Libertarian Hawk


Democrats Want Job Creation—But Not Under Republican Governors

March 13, 2013 By: Scott Spiegel Category: Economy

Indiana_IFT_Protest2The progressive Wisconsin-based Cap Times recently released a graph featuring Bureau of Labor Statistics numbers showing Wisconsin well below neighbors Minnesota, Michigan, Iowa, and Illinois in job creation over the past two years.  Liberals have been tittering over the graph, because in 2010, Wisconsin gubernatorial candidate Scott Walker campaigned on the promise of creating 250,000 new jobs in his first term, yet the state has witnessed a net decline of 16,000 jobs since he took office in January 2011.

In defense of Walker, comparing Wisconsin unfavorably to Michigan and Illinois—two of the states with the highest unemployment rates in the country—is hilarious.  In December 2012, Wisconsin’s unemployment rate was 6.6%, compared to Illinois’s at 8.7% and Michigan’s at 8.9%.  (Iowa, with its Republican governor and House, is admittedly doing very well at 4.9%).

Remember that Walker promised to create 250,000 jobs by the end of his first term, which lasts until January 2015.  I think it’s a bit premature for liberals to gloat over the presumed economic fallout from the slight limitations he enacted on lavish taxpayer-funded union benefits via his Wisconsin Budget Repair Bill.  As anyone who grimaced while first-term President Reagan rode out the second half of a double-dip recession can attest, reform takes time to kick in.  There’s so much variability in the numbers of jobs Wisconsin’s neighbors have created over the past 24 months—from Minnesota’s 72,200 down to Iowa’s 18,600—that it’s way too early to tell whether Walker’s policies have worked.  And Reagan didn’t have to waste the first year of his presidency fighting a pointless recall election staged by powerful public sector unions.  (The Wisconsin recall election also set taxpayers back to the tune of 16 to 18 million job-killing dollars.)

Also remember that the change in Wisconsin’s net jobs includes not only private-sector jobs but government jobs.  Since Walker explicitly campaigned on a platform of cutting government spending, it’s safe to assume that several thousand of those “lost” jobs came from laying off pencil-pushing bureaucrats to save the state money.

In addition, Walker promised to create jobs via business expansion.  Yet Democrats have been doing everything in their power since he was elected to stymie his job-creation legislation.  Most regrettable is their effort to stop his mining bill that would open territory in the Lake Superior region for a gigantic $1.5 billion iron ore mine and create thousands of jobs in the mining, trucking, and housing industries.  Despite the bill’s recent passage after a year of Democratic stall tactics, the mine’s opening could be delayed for years due to environmentalist legal challenges.

But since Democrats want to draw comparisons, let’s take a broader view.  Crunching the numbers reveals that unemployment rates declined more across the country in red states—as defined by 2012 Electoral College votes—than blue states from January 2011 to December 2012: 20% on average in red states and 14% in blue states.

Unemployment increased in only two states over the past two years: New Jersey and New Hampshire—both blue.  Unemployment decreased by piddly single-digit percentages in New York, Illinois, Maryland, Connecticut, Maine, and Pennsylvania—all blue states. Similarly, decreases were 17% or less in blue states Michigan, Washington, Hawaii, Vermont, Rhode Island, Colorado, and D.C.

In contrast, unemployment plummeted for red states Utah (32%), Idaho (32%), Missouri (30%), Louisiana (29%), Texas (27%), Alabama (24%), Montana (24%), Oklahoma (23%), Kentucky (22%), West Virginia (22%), Wyoming (22%), Kansas (21%), South Carolina (20%), and Tennessee (20%).

Florida was a blue state in 2012—barely—but has a Republican governor, Senate, and House, and their unemployment dropped a whopping 33% from January 2011.  Swing state Ohio similarly tipped blue in 2012, but also has a Republican governor, Senate, and House, and their unemployment plunged 29%.

Red states also had lower average point-in-time unemployment rates in December 2012 than blue states—7.5% vs. 6.6%.  The following red states all boasted unemployment rates below 6.0%: North Dakota (3.2%), Nebraska (3.7%), South Dakota (4.4%), Wyoming (4.9%), Oklahoma (5.1%), Utah (5.2%), Kansas (5.4%), Louisiana (5.5%), and Montana (5.7%).  Seven of the ten states with the lowest unemployment rates in the nation are red.  The states with the four lowest unemployment rates are all red.

