Tag: unemployment

Another Month of Data Re-Confirms Obama’s Horrible Record on Jobs

Remember back in 2009, when President Obama and his team told us that we needed to spend $800 billion on a so-called stimulus package?

The crowd in Washington was quite confident that Keynesian spending was going to save the day, even though similar efforts had failed for Hoover and Roosevelt in the 1930s, for Japan in the 1990s, and for Bush in 2008.

Nonetheless, we were assured that the stimulus was needed to keep unemployment from rising above 8 percent.

Well, that claim has turned out to be hollow. Not that we needed additional evidence, but the new numbers from the Labor Department re-confirm that the White House prediction was wildly inaccurate. The 8.2 percent unemployment rate is 2.5 percentage points above the administration’s prediction.

Defenders of the Obama administration sometimes respond by saying that the downturn was more serious than anyone predicted. That’s a legitimate point, so I don’t put too much blame on the White House for the initial spike in joblessness.

But I do blame them for the fact that the labor market has remained weak for such a long time. The chart below, which I generated this morning using the Minneapolis Fed’s interactive website, shows employment data for all the post-World War II recessions. The current business cycle is the red line. As you can see, some recessions were deeper in the beginning and some were milder. But the one thing that is unambiguous is that we’ve never had a jobs recovery as anemic as the one we’re experiencing now.

Job creation has been extraordinarily weak. Indeed, the current 8.2 percent unemployment rate understates the bad news because it doesn’t capture all the people who have given up and dropped out of the labor force.

By the way, I don’t think the so-called stimulus is the main cause of today’s poor employment data. Rather, the vast majority of that money was simply wasted.

Today’s weak job market is affected by factors such as the threat of higher taxes in 2013 (when the 2001 and 2003 tax cuts are scheduled to expire), the costly impact of Obamacare, and the harsh regulatory environment. This cartoon shows, in an amusing fashion, the effect these policies have on entrepreneurs and investors.

Postscript: Click on this link if you want to compare Obamanomics and Reaganomics. The difference is astounding.

Post-postscript: The president will probably continue to blame “headwinds” for the dismal job numbers, so this cartoon is definitely worth sharing.

Post-post-postscript: Since I’m sharing cartoons, I can’t resist recycling this classic about Keynesian stimulus.

More Sub-Par Employment Numbers

The Labor Department just released its monthly employment report and the White House is probably not happy.

There are several key bits of data in the report, such as the unemployment rate, net job creation, and employment-population ratio.

At best, the results are mediocre. The unemployment rate generally gets the most attention, and that was bad news since the joblessness rate jumped to 8.2 percent.

What makes that number particularly painful is that the Obama Administration claimed that the unemployment rate today would be less than 6 percent if the so-called stimulus was adopted. But as you can see from the chart, squandering $800 billion on a Keynesian package hasn’t worked.

While that chart is probably embarrassing to the White House, I think the most revealing numbers come from the Minneapolis Federal Reserve Bank’s interactive website, which allows users to compare employment data and GDP data for different business cycles.

I looked at those numbers a couple of months ago, so I could compare Reaganomics and Obamanomics, and the difference is startling. The Reagan policies of lower tax rates, spending restraint, deregulation, and tight money generated much better results than the statist policies of Obama.

The most recent numbers, shown below, aren’t any better for the Obama Administration.

But I suppose the good news is that the United States is not Europe. Government is even bigger on the other side of the Atlantic and many of those nations are in the middle of a fiscal crisis and the unemployment rate averages 11 percent.

Sort of makes you wonder whether there’s a lesson to be learned. Maybe, just maybe, bigger government means weaker economic performance.

One Year Later, Another Look at Obamanomics vs. Reaganomics

On this day last year, I posted two charts that I developed using the Minneapolis Federal Reserve Bank’s interactive website.

Those two charts showed that the current recovery was very weak compared to the boom of the early 1980s.

But perhaps that was an unfair comparison. Maybe the Reagan recovery started strong and then hit a wall. Or maybe the Obama recovery was the economic equivalent of a late bloomer.

So let’s look at the same charts, but add an extra year of data. Does it make a difference?

Meh… not so much.

Let’s start with the GDP data. The comparison is striking. Under Reagan’s policies, the economy skyrocketed.  Heck, the chart prepared by the Minneapolis Fed doesn’t even go high enough to show how well the economy performed during the 1980s.

Under Obama’s policies, by contrast, we’ve just barely gotten back to where we were when the recession began. Unlike past recessions, we haven’t enjoyed a strong bounce. And this means we haven’t recovered the output that was lost during the downturn.

