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Unmask The Economy And It's Better -- Or Worse -- Than It Seems

My angst concerning the economic future of our country was momentarily relieved while reading and digesting "Why the economy is a lot stronger than you think" (Cover Story, Feb. 13). Nonetheless, all the "feel good" analysis about intangibles, the value of intellectual capital, physical capital, etc., does not obscure the hard fact that with a $400 billion federal government deficit and a well over $700 billion current account trade deficit, we will be adding another trillion dollars of debt obligations for future American generations to deal with. This external and federal debt, combined with the record personal home equity, mortgage, and credit-card debt, will eventually result in major economic challenges for the country.

So while your article may have momentarily unmasked the economy, I still do not like what I see.

John Henry

Naples, Fla.

"Why the economy is a lot stronger than you think" is yet another hallmark expos? by Michael Mandel. His thoughts on antiquated economic measures also extend to the corporate world. In fact, many of these outdated measures emanate from corporate financial reporting that does not reflect today's knowledge economy. Any accountant who doesn't understand the adage "relevancy lost" should read this article.

Companies such as Apple Computer (AAPL), General Electric (GE), and Samsung drive growth and prosperity through investing in innovation, technology, and market development. Financial statements that reflect this investment will eliminate the Federal Reserve's need to "dig into arcane factoids." Let's overhaul the accounting profession so we can unmask the economy.

Randy R. Williams

Syracuse, N.Y.

In your cover story about the shadow economy you extend a discussion about improper measurement of gross domestic product into an excuse for overspending by our government. However good the cause, such as education, we cannot go on living beyond our means.

The end result of your discussion is to create a balance sheet for the U.S. government. But as we all know a company with a great balance sheet can quickly go under if the cash flow statement is a disaster. None of the measures you discuss will change the cash flows. Further stating that personal savings would be positive if expenditures for education were not counted as consumption makes the same mistake.

Mike Grosner

San Diego

The problems with our national economic statistics are more serious than you report. Not only do we fail to count all the relevant positives, as you report, but we count as positive many transactions that, in fact, add little net value or detract from our national wealth. For example, the billions to be spent rebuilding the Gulf Coast will be recorded as dollar-for-dollar contributions to our national economic well-being, when all they do is get us back to where we were, or perhaps slightly ahead. Likewise, huge sums of money spent fighting crime and terrorism, and incarcerating criminals, however necessary, are recorded as net contributions to our national wealth. In fact, these expenditures are net detractors as they divert money from investments such as education, research and development, and infrastructure.

Neil L. Drobny

Columbus, Ohio

Your analysis was a search for asset omissions and failed to address the magnitude of unrecorded liabilities, such as the obligations for Medicare, Medicaid, and retirement, which are increasing faster than income and will soon make huge deficits very much larger and create a fiscal and economic crisis.

You treated education spending as an investment rather than as a cost of production. After all, if capitalized, it would have to be amortized. The higher level of education spending was treated as a plus; however, the higher spending is inefficient, since the U.S. spends much more than any advanced nation on education, for, at best, no better results. Treating education as a positive adjustment to national savings is clearly inappropriate. Also, for comparative purposes, you would have to treat all countries' education as an investment, which would reveal even larger gaps in national savings.

Morton Egol

Hastings-on-Hudson, N.Y.

Editor's note: The writer is author of the book, Dynamic Scoring: Reinvented Accounting for a New Management Paradigm.

As a parent in the midst of financing the college expenses of three children, I read "Tuition: It's not like an ice cream cone" (Cover Sidebar, Feb. 13) with great interest. Following your dessert theme, it would seem that the writer is practicing "double dipping." If possible, college education should be paid for using funds saved for that purpose. This process generally takes years to accomplish. These amounts would have been taken into account when the national savings rate is tabulated. To get the credit for these outlays a second time seems to be the very fiction the author rails against.

Steven Jay Tenenbaum

Newtown, Conn.

Editor's note: Mandel responds on his blog (

Re "No union, please, we're Wal-Mart" (Book Excerpt, Feb. 13). Did I miss something? Has BusinessWeek become a journal of opinion for socialism? How can you run an excerpt from Anthony Bianco's Wal-Mart (WMT)-bashing book, with attendant nasty caricatures and insulting headline? The people of Jonqui?re got exactly what they deserve -- more unemployment, higher prices, and less choice. If their Wal-Mart was such a terrible place, people would not have shopped or worked there, but they did both.

Wal-Mart has done only one thing wrong in America, as well as in Canada: They have not hired effective public-relations people.

Eric Vollrath

Sturgeon Bay, Wis.

"The good news about America's auto industry" (News: Analysis & Commentary, Feb. 13) ignored the fact that the auto industry is alive and well in Ohio. The proof is in the numbers: During the past three years, auto makers have invested $3.1 billion in projects in Ohio.

Ohio is home to thriving foreign auto makers such as Honda of America Mfg., which just celebrated 25 years of business in America and in Ohio. Others are investing in Ohio, too, such as DaimlerChrysler's (DCX) $222 million expansion and creation of a supplier park in Toledo and General Motor's (GM) $500 million expansion in Northeast Ohio for building the Chevy Cobalt.

Ohio is first in the number of automotive suppliers in the U.S. and second in the production of vehicles. Ohio is enjoying not only new growth but also a productive history and an outstanding forecast for the future.

Lt. Governor Bruce Johnson

Director of Development

Ohio Development Dept.

Columbus, Ohio

"What's holding women back" (The Welch Way, Feb. 13) underrates both women and men because Jack and Suzy Welch assume that men have neither a role nor a responsibility when it comes to raising their children, particularly in a two-working-parent home. No one questions whether men should continue to work or the hours they put in after they have children.

Chris Hofmann and Ashley Opp

Alexandria, Va.

Wait just one second -- are we in the year 2006 or 1956? Jack -- you ran General Electric, one of the most powerful corporations in the U.S. Are these the views that were underlying GE's job recruitment, placement, and advancement policies while you were there?

BusinessWeek -- shame on you for sending subliminal messages to Corporate America that encourage continued discrimination against women by suggesting that they can't be on a fast track if they have children. Shame on you as well for encouraging women to be satisfied with lower expectations for themselves as professionals.

Marti P. Murray

President & Chief Investment Officer

Murray Capital Management

New York

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