The Madness of Obamanomics
ACRU General Counsel Peter Ferrara wrote this column appearing December 8, 2010 on The American Spectator website.
For two years I have been arguing here and elsewhere that Obamanomics will not work. But for Obama and the Democrats to persist in transparent error after the election tsunami and now last Friday’s catastrophic unemployment report has now veered into madness.
Obama’s unreconstructed, throwback Keynesian economics from the 1970s and even the 1930s was a proven failure 30 years ago. Bringing it back as if nothing has happened since the Keynesian intellectual high water mark in the 1960s is public policy malpractice so extreme that it deserves sanctions. But Obamanomics has now gone beyond this silliness to outright assault on critical areas of our economy.
Dude, Where’s My Recovery?
The American economy doesn’t just fall flat on its back and then stay there for years and years. That has happened in countries like India in the past (currently booming), or Bangladesh or Argentina today, or elsewhere in the Third World. But not America.
For over 200 years, the American economy has fallen into periodic recessions and then recovered in a normal business cycle. A great success of Reaganomics was that it stimulated a 25-year economic boom virtually uninterrupted by recession. (People on the Left, like “Progressive” talk radio savant Thom Hartmann, don’t know that, because mentally they have not been living in America during that time).
But on average since World War II, now 65 years ago, recovery from recession has arrived just 10 months after the recession began. The longest previous postwar recession was 16 months.
But as of last Friday, nearly 3 years after this latest recession began, the unemployment rate was still rising, flirting with double digits at 9.8%. African Americans suffered with an unemployment rate at 16%, Hispanics with unemployment at 13.2%. Instead of a recovery after a previous recession record of 16 months, the unemployment rate has now remained stuck at 9.5% or above for a postwar record 16 months. This is why the record of Obamanomics is starting to look more like a depression than a recession.
The Bureau of Labor Statistics (BLS) household survey in Friday’s report actually showed a loss of 173,000 jobs last month, after a loss of 330,000 jobs the previous month, in a self-reinforcing downward spiral.
The number of unemployed rose to 15.1 million last month, with another 9 million “working part time because their hours had been cut back or because they were unable to find a full-time job,” according to the BLS. The number of discouraged workers who were not counted as unemployed because they had given up looking for work was up 421,000 from a year earlier.
As economist John Lott explained at FoxNews.com last Friday, “Economists thought that the unemployment rate would rise as some of the Americans who had completely left the labor force began to look again for jobs.” That would actually be a sign of coming recovery.
But as Lott further explained, that hopeful reason was not the cause of rising unemployment last month. Lott wrote, “Unfortunately, the bad news today is that not only is the number of unemployed rising, the number of people who have given up and left the labor force is also still going up. More than 500,000 Americans have left the labor force since September — a shocking rise in such a short period of time for a so-called ‘recovery.'” Moreover, “2 million Americans have either become unemployed or left the labor force since April.” Those are signs of continuing economic deterioration rather than recovery, again 3 years after the recession began.
Finally, as Lott perceptively reveals, “The untold story that isn’t being covered is how many Americans have stopped actively looking for work. At this writing, the number of unemployed plus those not in the labor force is at 99.83 million, just below 100 million and 10 million above what it was just two years ago. President Obama seems poised to claim the dubious distinction of breaking through that 100 million barrier.”
The Failure of Keynesian Economics
The economy has continued to deteriorate rather than recover because from the beginning the recession was countered with the proven failed nostrums of Keynesian economics. That, again, is the doctrine that what promotes economic recovery and restores growth is increased government spending, deficits and debt. Hence President Obama’s failed, wasted, nearly $1 trillion stimulus spending of February 2009.
The increased government spending and deficits are supposed to increase aggregate demand, which is supposed to stimulate increased production to meet that demand. It doesn’t work in part because if the government has to borrow, or worse tax, $1 trillion out of the economy, spending that additional trillion back into the economy leaves the economy no better off on net. In addition, all that government spending doesn’t do anything to change the fundamental incentives that really drive the economy.
