April 15, 2004, 8:58 a.m.
Dr. Misery
John Kerry’s economy is sick, sick, sick.

How would you like go to a doctor who takes your temperature with a thermometer that says you're running a fever even when you're perfectly healthy? Sound good? Well then step into the examining room — Dr. Kerry will see you now.

Never mind three back-to-back quarters of great GDP growth. Never mind new all-time high levels of household wealth. Never mind strong consumer spending, low inflation, and a recovering job market. Presumptive Democratic presidential candidate John Kerry has come up with what he calls the "Middle-class Misery Index" — and it purports to prove that the economy is sick, sick, sick.

It's all quackery, of course. And as you'll see in a moment, this economy is so healthy that even John Kerry and his brainless-trust of liberal economists couldn't come up with a fraud nasty enough to make it look really bad.

A traditional version of the misery index has been around for years, providing a rough-and-ready picture of the health of the economy as experienced by ordinary people. It's simple — you just add up inflation and unemployment: the lower the total, the lower the misery (and the healthier the economy). As Jerry Bowyer pointed out here a couple weeks ago, the traditional misery index looks great right now, thanks to very low inflation coupled with about-average levels of unemployment. Check out the chart below — there aren't a whole lot of periods when things have been less miserable than they are today (and lots when they've been plenty worse).

But that's a chart John Kerry doesn't want you to see — he knows you won't vote for him unless you are really and truly miserable. So he's come up with his own version of the index — based on different economic indicators — to show you just how miserable you really are. Below is a chart of it from Kerry's website. Be careful when you compare it to the one above — this one only goes back to 1976. And it's built upside-down: In the traditional misery index, lower readings are better, but in Kerry's version higher readings are better.

Instead of just adding up inflation and the unemployment rates, Kerry's misery index combines median family income, college tuition, health costs, gasoline costs, bankruptcies, the home-ownership rate, and private-sector job growth. Other than the home-ownership rate, all of these components have experienced negative moves in recent years. With a whole universe of economic statistics from which to choose, Kerry has deliberately picked economic measurements that tell a gloomy story, throwing in a single positive one — home ownership — to make it all seem fair and balanced.

On this basis, Kerry claims that under President Bush, the middle-class misery index has just had its "Largest Three-year Fall on Record," giving Bush "the Worst Record of Any President Ever."

"Ever"? That's a big word — too big even for the left-leaning New Republic. As Gregg Easterbrook points out on its website, "'ever' only goes back only to 1976."

Be that as it may, take a hard look at the chart — and set aside Kerry's overheated press-release rhetoric. You'll see immediately that even this hand-picked collection of negative statistics doesn't really make today's economy look especially bad. Looks about average to me.

The only years that were much better came during the bubble economy of President Clinton's second term (his first term was worse), and during President Carter's single term. No surprise that the good times according to Kerry's index would be under Democratic presidents. But as Easterbrook asks, "Can you find one single person in the United States who would want a time-machine ride to the economic conditions of 1978?"

It's remarkable that Kerry couldn't manage to make the economy look worse. Heaven knows he tried. Consider these dirty statistical tricks:

The non-partisan Annenberg Political Fact Check has pointed out that Kerry's median family income statistics are pre-tax: "The Kerry index reflects none of the benefit of the Bush tax cuts." Surely voters know from their own happy experience that taxes have been cut steeply under the Bush administration.

The Annenberg report also points out that the college costs included in Kerry's index are exclusively for public colleges, where tuitions have risen almost three times as rapidly as private colleges. But when it comes to jobs, it's just the opposite. The Kerry index looks only at the number of private-sector jobs (which has fallen), completely ignoring the number of public-sector jobs (which has grown).

When Americans go to the polls in November, chances are they'll vote on the basis of how wonderfully unmiserable the economy really is. They won't be swayed by the sleazy statistical quackery of Kerry's index. Or maybe they will — maybe they'll decide they don't want to vote for a quack.

— Donald Luskin is chief investment officer of Trend Macrolytics LLC, an independent economics and investment-research firm. He welcomes your comments at don@trendmacro.com.

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