The American Spectator
House GOP Leader John Boehner created a stir last month when he called on President Obama to fire his top economic advisors, Treasury Secretary Tim Geithner and Assistant to the President for Economic Policy Larry Summers, because of the Administration’s disastrous economic performance. But while Summers is, indeed, a clueless Keynesian, and Geithner is a career bureaucrat, they are not the source of the problem. The source of the problem is the Godfather of the Administration’s economic policies, President Obama himself.
Consequently, what is needed is not to fire Geithner or Summers, but to fire Obama. While President Obama is not on the ballot this fall, the American people will nevertheless have the opportunity in November to do precisely that, by effectively removing him from power, as explained further below. Reality will continue to punish the American people harder and harder until they do.
President Obama’s Malaise
The National Bureau of Economic Research (NBER) officially scored the recession as starting in December, 2007. NBER also reports that since World War II, 65 years ago, the average duration of recessions has been 10 months, with the longest previously being 16 months. In April of this year, NBER issued a statement saying it could not yet determine an end to the recession, 28 months after it began.
What we do know is that in August, 2010, 32 months after the recession started, double the previous longest recession in the 65 year postwar era, the economy was still losing jobs, and unemployment was still rising. The Labor Department reported another 54,000 jobs lost in August, with unemployment rising to 9.6%. Major Obama voting blocks are being punished by Obamanomics, with African Americans suffering a sustained depression reflected by 16.3% unemployment, even worse for teenagers with unemployment at 26.3%, and Hispanics not far behind at 12% unemployment.
The total army of the unemployed remains stuck at nearly 15 million, with 42% of those classified as long-term unemployed, jobless for over 6 months, the highest since the Great Depression. The number of additional workers employed part-time for economic reasons was still rising in August, up by another 331,000 to nearly 9 million. The Bureau of Labor Statistics (BLS) defines these workers as those who “were working part-time because their hours had been cut back or because they were unable to find a full time job.”
Another 2.4 million were defined as marginally attached to the labor force, stuck at that total for a year. The BLS explains that these individual “wanted and were available for work, and had looked for a job in the prior 12 months,” but were not counted among the unemployed because they had not looked for work in the prior 4 weeks. These included 1.1 million discouraged workers, up 352,000 over the past year, who were not currently searching for work, and therefore not counted as unemployed, because they believe that in the economy of hope and change no jobs are available for them.
The army of the unemployed and underemployed consequently stands at 26.2 million Americans. That would add up to an unemployed and underemployed rate of 16.7%, almost 3 years after the recession started. The full picture of hopelessness is measured by the precipitous drop in the civilian-employment population ratio from 63% in 2007 to 58% today, fully reflecting the millions who have simply given up even trying to look for work.
Moreover, the economic growth we have experienced recently has been less than half the growth we experienced after similarly severe downturns. The economy grew by almost 7% in real terms in Reagan’s recovery in 1983 and 1984. Even under President Ford, real GDP grew by 6.2% in the year after the 1974-75 recession. But under President Obama, economic growth is again in a tailspin already, falling from 5% in the fourth quarter of 2009, to 3.7% in the first quarter this year, to 1.6% in the second quarter. Moreover, the stock market is stalled, mired 30% below its record highs over 14000 in the Dow.
This deteriorating economy couldn’t be a worse time to raise top federal tax rates across the board for every major federal tax, as will begin on Jan. 1 under President Obama’s economic policies. If those tax increases go through, the probability will be over 100% for a double dip recession, if not Art Laffer’s Coming Crash of 2011.
President Obama’s Fallacies
In his Labor Day speech before a cheering AFL-CIO crowd excited about their prospects of taking over the economy, President Obama revealed the root of the problem. He has no clue as to how the economy works, or what policies would produce economic growth. Indeed, while he may have physically been in America over the last 30 years, his mind may as well still have been in the Indonesia of his youth, for all he understands about what has happened in this country over that time.
After last year’s “stimulus” costing nearly a trillion dollars that was supposed to be focused on “shovel ready” infrastructure projects, President Obama on Monday announced his “new” economic recovery plan: another $50 billion in increased federal spending for infrastructure. He said, “I am announcing a new plan for rebuilding and modernizing America’s roads and rails and runways for the long term.” But even this simple statement of his own plan is false. For there is nothing new about it. That is what his stimulus of over a year ago was supposed to be about. But the American people are learning from hard experience that President Obama does not learn from experience. He is all theory and ideology, neo-Marxist ideology.
President Obama has made it clear over and over, including in Monday’s speech, that what he thinks drives economic growth is increased government spending, deficits, and debt. That is the sum and substance of his entire Keynesian economic theory. And he persists in that even though experience under his own Administration has proven once again that Keynesian economics doesn’t work. Indeed, that was proven so thoroughly in America in the 1970s, and again in Japan since the 1990s, that Keynesian economics today is frankly silly, and advocating still more of it now can only be accurately characterized as braindead.
Japan suffered its own financial crisis at the start of the 1990s. It responded with Keynesian government spending, deficits and debt, focused on infrastructure spending. The result has been what has been accurately called two lost decades of economic stagnation, very similar to what America is experiencing now.