By Peter Ferrara on 6.9.10 @ 6:09AM
As Mark Twain would have understood, he’s taking us back to the 6th century.
In a seminal speech last week at Carnegie Mellon University, President Obama gave a stunning performance of A Connecticut Yankee in King Arthur’s Court. In the novel of that name written by Mark Twain over a century ago, a 19th century American entrepreneur drawn into a barroom brawl is knocked over the head with a crowbar all the way back to the 6th century. Literally.
He awakens sprawled on an English field on June 20, 528, with an English knight pointing a lance straight at his nose. Taken prisoner and hauled off to King Arthur’s court, he is pronounced the sentence of death by burning at the stake the next day at noon, for the pleasure of the capturing knight. But the Boss, as the Yankee is called in the book, remembers that a total eclipse of the sun occurs the next day, June 21, 538, at precisely 12:03 pm. The Boss proclaims to the court that he is a great magician, and rattles his captors by threatening to blot out the sun if they try to harm him. But Merlin assures King Arthur it is an idle threat.
The next day, around noon, the Boss stood in the open courtyard of King Arthur’s castle, before the assembled multitude come to watch the spectacle, chained to a stake surrounded by kindling. The executioner raised a blazing torch, but suddenly froze, petrified. The crowd rose to its feet, gasping. The Boss recounts, in the words of Twain,
I followed their eyes; as sure as guns, there was my eclipse beginning….The rim of black spread slowly into the sun’s disk…and the assemblage stared into the sky motionless. I knew this gaze would be turned upon me, next. When it was, I was ready. I was in one of the most grand attitudes I ever struck, with my arm stretched up pointing to the sun. It was a noble effect.
A panicked King Arthur says to the Boss, “Name any terms, reverend sir, even to the halving of my kingdom; but banish this calamity, spare the sun.” As the darkness spread across the sun, the Boss demands to be named Perpetual Minister and Chief Executive of the Kingdom, sharing in a percentage of all increased revenues. The crowd and the King immediately applaud and embrace the deal.
Similarly, in his speech in Pittsburgh last week, Barack Obama said:
It has now been a little over 16 months since I took office amid one of the worst economic storms in our history. And to navigate that storm, my administration was forced to take some dramatic and unpopular steps. These steps have succeeded in breaking the freefall. We’re again moving in the right direction. An economy that was shrinking at an alarming rate when I became President has now been growing for three consecutive quarters.
Consider exactly what Obama is implying in these words. When he came into office, the economy was in “freefall,” “shrinking at an alarming rate.” It was only because of the “dramatic and unpopular steps” he took that this was stopped, and reversed. Otherwise, without Obama’s miracle Grecian formula elixir, the economy would have continued in freefall, all the way back to the stone age.
This claim is in perfect parallel to the claim by Twain’s Connecticut Yankee that he was blocking out the sun during that solar eclipse on June 21, 528, wowing the Dark Ages yahoos. The economy was never going to remain in freefall absent Obama’s miracle cure innovation of trillion dollar deficits. For centuries now, we have experienced the business cycle in market economies, where the economy goes down, and then recovers. We just don’t remember that anymore because Reaganomics was so successful that it banished the business cycle effectively for a record 25 years, with only 2 short, shallow downturns during that time. Even the official scorekeepers at the National Bureau of Economic Research (NBER) have suggested that the period be considered one continuous, unparalleled expansion.
In fact, since World War II, the U.S. economy has suffered 12 recessions, lasting an average of 10 months. NBER reports 33 business cycles since 1854. The longest during the 75 postwar years, until now, has been 16 months. But here we are today, 30 months since the latest downturn officially began in December 2007, with unemployment still stuck at nearly 10% for months now.
Last Friday’s jobs report for May shows that the agony continues, even though President Obama predicted in his Carnegie Mellon speech that “we expect to see strong job growth in Friday’s report.” Outside the government employment of 411,000 temporary Census workers, Obama’s economy 30 months after the recession began created only 20,000 net new jobs.
More than 10 times that many new jobs are needed each month just to keep unemployment from rising over the long run. The unemployment rate dipped in May only because 322,000 potential workers hopelessly fled the flagging work force. The Bureau of Labor Statistics (BLS) reports, “there were 1.1 million discouraged workers in May, up by 291,000 from a year earlier. Discouraged workers are persons not currently looking for work because they believe no jobs are available for them.”
The BLS further reported that the army of the unemployed persisted at 15 million Americans in May. Nearly 7 million remained long-term unemployed for more than 6 months, another postwar record. African Americans continued to suffer depression level unemployment under Obama at 15.5%. The teenagers who supported him have similarly been punished with continuing 26.4% unemployment. Ditto Hispanics at 12.4%.
Herbert Obama’s Great Depression
The magical economic policies of Obama the Magnificent have served only to delay and slow recovery. Given the severity of the recession, the recovery should exhibit booming growth for at least the first year. But the three quarters of growth President Obama touted have displayed less than half the growth in the first three quarters of the 1983 recovery, from the last recession of similar magnitude. Obama’s three growth quarters came after 18 months of decline, which would be a postwar record recession in itself. But in an April, 2010 statement, the NBER concluded that it cannot yet identify the end of the recession.
