American Elephants

A Bleak and Foreboding Economy And How to Fix It. by The Elephant's Child

The Obama campaign continues the mantra of “26 months of job growth.” That sounds like the economy is improving, doesn’t it? What they are not mentioning is that more people are dropping out of the job market. Their statement is true, but wrong in that it gives a false picture of what is happening.

The Wall Street Journal reported:

The economy turned in another lackluster month for job creation in April, with 115,000 net new jobs, 130,000 in private business (less 15,000 fewer in government). The unemployment rate fell a tick to 8.1%, albeit mainly because the labor force shrank by 342,000. This relates to what is arguably the most troubling trend in the April jobs report, which is the continuing decline in the share of working-age Americans who are in the labor force.

The civilian labor participation rate, as it’s known, fell again in April to 53.6%. That’s the second decline in a row and the lowest rate since December 1981.  That’s right— more than 30 years ago, longer than Mark Zuckerberg has been alive.  The nearby chart shows the disturbing round trip the workforce participation rate has taken since 1980 and the precipitous drop in the last three years.

Normally as we come out of a recession, hiring picks up, and as Americans see job opportunities they jump back into the labor force. That’s what happened after the sharp recession of 1981-1982 when the participation in the labor force last hit 64.6%.

Average weekly earnings are up 2.1% but inflation has climbed by 3%. With real wages climbing so slowly, work is less attractive.

Government has rapidly expanded government transfer payments during this recession.  It creates a disincentive for low skilled workers because in some high-benefit states they would need to earn more than $30,000 to make up for the benefits they would lose.

The tragedy is that the Obama administration has put their policy of social welfare ahead of the policies that would create a strong, durable economic expansion. President Obama has been on a tour of college campuses to sell his proposal to lower student loan interest rates. But what students most need are jobs when they graduate, and this administration has no idea how to encourage job growth.

I think that the administration holds conservatives in such contempt that they reject any and all Republican ideas for creating jobs or encouraging growth. The president has sneered at suggestions celebrating individualism and suggesting that people do not need an all-powerful government to direct their lives. The president rejects any idea that there is too much regulation and claims that Republicans don’t care about clean air, clean water or sick children.  Callous, that’s us.  The complaints of businesses about over-regulation fall on deaf ears.

Victor Davis Hanson captured it:

Much of the answer is found in the collective psyche of those Americans who traditionally hire, purchase, or invest capital. An economy is simply the aggregate of millions of private agendas, of people sensing and reacting to a commonly perceived landscape. Yet since January 2009, that landscape has been bleak and foreboding.

Take the debt. The problem is not just that Obama has borrowed $5 trillion in less than four years, but also that he has offered few plans to reduce the ongoing borrowing and none at all to pay down the debt. Instead, he has demonized as heartless anyone who opposes his serial $1 trillion annual deficits. That demoralizes the public, who privately know that they cannot buy everything they might wish, and who expect that government will not, either. In the business community, there is the unspoken assumption that, at some point very soon, either taxes will have to rise, the currency will have to inflate radically, or debts will have to be renounced — all equally foreboding for those with capital. Some even believe that Obama is not a haphazardly profligate spender but a deliberate one who welcomes the radical measures on the horizon to stave off bankruptcy as laudable in themselves.

Obama’s obsession with “clean energy” and attempt to end our reliance on fossil fuels are a direct attack on the economy. The mandates of the EPA are strangling business. ObamaCare is a mess of mandates, escalating costs and misguided interference in the free market. Liberals always think that big or bigger government will perform better than the free market — which is just the aggregate, as Mr. Hanson says, of  “millions of private agendas. people reacting to a commonly perceived landscape.” Liberals are sure that their “experts” can do better. but there are no experts there — only ordinary people with bad ideas. They must be voted out of office.

Victor Davis Hanson added:

The net result is that those with capital, even if they are small businesses, do not believe that the Obama administration likes them. They feel that regulations will increase, that taxes will increase, that energy costs will increase, and that as they pay more to government and keep less, government will nevertheless become even more arrogant and inefficient — and they will become even more demonized. When people pay over 50 percent in payroll, federal, state, and local taxes and are still caricatured as “not paying their fair share,” a sort of collective shrug follows and bodes ill for the economy at large. One need not be liked to make money, but the constant presidential harangues finally take their toll in insidious ways.

Do read the whole essay. It is well worth your time.


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