Meanwhile, these poor blue states all had miserable unemployment rates above 8.0% in December 2012: Rhode Island (10.2%), Nevada (10.2%), California (9.8%), New Jersey (9.6%), Michigan (8.9%), Illinois (8.7%), Connecticut (8.6%), D.C. (8.5%), Oregon (8.4%), and New York (8.2%).  Seven of the ten states with the highest unemployment rates in the nation are blue.  The states with the four highest unemployment rates are all blue.

So here’s some advice for Democrats who whine when Republican governors fail to fully implement their economic growth promises quickly enough: Stop saddling them with costly, time-consuming recall elections, and stop opposing every job-creation measure they propose.  They can create a lot more jobs that way—if that’s truly what you want.

Previously published in modified form at Red Alert Politics

As Featured On EzineArticles

Print This Post Print This Post

Enhanced by Zemanta

Top Ten Sequester Lies

February 27, 2013 By: Scott Spiegel Category: Economy

02-25_Ax_Editorial_cartoon_Sequester_is_but_an_insect_t6402The budget sequester, which President Obama opposed when it was passed in 2011, will hurt the economy, arbitrarily cut $85 billion in spending, and put hundreds of thousands of essential federal employees out of work; yet Republicans refuse to compromise to avert the crisis.

There’s nine lies right there, all in one sentence.  Let’s break them down for the “low-information voter”:

1. Obama opposed the sequester.  Obama swore in the fall of 2011 to veto any attempts to repeal the sequester his party had incorporated into the Budget Control Act as part of the debt ceiling compromise.  Democrats bet that in the sequester game of chicken, Republicans would flinch because they wouldn’t be able to stomach proposed defense cuts.  Democrats bet wrong.  Now they’re trying to rewrite history to make it look as though they didn’t underestimate determined Republicans.

2. The sequester scheduled to take place on March 1 will hurt the economy.  Minor spending cuts don’t hurt the economy; they show investors and employers we’re taking steps to resolve our debt crisis and avoid credit downgrades.  They also pave the way for federal tax cuts, which—from JFK to Reagan to Clinton to Bush—have stimulated the economy and promoted growth.

3. The sequester will put hundreds of thousands of federal employees out of work.  Given how these things usually unfold, the odds are that whatever time these workers spend off the job they will most likely be compensated for via the furlough appeals process or unemployment benefits.

4. If the sequester takes place, fires won’t be put out, crime won’t be stopped, air traffic will halt, meat will rot, etc.  All of the essential functions of government, and many more, will continue to be carried out under a sequester.  Most agencies under Obama have increased significantly in size since he took office; a return to roughly 2009 spending levels isn’t going to send them into a tailspin.  For comparison, look at the huge aviation disaster that didn’t happen in 1981 when President Reagan fired 10,000 air traffic controllers.

5. The cuts proposed in the sequester are capricious and arbitrary.  In 2011 the 12-member, bipartisan supercommittee hashed out the cuts that would form the sequester, half from domestic spending and half from military spending.  While neither side is happy with the balance, at least it’s clear how the division was arrived at.  But propagandists like Paul Krugman make it sound as though lawmakers started randomly targeting hapless federal employees to fire.  As George Will counters the sequester naysayers,  “[C]ritics are utopians if they are waiting for the arrival of intelligent government.  The real choice today is between bigger or smaller unintelligent government.”

6. Republicans refuse to compromise on the sequester.  No one considered the sequester an ideal solution.  However, at some point it dawned on the GOP that the sequester might be the only way to force Democrats to cut spending on anything, ever, other than the military.  Republicans are willing to take a haircut on defense if Democrats are forced to trim a whisker or two off the giant entitlement state.  How is that not compromising?  Also, Republicans did compromise with Democrats, just last month, on the fiscal cliff deal that postponed the sequester for two months, and whose $600 billion tax increase was much more consequential than the sequester.  Republicans also compromised with Democrats on the original deal to raise the debt ceiling that led to the sequester.