What actually drives economic recovery and growth is increased production, which results from increased incentives to produce, and reduced costs burdening production. That involves reduced tax rates, which allow producers to keep a higher percentage of what they produce. It also involves reduced regulatory costs and reduced costs of government spending. This is what the more modern supply-side economics adopted by President Reagan was all about. But Obama refuses to consider any of this because it involves reducing rather than expanding the power of government, and he is rigidly opposed to that ideologically.
Instead what we continue to hear from soon to be former House Speaker Nancy Pelosi, and the equally brain-dead Joe Biden (both of whom make Sarah Palin sound like a Nobel Prize winner), is the continuing Keynesian foolishness that extended unemployment benefits will promote economic recovery and growth. “That money is immediately spent at the gas station and the grocery store,” Biden tells us. But if that is so promising, why don’t we just send every American a check for $1,000 right now? Oh, wait, we tried just that in the “stimulus” stupidity of February 2008, at the behest of Pelosi, Biden and Obama then heading the Democrat Congressional majorities. That worked so great nobody even remembers it anymore.
This doesn’t mean we should not extend unemployment benefits. It just shows that Obama and the Democrats have no understanding of how to promote economic growth and recovery. What does it say about their economic policies that we are now seeking to extend unemployment benefits past two years to how long, three years? What effect does that have on unemployment? Obama and the Democrats can’t figure that out? Or are they deliberately trying to trash the economy?
But Obama persists in his public policy malpractice, and misleadership, in seeking extension along with the Bush tax cuts of the refundable tax credits in his failed 2009 stimulus package, like the so-called “Making Work Pay” tax credit. Because those tax credits do not reduce rates, they do nothing to provide increased incentives for production, and economic recovery. They are really just tax welfare, based again on the Keynesian hocus pocus that the increased demand from increased spending, deficits, and debt will promote recovery and growth. The American people just demonstrated in the 2010 elections that they understand what Obama doesn’t: that increased government spending, deficits, and debt are the problem, not the solution. They will demonstrate that again in 2012, if Obama is so reckless in his misleadership of the Democrat party as to give the voters that chance.
Obama Decrees Economic Shutdown
The economy is even now straining to break through the Obama bonds holding it back from economic recovery. With $2 trillion in corporate cash reserves, $1 trillion at least in excess bank reserves, and the 2010 elections putting an end to any further New Left immaturity getting through Congress, extending the Bush tax cuts just could be enough to allow a bounding recovery to resume. Just remember that American economic history is that the deeper and longer the downturn the stronger the recovery.
No doubt Obama will demand political credit for that inevitable recovery whenever it comes, no matter how many years his brain-dead policies manage to delay it. But with recovery coming only after the GOP political tsunami of 2010, and extension of the Bush tax cuts, no way the voters will be fooled by Obama and his party-controlled press again.
Political commentary regarding 2012 today is a treasure trove of great mirth. Obama’s chances of reelection are less than zero. There is a greater possibility that if he tries he will terminate the Democrat party outside of its urban political machines.
In 1964, Lyndon Johnson won a much bigger landslide than Barack Obama in 2008. By 1968, thanks to the Kennedy tax rate cuts, “the economy was booming, with 4.8% real growth,” as explained by Jeffrey Anderson in Investors Business Daily on November 26. “March 31, 1968…capped an economic quarter in which the real (seasonally adjusted) annual rate of growth in GDP was 8.5%,” as Anderson further explains. What happened on March 31, 1968? That was the day on which Johnson pulled out of his hopeless reelection bid, at the height of ’60s liberalism.
So, no, a GOP economic recovery is not going to save Barack Obama politically in 2012. But that issue may never arise. Because the Obama Administration is plunging headlong into doing all it can to further prevent economic recovery.
