Another Doomsday myth Debunked: "Cash for Clunkers only borrowed future demand"

- by New Deal democrat

There are major structural problems with the US economy -- chief among them, a yawning trade deficit that orthodox economics has no answer for; a lopsided accumulation of income, assets, and wealth at the very top; and a hollowed out former middle class. The road to reforming these imbalances would be painful even if political and economic geniuses with their hearts in the right places were at the helm.

I have said over and over before that the Progressive case is not Armageddon, it is Inequality, a pernicious, pervasive and incessant inequality of opportunity and reward that puts paid to the former American myth.

Doomers don't get it. Everything must be fed into the Doomsday machine. Every statistic, shorn of everything going up, is going down, therefore things are bad bad bad, and must necessarily lead to Great Depression II. Of course, we could still have GD2, and Prof. Krugman yesterday warns of the rising risk of a double-dip, appropriately so in my opinion.

But it ain't necessarily so. Ben Bernanke et al., have also read the books on the Great Depression -- in fact in the Fed Chairman's case, he's written one. So both the Keynesian and Monetarist solutions to GD1 have been tried with mild abandon in the last year (no, that's not a typo). They are bound and determined not to make the same old mistakes -- they will make new ones. Hopefully the new mistakes will not lead to the supposedly inexorable old outcome.

And so, yesterday, another Doomer myth bit the dust. November car sales were reported at 10.9 million vehicles, up from a year ago, and up from last month. This is the second increase in a row over September, and October and November have been the best months this year, ex- the 2 "cash for clunkers" months of July and August. In other words, the notion that the only thing that "cash for clunkers" did was borrow sales from the future, and we would have sub-9 million car sales a month for the foreseeable future, is yet another dead doomer black swan.

Not that they'll ever admit it. There isn't a week that goes by that I don't mention some news items that are contrary to my general take on the economy, and I always try to be open to the data changing my mind -- just as I was back in January and February when I noticed that consumers were coming "back from the grave" instead of spiraling ever deeper down into the endless abyss. But Doomers never have to admit that they have been wrong. They just move the goalposts, and move on to the next reason why Armageddon is upon us.

And if anyone in particular thinks this post is aimed at them, here is my challenge: find 5 times in the last 3 months when you have reported that data was positive. Not begudgingly, but with an accurate, neutral description. If you can't do that -- if you haven't been able to acknowledge that even 5 pieces of data in the last 3 months have been positive -- then you are ideology driven and are not, in fact, "reality based".