President Obama’s $1.6 trillion deficit for this year, following his $1.4 trillion deficit for last year, has been sucking the capital investment needed to create jobs and economic growth right out of the economy into runaway government spending and government employment. In fact, total gross federal borrowing this year and last is much higher. This and the threatening prospect of what lies ahead is what has delayed and slowed recovery so seriously so far.
Now it appears that Obama’s policies, hearkening all the way back to FDR’s 1930s, may be leading us into another Great Depression, in fact. The economy is wobbling now potentially into another downturn because of the specter of President Obama’s sweeping, across the board tax increases set to go into effect next year, raising virtually every tax Federal tax rate, echoed by pending and actual state and local tax increases. On top of that he is feverishly adding to regulatory cost burdens. In his Carnegie Mellon speech, he perversely proclaimed he would lead us into renewed economic growth and prosperity by dumping another multitrillion dollar cost on the economy through his cap and trade tax.
As Art Laffer predicted in Monday’s Wall Street Journal, “When we pass the tax boundary of Jan. 1, 2011, my best guess is that the train goes off the tracks and we get our worst nightmare of a severe ‘double dip’ recession.” Laffer recounts how the delay in Reagan’s tax cuts to 1983 delayed that recovery, but once they became effective the economy skyrocketed into a 25-year boom. He explains the lesson for today:
Reagan’s delayed tax cuts were the mirror image of President Barack Obama’s delayed tax rate increases. For 1981 and 1982 people deferred so much economic activity that real GDP was basically flat (i.e., no growth), and the unemployment rate rose to well over 10%. But at the tax boundary of Jan. 1, 1983 the economy took off like a rocket, with average real growth reaching 7.5% in 1983, and 5.5% in 1984. It has always amazed me how tax cuts don’t work until they take effect. Mr. Obama’s experience with deferred tax rate increases will be the reverse. The economy will collapse in 2011.
As this analysis implies, the prospect of sweeping, across the board, tax rate increases next year is actually boosting the economy this year, as people scramble to earn what they can before Obama closes the barn door. That is why as bad as the economy is right now, this for the next 6 months is the best the Obama economy is going to get.
This is why the stock market is dropping again now, with the Dow never returning anywhere near its previous peak over 14,000. The stock market looks 6 months ahead, and what it sees is Obama’s tax massacre, and other foolishly counterproductive policies. Many have been playing the market for the short term natural business cycle recovery, before the effects of President Obama’s anti-growth, neo-socialist policies kick in. But there is no longer enough upside in the economy and the market to make that game worthwhile. That is why the capital flight is beginning now.
And how much further will the already record shattering deficit of $1.6 trillion soar with renewed economic downturn? How much longer will it be before Greece comes to these shores, and the bond markets refuse to lend us vast chunks of the world’s resources to finance President Obama’s further exploding budgets and deficits?
War Through Weakness
Reagan brought us Peace Through Strength, winning the Cold War without firing a shot. Now President Obama, so comprehensively pursuing the opposite of every Reagan policy, is bringing us war through weakness, quite possibly as early as this summer, just as FDR’s liberals and the isolationists of the 1930s ultimately did. This would complete President Obama’s total eclipse of America.
Already North Korea has attacked South Korea, our ally America is pledged to defend, with American troops still stationed there. The non-response to North Korea’s traditional act of war in sinking a South Korean naval vessel is communicating fear of military conflict to our adversaries worldwide.
President Obama’s distancing of America from Israel is now further encouraging Israel’s murderous enemies to attack while the opportunity apparently beckons. President Obama has been withdrawing American naval fleets from around the world, including the eastern Mediterranean, because he thinks such a show of naval force is “provocative.” He will soon learn how provocative the withdrawal of such naval force can be.
Turkey is joining Iran in promising still more peace flotillas to run Israel’s well-justified blockade of Gaza, perhaps armed with Iran Revolutionary Guard forces. That blockade was adopted to stop the elected Hamas government from continuing to launch hundreds of rockets at civilian targets in Israel, another traditional act of war. The blockade has proved successful in depriving Hamas of further missile supplies to continue their attacks. Egypt has joined in enforcing that blockade because the Hamas militants threaten that country as well. But instead of firmly backing our ally Israel in this legitimate act of self-defense, President Obama has equivocated, inviting expanded military conflict with such weakness.
America’s fiscal and economic disarray further projects inviting weakness. For where is America going to get the money to fight any significant conflict? Borrow still more from the Chinese? Will they really lend us money to fight their client states of Iran or North Korea?
Meanwhile, the Iranian Islamist extremists race to the final acquisition of nuclear weapons, with no meaningful counter from the Obama Administration, sharply focused on what it sees as the real threat to America: the Republicans. What horrors for Israel, and America, will such nuclear weapons in the hands of genocidal suicide bombers bring? Is this already emboldening Iran to attack Israel?
The American people already seem to be waking up to the grave mistake of President Obama. But will the American revival come soon enough to prevent the New Left from leaving permanent scars on the beautiful face of my country? That is becoming doubtful.
Peter Ferrara is Director of Entitlement and Budget Policy at the Heartland Institute, General Counsel of the American Civil Rights Union, Senior Fellow at the National Center for Policy Analysis, and Senior Policy Advisor on Entitlements and Budget Policy at the National Tax Limitation Foundation. He served in the White House Office of Policy Development under President Reagan, and as Associate Deputy Attorney General of the United States under President George H.W. Bush.
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