Five Myths About the U.S. Economy and Society

The United States is, in many ways, a mystical and enchanting place. The creation of (largely) Protestants in the 18th century, in the 19th and 20th centuries it became a sanctuary for Catholics and Jews, and now, just about everyone else. And along the way, the nation went from a primarily rural, agarian society, to the strongest industrial power of the industrial age, and then to hte technological leader in the Internet age.

Right now, as most investors know, the United States economy is restructuring -- a transition complicated by the global financial crisis and the aftermath of the bursting of the U.S. housing bubble. Those two latter problems prompted unconventional responses -- most of which have so far worked, but in the process it's prompted a critique.

Some of the critique has been valid, but some has simply sought to exploit the vulnerabilities and fears among the American body politic, and also play on certain myths.

Moreover, it goes without saying that a civilization and society as complex as the U.S. would have its share of myths and misnomers. Further, particularly in the early 21st century, and magnified by the challenges/stresses associated with the U.S. economic restructuring, some misnomers have made the round with regular frequency, it seems. They are misnomers are rooted in ignorance, and in some cases, stem from a concerted effort to distort the record, so let's take a moment to dispel a few here:

1. 'The labor movement doesn't benefit me.' This is perhaps the most egregious error making the rounds today.

Simply, labor market reforms and improvements -- many of which are hard-fought gains won by unions -- have made the work environment a safer, more humane place. Everything from fair labor and standards acts, to overtime for extended work period, to numerous safety measures that have saved lives were enacted in many cases after reforms lobbied for and secured by the labor movement.

Oh, and then there's the matter of pay/compensation: In general, when the labor movement/union movement wins increases in pay and benefits, it tends to push up the wages and benefits of non-union employees in the region as well.

2. 'The feminist movement doesn't benefit me, as a woman; or me, as a man.' These are two more canards. While the American revolutionary period of the 18th century and American frontier of the 19th century contained many conservative women of significance and consequence, the improved status of women that exists today would not have been possible without the liberal reforms championed by Gloria Steinem, Betty Friedan, and many other feminists.

As proof of the impact of Steinem, Friedan et al: look at the U.S. House, Senate, workforce and college campuses before the modern feminist movement, in say, 1952: not too many women. And today? Women abound in these spheres.

Second, the feminist movement benefits men in many ways -- including the breaking-down of stereotypes and barriers. For example, notions that men cannot care for children in an extended way. Fifty years ago, the notion of a Dad Mr. Momming it for a year or two while he decides what new career to choose after a downsizing, would have been impossible. Today, it's done all the time.

And, of course, also think of the brainpower unleashed by the modern feminist movement? Simply, lives have been saved by the brainpower of women in medicine, science, and in countless other fields.

3. 'There's no need to pay employees and workers a living wage.' This third misnomer is a costly delusion, particularly for those of you who are rooting for high rates of return on stocks and bonds.

True, an employee or worker represents a cost that must be contained, but as New York University Economics Professor Nouriel Dr. Doom Roubini and others have pointed out, if employee salaries and worker wages are cut too much, you undermine the commercial system's foundation -- the base for revenue growth and earnings growth.

Roubini points out that this flaw is at the heart of the U.S.' current sluggish economic growth: right now, the United States does not have enough people with incomes large enough to support substantial and sustained GDP growth, and by extension, corporate revenue growth and earnings growth.

Further, ways must be found -- both public and private -- to increase both salaries and wages, or the U.S. economy will, at minimum, continue to languish.

What's more, there is no shortage of investment capital in the United States. The U.S. had $54.6 trillion in household net worth at the end of the first quarter 2010, up from $53.5 trillion in the first quarter 2009, according to U.S. Federal Reserve data. The problem, as Keynesian economists correctly argue, is not that there isn't enough capital (supply side), but that there aren't enough consumers (demand side), or at least Americans with incomes adequate enough to increase sales, and by extension, earnings, to make capital worth deploying.

4. 'Government can't create jobs.' This misnomer is truly mind-numbing. The U.S. Congress creates jobs all the time. If Congress says, General Dynamics in Groton, Conn., build the U.S. Navy a submarine. And presto! A couple years later, a submarine appears, the work of thousand of engineers and related laborers paid for by Congress.

Further, the conservative assertion that World War II, not government fiscal stimulus, ended the Great Depression is another canard. The reason? U.S. government spending rose massively -- peaking at about 53% of U.S. GDP -- during the armament and mobilization for World War II in 1941-1945. The federal government also controlled prices and rationed goods during the war but the economy still grew at rapid rate, and get this: the unemployment rate dropped below 3 percent!

In short, as a result of a mostly government-run economy during World War II, there was massive GDP growth and job creation with government the primary growth engine in the economy and amid government price controls and rationing. The federal government literally created tens of millions of jobs then, and it can again today.

5. 'Republican presidents create more jobs than Democratic presidents.' This is perhaps the most widely believed economic myth.

The Republican Party claims that it is the party of pro-business, pro-growth, and pro-job creating policies.

The reality? That may very well be the GOP marquee, but U.S. Labor Department data indicates otherwise: Democratic U.S. Presidents have created more jobs per year than Republican U.S. presidents.

Over 40 years Democratic presidents created 73.22 million jobs or 1.83 million per year.

The Democratic total and averages are 71.57 million jobs and 1.647 million per year, respectively, if you include the current, partial term for President Barack Obama.

Meanwhile, over 36 years Republican presidents created 34.78 million jobs or 966,388 per year.

America: A City on a Hill

All due respect to my beloved France and Italy, the United States remains the world's preeminent democracy. Blessed in so many ways, it needs to use its resources wisely and make constructive choices to retain that privileged status; moreover, the view from here argues in order to make those constructive choices Americans need to see what shortcomings existed in its economic and political system before the modern age, and what changes pointed it toward that more perfect union.

And here's to an even more perfect union, in the years and decades ahead.