7. The sequester will result in large budget cuts.  The sequester cuts $85 billion, or 3% of projected $3.6 trillion federal discretionary 2013 spending—also known as a “budget” before Democrats came to power.  As The Washington Post admitted, “[S]ome White House allies worry the slow-moving sequester may fail to live up to the hype.”  Or, as healthcare lobbyist Emily Holubowich charmingly put it, “‘The good news is, the world doesn’t end March 2.  The bad news is, the world doesn’t end March 2…  The worst-case scenario for us is the sequester hits and nothing bad really happens.’”

8. The sequester will cut $85 billion out of the 2013 budget.  Actually, it will cut only $44 billion, or about half that amount.  The $85 billion figure references the cut in “spending authority,” the other half of which Congress will likely postpone indefinitely, then reverse once voters have forgotten about it.

9. The sequester will in fact cut spending.  Actually, the sequester will merely slow the baseline increase in spending.  Even with the sequester, the 2013 federal budget will exceed the 2012 budget.  The sequester will no more cut spending than shooting a bullet through shrubbery will reverse its course.

And one more:

10. Republicans can win the sequester fight.  Only if they stand up and make the above points—in clear, easy-to-digest language, with concrete examples, scathing refutations of quotes by Democratic fear-mongers, and relentless attacks on Obama for lying to Americans and treating them like children.

Previously published in modified form at Red Alert Politics

Print This Post Print This Post

Enhanced by Zemanta

Liberal Myths: Holiday Edition

December 12, 2012 By: Scott Spiegel Category: Economy

three donkeys copyHow many liberal myths can a mainstream news announcer cram into one innocent, 90-second, top-of-the-hour news briefing?  On WABC’s New York affiliate one recent December evening, I counted eight.

First the news reader (as they more appropriately call them in Japan) cheerfully announced that seasonal hiring—inventory control agents, sales clerks, deliverymen—was way up this year compared to last year; that increased holiday spending was a sign the economy was improving; and that goods being purchased in the U.S. are unfortunately being made more often overseas.

There’s three myths right there: (1) elevated part-time hiring reflects economic health; (2) consumer spending drives growth; and (3) trade imbalances are harmful.

(1) That retailers are hiring more temporary help isn’t a sign the economy is thriving; it’s a sign there are more underemployed workers taking part-time work below their skill level.  If permanent, full-time employment were stable, we wouldn’t see such a leap in short-term hiring during peak economic season.  Increased part-time hiring also reflects employers’ reluctance to take on “full-time,” 30-hour-a-week employees whom they must soon provide health insurance per Obamacare.

(2) Consumer spending does not drive economic growth; investment and production do.  There’s nothing to consume if manufacturers don’t have the capital and the optimism that investing in productive enterprise will be worth it.  And manufacturers don’t think production will be worth it if they’re saddled with confiscatory tax rates, burdensome regulations, and long-term uncertainty.  Consumer spending is the last step in the economic chain of production, not the first.

(3) Trade imbalances reflect the fact that some countries have more stable economies and reliable currencies than others, the latter of whom must depend more on tangible production efforts to demonstrate they have something of value to trade.  Trade imbalances also signal advanced nations’ capacity to provide high-tech, intangible services and sophisticated knowledge transfer that aren’t as concrete or visible as shiploads of dry goods.

After this trio of falsehoods, the announcer chirped that gas prices were lower than they’d been in months—a boon for the economy—but higher than this time last year, which could reflect rising wages.

There’s two more myths: (4) seasonal fluctuations in gas prices reflect economic growth; and (5) high gas prices reflect improving wages.

(4) Gas prices are always higher in the summer; this is a reliable, cyclical variation, and gas prices declining from June to December say nothing about comparative economic performance at the end of the year.

(5) Our current high gas prices are less likely a reflection of increasing income—which we know is at historically low levels—and more likely the result of instability in the Middle East (due to our President’s weak foreign policy), forecast scarcity of oil (due to drilling restrictions), and looming inflation (due to the Federal Reserve’s currency devaluation).

After a commercial break, the reporter referenced the recent renewal of the Kyoto Protocol and uncritically repeated the news that (6) scientists are alarmed because 2012 is on track to be one of the hottest years on record.

(6) The Met Office in Great Britain recently released a report showing global temperature the same in 2012 as it was in 1996.  The period over which no global warming has been taking place (1996-2012) is thus the same length as the period over which it was supposedly taking place (1980-1996).  But never mind: news outlets such as The New York Times inveigle us to “Bundle Up: It’s Global Warming.”

