Monday, October 22, 2012

CNN: Misery Index Predicts Obama Will Win The Election

On October 17, a CNN reporter, Annalyn Censky, wrote an article titled:  "Misery Index predicts Obama will win the election." I can't even fathom that CNN would take the time and space to produce such a major piece of dribble; unless, of course, they're actually in the tank for Obama.

If you're not familiar with the Misery Index, it is a simple number made up of two factors: (1) the current inflation rate added to (2) the current unemployment rate.  Theoretically, if the index is below 12%, the incumbent President will win because the average voter isn't really suffering any serious economic pain. Today, that number stands at 11.8% -- 2% for inflation and 7.8% for unemployment -- and that is why Ms. Censky is saying that "Obama will win...".

My problem with the 11.8% number is that it grossly understates the true economic pain that most Americans are feeling right now. 

First of all, there's the understatement of the inflation rate at 2%.  By protocol, the United States and many other countries measure inflation by "excluding" what they call volatile changes in both food and energy prices.  As a result, the Misery Index automatically doesn't include the "misery" of having to pay double at the gasoline pump since Obama took office.  This represents an additional expense of at least $2000 a year for the average, 2-car, middle class family. Nor, does it take into account the misery of dramatically higher food prices.  Further, the inflation rate calculation uses the lowering of costs for non-essential things like cell phones and flat-screen TV's to hide the fact that essential expenses, such as electrical energy and clothing prices, have gone up significantly.  Then, there's the two most critical inflationary factors of all: The average family income has fallen by $4019 and health care insurance premiums have gone up by $2370 since Obama took office. 

So, if you simply add up all the easy-to-identify negatives from the above paragraph (gasoline, health insurance, and income), you come up with a number of  $8,389.  Taken against the average family income of $54,983 in January of 2009, it means that the average American family has lost more than 15% in purchasing power since Obama has been President.  That to me, is the same as having an "additional" 15% inflation.  This means that the true Misery Index is a lot closer to 26.8% than the calculated 11.8%. 

Then, there is the understated unemployment rate of 7.8% that assumes only 12.1 million Americans are out of work.  But, in reality, that number doesn't include the misery of 8.6 million having to work part-time because they can't find full-time jobs, or, the nearly 10 million Americans who have just stopped looking because there aren't any jobs to look for.  When, all is added up, you get a real unemployment rate that is 14.7%.  That, then, means that the true Misery Index should be raised again; from 27% (above) to 33.7%.

Lastly, there's an immeasurable factor when it comes economic misery in the U.S.  And, that's the misery of having to lose your home to foreclosure or being so underwater on your mortgage that you have no other choice but to walk away from your home through a short sale. 

For Ms. Censky to simply conclude that Obama will win because of some artificially low Misery Index is consistent with what I have always stated in the blog:  There are lies, damn lies, and statistics.

Note: The above annual gasoline expense is calculated on the basis that the average American car uses about 558 gallons of gasoline per year.  This is based on an average driving range of 12,500 miles per year with an average fuel consumption rate of 22.4 miles-per-gallon.  This is a somewhat conservative estimate since "averages" on the Internet vary from 12,000 to 15,000 miles driven per year with mileage rates of anywhere from 21 to 24 mpg.


--- CNN:  Misery Index predicts Obama will win the election:

--- Forbes On Losses In Median Income:

--- Investor's Business Daily: Health Premiums Up $3,000; Obama Vowed $2,500 Cut:

--- September Unemployment Report:

--- Historical Gasoline Prices (interactive Chart):

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