Kerry's misery index
2004-04-13 | 1:33 p.m.

Misery Loves Company

April 13, 2004; Page A20

As John Kerry showed yesterday, there is a way to make lemons out of lemonade: Mine government statistics to show that, all evidence of prosperity to the contrary, the country is actually going to hell in a hand basket. Voila -- the Kerry campaign's new "misery index," which allows the Democratic presidential challenger to paint George W. Bush as the reincarnation of Herbert Hoover.

The original misery index -- the sum of the unemployment and inflation rates -- leapt into the public consciousness when candidate Jimmy Carter attacked President Gerald Ford's record back in 1976. Back then the index was stuck at 13.5. Over Mr. Carter's White House tenure the country only suffered more, as the index shot up to 20.6. For the record, it's now at a historically low level of 7.7, eight points below when Bill Clinton sought a second term in 1996.

Mr. Kerry's new misery index purports to tell a different story, and would have us believe that the middle-class way of life is profoundly threatened. Of the seven components, three are based on the price of goods and services that have been rising far faster than inflation: college tuition, health care and gasoline.

While these trends are worthy of discussion by themselves, they don't tell us much about the ability of a middle-class family to make ends meet. That's why statisticians use a basket of goods and services weighted according to the expenses of real households in order to calculate the inflation rate. No doubt Mr. Kerry's college audiences this week will be pleased by his pledges to hold down tuitions. But they might also consider whether his cherry picking of figures to get his desired answer would pass muster in their classrooms.

Credit should be given where it is due, though, when it comes to gasoline prices. Sure, some of Mr. Kerry's answers to this problem are uninspiring -- "work more effectively to ensure that OPEC increases production." And the suggestion that the Bush Administration's collusion with oil companies at the expense of conservation has somehow driven up gas prices is nonsensical. Nevertheless, it's encouraging that in recent days Mr. Kerry seems to have realized that excessive regulation in the form of "the patchwork of rules on gas all over this country" has driven up costs.

There are more serious problems with two other components of the Kerry misery index. Median family income and private-sector job growth both depend on data from the Bureau of Labor Statistics measuring employment last year. This is tabulated largely on the basis of large companies' payrolls, since the government has a tough time tracking the self-employed and new jobs at small firms.

In the past this was not such a problem but as the economy evolved it has become a major distortion; by one measure these difficult-to-count jobs accounted for 31% of employment growth since the end of the last recession. In an attempt to compensate, the BLS uses states' unemployment-insurance rolls, but because of a time lag economist Brian Wesbury estimates that the government low-balled job growth for the second half of 2003 by 734,000.

But the best proof that the Kerry index doesn't reflect reality is the way it distorts history. By his measure, the Carter years supposedly saw a six-point improvement in the misery index, while under Ronald Reagan the U.S. fell back almost as far. Does anybody else remember it that way?

The most interesting question about Mr. Kerry's misery index is how faithfully it will be updated. As unemployment continues to fall and real incomes rise, will Mr. Kerry stop mourning the demise of the middle class? Since misery loves company, perhaps that's too much to hope.

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