Political rhetoric based on dubious economic beliefs

This is a campaign year, full of political promises. The economy will be an issue, though it’s loaded with common, though dubious, beliefs.

To start, it is true that the economy is better than during the recession. Employment has largely recovered. In Maine, the Portland/South Portland jobless rate is 3.1 percent, an impressive level in the entire country.

But critics say many people who would like to work remain outside of the labor force, having given up trying. If they were added back in, unemployment would be a lot higher. And, when people find work, they may be paid less than before the recession.

These reservations about the recovery are based on the belief that nothing should have changed in the American economy once things picked up again. We have been cheated unless we get back on the same track and enjoy the same kind of growth.

This optimistic thought is wearing thin as time passes. It’s simply not happening. The nature of the economy has changed, demanding people have more skills than ever before. Workers struggle to catch up.

What’s more, attitudes toward work and spending may have changed. Consumers are expected to buy more and be drivers behind the economy, but now some of their money goes to savings not spending, reflecting the long-term worries brought on by the recession.

We are also told that some inflation is good and is needed to promote employment and the economy. In theory, inflation would be evidence of a labor shortage, forcing employers to hire the unemployed and pay more.

But we have little inflation. Why? Mostly because the price of oil has fallen as new supplies have become available. Cheaper oil should help business, but it is surprisingly seen as a negative.

In fact, not all inflation is caused by a short labor supply. Besides, without inflation you can get what amounts to a pay increase whenever you buy gasoline for your car.

Another reason the economy is lagging, we are told, is that China, a major customer in the world market, is having serious problems of its own. The supposedly enormous growth in China’s economy has faltered and can cost American and European companies a major market and investment opportunities.

Blaming China for American economic concerns seems to have replaced worries that China owned so much U.S. debt that it could do serious harm to this country. This belief was never true, and China turned out not even to be the largest American creditor. By the way, the largest holder of American debt is, well, Americans.

After the depression scare in the U.S. economy, to which risky lending and investing contributed, the country was thought to have learned its lesson. Banks would not be allowed to get the point of requiring a government bailout because they were “too big to fail.”

Since then, Congress has begun nibbling at the measures adopted to protect against risky banking, which results from making loans to people who really can’t afford them. Banks and other lender have resumed their practices of not asking for sizeable down payments or real proof of creditworthiness.

As the political year attracts wider interest, voters can expect to hear promises about more government programs from which they will benefit. They will hear little about how these programs will be financed.

Making such promises is not unusual, but is particularly flagrant at a time when many politicians are also promising to cut spending, taxes and the size of government. Government deficits and their contribution to the national debt must end, they say. A combination of cutting waste and leaving more to the individual will achieve their goals.

But the gap between their promises of debt reduction and smaller government is illustrated by the recent tax and spending bill. It was a classic case in making debt-financed gifts to voters.

The extent of political pandering is shown by the annual congressional report listing hundreds of overlapping federal government programs. Without eliminating or reducing the effect of any program, huge savings could be realized by merging many of them.

But members of Congress won’t allow that to happen if any of the efficiency reductions hit their constituents. So promises about cutting the size of government usually means cutting services provided to somebody else.

These beliefs about the economy are either unrealistic hopes or outright myths. Whether the product of ignorance or hype, they will echo in the political promises coming this campaign year.

Making political promises is easier than facing economic reality, which is left to the voters.