President Obama’s Grecian formula certainly won’t.
Social Security, Medicare and the retirement of the baby boom generation wasn’t enough of a burden for the American taxpayer. We will now be paying as well for the generous pensions of Greek bureaucrats retiring in the warm Mediterranean sun at age 55, thanks to the foresighted leadership of our very own international statesman, Barack Obama.
Just last year President Obama proposed, and his overwhelmingly Democrat Congress approved, an additional $100 billion line of credit from the USA to the International Monetary Fund (IMF). On Sunday, the IMF approved a contribution of $40 billion to the Greek bailout, with America voting yes for yet another raid on its own taxpayers.
But this is only the beginning. What the trillion dollar Euro bailout fund has done is to create the perverse incentives of Too Big to Fail for fiscally irresponsible Eurostates. Do those literally murderous Greek rioters look ready to accede to austerity budgets with massive tax increases and massive benefit cuts? Political leaders in the Mediterranean states in particular, faced with short-term financial and political pressures, will be too tempted to put off the pain a little longer, hoping that EU bailouts will save them in the end. Indeed, voters in Spain, Italy, Portugal, and elsewhere may well think they should get their share of those bailout funds too, voting out leaders who try to be responsible, and voting in the worst demagogues trying to take advantage of the situation to gain political power.
Imagine if each of the American states could run deficits with a federal bailout fund to back them up. Could we count on the voters of California, New York, New Jersey, Michigan, and Illinois to support candidates promising crippling austerity budgets, with draconian benefit cuts and skyrocketing taxes, so they can do the responsible thing? This is the system the EU has just adopted. What that means is get ready for still more IMF bailouts financed by American taxpayers.
Unemployment Still Rising
Yet, America is still plagued with its own problems, poised soon enough for yet another ride down the roller coaster. The unemployment report just last Friday showed unemployment rising again in April, from 9.7% to 9.9%, almost two and a half years now after the recession began in December, 2007. Since World War II, the average recession has lasted 10 months, and the longest has been 16 months. Yet, 28 months after the last recession began, unemployment is still 10% and rising.
And that is only scratching the surface. Besides the 15.3 million officially unemployed, the army of the underemployed included 9.2 million described by the Bureau of Labor Statistics as “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 marginally attached to the labor force, meaning they were not in the labor force, but “wanted and were available for work, and had looked for a job sometime in the prior 12 months.”
That leaves a total of nearly 27 million Americans still unemployed or underemployed. With a labor force of 154.7 million, that translates into a total underemployment rate of 17.4%. Moreover, of the officially unemployed, close to 50%, or 6.7 million, were long-term unemployed, meaning they had been unemployed for 27 weeks or more, the highest total since the recession began over 2 years ago, and still rising.
While President Obama and his party-controlled media ballyhooed the 290,000 new jobs created in April, 66,000 were temporary census workers. Moreover, that is still not enough new jobs created to reduce unemployment. Given the natural rate of new entrants to the work force, close to twice that many must be created each month to reduce the unemployed.
The Recovery: Hopelessly Too Little, Shamelessly Too Late
Yes, with the U.S. economy growing again, economic recovery is technically underway. But that is an inevitable, natural, cyclical recovery, as I predicted in this column over a year ago. The notion that the economy was going to tumble ever downward without some magic from Obama the Magnificent was always a fairy tale bedtime story for small children and their mental equivalents. As mentioned above, the average recession since World War II has been 10 months, and those recoveries were not due to magical Big Government rescues.
The way to evaluate the current recovery is by comparison to other recoveries after downturns of similar magnitude. Historically, the deeper the recession the stronger the snapback recovery. The Bureau of Economic Analysis reports that economic growth in the first 3 quarters after the 1981-1982 recession was 5.1%, 9.3% and 8.5%. Yet, economic growth in the first 3 quarters after this last recession was 2.2%, 5.6% and 3.2%, not even half as much.
Moreover, in 1984, real economic growth boomed by nearly 7%, the highest in 50 years. That recovery then lasted 92 months without a recession until July, 1990, when the tax increases of the 1990 budget deal killed it. This set a new record for the longest peacetime expansion ever, the previous high being 58 months. During that recovery, the economy grew by almost one-third, the equivalent of adding the entire economy of West Germany, the third largest in the world at the time, to the U.S. economy.
Real per capita disposable income grew by nearly 20% during that boom, meaning the American standard of living increased by that magnitude. Real median family income had declined by almost 10% from 1978 to 1982, with income falling by 14% for the bottom 20%. But in a stunning reversal, real median family income grew by 11% during the recovery, with incomes increasing by 12% for the bottom 20%. The poverty rate, which had started rising despite trillions spent on the war on poverty, reversed and declined every year during the recovery as well.
Note also that the 1981-1982 recession resulted because Reagan had to slay a historic inflation. Inflation roared over 1979 and 1980 by 25% (11.6% in 1979 and 13.5% in 1980), after accelerating throughout the 1970s. But Reagan backed strict monetary policies at the Fed reining in the money supply, and inflation was slashed in half by 1983 as a result to 6.2%, and by half again in 1984 to 3.2%. Every school of economic thought, from Keynesian textbooks to the most free market “Austrian” economics of Friedrich Hayek and Ludwig von Mises, preaches that ending inflation inevitably produces a period of unemployment and recession.
A man of faith in a godless age is hitting Americans where it hurts.
Mr. and Mrs. American Spectator Reader, let P.J. O’Rourke talk sense to your kids.
In Britain, defending your property can get you life.
The debacle of this president’s administration is both a cause and a symptom of the decline of American values. Unless Congress impeaches him, that decline will go on unchecked. An eminent jurist surveys the damage and assesses the chances for the recovery of our culture.
It won’t take long for conservatives to scratch this presidential wannabe off their 2008 scorecard.
The American Christmas, like the songs that celebrate it, makes room for everybody under the rainbow. Is that why so many people seem to be hostile to it?
Was the President done in by the economy, or by the politics of the economy?
H/T to National Review Online