This is a damning indictment of Obamanomics

Indeed, I made this point several months ago when analyzing some work by Nobel laureate Robert Lucas. And it’s been highlighted more recently by James Pethokoukis of the American Enterprise Institute and the news pages of the Wall Street Journal.

Unfortunately, the jobs chart is probably even more discouraging. As you can see, employment is still far below where it started.

This is in stark contrast to the jobs boom during the Reagan years.

So what does this mean? How do we measure the human cost of the foregone growth and jobs that haven’t been created?

Writing in today’s Wall Street Journal, former Senator Phil Gramm and budgetary expert Mike Solon compare the current recovery to the post-war average as well as to what happened under Reagan.

If in this “recovery” our economy had grown and generated jobs at the average rate achieved following the 10 previous postwar recessions, GDP per person would be $4,528 higher and 13.7 million more Americans would be working today. …President Ronald Reagan’s policies ignited a recovery so powerful that if it were being repeated today, real per capita GDP would be $5,694 higher than it is now—an extra $22,776 for a family of four. Some 16.9 million more Americans would have jobs.

By the way, the Gramm-Solon column also addresses the argument that this recovery is anemic because the downturn was caused by a financial crisis. That’s certainly a reasonable argument, but they point out that Reagan had to deal with the damage caused by high inflation, which certainly wreaked havoc with parts of the financial system. They also compare today’s weak recovery to the boom that followed the financial crisis of 1907.

But I want to make a different point. As I’ve written before, Obama is not responsible for the current downturn. Yes, he was a Senator and he was part of the bipartisan consensus for easy money, Fannie/Freddie subsidies, bailout-fueled moral hazard, and a playing field tilted in favor of debt, but his share of the blame wouldn’t even merit an asterisk.

My problem with Obama is that he hasn’t fixed any of the problems. Instead, he has kept in place all of the bad policies - and in some cases made them worse. Indeed, I challenge anyone to identify a meaningful difference between the economic policy of Obama and the economic policy of Bush.

  • Bush increased government spending. Obama has been increasing government spending.
  • Bush adopted Keynesian “stimulus” policies. Obama adopted Keynesian “stimulus” policies.
  • Bush bailed out politically connected companies. Obama has been bailing out politically connected companies.
  • Bush supported the Fed’s easy-money policy. Obama has been supporting the Fed’s easy-money policy.
  • Bush created a new health care entitlement. Obama created a new health care entitlement.
  • Bush imposed costly new regulations on the financial sector. Obama imposed costly new regulations on the financial sector.

I could continue, but you probably get the  point. On economic issues, the only real difference is that Bush cut taxes and Obama is in favor of higher taxes. Though even that difference is somewhat overblown since Obama’s tax policies - up to this point - haven’t had a big impact on the overall tax burden (though that could change if his plans for higher tax rates ever go into effect).

This is why I always tell people not to pay attention to party labels. Bigger government doesn’t work, regardless of whether a politician is a Republican or Democrat. The problem isn’t Obamanomics, it’s Bushobamanomics. But since that’s a bit awkward, let’s just call it statism.

We’ve Had Enough Government ‘Stimulation’

After three years and $4 trillion in combined deficit spending, unemployment remains stubbornly high and the economy sluggish. That people are still asking what the government can do to stimulate the economy is mind-boggling.

That the Keynesian-inspired deficit spending binge did create jobs isn’t in question. The real question is whether it created any net jobs after all the negative effects of the spending and debt are taken into account. How many private-sector jobs were lost or not created in the first place because of the resources diverted to the government for its job creation? How many jobs are being lost or not created because of increased uncertainty in the business community over future tax increases and other detrimental government policies?

Don’t expect the disciples of interventionist government to attempt an answer to those questions any time soon. It has simply become gospel in some quarters that massive deficit spending is necessary to get the economy back on its feet.

The idea that government spending can “make up for” a slow-down in private economic activity has already been discredited by the historical record—including the Great Depression and Japan’s recent “lost decade.”

Our own history offers evidence that reducing the government’s footprint on the private sector is the better way to get the economy going.

Take for example, the “Not-So-Great Depression” of 1920-21. Cato Institute scholar Jim Powell notes that President Warren G. Harding inherited from his predecessor Woodrow Wilson “a post-World War I depression that was almost as severe, from peak to trough, as the Great Contraction from 1929 to 1933 that FDR would later inherit.” Instead of resorting to deficit spending to “stimulate” the economy, taxes and government spending were cut. The economy took off.

Similarly, fears at the end of World War II that demobilization would result in double-digit unemployment when the troops returned home were unrealized. Instead, spending was dramatically reduced, economic controls were lifted, and the returning troops were successfully reintegrated into the economy.

