The Obama Watch

Withholding Credit

Everyone knows the president deserves no credit for the recent employment gains -- but do Republicans?

By 4.4.11

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Like a medieval "doctor" telling an ignorant patient that his recovery was due to being bled by leeches, Barack Obama's claims that our recent modest economic improvements flow from his economic policies aren't -- and shouldn't be -- fooling anyone (except perhaps reporters and other Democrats).

On Friday morning, the Department of Labor released the March employment data showing a gain in nonfarm payrolls of 216,000 jobs, and an unemployment rate of 8.8%, down 0.1% from February and down 1% since November.

N.Y. Times reporter Jackie Calmes, no partisan she, offered this hopeful analysis: "[A]s the unemployment rate ticked down, the hopes of Mr. Obama and his party ticked up: perhaps by the approaching election year they could claim vindication for the stimulus policies Democrats have enacted, or at least dodge the sort of blame that Republicans so effectively stuck them with last November in the midterm elections."

Ms. Calmes' NYT colleague Michael Powell gave a more balanced discussion, noting that although "March was the 12th consecutive month of private sector job growth… [the] numbers also offered more than a few cautionary signs that the national economy was not cured of all its ills."

Indeed job growth coming out of this recession is taking far longer and recovering much more slowly than in prior recessions, bad news for a nation that has suffered far worse job loss than at any time since the Great Depression. (See this chart from Calculated Risk Economics for a "picture worth 1000 words" representation of the data.)

Nevertheless, the Obama Administration is trying to use Friday's report to its political advantage. Indeed, Ms. Calmes' article was entitled "Job growth alters playbook for Obama and his Critics," though there is no evidence that Obama's critics or political opponents -- or even American citizens more broadly -- give Obama credit for any improvement in our economy.

And why should they? Obama famously promised, based on the report by his former chief economic advisor, Christina Romer, that if the "stimulus" were passed, unemployment would stay below 8%. Instead, it hit 10%. Furthermore, the number of unemployed Americans remained almost constant around 15 million people, and the unemployment rate fairly constant between 9.5% and 10.1% from June 2009 until (wait for it!) December. What was December? It was the first month after the election in which Republicans won back control of the House and made solid gains in the Senate, setting up a likely Republican majority in that body after the next election. And perhaps more importantly, it was the month in which that new Republican majority compelled Barack Obama to agree to extend the Bush Tax Cuts.

In other words, essentially all of the improvement in employment conditions occurred once employers knew that the Democrat radicals led by Nancy Pelosi, Harry Reid, and Barack Obama would no longer be capable of to shoving their Keynesian econo-nonsense and hyper-regulation down our throats, at least not through legislation.

But President Obama is oblivious to what the rest of the nation (except Democrats) sees. Speaking at a United Parcel Service facility on Friday (UPS is unionized while FedEx isn't…), the president warned that a government shutdown over the size of federal budget cuts would be "the height of irresponsibility" and that a shutdown would "halt our economic momentum because of the same old Washington politics."

Beyond the fact that arguing over whether to cut government spending by $30 billion or $60 billion (or even $100 billion) is hardly the same old politics, Americans recognize and the data show that the American people believe Republican plans to cut spending are good for the economy and good for business.

It's not just the backward-looking employment data that bear this out. A Rasmussen Reports poll also released Friday shows that "57% of Likely U.S. Voters think making deeper spending cuts in the federal budget for 2011 is more important than avoiding a partial government shutdown. Thirty-one percent (31%) disagree and say avoiding a shutdown is more important." Not surprisingly, 54% of Democrats want to avoid a shutdown while 76% of Republicans think deeper spending cuts are the priority. The point of the political spear, however, is the all-important unaffiliated vote, of which a remarkable 67% also prioritize spending cuts over avoiding a federal government shutdown.

Similarly, while 69% of Democrats would keep funding the government at current levels until a spending agreement can be made among members of Congress, "74% of GOP voters and 70% of unaffiliateds would rather have a shutdown until an agreement on deeper cuts can be reached."

Members of the Obama Administration are drinking their own Kool-Aid. Secretary of Labor Hilda Solis asserts that "the policies and programs of this Administration are working." Indeed they are, in the way that a leech works on a patient; the patient improves in spite of, and not because of, the treatment.

