April 14, 2004,
John Kerry can't even do misery right.
Since the 1960s, economists and politicians have taken America's economic temperature using the "Misery Index," adding the rate of unemployment to the rate of inflation. It's a simple and illuminating snapshot of the economy, and was used to devastating effect by Ronald Reagan in 1980, when Jimmy Carter was president and the Misery Index was close to 21 percent.
The M.I. is an excellent tool for any politician challenging an incumbent in a weak economy. And since, as John Kerry & co. keep telling us, this is the worst economy since WWII/The Depression/The Dark Ages, why wouldn't the Kerry campaign want to highlight the current state of misery?
And so with great fanfare, John Kerry released his "Middle Class Misery Index" to great media fanfare. It's Reagan vs. Carter all over again. One glance at Kerry's Middle Class Misery Index proves beyond all doubt that the American economy is in the tank, that the Bush economic policy is a disaster, and that it's time for a change.
Only one problem. It's not the "Misery Index."
Instead of simply adding the unemployment rate to the inflation rate, Kerry has come up with what he claims is a "Misery Index" specifically for the middle class. In so doing, Kerry is echoing potential veep John Edwards's claim that there are two Americas, one that's happy, prosperous, and well adjusted, and one that votes Democrat.
The Kerry Index O' Misery combines median family income, college tuition, health costs, gasoline cost, bankruptcies, the homeownership rate, and private-sector job growth. Coincidentally (?), six of these seven economic trends have gone the wrong way during the Bush presidency. Only home-ownership rates have improved.
Kerry argues that these measurements in particular median family income are the true measure of America's economic fortunes. "Less noted, but perhaps even more important, is the fact that middle-class families are increasingly being squeezed by the rising cost of health care, college tuition, and gasoline at the same time that wages and incomes are stagnating and personal bankruptcies are at record levels," reads part of Kerry's report.
Nobody would disagree that expensive gasoline and health-care costs are bad news, or that fewer bankruptcies would be a good thing. But in addition to the fact that, adjusted for inflation, the price of gas is relatively low, is it any better a measure of the health of the middle class than, say, food prices? Rent prices? The cost of clothing?
A fair-minded person could put together an economic index using these three indicators, along with net tax rates, new business starts, the Dow Jones average, and home-equity values and get a completely different result. What would it prove?
This is why, since the Johnson administration, the "Misery Index" has been a combination of the two most broad and important indicators: unemployment and inflation; Do you have a job and how much is your paycheck really worth?
So if the Kerry campaign is right and the American economy is awash in misery, why not stick with the basics? Why go through these economic contortions?
Because, as is so often the case with John Kerry, the numbers don't add up.
As the Wall Street Journal pointed out on their editorial-page earlier this week, the real "Misery Index" today is at an all-time election-year low. In 1980, the M.I. was 20.6 percent. In 1996, during the boom years of Bill Clinton, it was at 8.4 percent. The average M.I. in America since World War II has been above 9 percent.
And how miserable is the American economy today? Unemployment is at 5.7 percent, inflation is at 2.0 percent, giving us a "Misery Index" of 7.7 percent.
We have a winner!
This number, it should be remembered, is the real M.I. before new job growth is factored in. If the first-quarter job-growth trend continues, and the economy does add 200,000 jobs a month for the rest of the year, the "Misery Index" will fall even lower before Election Day.
The fundamental battle over the economy between an incumbent and a challenger is whether the glass is half full or half empty. Using the traditional "Misery Index," the American economy is overflowing.
What will John Kerry talk about now?
Radio-talk-host Michael Graham is an NRO contributor.