In psychology, confirmation bias is a tendency to search for or interpret new information in a way that confirms one’s preconceptions. It’s a trap into which we are all vulnerable to fall. Because our beliefs comfort us in our uncertainties, we tend to avoid information and interpretations that contradict our beliefs.
I suspect that I encountered confirmation bias in another person recently while discussing the current line-up of political candidates. I was talking with a conservative teacher friend of mine. Yes, folks, I do have some conservative friends, those who are still open to discussing things without getting red-in-the-face mad and calling me names.
My friend must have felt challenged by my assertion that a Democrat would most likely occupy the White House after next year’s elections, this owing to current economic conditions in our country. History tells us that Americans always vote for the other party’s candidate when the economy is on the ropes. Mind you, I didn’t say that I thought the Bush-Cheney tax cuts and run-away spending by a Congress dominated until recently by Republicans was entirely to blame, but I’m pretty sure this is what he thought I was implying. In defense of the tax cuts, my friend made a claim that I had not heard before. He said that a recession prevailed during the last three quarters of Bill Clinton’s second term.
As a teacher of economics, I had not heard this claim before, a belief that I now understand to be widely-held by conservatives. It challenged me, a “glass-is-half-empty” type of more liberal thinker, so I decided to check it out for myself. I researched economic data for that period, which is available at the Bureau of Economic Analysis (BEA) website. What I found was interesting –to me anyway. While it is true, based on the data I found, that the U.S. economy shrank in three non-consecutive quarters in the early 2000s (the third quarter of 2000, the first quarter of 2001, and the third quarter of 2001), this did not constitute a recession –the official definition of recession being “a fall of a country’s real GDP in two or more successive quarters.” A minor technicality that the declining quarters were not consecutive? Perhaps.
My friend was right though; the economy was on shaky ground back then with relatively high unemployment following the burst of the dot-com bubble. The unemployment was structural, caused by a series of layoffs by companies shifting manufacturing jobs overseas. Spending was down because many took early retire- ment or adjusted their household budgets from what they had brought home from high-paying, assembly line jobs to what they could make with temporary, part time jobs in the services sector. All of which validates the point that I was making in the first place. And that is: voters go for candidates representing the “other” party whenever the economy is in a slump. But was this economic downturn Clinton’s fault for having increased taxes on the most wealthy of Americans in 1993 to generate budget surpluses in order to reduce the national debt? No, I don’t think so. The stock market had just become over expanded owing to investor enthusiasm for anything with a dot-com in its name. Impounding the surpluses and buying back treasuries with the surplus generated by higher taxes and lower spending was the right thing to do, in my opinion, to keep inflation under control during those years of rapid economic growth.
Future historians will no doubt recall these shaky economic conditions in the final year of Bush-Cheney administration, conditions caused largely by the second-tier mortgage finance problem, which begat a decline in home values, which begat a decline in the entire housing sector (a huge part of the total economy), which begat a major fall in consumer confidence. Also factoring into this mess is the dollar’s decline against foreign currencies resulting in large part from the Fed’s expansion of the money supply to cover deficit spending. And don’t forget the inflation that everyone anticipates owing to the recent increase in the price per barrel of oil. Why the high price for oil? Oil prices are pegged to the U.S. dollar world-wide, which is now worth about forty percent less than before 911. Also, world-wide demand for oil has rapidly increased in recent years as millions of people in China and India step up to their turns behind the wheel of automobiles.
With the national debt now more than $10 Trillion dollars (it was only $5.7 Trillion when Bush was first elected), this neophyte economist believes that we’re in for a long hard pull to dig our- selves out of the hole that we are now in. If we are already in a recession and don’t know it yet, no matter what this or the next administration attempts to do (whether fiscal or monetary), other matters will be made worse. If the Fed expands the money supply any more, the dollar will lose more value even quicker and foreign investors will look elsewhere for places to invest. China has already announced that she is looking toward European countries for safer places to invest. Oil, ever increasing in price as demand grows and OPEC refuses to produce more, will cost us dispro- portionately more than it costs other countries. With respect to the fiscal policy alternative government has with which to boost the economy, if more is spent ala FDR’s new deal, the national debt could soon rival the 120 percent of the GDP we had during WWII.
Yep, I really am a “glass-is-half-empty” kind of guy. So I hope that I’m all wet in my assessment of where we are after eight years of reduced national income, this owing to tax cuts that favored households with a lower marginal propensity to consume (MPC), and unconstrained national spending on congressional district pork and a war that could go on forever.
But all this is just what I think; it’s not what I know. So, please correct me, whoever you are, wherever you think my thinking is wrong. I hope to never become so closed-minded in my beliefs that I’m not open to fully hearing opposing arguments.
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