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The Great Depression Hoax

August 15, 2008

I slapped the side of my television in April when economist Joe Stiglitz called this the worst recession "since the Great Depression." But now the economy is not only hurting homeowners; it's apparently harming parakeets, too! An AP item reports that pet owners are abandoning their furry and feathery friends to animal shelters because they can no longer afford to feed them. Never mind that GDP is puttering along in positive terrain. Headlines still scream that we're closing in on 1929, not 2009.

Are we a nation of whiners, as Phil Gramm put it a little while ago, getting himself kicked off John McCain's advisory team? No, the American public is not whining. One reason may be that consumers are swallowing $13 billion of pick-me-uppers like Prozac, Zoloft and Paxil. (A doctor friend who volunteered at a sleepaway camp said that, every morning, 20% of the kids lined up for their psychomeds.) More likely, though, Americans are just leaving the whining to pundits and trend reporters. The fellow who filed the pet story did not bother to point out that, in this alleged new Great Depression, the Pet Products Manufacturers Association says that Americans have spent 5% more this year on their pooches and pussies than last year.

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Where are the Hoovervilles camped out under the Washington Monument? Where are the soup lines? Willie Nelson is still on tour, beseeching us to save the family farm. But it must be tougher for him to gin up support when the typical American farm, thanks in part to ever expanding ethanol subsidies, has see its annual income surge 50% past its 10-year average. Apparently Willie is traveling on a biodiesel, soybean-fed bus. So now we know at least what Willie's bus is smoking.

The fact is that most Americans get up in the morning to work hard, feed their families and pay for soccer uniforms and maybe a vacation, if they can stand the security lines at the airport. Most Americans don't let whining get in the way of work. That separates us from the French, who would join a picket line to protest against picket lines. The problem with whining, as with socialism, is that it requires too many evenings. And forget about the organized whining that we know as social activism. That requires too many meetings and too many covered-dish dinners too. I'm still not sure what Barack Obama accomplished as a professional "community organizer." I doubt he was another Martin Luther King, but I'm pretty certain he carried a lot of macaroni salad.

Sure, we gripe about higher food prices and shaky home prices, but we are still living "La Vida Latte," lining up every morning before a barista and otherwise indulging in the imperatives of the good life. Yes, the share price of Starbucks has sunk of late, but Americans spent more, not less, at Starbucks last year than the year before. And if you add premium coffee sales at McDonald's and Dunkin' Donuts, the growth rate of this liquid luxury has soared. I should point out that the price of a Starbucks latte is about $1,200 a barrel. Makes that SUV fill-up a little easier to swallow, doesn't it?

Meanwhile, Prius cars are flying off the Toyota lots, even though they cost $3,700 more than a similarly sized gasoline-fired Toyota and it takes 3.5 years to pay back the investment in fuel savings. The ageless Paul McCartney's spanking new Lexus LS600h will take him 102 years. Rock on, Sir Paul.

Of course, these are high-end luxury items, the kinds you see at the Kennedy compound when you look at it from Martha's Vineyard, hoping never to see a windmill blocking your view. But even the situation for middle-class Americans is not all that dire. In July the jobless rate among college graduates was just 2.4%, drifting up from 2.1% in March. That is miles away from the 1981 recession and, of course, you'd need scientific notation to compare it to the Great Depression, no matter what the Obama campaign says. The job market, while weak, has not collapsed.

Each Thursday morning I look at weekly jobless claims -- how many people trudged up to state unemployment offices, pink slips in hand. That number has hovered under 500,000. To match up to the level of 1981-82 layoffs, it would have to explode to 1.2 million. It won't. Moreover, a big proportion of the layoffs are coming among 16-24 year olds, who are not yet supporting a household.

So, no, we are not whining -- in part because we do not have much to whine about, whatever the hysterical headlines might say. But don't pop champagne corks yet. For some, it still feels lousy out there. But lousy is not a technical synonym for recession. On the lower end of the income spectrum, we have deep problems, both economic and sociological.

Back in the '60s a high-school graduate could still make good money, especially if he learned a trade. That's because almost every other adolescent in the world lacked a high-school degree. We were about the only country that educated teenagers. But now the rest of the world has caught up, and Americans are undereducated or ill-educated. High schools don't teach what they used to, and so students who don't go to college are left without the skills necessary to compete in a global economy. Forget the Beijing Olympics. In math-science competitions, the U.S. is the Jamaican bobsled team of education.

Most Americans who suffer layoffs do not deserve blame. It is more likely that their incompetent, often overpaid, bosses do. Still, no president, Democrat or Republican, can create prosperity for those who decide to forgo even a basic education. Our problem is not whining. It is persuading young people that, with baby boomers retiring, entitlement programs bulging and the world economy growing ever more competitive, now's the time to roll up the sleeves for something other than tattoos.

As for hysterical journalists, I'm waiting for a reporter to tell us that pet owners can't even afford the paper to line their animals' cages. That would be a shame, because it's about all those papers are good for.

Mr. Buchholz, an economic adviser to President George H.W. Bush, is managing director of an investment fund based in San Diego and the author of "New Ideas From Dead CEOs" (HarperCollins).
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