The announcer then mentioned Obama’s recent trip to Michigan to grandstand on the end-of-the-year fiscal showdown, and parroted his claim that (7) spending cuts must be balanced with tax increases to balance our budget.  The announcer concluded that (8) the Dow Jones Industrial Average was up slightly due to optimism over progress in the fiscal cliff talks.

(7) Liberals refuse to understand that revenue increases are not the same as tax increases.  One means more money going to the government; the other means a higher percentage of people’s income being taken from them.  Paradoxically, lowering marginal tax rates on high-income earners increases revenue, because then they don’t scale back their investment and hiring to avoid being gouged.  Cutting taxes increased revenue under JFK, Ronald Reagan, and Bill Clinton.  Yet liberals forever believe Republicans want the government to run with no revenue.

(8) No one can say on any given day why the Dow is up or down, and analysts frequently project their prejudices onto such causal pronouncements.  It’s equally possible that the DJI is up because investors believe little progress is being made as the end of the year approaches, automatic budget cuts are going to kick in, and we’re finally going to start reining in spending.

At this rate, the mainstream media will soon be reporting flying reindeer sightings.

(For more liberal howlers, see Liberal Myths: Tax Day Edition!)

Previously published in modified form at Red Alert Politics

As Featured On EzineArticles

Print This Post Print This Post

Enhanced by Zemanta

Obama Was Dealt a Dream Hand

November 07, 2012 By: Scott Spiegel Category: Elections: 2012

No modern American president has ever been granted the opportunity President Obama received to preside over explosive economic growth while in office if he had simply left well enough alone.

Consider this: Politically speaking, if a president assumes office during a recession, the luckiest time for him to do so is around twelve months in, when the economy is near rock-bottom and ready to come roaring back.  If he plays his cards right, he can take credit for some of the recovery by claiming that his policies contributed to it.  What’s least fortunate is to assume office near or before the start of a recession, because then the downturn occurs entirely under his watch and everyone blames him for it.

Harry Truman took office two months into the 1948 recession—a precarious position, because unemployment plunged for a year under his watch before recovering.  Eisenhower assumed office six months before the 1953 recession and was forced to serve as the face of twelve months of decline.

Kennedy was fortunate enough to assume office nine months into the 1960 recession, one month before the recovery, the latter of which he sustained by cutting income taxes for all earners.

Nixon assumed office eleven months before the 1969 recession and presided over twelve months of decline.  Reagan took office six months before the 1981 recession and endured sixteen months before the recovery.  Bush assumed office two months before the 2001 recession and held office through ten months of decline.

When did Obama take office?  A whopping thirteen months after the start of the 2007 recession, the longest lag time any president has experienced while assuming office near the start of a recession since the Great Depression.  Only Kennedy came close to being as lucky, and he didn’t squander his luck.

The economy had been hemorrhaging jobs for a year before Obama took office; the sharpest decline was behind us.  Job losses would have continued for several months under Obama no matter what he did, but no one would have blamed him for that if had he appropriately positioned the country for recovery.  Had he governed like a fiscal conservative, à la Bill Clinton, Republicans would have been delighted and vindicated, even if his policies hadn’t yielded immediate results.  Democrats would have griped, but they would have covered for Obama.

But that’s not how Obama governed.

Obama blew his chances via massive deficit spending, threats to raise taxes, nebulous business regulations, and expensive new entitlements.  Obama was dealt the opportunity of a lifetime to preside over historic recovery and growth, without his having to lift a finger for the country.

Instead, he chose to lift a finger to the country.

Obama was also dealt a dream hand on national security.  In their tepid reelection endorsement, The Economist claimed Obama had been “left with a daunting inheritance” from Bush.  On the contrary.  It was a piece of cake for Obama to end the Iraq War, since all he had to do was follow to the letter the Status of Forces Agreement for the drawdown of troops that Bush had set up for him before he left office.  (It was Bush who was dealt the atrocious foreign policy hand: the 9/11 attacks that happened months into his first term and were the culmination of twenty years of Islamist attacks against the West.)

It was easy for Obama to order the surge in Afghanistan—though he dawdled for months doing it anyway—because he had the successful example of the counterinsurgency operation Bush had ordered General David Petraeus to execute, at great political cost, in 2007 (the one Obama opposed and Biden called “dead flat wrong”).  It took the Bush administration years to discover counterinsurgency as the optimal strategy for winning the Iraq War.  Obama had a textbook example of how to do it in Afghanistan, and the same generals to implement it, right in front of him.

