The Failure of Obamanomics

The Failure of Obamanomics

Monty
Pelerin

 

The monthly jobs numbers are both tragic and telling.
Each report brings forth spin from the White House asserting how the economy has
turned the corner and the recovery is occurring. Nothing could be further from
the truth! Jobs are not being created, certainly not at the rate which would be
consistent with a recovering economy.

Nor are jobs being created at a
rate sufficient enough to deal with growth in the labor force. As a result,
despite all the political puffery, the unemployment problem is not going away
any time soon. From the Wall Street Journal, with emboldening added, comes a blunt
assessment of job creation:

The latest employment reports have not been encouraging. At the rate
of 36,000 new jobs a month-the number gained in January-we will never
get back to full employment
. Even if we keep adding jobs at the
December rate of 121,000 new jobs, we wouldn’t achieve full employment
in this millennium.

The White House keeps hoping for monthly job
gains of 250,000. But even gains of that magnitude-more than double the average
gain last year- would not get America back to full employment until
2018
.

This assessment of the lack of job creation
is indicative of the failure of the Administration’s economic policy. The policy
has been tragic, producing the following outcomes:

  • A poorer America as a result of a seriously under-performing economy for now
    and apparently well into the future
  • Economic suffering and hardship for those unable to find work
  • Bankruptcies and foreclosures as a result of loss of income
  • Trillions of dollars wasted on useless “stimulus”
  • Trillions of dollars of debt imposed on future generations

One
might hope, probably in vain, that two positive lessons might be gleaned from
this terribly tragic and expensive experience:

  1. Keynesian economics (again!!!!!) does not work!
  2. Never elect an inexperienced unknown to the highest office in the
    land


Monty Pelerin at www.economicnoise.com

Why Obamanomics Has Failed

Why Obamanomics Has Failed

June 30th, 2010

By ALLAN H. MELTZER, The Wall Street Journal

The administration’s stimulus program has failed. Growth is slow and unemployment remains high. 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. And so the U.S. was odd-man out at the G-20 meeting over the weekend, continuing to call for more government spending in the face of European resistance.

The contrast with President Reagan’s antirecession and pro-growth measures in 1981 is striking. 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 it continued to expand above trend rates.

Two overarching reasons explain the failure of Obamanomics. First, administration economists and their outside supporters neglected the longer-term costs and consequences of their actions. Second, the administration and Congress have through their deeds and words heightened uncertainty about the economic future. High uncertainty is the enemy of investment and growth.

Most of the earlier spending was a very short-term response to long-term problems. One piece financed temporary tax cuts. This was a mistake, and ignores the role of expectations in the economy. Economic theory predicts that temporary tax cuts have little effect on spending. Unless tax cuts are expected to last, consumers save the proceeds and pay down debt. Experience with past temporary tax reductions, as in the Carter and first Bush presidencies, confirms this outcome.

Read More

A new Dr. Seuss book…

A new Dr. Seuss book…

I do not like this Uncle Sam, I do not like his health care scam.

I do not like these dirty crooks, or how they lie and cook the books.

I do not like when Congress steals,

I do not like their secret deals.

I do not like this speaker Nan ,

I do not like this ‘YES WE CAN’.do not like this spending spree,

I’m smart, I know that nothing’s free, 

I do not like your smug replies, when I complain about your lies. 

I do not like this kind of hope. 

I do not like it you BIG Dope. 

I do not like it NOPE NOPE NOPE! 

 

 

Obamanomics: No Jobs, No Recovery

Obamanomics: No Jobs, No Recovery

Posted on | June 19, 2010 | 2 Comments

Here’s a handy little chart showing the pattern of job losses in recessions since World War II:

That big red line is the current recession, and Scott Stoddard of Investor’s Business Daily explains:

Job recoveries have been increasingly sluggish over the past several recessions and the current downturn looks to be the longest since at least World War II. . . .
Today’s jobs slump, already at 29 months, could last five years or more, analysts say. Employers are expected to stay cautious amid a sluggish economic recovery.
“It would be strange but not inconceivable” for employment to fall short of its pre-recession peak before the next downturn, said Don Rissmiller, chief economist at Strategas Research Partners. . . .

OK, here come the magic words:

Rissmiller and other economists say a double-dip recession is unlikely. Yet hiring remains painfully slow. Excluding temporary hires for the 2010 Census, the economy has added about 500,000 jobs so far in 2010. The U.S. will need to add about 8 million jobs just to get back to the December 2007 peak, when the recession started.
Excluding the soon-to-disappear Census jobs, employers would need to average nearly 300,000 new jobs a month for the next 27 months just to get to the pre-recession peak by the end of 2012. . . .

Read the whole thing. Everybody keeps saying that a double-dip recession — that is, a “W”-shaped recession, instead of a “V” — is “unlikely.” Right, and if trends turn downward again, I’m sure that will happen unexpectedly.

Speaking of which, what about an unexpected debt crisis?

Former Federal Reserve Chairman Alan Greenspan said the U.S. may soon face higher borrowing costs on its swelling debt and called for a “tectonic shift” in fiscal policy to contain borrowing.
“Perceptions of a large U.S. borrowing capacity are misleading,” and current long-term bond yields are masking America’s debt challenge, Greenspan wrote in an opinion piece posted on the Wall Street Journal’s website. “Long-term rate increases can emerge with unexpected suddenness,” such as the 4 percentage point surge over four months in 1979-80, he said. . . .
“The federal government is currently saddled with commitments for the next three decades that it will be unable to meet in real terms,” Greenspan said. The “very severity of the pending crisis and growing analogies to Greece set the stage for a serious response.”

Don’t worry. I’m sure higher interest rates are as “unlikely” as a double-dip recession. Or the bursting of the Australian housing bubble. Wonder what’s up with gold prices?