From: MEDELMA@cms.cc.wayne.edu (Michael Edelman)
Subject: Re: Using misinformation
Organization: Wayne State University, C&IT
Date: Thu, 27 Aug 1992 19:06:49 GMT

In article <guido.714937170@sparc-3>
guido@blink.att.com (Guido Bertocci) writes:
 
>
>I wouldn't normally bother posting, however, there seems to be an
>insistence on using statistical data about inflation and unemployment
>to make political points that is simply not true.
>
[...]
>
>         (% increase)  (% of workforce)
>year     CPI    energy  Unemployment
>70       5.7     2.8    4.8     Nixon
>71       4.4     3.9    Not available
>72       3.2     2.6    Not available
>73       6.2     8.1    Not available
>74      11.0    29.6    Not available
>75       9.1    10.5    8.3     Ford
>76       5.8     7.1    7.6
>77       6.5     9.5    6.9     Carter
>78       7.6     6.3    6.0
>79      11.3    25.1    5.8
>80      13.5    30.9    7.0
>81      10.3    13.6    7.5     Reagan
>82       6.2     1.5    9.5
>83       3.2      .7    9.5
>84       4.3     1.0    7.4
>85       3.6      .7    7.1
>86       1.9   -13.2    6.9
>87       3.6      .5    6.1
>88       4.1      .8    5.4
>
>The data clearly shows that unemployment was higher under Ford
>and Reagan than under Carter.  (One is certainly free to argue
>how long a particular administrations responsibilities carry over into the
>next).
>
That last bit sounds counterintuitive, doesn't it? It also sounds far from
what we remember reading in the news. That's beacuse it's very misleading
in the way it is reported. Using yearly averages grossly distorts the real
trends, eliminating the peaks and dips. In fact, in the fall of 1980
inflation was over 17.5% one month. Unemployment peaked around then as
well, leading to the famous "misery index" (unemployment + inflation)
of something near 24. Carter's staff had come up with the misery index
during the 76 election campaign to run down Ford (whose index was around
10, I think)
 
The choice of years in the above table is misleading to the point of
outright misrepresentation. Reagan took office in 1981, and the 1981 budget
was primarily a product of the Carter administration. You can make a
reasonable argument that his policies didn't really kick in until 1982.
 
So what we really see is Carter inheriting a mean CPI of under 8% and
driving it to an averaged 13+% and a monthly peak of over 17%.
 
Similary we have the implication that energy prices drove Carter policy
rather than the converse, which is actually the case. The famous energy
crisis occurred under Ford, not Carter! But even given the instability of
OPEC, US energy prices stayed high! If we look at the "energy policy" of
Carter, we see a number of reasons prices stayed high. Those of you old enough
to have been reading the newspaper back then may recall the various classes
of oil and the different tariffs- at first there was "old oil", which was
taxed heavily, and "new oil" which wasn't. Then Congress came up with ways
to increase taxes, including "new old oil" and "old old oil". It was
policy, not any embargo, that kept energy prices high.
>
>For those of you who want to argue about how awful Carter's administration
>was and what horrible economic policies he had, at least have the courtesy
>to use valid data.  (If you have different numbers feel free to post them
>along with their source).
>
And before you post a silly argument like the above, make sure you
understand the data!
 
>My own interpretation of the data is that inflation was drastically
>reduced in the 80s due to falling oil prices and was on its way down
>before Carter left office.  If you think that Carter or Reagan were
>primarily responsible for driving oil prices up or down feel free to
>argue that as well, but try to be specific on why or how they did it.
>Don't forget to consider the big jump in energy prices in 74 and 75.
>
And you might be advised to beware of spurious correlations.
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 Michael Joseph Edelman           Wayne State University
 medelma@cms.cc.wayne.edu         Computing & Information Technology
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