Obama was gifted mountains of intelligence, obtained through enhanced interrogation techniques he opposed, that led the U.S. military to the hideout of Osama bin Laden, and to the call any sane President would have made to order Navy SEALs to kill him.

Obama received the Nobel Peace Prize for delivering fruitless campaign speeches about how he would sit down with dictators and charm them into cooperation.

Obama’s dream hand extended to his party’s majority in the House and supermajority in the Senate, which allowed him to get his stimulus bill, the Dodd-Frank banking bill, Cash-for-Clunkers, the Fair Pay Act, and other major legislation passed.  Obama apologists have bragged about how much he got done, in part because of Democratic majorities in Congress.

Obama was given a generalized, all-purpose benefit of the doubt like no other modern president.  Months into office, while economic indicators were plunging, everyone on both sides of the aisle lamented what a bad hand he had been dealt.  But who would have imagined that his supporters would be reciting that excuse four years later for why unemployment the Friday before Election Day was higher than when he took office?  Who would have guessed that the strongest argument for reelecting Obama would be “He was dealt a bad hand”?

Obama had the entire mainstream press except Fox News on his side.  Reporters covered for him, asked fawning questions, failed to ask tough questions, kept quiet during long stretches without press conferences, colluded to shield him, and coordinated to attack his opponents.  In the final months of the election, Democrats gained momentum and Republicans suffered demoralization from a cadre of shameless, biased pollsters who used ridiculous weighting models to spread the meme that Obama was up 5 to 15 points in key swing states and the election was over.

What other modern American president has enjoyed such a deep reserve of good will, tolerance, patience, and protection from the press, the public, politicians in and out of his party, and leaders and peoples of the free world?

Most presidents would be deeply envious to receive the welcome Obama got when he took office.  Fortunately Mitt Romney is tough enough to thrive without it after he is inaugurated.

Previously published in modified form at Red Alert Politics (Part 1 and Part 2)

As Featured On EzineArticles

Print This Post Print This Post

Enhanced by Zemanta

GOP Govs Succeeding in Spite of Obama

June 06, 2012 By: Scott Spiegel Category: Economy

On Friday the Bureau of Labor Statistics released disheartening statistics showing that the nation’s employers added many fewer than expected jobs to their payrolls in May.  The unemployment rate ticked up for the first time in almost a year from 8.1% to 8.2%.  The stock market suffered its worst day all year, and the dip in Friday’s Dow Jones Industrial average completely erased 2012’s gains.

Democrats’ constructive response to these dismal numbers was to accuse Republicans of being happy the economy was tanking.

Hey Democrats: Republicans don’t want the economy to fail, we want you to fail.  Hoping for the economy to sink is Democrats’ métier: Democrats do better when there’s more poverty and misery, because that gives them more of an opening to step in and “help,” and more of an impetus to “never let a serious crisis go to waste.”

Republicans expect that the economy will struggle under your policies, and we take bittersweet satisfaction when our predictions are proven correct—because it proves we’re not crazy, as you accuse us of being—but we take no joy in mass unemployment and despair.

The less-discussed flip side of Democrats’ narrative is that pointing out glimmers of hope in the economy equals endorsement of liberal economic policies.

Lately the mainstream media have been claiming that modest economic recovery in Republican-led states puts GOP governors in a bind, because they can’t showcase their states’ success without bolstering the case for Obama’s reelection.

Take the recent Time article “A Tale of Two Economies,” in which author Michael Crowley writes, “The President’s campaign argues that the economy, while still troubled, is clearly and steadily improving…  And he has gained some unlikely support: Republican governors in critical swing states like Ohio.”

Crowley reports that Ohio’s John Kasich and other Republican governors in battleground states such as Virginia, Florida, Nevada, Michigan, and Wisconsin are touting their states’ recent economic improvement.  He implies that these governors’ defense of their policies constitutes indirect campaigning for Obama.

There’s just one problem with this formulation: These states are improving despite liberal economic policies, not because of them.

These states have begun recovering only recently, and were doing crummy like the rest of the nation until their governorships changed parties midway through Obama’s tenure.

