Unemployment and airplane crashes

DFN: Politics aside, this is pretty witty and informative at the same time. Great analogy about the derivation of unemployment. Good insights, of little solace, if your unemployed.

Unemployment and airplane crashes
By Jame Fallows
07 Nov 2009 12:05 pm

A man in Florida sends what may be the ideal example of reader mail, combining as it does aerodynamic theory, politics, economics, and presidential rhetoric. If only there were a China- or beer-related angle… Seriously, his critique of how the Obama team has explained the continuing collapse of the U.S. employment base is insightful. Although it is obviously too late to adjust the rhetoric with which the Administration launched its economic recovery plans, arguments like this reader’s could help shape the ongoing discussion.

"I’m really confused by how the Obama administration has handled the narrative and voter expectations for this recession. I clearly understand that they had to carefully balance early 2009 dire warnings against economic pessimism, while making a case for the stimulus package, etc. But once the stimulus was passed, I believe that they should have boldly stated how bad things really were, how their economic policies were the correct choices (even acknowledging Krugman’s critiques of "too little"), and emphasizing that even the best possible management of the 2008 economic trainwreck would see significantly increasing unemployment as a lagging indicator.

"One analogy I’ve thought of often, aligned with your interests, is an economic analogy of an aerodynamic stall. When commerical credit froze and consumers reduced spending, the prevailing economic "lift" was gone. Stall! Conservative knee-jerk reactions for tax cuts were the equivalent of "pulling up" on the stick- intuitive but deadly. Obama’s expert advice was to gain speed by spending (diving), even at the cost of altitude (deficit/debt). High unemployment was destined from the moment the stall occurred. Only when sufficient airspeed/angle of attack (spending) had been reached could the economy begin to pull up, and the unemployment would be analogous to the altitude lost even after the decision to finaly "pull up" had been made. Passenger relief (consumer confidence) would follow long after the immediate recovery (i.e., GDP), and no one would be "satisfied" until the plane came in for a (economic) "soft landing."

"There are probably numerous logical errors with this analogy [JF note: seems pretty good to me], but the simple point is this: If "Joe six-pack" clearly understands that Obama saved his economic life, while Conservatives would have driven the plane into the ground, he’s more likely to appreciate and reward the unpalatable choices that Obama made. His appreciation would be enhanced if he understood all along that the pilot had no choice but to lose altitude, and the pilot explained that altitude (jobs) would take a long time to regain. This administration sorely needs a narrative that citizens can grasp and accept, otherwise the cynical partisan naysayers will continue to fill the void….

"I came across this, published online by Irwin M. Stelzer on 12/19/2008 in the Weekly Standard (hardly a liberal apologist):

‘Bush knows that Obama is inheriting a very difficult economic situation indeed. So does the president-elect. Economists with whom I have spoken–and these are the people listened to at the highest levels in both parties and at Ben Bernanke’s Federal Reserve Board–believe that the unemployment rate, now at 6.7 percent, will hit double digits sometime in 2009, and stay there well into 2010. They expect house prices to drop another 15 percent and share prices at least another 10 percent before finding a bottom.Worse still, they are predicting an extraordinarily sluggish recovery. Since unemployment is what economists call a lagging indicator–job creation doesn’t start until a recovery is well under way–the unemployment rate might remain high well into 2011.’

"None of this is news to you. But if the Weekly Standard could articulate this in late 2008, why hasn’t the Obama administration made sure that average Americans understand the "pre-destination" involved with unemployment?"

As an answer to the final question, my guess is that a combined message of uplift and caution is among the most difficult for leaders to convey. Obama and his economic team had to keep sounding optimistic, since so much of a recovery is affected by "animal spirits." But they also needed to acknowledge that for a long time ahead more people would be losing than gaining jobs. The dual message is not impossible, but it’s tricky, and as the reader suggests the proper balance has not yet come across.


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: