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Thursday, October 29, 2009

Despite GDP Gains, Economy Still in Deep Distress

FEE Distress Index Shows Economy Still Weak


For immediate release – October 29, 2009 (Irvington, New York) Despite a reported increase in GDP in Q3 of 2009, the overall economy remains in deep distress says the Foundation for Economic Education, publisher of the Distress Index. The Distress Index combines government statistics measuring inflation, unemployment, GDP, household debt and industrial capacity utilization. The current score is 58.4, down slightly from a peak of 61.7 in June, the highest since 1975.

Historical analysis shows some correlation between the index exceeding 47.0 and the economy slipping into recession. In March of 1975, the index reached an all-time high of 63.9, more than double the all-time low of 29.5 in February 1973. The index was lowest in the 1990s, averaging 40.1. But the last decade has shown a significant increase to an average of 46.6. Since President Obama took office, the index has averaged 60.3.

The Distress Index was created by Mount Olive College’s Dr. Paul Cwik and FEE’s Web Director Mike Van Winkle. It is intended as a modernized version of economist Arthur Okun’s Misery Index which measured only unemployment and inflation.

The Distress Index is a simple, uncontroversial, and nonpartisan diagnostic tool for the health of the economy.

The Distress Index also helps Americans interpret what the media and government are telling them about the economy. Professor Cwik says that while “politicians and candidates have an imperative to spin the numbers to stress their points, the strength of the index is that it is not attached to any particular agenda. This means that both the left and the right have to take notice, and neither can simply dismiss it as a partisan perspective.”

Van Winkle sees the index as a way to “give voice to the unemployed and overburdened taxpayers” and hopes the index will “keep pressure on policy makers and opinion leaders to make decisions that improve the economy rather than distressing it further.”

To learn more about the Distress Index, visit (https://fee.org/distress-index/) or contact Mike Van Winkle at (708) 289-3136 or [email protected].

About Paul Cwik:
Paul Cwik is an associate professor of economics at Mount Olive College. He holds a B.A. from Hillsdale College, an M.A. from Tulane University, and a Ph.D. from Auburn University. He has taught classes at several colleges and universities, including Auburn University, Campbell University, and Walsh College. His work has been published in academic journals that include The Quarterly Journal of Austrian Economics, New Perspectives on Political Economy: A Bilingual Interdisciplinary Journal, and Business Ethics: A European Review. As an Austrian economist who is unafraid to use numbers, he specializes in econometrics and business cycle theory and is particularly interested in the blending of Austrian macroeconomics with finance.

About Mike Van Winkle:
Michael Van Winkle is Web Director for the Foundation for Economic Education. He received his M.A. in Social Sciences from the University of Chicago and has been published in the Chicago Tribune, the Chicago Sun-Times, and various online publications.

About the Foundation for Economic Education:
The Foundation for Economic Education (FEE) is a non-political, non-profit, tax-exempt educational foundation dedicated to the study and advancement of the “first principles” of freedom: the sanctity of private property, individual liberty, the rule of law, the free market, and the moral superiority of individual choice and responsibility over coercion. The Foundation’s periodicals, The Freeman: Ideas on Liberty, Notes from FEE, and In Brief (an e-commentary) offer timeless insights on the positive case for human liberty to thousands of people of all ages in America and around the world. FEE’s publications, lectures, programs, and seminars have been bringing individuals together to explore the foundations of free enterprise and constitutionally limited government since 1946.