to the 1981-82 recession might be appropriate, Consider the job losses that Mr. Obama cites. In the last year, the U.S. economy shed 3.4 million jobs. That’s a grim statistic for sure, but represents just 2.2 percent of the labor force. From November 1981 to October 1982, 2.4 million jobs were lost—fewer in number than today, but the labor force was smaller. So 1981-82 losses totaled 2.2 percent of the labor force, the same as now.

“Job losses in the Great Depression were on an entirely different magnitude…Jobs were being lost at double or triple the rate of 2008-09 or 1981-82.

“This was reflected in the unemployment rates. The latest survey pegs U.S. unemployment at 7.6 percent. That’s more than three percentage points below the 1982 peak (10.8 percent) and not even of the a third of the peak in 1932 (25.2 percent). You simply can’t equate 7.6 percent unemployment with the Great Depression."

Auto production last year declined by roughly 25 percent. That looks good compared to 1932, when production shriveled by 90 percent. The failure of a couple of dozen banks in 2008 just doesn't compare to 10,000 bank failures in 1933. Stockholders can take some solace form the fact that the recent stock market debacle doesn't come close to the 90 percent devaluation of the early 1930s.

There now, don't you feel better.

George W. Bush was president through some of the darkest days of our history and yet his optimism never waned. He is optimistic by nature, but he also understood the importance of always communicating a sense that things will get better. And it’s in part why John Kerry lost in 2004. He painted a terrible picture of the future. And as Bush said, “You can’t say things are going to be awful, follow me and expect to turn around and see a crowd.”

So, Mr. President, you’ve got a big speech coming up. Turn the heat up and the lights back on.

Source: The Daily Beast

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