OPINION: Cheerfulness is no substitute for substance

          Pompeiia Pompom is an economic cheer leader extraordinaire, exhorting participants to greater effort and stimulating observers to excesses of enthusiasm. Recently she was the guest speaker at the Bluster County Business Banquet. Her topic was “Changes in the American economy thus far in this century.

          “Hasn’t it been great?” she asked her audience of 27, three of whom were clearly awake. “We’ve had our ups and we’ve had our downs, but it all averages out to a solid 1.7 percent annual increase of Real Gross Domestic Product.”

          Under my breath I said,“A long-run average increase of GDP of 1.7 percent, after adjustment for inflation, is nothing to cheer about.”

          “And do you know what’s thrilling about that?” she pointed to one of her listeners. With no response, she continued, “The increase in Personal Consumption Expenditures was nearly 80 percent of all the growth in GDP.”

          Pausing for effect, she said, “You know what that means?” Silence. “It’s clear. America is getting greater all the time, achieving its destiny. Consumer spending has gone from 65 percent of GDP in 2000 to 68 percent last year. That’s what we value - - growth in consumer spending, an economy geared to satisfying the wants of households.”

          “What did we give up to get that gain?” I asked myself.

          As if she heard me, Pompeiia continued, “Basically, with 80 percent of the growth in GDP coming from consumers, the balance came about equally from just two sectors: business investment and government spending.”

          She beamed with delight. I frowned. Her ecstasy was based on slower growth in our national economy for public and private investment, plus a reduced role for government services.

          “And this is good for Indiana,” she exclaimed, bouncing on her feet and raising her arms in the air.

          “Yes,” she exalted. “What is the base of Indiana’s economy? Why, it’s durable goods manufacturing and nearly a quarter of the increase in consumer spending came from just that – durable goods.”

          “Oh,” I sighed to myself, “now she is playing with the data. Durable goods grew by an average annual rate of 4.4 percent nationally, but that growth was not in industries of Indiana’s strength; new motor vehicles, one of our strengths, grew by only 1.5 percent.

          “By contrast,” my ruminations continued, “the big growth sectors involved things we don’t make in Indiana: video, audio, photographic, and information processing equipment (up 15 percent annually over the 14 year period) or telephone and fax equipment (up 16 percent annually).”

          While I was thinking about this, Pompeiia was saying “There will be on-going, accelerating growth in spending for nursing homes, gambling, and places where people eat away from home. It’s a bright future!”

          I left at this point. I’d heard it all before. I knew the real growth in each of those areas, over the past 14 years, had been two percent or less annually despite previous bullish expectations.

          Happy people can be dangerous when their joy overwhelms their knowledge and judgement.