Benjamin Disraeli once said that there are “lies, damned lies, and statistics.” He may have had Nancy Pelosi in mind. As my friend Bruce McQuain at QandO discovers, context means everything in statistical analysis, especially in creating graphical representations. Pelosi uses this chart to argue that we are in The Worst Economic Crisis of All Time by showing the drop in employment rates:
Oh. My. GAWD!! It’s certainly the worst performance in … the last three recessions, the oldest of which is the 1991 slowdown. But what happens when we go back to 1974? Justin Fox gives us the answer:
In fact, July 1974 and July 1981 both look worse, at least at the moment. In neither case did we try passing such a huge, porked-up spending bill full of government pet projects as Pelosi offers now. However, in the early 1970s we did experiment with wage and price controls, which helped create the recession in 1974 and the resultant unemployment. We continued with federal interference in the economy all through th 1970s, resulting in three recessions in six years on this chart — and only when Ronald Reagan began privatizing the markets again did we pull out of it, when unemployment increased much more than this recession has, at least thus far.
But that’s not the end of the context, either. William Polley takes us all the way back to World War II for even more comparisons:
When one looks at the past 60 years, we see that this recession’s unemployment only ranks it thus far as a mid-range recession. Even the rate of decline has been more moderate in this recession than in most of the others. It’s not cause for celebration or a prescription for inaction, but panic isn’t necessary, either. Instead, we should focus on what worked in previous recessions, rather than get stampeded into a “let’s try anything” approach that will almost certainly make matters worse.
The last damned lie is that these charts provide even a scintilla of evidence for the Pelosi Porkulus Bill. All they show is unemployment rates. The real lessons come in the policies followed in the recoveries, along with the lasting power of those policies. When we used government regulation of free markets in the 1970s as a response, the result was three significant recessions in seven years, along with massive inflation and soaring interest rates. When we relied on market-based economics, we have had only four significant recessions in the last 28 years, including the one that weaned us off of the disastrous policies of the 70s — to which Pelosi and Obama want to return.
And more than anything, the lesson to be learned here is that Nancy Pelosi has been deeply dishonest about this recession.