Tag: jobs

Heckuva Job on that Stimulus!

Based on this morning’s numbers, I’ve updated my chart showing what the Obama Administration said would happen with the so-called stimulus compared to what actually has happened. As you can see, the unemployment rate is about 2.5 percentage points higher than the White House claimed it would be at this point.

Since I just did an I-told-you-so post about Greece, I may as well pat myself on the back again (albeit for another completely obvious prediction). Here’s the video I narrated a couple of years ago on the Obama faux stimulus.

New Job Numbers

The Labor Department released its latest job numbers today and they remind me of Clint Eastwood’s 1966 classic, The Good, the Bad, and the Ugly.

The good news is that the economy created 244,000 new jobs, the biggest gain in almost a year. And the jobs were in the productive sector of the economy rather than government, so the added employment means more taxpayers rather than more tax-consumers.

The bad news is that the jobless rate increased to 9.0 percent, up from 8.8 percent last month. This means that the number of people looking for work is increasing at a faster rate than the number of jobs being created.

The ugly news, at least from the perspective of the Obama administration, is that the latest data is yet another piece of evidence that the White House was grossly mistaken when it claimed that bigger government would translate into better economic performance.

The blue line in the chart below shows the administration’s prediction of what would happen to unemployment if the so-called stimulus was enacted. The dots represent the actual unemployment rate.

As you can see, the unemployment rate is easily more than two percentage points higher than the White House said it would be at this time.

Administration apologists respond by moving the goal posts, asserting that the original prediction underestimated the economy’s weakness and the unemployment data would have been even worse in the absence of all the spending.

Since economists are lousy at predicting the future, that’s a legitimate argument.

But is it an accurate argument? Since there’s no parallel universe where we can conduct policy experiments, there’s no way of proving which side is wrong. Nonetheless, this chart from the Minneapolis Federal Reserve Bank is rather revealing. It compares employment numbers after the deep recession of the early 1980s with the employment numbers from the recent deep recession.

Perhaps I’m biased and reading this chart incorrectly, but it certainly seems as if Reaganomics generated better results than Obamanomics. Maybe it’s time to realize that government is the problem, not the solution?

Deloitte Survey: Concerns about Government

A Deloitte Growth Enterprise Services survey of 527 executives at mid-market companies (annual revenues of between $50 million and $1 billion) found “tempered optimism” that the economic recovery will continue. However, the survey also found significant concern over government fiscal and regulatory policies.

A whopping 50 percent cited federal, state, and local debt as the greatest obstacle to U.S. growth in the coming year. Lack of consumer confidence (39 percent) and rising health care costs (33 percent) came in second and third. Lest anyone construe the executives’ concern about government debt as implied support for tax increases, high tax rates came in fourth at 30 percent. Government austerity, which can include tax increases, and infrastructure needs came in at 15 and 9 percent, respectively.

When asked to choose up to three items that represent their company’s main obstacle to growth, only 21 percent cited government budget cuts. I’m frankly surprised that the figure isn’t higher considering that a number of these companies probably “do business” with government. Increased regulatory compliance was only a tick higher at 22 percent. Health care costs came in third at 30 percent, and uncertain economic outlook was first at 41 percent. I would pin that uncertainty on government policies. It is likely that a substantial number of the respondents would agree given other survey results.

Reducing corporate tax rates (33 percent) was the clear winner when the executives were asked to choose up to two measures by the U.S. government that would most help mid-size businesses grow in the next year. Keeping interest rates low (32 percent) was close behind, followed by rolling back health care reform (23 percent). Keynesian measures that are popular in the White House, supporting increased infrastructure investment and stimulating private consumption, came in at 19 percent and 14 percent, respectively.

Finally, many, if not the majority, of respondents expect regulatory costs to increase next year, particularly in the area of health care reform. Respondents expect the president’s Affordable Care Act to sharply increase costs (33 percent) or slightly increase costs (33 percent). A majority (56 percent) expect tax compliance costs to increase. A near majority (49 percent) expect both economic and occupational health & safety regulatory costs to increase.

