Welcome to the worst economic recovery since the Great Depression.
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The Reagan recovery blossomed into a 25-year economic boom, from 1982 to 2007, which Art Laffer and Stephen Moore called in their book The End of Prosperity, “the greatest period of wealth creation in the history of the planet.” In the first 7 years alone, 20 million new jobs were created, which grew into 50 million new jobs over the entire boom.
In contrast, as the Wall Street Journal reported on May 5-6, “Nearly three years into the [Obama] recovery, the U.S. still employs five million fewer workers than before the recession.”
When Reagan entered office, the first thing he did was lead Congress to enact the initially much-derided “Reagan budget cuts,” which have now been dumped down the Left’s memory hole. Federal spending was cut by nearly 5 percent. In sharp contrast, the first thing Obama did upon taking office was pass his nearly $1 trillion so-called stimulus bill.
At best, that stimulus did nothing to promote growth, because borrowing a trillion dollars out of the economy to increase government spending by a trillion dollars does nothing to enhance the economy on net. But Norquist and Lott argue that “The Stimulus made things worse.” Indeed, Lott published an article at FoxNews.com on February 3, 2009, predicting, “President Obama and the Democrats’ ‘stimulus’ package will increase the unemployment rate,” contrary to the administration’s prediction that unemployment would stop rising once the stimulus was passed. Lott proved more prescient than the entire administration’s army of hired economists.
Norquist and Lott report, “Business economists and forecasters had consistently been expecting the economy to begin positive growth in the second half of 2009. But passing the Stimulus appeared to dampen the recovery economists were anticipating…. Paul Evans, the editor of the Journal of Money, Credit and Banking and an economics professor at Ohio State University, agrees, and told us: ‘Most likely the economic recovery would have been more rapid at this point without [the Stimulus package].’”
Norquist and Lott note that Wall Street Journal-surveyed forecasters cut their growth expectations in half by May, after the stimulus passed, from January, before the stimulus passed.
Norquist and Lott explain why the stimulus spending was counterproductive: “The resources the government spends have to come out of someone else’s pocket. Spending almost a trillion dollars on various stimulus projects means moving a lot of resources from the private sector, eliminating the jobs many people currently have.” This shift from market-directed employment to government-directed employment causes dislocation, as workers shift from one job to another, which is a net drag on the economy.
On top of that, the government-created jobs are likely to be temporary and fewer than the number of jobs destroyed elsewhere. The simple reason is that many of these new jobs are artificial and will only exist as long as the government continues heavy subsidies…. Obama’s Council of Economic Advisors wrongly assumes that all of the Stimulus jobs are filled by the unemployed. But that is clearly wrong. Indeed, most of those getting the new [stimulus funded] jobs already had a job to begin with…. Whatever jobs might have been created, they did not come cheap….Accepting the Administration’s most optimistic 3.6 million number, it cost $200,000 per job. And if the survey of recipients is right, the cost per job created soars to over a million dollars…. In many cases, the money was just wasted completely. For instance, at Solyndra, the scandal-plagued solar energy company that got $535 million from the federal government, what had originally been counted as long term jobs soon disappeared when the company went bankrupt and took the half billion government loan guarantee with it.
The bottom line is that what drives economic growth and recovery is not government spending, as the Obama administration’s Keynesian throwbacks imagine. What drives economic growth and recovery is incentives for increased production. That is what Reagan proved, first by cutting taxes 25 percent across the board, and then by cutting the top tax rate from 70 percent, where it was when he entered office, to 28 percent, and slashing the rate for middle income earners to just 15 percent. Cuts in tax rates, not just tax cuts, enhance incentives, because producers can then keep more of what they create.
What most people do not know is that, just the opposite, Obama has already led the enactment in current law, for next year, of increases in the top tax rates of virtually every major federal tax. That is because the Obamacare tax increases go into effect, and the Bush tax cuts will expire, as Obama refuses to renew them for the nation’s small businesses, job creators, and investors. This is on top of the U.S. corporate income tax burden, which under Obama is already the highest in the industrialized world at nearly 40 percent on average, counting state corporate taxes. Yet, under Obama there is no relief in sight. Instead, he has spent the past year and a half barnstorming the country calling for still more tax increases.
These pending tax rate increases help explain why so much money is sitting on the sidelines in a capital strike, or fleeing overseas in a capital flight, like in a third-world country. And that missing investment helps explain why there are no jobs.
Obama is also following the exact opposite of Reagan’s policies by vastly expanding rather than reducing regulatory costs, supporting a record amount of easy money at the Fed, and restricting rather than maximizing American energy production. If Obama’s policies are not quickly reversed, the result without a doubt will be another whopping recession next year.
But the decline and fall of America is not inevitable. The economy is poised to boom again, at all-time records of capitalist prosperity, if the American people will only free it this fall from the socialism of Obamanomics.
The Real Obama
John Lott speaks from direct personal experience with the real Obama during the days when they were both junior professors at the University of Chicago. Lott relates these personal interactions in the book, saying,
When I was first introduced to Obama, he said, “Oh, you’re the gun guy.” I responded, “Yes, I guess so.” “I don’t believe that people should be able to own guns,” Obama replied. I then suggested that it might be fun to have lunch and talk about that statement sometime. He simply grimaced and turned away, ending the conversation. That was the way that numerous interactions with Obama went…. It was very clear that Obama disagreed on the gun issue and acted as if he believed that people who he disagreed with were not just wrong, but evil. Unlike other liberal academics who usually enjoyed discussing opposing ideas, Obama simply showed disdain.”
This ideological rigidity and extremism are what people paying attention to Obama as President should have expected.
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?