American Elephants

Recessions, Depressions, Recoveries, Repudiations and Pretensions. by The Elephant's Child


Obama has been working hard to emphasize how much he has done for the economy. He took a victory lap when he announced that the 2015 deficit will be only $483 billion.

‘The deficit has gone down by two-thirds since I was president of the United States,” President Obama said, calling his budgeting “responsible.”

My understanding is that the deficit has gone down because John Boehner outfoxed Obama in the negotiations regarding the sequester. Remember Obama’s attempt to stop the sequester spending cuts by shutting down national parks, airports and food-safety inspections? The decrease is a big deal, because under Obama’s fiscal management the debt had risen by more than $7 trillion — including the three largest deficits since World War II. Federal deficits don’t usually decrease, they just grow, and grow.

The Democrats have, in general, believed in Keynesian economics and the value of pumping money into the economy where it will circulate and like other noxious contagious diseases — multiply. Obama inherited a recession, added $830 billion in deficit spending right off the bat. Then the auto bailouts, cash for clunkers, green jobs, renewable energy, subsidies, food stamps, increased unemployment insurance, ObamaCare, and now, besides amnesty, he wants to give out free Community College, free sick leave, and undoubtedly some other goodies he will surprise us with on Tuesday night in the SOTU. He likes giving away stuff we have to pay for. Makes him feel magnanimous. He also wants to raise taxes on the rich. But that’s just an attempt to portray Republicans as the party of the rich, because he knows Republicans won’t raise taxes. (See the  last paragraph)

He’s restored full diplomatic relationship with Cuba, although he can’t do the embassy and ambassador part without Congress, and it’s not at all clear how this benefits anyone but the Castros, who have been trading their doctors for Venezuelan oil. But the Castros welcome our generosity, and our surrender.

It’s getting really hard to tell what is real and what is not. Improving employment numbers are touted, but then you find out that a larger number of potential workers have dropped out of the workforce. Jobless claims rise to 316,000. If the number of people receiving unemployment payments drops, it may turn out to be because they used up their benefits, or perhaps they retired.  And the number of Americans of working age no longer in the workforce keeps climbing. That number of people 16 years of age and older who are not employed and not making an effort to find employment hit a record 92,898,000.

So the numbers of employed are a segment of a larger and larger number of dropouts, and new jobs are a segment of a smaller and smaller work force. And in the meantime more young people are entering the work force, but not finding jobs. How do you get any real numbers out of that moving and growing ill-defined multitude? Of course you don’t, and the president will simply tell you what he wants you to hear anyway, and the media will repeat it until you’ve got it.

The big claim was about the big jump in GDP growth in the fourth quarter to 5%. Finally, the press announced, the Recovery! Except that number was apparently phony, since they did some tricks with the numbers — and the increased consumer spending and confidence turned out to actually be the higher costs of ObamaCare.

Numbers just out say that retail sales for December were down by 9%. and more American businesses are dying than new ones are starting up.

The good news is that the big reduction in the price of gas is a savings for every family budget, and will reduce some of the costs of business. Obama will undoubtedly take credit for that, though he has fought fossil fuels with everything he and the EPA could come up with.

You have surely noticed how often President Obama has referred to the Great Depression of the 1930s. He likes to compare his depression to President Roosevelt’s. Trouble is that his recession ended in June of 2009, while Roosevelt’s went on until World War II. Our political leaders have always tried to claim it was the result of capitalism run amok, but it was the result of Roosevelt’s bad  policies and endless tinkering.

But did you know about the Financial Crisis of 1920-21? The situation was grim, unemployment had jumped from 4 percent to nearly 12 percent, and GNP declined by 17 percent. Despite the severity of the contraction, the Fed did not try to turn the money supply around and fight the downturn.

Instead, Harding cut the federal budget nearly in half between 1920 and 1922, He slashed tax rates for all income groups. The national debt was reduced by one-third. And then he allowed the economy to adjust. No pump-priming, no increased expenditures. Just the old-fashioned view that government should keep taxes and spending low and reduce the federal debt. And so he did. And the economy swiftly recovered, and hardly anyone knows that there was a recession in 1920-21. So there you go.

ADDENDUM: I corrected a spot in the third paragraph where I said deficit when I meant debt. My bad. It’s confusing enough without my brain freezes. I regret the error.

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