But that's just their red Kool-Aid; we can't forget about their green Kool-Aid, which was also on offer on Friday as both Obama and Solis touted the Administration's "green energy" obsession. According to the president, "But we have to keep up the momentum, and transitioning to a clean energy economy will help us do that." And according to Solis, "The growth of the clean energy economy will bring significant changes to the American workplace and require workers to acquire new and different skills." Anyone catch that "require" bit? Since when has government requiring millions of people to "acquire" skills or anything else helped do anything but swell the ranks of government bureaucrats?

If there's one thing you can count on "Progressives" for, it's to ignore the lessons of history, even very recent history, with their belief that any big-government plan that goes wrong was simply due to its not being big enough or implemented by smart enough people. Nevertheless, a few European examples of "green jobs" are instructive.

A 2009 study of the "green energy" industry in Spain -- an industry that can only survive with massive government subsidies, meaning taxes on the rest of us -- concluded that "the U.S. should expect a loss of at least 2.2 jobs on average (per "green job" created), or about 9 jobs lost for every 4 created, to which we have to add those jobs that non-subsidized investments with the same resources would have created."

Other highlights of the Spanish study:

• Since 2000 (and until the recent economic collapse), Spain spent over $800,000 for each "green job" created, including subsidies of more than $1.4 million per wind industry job.

• Each "green" megawatt installed destroys 5.28 jobs on average elsewhere in the economy; solar power has been particularly destructive.

• 90% of jobs created were temporary.

• Subsidies to green energy consumed about 3.5% of all personal income taxes collected.

In November and December, Spain announced massive cuts in solar and wind project subsidies even though a government minister recently said that Spain wants to double its renewable energy output over the next decade. It will be interesting to see whether its green Kool-Aid daydreams triumph over the economic reality. According to Bloomberg, last year, in Spain's convoluted power payment system, where existing energy producers directly fund the subsidies to renewable energy, "the power system's payment obligations exceeded its income by more than 4.6 billion euros ($6.5 billion)."

France has cut back on solar projects for the foreseeable future and Italy is slashing its efforts in both wind and solar power. South Africa is also looking to cut solar subsidies. And England is cutting the taxes on energy companies that have been used to subsidize solar projects.

Portugal, another European economic basket case, has also been on the "green energy" bandwagon. Though it has some advantage in its access to hydropower, CNN reports that "Being the third largest producer of renewable energy in Europe has meant a jump in costs -- 15 percent - to household consumers of electricity in the last 10 years."

Meanwhile the Netherlands, historically perhaps the most financially savvy European nation, is, according to press reports, "in a radical change of policy… reducing its targets for renewable energy and slashing the subsidies for wind and solar power [because] wind and solar subsidies are too expensive."

And this is where Obama thinks the economic Holy Grail lies?

The danger for the U.S. economy lies in the Administration using executive agencies like the EPA to force economic changes it knows could never pass through Congress as legislation. It may only be a danger for two more years, but with enough determined enviros and socialists in positions of power and focused on the energy sector with a pathological hatred of fossil fuels, much damage can be done before the next president is sworn in. (And if Obama wins a second term, all bets on the future of America's domestic energy production are off.)

In terms of politics, the key is not whether or not the recent uptick in employment is good news for the Obama Administration. While it is certainly better it than a growing unemployment rate, the critical point is that the Administration believes that the public will give it credit for the modestly improving situation. It is misjudging the public here just as it has with every major economic policy initiative since Obama took office.

The economy, even an improving economy, is Barack Obama's Achilles heel; his claiming otherwise can only fool people if free-market citizens, politicians, and economists let him get away with it.

Congressional Republicans must remind the voting public over and over that the recent turn for the better in job creation occurred immediately following the November election. They must repeat, early and often, the value of the extension of the Bush Tax Cuts which the Democrats, in what may turn out to be very bad strategery on their part, agreed to let expire in two years and thus become a political issue again going into the 2012 elections. Republicans must not allow Obama to take credit for employment gains when his only impact has been the economic equivalent of putting a dozen leeches on a gravely ill patient who, fortunately, got better in spite of such quackery. And We the People must make the many vulnerable Democrats in the House and Senate understand that any move by the Administration, even if through regulatory channels nominally out of their control, to "require" Americans to pay more for heating and driving will be held against them with extreme electoral prejudice. 

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About the Author
Ross Kaminsky is a self-employed trader and investor and is a senior fellow of the Heartland Institute. He is the host of The Ross Kaminsky Show on Denver's NewsRadio 850 KOA on Saturday mornings from 6 AM to 9 AM. You can reach Ross by e-mail at rossputin(at)rossputin(dot)com.