In sum, the good news is that optimism is on the rise in the business community. The bad news is that the heavy hand of government is still a dark cloud hovering over the recovery.

Correction: Charles Mahtesian at Politico Did NOT Agree with Chris Matthews

In my recent Wall Street Journal article, “The Myth of Corporate Cash Hoarding,” I quoted Chris Matthews of MSNBC’s Hardball asking Politico’s Charles Mahtesian an apoplectic question about businesses “sitting on their money” just to keep the economy weak and hurt Obama’s reelection chance in 2012.   Then I carelessly added an erroneous superfluity −writing that “Mr. Mahtesian concurred.”

My apologies to Charles Mahtesian (and congratulations for having had the good sense to disagree with Chris Matthews).

In reality, Mahtesian wisely dodged Chris Matthews’ bizarre interrogation about corporations willfully refusing to spend idle cash until after 2012 election.  Mahtesian instead switched to talking about business going “whole hog” during the 2010 congressional election (this show aired September 27).

Here is the transcript:

MATTHEWS:  You know, a great question, Charles, that wasn‘t on my list to ask, but I‘m going to ask you because you seem like a sophisticated guy of many parts.  Do you think business can sit on those billions and trillions of dollars for two more years after they screw Obama this time?  Are they going to keep sitting on their money so they don’t invest and help the economy for two long years just to get Mr. Excitement, Mitt Romney, elected president?  Would they do that to the country?

MAHTESIAN:  Well, I won’t touch the first question, Chris, but…

MATTHEWS:  That was all one question, bro!

MAHTESIAN:  Oh!  I prefer splitting the two.  I’d say that I think what you’re going to see the business community do is really go whole hog at this election right now because either way, you know, I think they can envision a scenario in which they lose … because, for example, number one, if the president has a Republican House, that’s probably going to be a rough scenario for them anyway because that’s what the White House wants if they want to get elected in 2012 — re-elected.  So, probably the best-case scenario for them.

MATTHEWS:  Yes.

MAHTESIAN:  So you know, either way, I mean, I think they — they weigh the equities, and you know, see it as a 50-50 endeavor.

MATTHEWS:  Anyway, I just hope business starts spending.

Spending Still Increases with GOP Cuts

House Republicans engineered a continuing resolution for fiscal 2011 that would trim $61 billion in “regular” discretionary budget authority versus fiscal 2010. The Obama administration and the Democratic majority in the Senate balked at the cuts, and a two-week continuing resolution will be passed in order to avoid a “government shutdown” and give the sides more time to reach an agreement.

Based on the Congressional Budget Office’s score of the continuing resolution containing $61 billion in funding cuts, and the CBO’s recent budget projections, both discretionary and total federal outlays (actual spending) would still be higher in fiscal 2011 versus fiscal 2010.

Keep these charts in mind the next time you hear or read that the Republicans’ supposedly “major spending cuts” will lead to reduced economic growth and hundreds of thousands of jobs lost.

Stimulus Spending Testimony

I testified today to a a subcommittee of the House Oversight and Government Reform Committee looking at the effects of the 2009 stimulus bill (the “American Recovery and Reinvestment Act”).

Some of the discussion regarded the continuing claims by stimulus supporters that the $800 billion bill created millions of jobs. To most people, such a claim now seems laughable–unemployment is still very high two years later and the recovery from the recession is very sluggish compared to prior recessions.

Also testifying was Stanford economist John Taylor, who offered a view on why economists using Keynesian models are still claiming success for the ARRA bill:

“Why do some argue that ARRA has been more effective than the facts presented here indicate? Many evaluations of the impact of ARRA use economic models in which the answers are built-in, and were built-in before the stimulus package was enacted. The same economic models that said, two years ago, that the impact would be large now show that the impact is in fact large.”