For example, Ohio governor John Kasich, who took office in January 2011, was preceded by Democrat Ted Strickland.

Virginia GOP governor Bob McDonnell, who took office in January 2010, was preceded by Democrat Tim Kaine.

Florida GOP governor Rick Scott, who took office in January 2011, was preceded by former RINO/current Independent Charlie Crist.

Michigan GOP governor Rick Snyder, who took office in January 2011, was preceded by Democrat Jennifer Granholm.

Wisconsin GOP governor Scott Walker, who took office in January 2011, was preceded by Democrat Jim Doyle.

Are you seeing a pattern?

These states’ economies have rebounded over the past year or so because of their newly elected Republican governors’ policies.  Yet Democrats are banking on undecided voters being dumb enough to think that their states’ economic reversals are due to consistent implementation of Obama’s plans rather than changes in their governors.

Saying that newly elected Republican governors can’t point to recent growth in their states without giving Obama credit is like saying there’s no difference between federal and state government.  This line of thinking suggests that all 50 states move in lockstep and are entirely controlled by the decisions Congress and the President make.

The fact is that the economy is improving markedly in many states that recently switched from Democratic to Republican governors.  Ohio’s unemployment rate, for example, dropped from 9.5% in December 2010, before its newly elected Republican governor took office, to 7.4% in April 2012.  Wisconsin’s unemployment rate plummeted from 9.3% to 6.7% in the 16 months Scott Walker has held office.  Florida’s rate plunged from 12.0% under fiscally liberal Charlie Crist to 8.7% under Tea Partier Rick Scott.  Michigan’s sunk from 11.1% to 8.3% under Rick Snyder.

In Hawaii, which hosts one of the few governorships Democrats managed to pick up from Republicans in 2010, unemployment has stagnated at 6.3%.  In New York, which elected a new governor in 2010, but one from the same party as his Democratic predecessor, unemployment inched up from 8.2% to 8.5%.  Other Democratic-controlled states such as California and Colorado have witnessed piddly declines in their unemployment rates in the past year-and-a-half.

If I were a Democratic campaign strategist, I wouldn’t count on undecided voters in Ohio, Florida, Michigan, Wisconsin, and other recovering states being snookered into thinking that their modest growth over the past 16 months is due to Obama’s economic policies finally succeeding.  And I certainly wouldn’t push the nasty narrative that Republicans are glad the country is floundering.

Previously published in modified form at Red Alert Politics

As Featured On EzineArticles

Print This Post Print This Post

Enhanced by Zemanta

Obama’s Reelection Slogan: “I Saved Us From Becoming Greece!”

March 21, 2012 By: Scott Spiegel Category: Economy

In 2008, presidential candidate Barack Obama ran, not against the promises of Republican nominee John McCain, but against the policies of second-term president George W. Bush.  In 2012, Obama apparently plans to run against Bush once more.

Obama sure doesn’t seem to want to run on his record, since the economy is still in terrible shape after three years of his leadership.  Instead, it appears he’s going to campaign on the conceit that Bush left him with a much worse economy than anyone—he, economists, Nostradamus—could have predicted.  Obama now would have us believe that his policies prevented an economic slide the likes of which would have made 2010 look like boom times.

That’s a very interesting campaign platform, because even a cursory look at the trajectory of unemployment rates and economic growth in the months following the country’s recessions of the past 50 years shows that the downturn that started in December 2007 is singularly deep, protracted, and devastating.  If Obama’s right, and our economy would have been much worse had he not enacted his resuscitating policies, then our country narrowly dodged a plunge to a standard of living on par with that of the 1960s.

Take a look at the following chart, which I generated using data from the Federal Reserve Bank of Minneapolis (hat tip: Robert Tracinski).  It shows the percent change in total U.S. employment for all post-World War II recessions averaged together (the red line), and for 2007 by itself (the blue line), for each month after the start of the recession:

For the average recession, monthly change in employment decreased until hitting rock bottom at -2%, a year after the start of the recession; then headed up to 0% two years out; and finally continued up to 7% five years out.

In contrast, the 2007 recession looks radically different.  One year after it began—around the time Obama was elected—monthly change in employment was at the historical average of -2%.  But change in employment continued to plummet, down to 6% per month two years out, when by historical trends it should have been back to 0%.  Three years out it was still sunk at -5% rather than up at the 3% average.  Four years out it had “improved” to -4% rather than the 5% average.