Therefore, the focus of policymakers in Washington should be on fostering long-term economic growth instead of futilely trying to jump-start the economy with costly short-term government spending sprees. In order to reignite economic growth and job creation, the federal government should enact dramatic cuts in government spending, eliminate burdensome regulations, and scuttle restrictions on foreign trade.

The budgetary reality is that policymakers today have no choice but to drastically reduce spending if we are to head off the looming fiscal train wreck. Stimulus proponents generally recognize that our fiscal path is unsustainable, but they argue that the current debt binge is nonetheless critical to an economic recovery.

There’s no more evidence for this belief than there is for the existence of the tooth fairy.

Not only has Washington’s profligacy left us worse off, our children now face the prospect of reduced living standards and crushing debt.

 

This article originally appeared in a PolicyMic debate between the Cato Institute’s Tad DeHaven and Demos senior fellow Lew Daly. Check out Daly’s piece here.

Yes, ObamaCare Will Eliminate Some 800,000 Jobs

From my article “ObamaCare–The Way of the Dodo” in Virtual Mentor, a journal of the American Medical Association:

The CBO projects the law will eliminate an estimated 800,000 jobs. The fashionable retort is to note that this effect “primarily comes from workers who choose not to work because they no longer have to work at jobs just for the health insurance.” That defense fails for two reasons. First, a “job” is when Smith and Jones exchange labor for money. It doesn’t matter whether Jones withdraws the money or Smith withdraws the labor. Either act eliminates a job. Second, it’s an odd defense of a law to say it encourages people to consume without producing.

Emphasis added; citations embedded as hyperlinks.

Put differently: why should we care only about someone not getting a paycheck and not at all about a job left undone?

Update: When he’s talking about something other than ObamaCare, President Obama himself acknowledges that suppressing the labor supply is as harmful as suppressing demand. Obama laments how government policies “cost[] us hundreds of billions of dollars in wages that will not be earned, jobs that will not be done, and purchases that will not be made.”

ObamaCare—The Way of the Dodo

In the latest issue of Virtual Mentor, a journal of the American Medical Association, I try to capture the multiple absurdities that make up ObamaCare. An encapsulation:

During the initial debate over ObamaCare, House Speaker Nancy Pelosi (D-CA) famously said, “We have to pass [it] so you can find out what’s in it.” One irreverent heir to Hippocrates quipped, “That’s what I tell my patients when I ask them for a stool sample.” The similarities scarcely end there…

ObamaCare supporters are ignoring the federal government’s dire fiscal situation; ignoring the law’s impact on premiums, jobs, and access to health insurance; ignoring that a strikingly similar law has sent health care costs higher in Massachusetts; ignoring public opinion, which has been solidly against the law for more than 2 years; ignoring the law’s failures (when they’re not declaring them successes); and ignoring that the law was so incompetently drafted that it cannot be implemented without shredding the separation of powers, the rule of law, and the U.S. Constitution itself. Rather than confront their own errors of judgment, they self-soothe: The public just doesn’t understand the law. The more they learn about it, the more they’ll like it…

This denial takes its most sophisticated form in the periodic surveys that purport to show how those silly voters still don’t understand the law. (In the mind of the ObamaCare zombie, no one really understands the law until they support it.) A prominent health care journalist had just filed her umpteenth story on such surveys when I asked her, “At what point do you start to question whether ObamaCare supporters are just kidding themselves?”

Her response? “Soon…”

(For more proof that ObamaCare supporters can draw from an apparently bottomless well of denial, see this article by Politico.)

Government and Job Creation: Help or Hindrance?

I recently posted four charts eviscerating Obama’s record on jobs.

My Cato colleagues, Caleb Brown and Austin Bragg, have a good complement to those charts. They’ve put together a short video looking at how government spending and regulation undermine job creation.

Caleb says he will be doing more excellent videos like this, which is very encouraging since there is so much more ground to cover – particularly when trying to educate people in Washington.

One thing he should explain is that jobs don’t exist without profits. As I explained in a New York Post column last year, employers “only create jobs when they think that the total revenue generated by new workers will exceed the total cost of employing those workers.”

This seems like an elementary observation, but it’s one that most politicians don’t seem to understand. Or don’t care to understand.

That certainly seems to be the case at 1600 Pennsylvania Avenue. The president will speak tonight and supposedly will propose a $300 billion plan. He’ll claim, of course, that this new “stimulus” package will boost growth.

But a look at the various components that reportedly will be in his plan doesn’t create a sense of optimism. Especially since it appears that he’s mostly recycling proposals that already have failed at least once.

Maybe the President should copy the policies of a former resident of the White House, who also had to deal with a deep downturn, but managed to produce dramatically better results.