Taylor’s testimony looks at the actual effects of the stimulus in the national income accounts data, rather using an assumption-filled model. Taylor concludes:

“In sum, the data presented here indicate that the American Recovery and Reinvestment Act was not effective in stimulating the economy … Currently, the increased debt caused by ARRA—both directly through its deficit financing and indirectly through its de-emphasis on controlling spending—is likely a drag on economic growth.”

Thanks to Tyler Grimm and the committee team for organizing the hearing. It’s important to explore the costly failures of such big spending programs as ARRA because the next time the economy goes into a downcycle the Keynesians, sadly, will be back to Capitol Hill pushing their expensive solutions and further bankrupting the nation.

Topics:

Fixing the Economy Demands More Than a Stroll across Lafayette Park

President Obama’s visit with the Chamber of Commerce this week has infuriated the anti-business Left.  But short of expropriation and nationalization, what doesn’t? 

Robert Reich and NPR and the scribes at the Huffington Post just don’t get it.  Their man may be in the White House, but business holds the keys to the kingdom.  Whether the president’s priority is job creation or reelection, nothing matters more than sustained economic growth. And without business having confidence that policy in the United States will become more hospitable and predictable, investment and job creation will remain tepid.

The president doesn’t have nearly the leverage assumed in the delusions of groups like Public Citizen, which wrote: “What America needs is not olive branches to giant corporations but controls over the companies that sank the economy.”  Back here in reality, businesses have options.  Many can choose to produce and operate in other countries, where the economic environment may be more favorable.  In that regard, globalization has produced a veritable Galt’s Gulch, which serves as an important check on bad economic policy.  Governments are now competing with each other to attract the financial, physical, and human capital necessary to nourish high value-added, innovation-driven, 21st century economies.  Gratuitously punitive anti-business policies will only chase away the companies that the president exhorts to invest and hire.

According to a survey of 13,000 business executives worldwide, conducted by the World Economic Forum, 52 countries have less burdensome regulations than the United States.  Add to that the fact that the United States has the highest corporate tax rate among all OECD countries and it becomes less mysterious why U.S. businesses shift more operations abroad.

As I wrote in a December 2009 Cato paper:

Governments are competing for investment and talent, which both tend to flow to jurisdictions where the rule of law is clear and abided; where there is greater certainty to the business and political climate; where the specter of asset expropriation is negligible; where physical and administrative infrastructure is in good shape; where the local work force is productive; where there are limited physical, political, and administrative frictions.

This global competition in policy is a positive development.  But we are kidding ourselves if we think that we don’t have to compete and earn our share with good policies.  The decisions we make now with respect to our policies on immigration, education, energy, trade, entitlements, taxes, and the role of government in managing the economy will determine the health, competitiveness, and relative significance of the U.S. economy in the decades ahead.

The president is beginning to get it – though grudgingly.  He acknowledges the burdens of excessive and superfluous regulations and bureaucracy (remember his SOTU story about the jurisdictions entangled in the salmon’s journey from salt water to fresh water to the smoker?).  The president has hinted that he would like to see the corporate tax rate lowered.  He knows that businesses have options to invest, produce, and hire abroad—and that oftentimes U.S. policy chases them there.  But, so far, rather than push policies to encourage domestic investment, production, and hiring, the president has done the opposite, while demonizing businesses that follow the incentives to go abroad.

The president’s position during his exchange at the Chamber of Commerce was that he has made concessions to business by moving toward the center on tax and trade policy, and that now it is time for business to show good faith by investing and hiring.  But Obama’s small steps toward the center come after two years of sprinting to the left on economic policy.  After ObamaCare, Dodd-Frank, taxpayer bailouts, unorthodox and legally-questionable bankruptcy procedures, subsidies for select industries, Buy American and other regulations governing how and with whom “stimulus” dollars could be spent, and the administration’s tightening embrace of industrial policy, businesses want a more quiet, less intrusive, less antagonistic, predictable policy environment before they will feel comfortable playing the role Obama wants them to play.

Until that happens, the president shouldn’t expect torrents of investment and hiring from the business community.