If the average of all other post-war recessions resembles the Little Dipper, the 2007 recession is the Big Dipper.

Think the non-2007 average is hiding wide variation in recovery rates for previous recessions that dwarfs the apparent outlier of 2007?  In fact, the chart below shows employment trajectories for each recession alongside the 2007 trend (light blue line at the bottom).  The 2007 path was comparable to that of the worst recessions for 15 months; then, three months into Obama’s presidency, it plummeted into uncharted negative territory and has stayed there ever since.

When liberals blithely claim that Obama has kept things from being worse than they could have been, what they fail to realize is that things are already atrocious by historical standards.  Compared to the rapid growth and recovery we’ve always seen after economic recessions in modern times, the 2007 recession is not on par with those recessions, it’s not a little worse, it’s not moderately worse—it’s much, much worse.  In fact, it’s not even comparable—it’s in its own separate category.

The seasonally-adjusted percent change in real GDP per quarter is equally sickening:

Note that for our current recession, quarterly changes are barely above 0%, when historically they should be at 12.5%.

Here’s the graph showing GDP for each recession separately:

The only post-recession period that came close to 2007’s for change in GDP was 1980’s—and that’s because 1980 began a double-dip recession, the second half of which followed shortly after in 1981, and looked just like the other recessions.  Other than that, 2007 stands alone.

Here’s the cumulative monthly increase in number of jobs:

The average for all non-2007 recessions never even dipped below 0%, whereas for the 2007 recession it went negative for more than 18 months, and after four years has still only recovered to where other recessions were at 9 months.

Finally, here’s the cumulative increase in GDP per quarter:

The cumulative GDP trajectory for other post-WWII recessions is 1% per quarter.  For the 2007 recession, it’s half that.

Here is a point that can’t be emphasized enough during the general election season: The recession Obama inherited, and more importantly, presided over and extended, is the worst this country has seen since the Great Depression.

I’ll repeat: The recession that technically ended in 2009, but whose fallout we are still enduring three years later, and 75% of which Obama presided over, is uniquely cavernous, prolonged, and dreadful among all U.S. recessions of the past half-century.  Obama is nonetheless campaigning on the platform that, were it not for his $1 trillion stimulus bill, auto company bailout, health care bill, $1- and $2-trillion deficits, record federal spending, and onerous regulations (four times as many in three years as Bush in eight), the United States would be suffering an apocalypse of famine, chaos, and desperation.  Does anyone really believe things would have been that much worse if Obama hadn’t gotten his way?

For those unsure about the hypothetical impact of heavy federal government spending vs. fiscal austerity, or confused by competing Democratic vs. Republican claims about the sources of economic growth, stop and think: Isn’t the notion that recovery from the recession would have looked more like recoveries from all other post-war recessions if Obama hadn’t enacted unprecedented, unparalleled spending at least as likely as Obama’s scenario?  Isn’t the fact that Obama carried out actions unmatched in scope in U.S. history possibly capable of explaining a sluggish recovery unmatched in modern history?

Obama’s supporters in the media are right about one aspect of his presidency.  It certainly has been historic: historically ruinous for the economy.

Print This Post Print This Post

Enhanced by Zemanta

I Guess Tax Cuts Stimulate the Economy After All

July 28, 2010 By: Scott Spiegel Category: Economy

The IRS Has My Money
Image by scott*eric via Flickr

Conservatives have been pounding their fists and screaming for decades that tax cuts stimulate the economy.  With lower taxes, investors and business owners can provide more capital for new ventures and engage in more hiring, because they know less of their profits will be confiscated to pay for things like solar panels at the White House.

Tax cuts don’t revive the economy the second they’re passed—no one, not even Rick Santelli, ever said they did.  They don’t do so a few weeks later; they don’t always do so in time for the next election.  But eventually they do.

Tax cuts trim government revenue temporarily, but soon increased growth from lower tax rates results in net revenue increases.

In contrast, tax increases—which is what the impending reversal of the 2001 and 2003 Bush tax cuts would amount to—shrink the economy by decreasing hiring and investment.  Regarding the Bush tax cuts, that’d be a combined tax increase to the tune of half a trillion dollars over the next decade.  (Pop quiz: If Rhode Island and Massachusetts’ tax structures were switched, would John Kerry still take the trouble to dock his yacht in another state, even though it would cost him half a million dollars a year in taxes?)

