Yesterday, President Obama’s two principal economic advisors — National Economic Council Director Larry Summers and Council of Economic Advisors chair Christina Romer — gave us a glimpse into the continued tumult in the White House’s over how to restart America’s economic engines.
Summers said, “Today, everybody agrees that the recession is over, and the question is what the pace of the expansion is going to be."
Romer — asked if the recession is over — said, “"Of course not. For the people on Main Street and throughout this country, they are still suffering, the unemployment rate is still 10 percent." She also said that the recession won’t be over until unemployment reaches “normal levels,” about 5%.
Romer is right. President Obama’s belief that America can spend its way out of the recession is being disproved at every turn. The stock market is higher than it’s been in two years, but mortgage refinancing is still very hard to get. This and other factors — especially unemployment numbers — are pointing to a false recovery which may presage a longer and deeper downturn.
Outside the White House, Americans are worried about Obama’s spending spree and enormous government intervention in the private sector. That worry is entirely justified. The more Obama intervenes the less economically free we are and the longer it will take to recover from his policies.
Last week, in his “jobs” speech, Obama said, “There are those who claim we have to choose between paying down our deficits on the one hand, and investing in job creation and economic growth on the other — but this is a false choice."
He is precisely wrong. The more the government grabs and spends, the less chance there is that jobs will be created.
2009 was a year in which Obama and congress rushed to enact one enormous spending program after another, each time increasing government control over the economy. Obama has nationalized two of the three carmakers, furthered the intervention in the financial industry and spent so much that even he admitted that we are out of money. But that recognition hasn’t stopped the spending or reduced his appetite for more and more government controls over industry.
The president is still pushing his healthcare “reform” bill and his Environmental Protection Agency has decided to regulate carbon dioxide emissions with or without congress’s permission. Announcing its newest economic intervention, EPA administrator Lisa Jackson threatened Congress that if it didn’t pass the “cap and trade” global warming tax, “… the EPA is going to have to regulate in this area." She said EPA “…is not going to be able to regulate on a market-based way, so it’s going to have to regulate in a command-and-control way, which will probably generate even more uncertainty." And infringe even more on economic freedom.
The president’s $1.2 trillion “stimulus” bill — about 20% of which has already been spent — has failed to create jobs. According to the Bureau of Labor Statistics, “In November, employment fell in construction, manufacturing, and information, while temporary help services and health care added jobs.”
The numbers are grim. According to that BLS report, manufacturing employment fell in November by 41,000 jobs and in the information industries by 17,000 (about half of that in the telecommunications sector.)
The president claims that 1.6 million jobs have been “saved or created.” But where are they? If not in construction, manufacturing and information, what is left? Those 1.6 million jobs are not in innovation: the US Patent Office reports that patent applications fell 2.3% in 2009, the first real decline in over a decade.
BLS also reports that the largest employer in America is the federal government, with about 2.7 million employed (including the Postal Service). Federal workers now earn — on average — about $30,000 more a year than private sector workers.
There are jobs that have been created this year, but apparently only in the federal government. BLS says the federal government has created about 76,000 jobs from November 2008 to November 2009. (Employment in state and local governments remains unchanged).
This week, Congress is expected to increase the federal deficit limit by another $2 trillion above its current level of $12.1 trillion. The added $2 trillion should enough to cover government borrowing through the 2010 election so that they won’t have to vote on another increase before it. There is no plan to reduce spending: only to increase it along with government intervention and control of the economy.
The Heritage Foundation publishes its “Index of Economic Freedom” annually, rating the world’s nations on ten factors. They range from government expenditures as a percentage of gross domestic product to the ability of banks to function freely. At the end of 2008, America was rated the sixth-freest in the world, with a score of 80.7 on a scale of 100.
And the report noted some big problems. Government expenditures were 36.7% of GDP and rising. Tax rates are uncompetitive with other industrialized nations.
And financial freedom? “Government interventions in financial markets in the second half of 2008, including purchase of assets and measures affecting the allocation of credit, if not rapidly undone, indicate a serious loss of financial freedom that will lower future U.S. economic freedom scores.”
Remember that was in January — before the president and Congress went on their spending spree and made massive new interventions in private sector business. Instead of reversing the decline of financial freedom, they accelerated it, creating new economic turmoil and reducing economic freedom every step of the way.
In his “jobs” speech, President Obama also said, “We can’t go back to an economy that yielded cycle after cycle of speculative booms and painful busts. We can’t continue to accept an education system in which our students trail their peers in other countries, and a health care system in which exploding costs put our businesses at a competitive disadvantage. And we cannot continue to ignore the clean energy challenge or cede global leadership in the emerging industries of the 21st century. And that’s why, even as we strive to meet the crisis of the moment, we have insisted on laying a new foundation for the future.”
In other words, President Obama refuses to chart a path back to economic freedom for America. He wants to increase government’s role in the economy, not reduce it. His intent is to shift our economy to one that allows only government-approved risks, and not permit those who in free economies take risks that produce financial booms to do so and lead us out of the painful “bust” we are now in. In short, Obama wants America’s economy to be government-directed and regulated.
According to the Heritage Foundation’s economic freedom index, America lost ground in 2008, sinking from 81% free to 80.7%. How much more did we lose in 2009?
We are in the midst of a false recovery. As I wrote last month, it is not enough to stop the hemorrhaging of money and expansion of government intervention in the economy. Obama’s economic “achievements” need to be repealed in order for our economy to recover.
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