American Elephants


The Great Obama Depression. by The Elephant's Child
July 2, 2010, 11:35 pm
Filed under: Capitalism, Domestic Policy, Economy, Progressivism | Tags: , ,

President Obama gave a speech to a town hall meeting in Racine,  Wisconsin this week. Straw men, not his fault, economy recovering, Recovery Act working, Bush’s fault, Republicans won’t help, stimulus worked, more straw men, border more secure than ever, not his fault, more straw men.  Promoting the “merits” of his stimulus bill, President Obama said:

Now, every economist who’s looked at it said that the Recovery [Act] did its job…The problem is, number one, it’s hard to argue sometimes, “things could have been a lot worse. Right?  So people kind of say, “Yeah, but unemployment’s still at 9.6 percent.” Yes, but it’s not 12 or 13 or 15.  People say “Well, you know, the stock market didn’t fully recover.” Yeah, but it’s recovered more than people expected last year.  So part of the challenge in delivering this message about all the Recovery Act accomplished is that things are still tough, they just aren’t as bad as they could have been..  They could have been a catastrophe.  In that sense [the stimulus] worked.

New claims for jobless benefits jumped last month by 13,000 to a seasonally adjusted 472,000.  The number of people continuing to claim benefits rose by 43,000 to 9.6 million.  The number collecting extended benefits fell by 376,000. Since unemployment figures count only those actively seeking work, the real number is said to be around 17 percent.

“Unemployment’s still at 9.6 percent.
But it’s not 12 or 13 or 25.”

Every economist certainly did not say that the Recovery Act did its job. Alan Meltzer, professor of economics at Carnegie Mellon, said in the Wall Street Journal yesterday “The administration’s stimulus program has failed.” as innumerable other economists have said.  Even Keynesian economist Jeffrey Sachs said that the stimulus failed.

Allan Meltzer added that “The president, his friends and advisers talk endlessly about the circumstances they inherited as a way of avoiding responsibility for the 18 months for which they are responsible.  But they want new stimulus measures — which is convincing evidence that they too recognize that the earlier measures failed.”

Obama got somewhat of a chilly reception from world leaders at the G-20 summit over the past weekend when he pressed them to continue with spending to bolster the global economy. Many nations in Europe and elsewhere have had to grapple with their own debt crises, and have been forced to enact tough austerity measures.

In 1981, President Reagan reduced marginal and corporate tax rates and slowed the growth of nondefense spending.  Recovery began about a year later.  After 18 months, the economy grew more than 9% and continued to expand above trend rates. The administration economists neglected the longer-term  consequences of their actions.

Economist Larry Kudlow says:

The economic power of business is the missing link in the faux debate that is now raging over spending and deficit policies. A brief look at the recent jobs report for June tells this story. After spending more than $1 trillion through so-called government stimulus, we are at best experiencing a grinding and anemic jobs recovery. Private payrolls are growing slowly. The workweek is again shrinking. And average hourly earnings have declined. The unemployment rate dropped to 9.5 percent, but that’s because 650,000 people left the labor force.

The economic power of business is the missing link in the faux debate that is now raging over spending and deficit policies. A brief look at the recent jobs report for June tells this story. After spending more than $1 trillion through so-called government stimulus, we are at best experiencing a grinding and anemic jobs recovery. Private payrolls are growing slowly. The workweek is again shrinking. And average hourly earnings have declined. The unemployment rate dropped to 9.5 percent, but that’s because 650,000 people left the labor force.

So what about all this stimulus spending? Well, it hasn’t worked.

Business, in order to hire, plan for the future, increase spending, needs more than vague hope.  They need some kind of certainty.  Right now, everything is up in the air.  There’s a new health care law, how much will it cost business? Nobody knows.  Will the Bush tax-cuts be extended? Will Congress enact new taxes?  What is in the new Dodd-Frank bill’s 2000+ pages and how will it affect business?  What new regulations are going to be imposed? Cap-and-trade would  be an enormous cost on doing business, will it pass, and what will it mean to business?  Are we in for a double-dip recession? How can a business, hoping to make a profit in an economy where everyone is reluctant to buy, reluctant to spend, know what to do?

Misdiagnosis of the problem, and a lack of understanding of the possible remedies has made the problem far worse than it needed to be. The far left blames “capitalism” for most of the world’s problems, but “capitalism” is simply the name Marx gave to the free market.

Unemployment is the problem.  Yet most policies adopted by the Obama administration increase unemployment.  Slapping a heavy tax on makers of medical devices means lower employment in that industry.  Unnecessarily shutting down all oil rigs in the Gulf creates huge unemployment as rigs leave the area.  Failing to take quick action to prevent oil slicks from reaching the coastline means unemployment all up and down the coast.  Requiring people to switch to CFL lightbulbs means that industry will take place in China.  Closing  federal lands to oil exploration means lost jobs. Putting too many regulations and taxes on business means businesses will move to somewhere where they are better treated. There are always consequences.




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