It’s really not that complicated.

Imagine that you run a lemonade stand and make $100 profit a day, and the Obama administration taxes you at 50%, for a government revenue total of $50.

Now imagine that the incoming Christie administration slashes that rate to 20%.  Instead of worrying about paying your bills and staying afloat, and resenting the government’s punishing your entrepreneurship, you hire more workers and eventually expand to five franchises.  At $20 in taxes per stand, you are now sending twice as much revenue to the government as before.

Leftists refuse to see the economy as dynamic and capable of expansion; they view it as a fixed pot that must be redistributed from oppressors to oppressed.

The 1990s were prosperous, not because Bill Clinton was a laissez-faire capitalist extraordinaire—though he was forced into the role of pseudo-free-marketer by Republican Congressional majorities after 1994—but because of the cumulative effect of Reagan’s policies throughout the 1980s.  Reagan campaigned on the idea of permanent tax cuts across the board and enacted them while in office; they remain largely in effect to this day.  The degree of certainty, stability, and flexibility that this consistent posture afforded investors and business owners over the next two decades should not be underestimated.

Reagan steadfastly resisted the call of Congressional Democrats and some Republicans to ramp up government spending during the early 80s recession.  Under his administration, deficit as a percentage of GDP never rose above 6.0%.  By 1987 it was down to 3.2%.

In contrast, the Office of Management and Budget expects the deficit-GDP ratio to be 10.0% in 2010 under Obama, and to barely decline in 2011.

During his presidential campaign, Obama was not shy about promising to let Bush’s tax cuts expire in 2011 if elected.  When Charles Gibson asked Obama why he would support an increase in capital gains taxes, even though raising them in the 1980s decreased revenue and lowering them in the 1990s and 2000s increased revenue, Obama insisted he would do it “for purposes of fairness.”  In other words, Obama feels obligated to make rich people suffer for the sin of being productive, even if that means poor people will suffer more in the long run.

In the spring of 2009, Obama and Congressional Democrats passed their poorly designed, massively irresponsible stimulus spending bill.  Before passage, Obama warned that without the $787 (now $862) billion bill, the unemployment rate might rise to 8.0%.

When unemployment hit 10.0% in 2010, Obama’s new tagline became, “Yes, but it’s not 12 or 13, or 15.”

Democrats’ halting efforts to offer targeted tax cuts to special interest groups as part of the stimulus bill were not convincing.  Giving a tax break to a “green” company that wouldn’t survive on its own does not create the wealth that a tax break for an independent, self-sufficient, productive company would.

Now that it’s become obvious to everyone except Paul Krugman that runaway government spending does not mysteriously create wealth, Federal Reserve Chairman Ben Bernanke has been caught admitting to the House Financial Services Committee last Thursday, 18 months after the stimulus bill has had a chance to work but failed, that extending the Bush tax cuts will strengthen the economy.

Bernanke was quick to walk back his statement and claim that extending the tax cuts is just one way to stimulate the economy.  (One way that works, he did not say in so many words, but give him credit for letting the genie out of the bottle.)

Since the end of last Thursday, the Dow Jones has rallied some 200 points to 10,500, after have troughed earlier in the week at just above 10,000.

Last month Obama economic advisor Christina Romer and her husband published a paper in The American Economic Review demonstrating that tax hikes hurt economic growth.  Their article included the following takeaway: “Our estimates suggest that a tax increase of 1 percent of GDP reduces output over the next three years by nearly 3 percent.  The effect is highly significant.”

Over the weekend, Republican senators revived the idea of extending the Bush tax cuts.  Now even some Democratic senators are talking up the idea, including Evan Bayh, Kent Conrad, and Ben Nelson.

So I guess tax cuts stimulate the economy after all, according to our liberal president’s Federal Reserve chairman, his economic advisor, and multiple Democratic senators.  It used to be newsworthy when we discovered that Obama’s associates and cabinet nominees were terrorists, communists, and Maoists.  Lately the scoop seems to be that a few of his cronies, if allowed to speak freely, occasionally have some sane ideas about how to run the country.

As Featured On EzineArticles

Print This Post Print This Post

Enhanced by Zemanta