The situation is worse than even harsh critics expected.
In February 2009, I published a commentary in the Wall Street Journal entitled “Reaganomics v. Obamanomics,” which pointed out that President Obama’s economic policies were exactly the opposite of President Reagan’s. I predicted that as a result they would produce exactly the opposite results. Art Laffer has produced a far more sophisticated argument advancing a similar analysis.
But the June unemployment report released last Friday shows an economy doing much worse at this point than even I expected. More than 30 months after the official start of the recession, the economy is still losing jobs, with non-farm payroll employment declining by 125,000 jobs in June. A total of 652,000 workers fled the workforce in June, and therefore were no longer counted as unemployed, which is why the unemployment rate fell from 9.7% to 9.5%. That follows 322,000 who dropped out of the workforce in May, for a total of nearly a million workers dropping out of the labor force in the last two months alone. If those million workers had remained in the workforce looking for work, the unemployment rate would be 10.1%.
Moreover, average hours worked per week dropped for all workers, as did average hourly earnings.
President Obama’s Fairy Tale Bedtime Story
But there was President Obama in a highly revealing speech on June 30 in Racine, Wisconsin, congratulating himself for having saved America from another Great Depression. He said, “Now every economist who has looked at it has said that the Recovery Act [stimulus bill] did its job,” starting a passage that will soon be memorialized as another chapter in Aesop’s Fables. As Obama said those words, on the very same day in the Wall Street Journal was a commentary by Allan Meltzer, Professor of Economics at Carnegie Mellon University, entitled, “Why Obamanomics Has Failed.” Maybe Obama just hadn’t read the Journal yet that day.
But Obama continued in Racine, “[The stimulus bill] put a brake on the collapse of the economy. We avoided a Great Depression. We are now growing again.” (Emphasis added.)
Instead of avoiding a Great Depression, however, President Obama is leading us into one. The National Bureau of Economic Research (NBER) scores the recession as officially starting in December, 2007. Now 31 months later, with unemployment still near 10% and the work force still declining, NBER says it still cannot determine an official end to the recession. The longest recession since World War II previously has been 16 months, with the average being 10 months. By next month, the period since the last recession started will be twice as long as the previous postwar recession record.
Yet, now we hear talk of another, double dip, downturn, reflected in the newly declining markets, where the S&P 500 is now lower than the price of gold for the first time in history. The comprehensive Obama tax rate increases scheduled for next year stand poised to pour napalm on this developing bonfire. For all the talk of how uncertainty is hurting the economy, the certainty of those tax rate increases once they become effective will be far worse.
A renewed, double dip, downturn, 31 months after the recession started and with unemployment already near 10%, would be a depression scenario, far worse than I have been predicting here and elsewhere for over a year now. While I have discovered from my sojourns on “progressive” talk radio (“progressive” is a polite word for socialist) that the Left is now denying history. For hundreds of years Western economies have been plagued by the business cycle, with the economy falling into downturns, and then naturally recovering. Since 1945, there have been 12 such downturns in the U.S., with the economy recovering sans Obama pixie dust within 16 months at the longest.
By this standard, the recovery was overdue a year ago. Moreover, the sharper the downturn, the stronger the recovery. But compared to the last downturn of similar magnitude, the 1981-1982 recession, the renewed economic growth today President Obama has been so vigorously trumpeting has been less than half what it should be. The positive economic results Obama can and does point to are way too little, way too late.
Two Christmases ago, I feared that by now Obama and his socialist policies would be riding the wave of inevitable recovery, before his policies crashed the economy in what I later called The Coming Crash of 2011. But politically as well as economically, it is all disintegrating faster even than during the Carter Administration, where 1978 was a hopeful year for conservatives that mostly didn’t pan out. President Obama is on the same trajectory as President Carter, times some multiplier of Keynesian foolishness.
With the most productive now scrambling to produce as much as they can before next year’s sweeping tax rate hikes, the double dip will probably be delayed until 2011. I privately told some major political players at the beginning of this year that the unemployment rate in November would be 9%. That may turn out to be right on the money. But if the unemployment rate does turn north again before then, which can well happen just from workers returning to the labor force to search for work, you can turn out the lights for the Democrat party.
The stock market, which tends to look 6 months ahead, seems to be predicting that Coming Crash of 2011. There is not enough upside compared to the double dip downside to be playing the stock market now even for short-term gains. That will change, however, the moment the market comes to believe in the regime change scenario. The great 1990s stock market boom began on Election Day, 1994.
The Perversity of Obamanomics
Over and over in Racine, Wisconsin, last week, President Obama made clear that he thinks it is government spending that creates economic growth. Besides touting the brilliance of his stimulus spending, and the growth opportunity in government subsidies for home weatherization, he said:
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?