Last week, Interior Secretary Ken Salazar announced a 7 year moratorium on oil drilling in the eastern Gulf of Mexico and up the east coast. They need that time to further study the BP oil spill and implement a “more stringent regulatory regime,” Salazar transparently prevaricated. Salazar is consequently depriving America of 7.5 billion barrels of oil and 60 trillion cubic feet of natural gas. To ensure their access to a reliable supply of oil at the time, the Japanese bombed Pearl Harbor. That’s shows what a serious attack on the American people this policy is.
Meanwhile, EPA Director Lisa Jackson is imposing cap and trade by regulatory decree, despite its thorough democratic rejection by a Democrat-controlled Congress and the American people in 2010. The result will be mass retirements of the coal plants that produce half of America’s electricity, skyrocketing electricity costs, and an indefinite moratorium on major energy, manufacturing, and construction projects. Once fully implemented, this bureaucratic coup will effectively be a $1 to $2 trillion tax increase on the American economy, destroying millions of jobs and trillions in GDP. As President Obama himself has suggested, this is his alternative way of “skinning the cat.”
As Dick Morris and others have explained, through this, its new draconian ozone regulations, and additional new sulfur dioxide regulations, even though there is no real problem with current regulatory standards, the EPA is “virtually making economic growth illegal in large parts of the United States.”
Meanwhile, FCC Chairman, and Obama law school pal, Julius Genachowski is plotting to seize the Internet under the guise of “Net Neutrality” regulations to be revealed at an FCC meeting on Feb. 21, as reported last week. Investor’s Business Daily urged readers on December 2 to note the emphasis in news reports “on ‘lawful Internet traffic’ and a ‘level playing field. This is government-speak for controlling what gets said and who gets to say it…. The FCC wants to decide what and whose ideas get heard…. The FCC would decide how and what information could flow through the Net.”
The Wall Street Journal noted last weekend that the FCC is moving ahead with these regulatory decrees “despite a federal court ruling in April that said the FCC lacked authority from Congress to restrict how Internet service providers manage traffic on their networks.” The Journal also noted, “All 95 House and Senate candidates — every one — who had signed a pledge stating that ‘I believe in protecting net neutrality’ lost in the midterm election.” But don’t expect trivialities like the law and democracy to stand in the way of the Hugo Chavez admirers on the FCC.
One of those is FCC Commissioner Michael Copps, who last week announced his plans for a thinly veiled attack on conservative talk radio. Before an audience at the Columbia School of Journalism, Copps called for radio stations to be subject to license renewal every 4 years instead of 8, in which they would be subject to a “public value test” measuring whether they were “serving the public interest” through such benchmarks as “local programming.”
The free Internet we have enjoyed until now has been a source of much prosperity and economic growth. As the Journal noted, “if job creation and economic growth are priorities for the Obama Administration, it makes no sense to target the telecom industry with new rules that will hamper capital investment and lead to years of litigation and regulatory uncertainty.”
Then there is National Labor Relations Board member Craig Becker, former Associate General Counsel for the SEIU and the AFL-CIO, who plans to lead the Obama majority on the Board to adopt regulations for forced unionization by depriving workers of secret ballot union certification elections. Serving as a recess appointee without Senate confirmation, Becker is not bothered that even the late, radical, Democrat-controlled Congress, booted out by voters just last month, rejected legislation providing for this policy. Such forced unionization will bring the wonders of Argentina’s economic prowess to our shores.
But don’t forget HHS Secretary Kathleen Sebelius, who is using Obamacare to effectively seize control of the health care industry, drive up health costs, kill still more jobs, and drive out of business your health insurance provider, whether or not you like it.
Article II, Section 4 of the United States Constitution provides, “The President, Vice-President and all civil officers of the United States, shall be removed from Office on Impeachment for, and conviction of, Treason, Bribery, or other high Crimes and Misdemeanors.”
The House of Representatives should begin impeachment proceedings against Interior Secretary Salazar, HHS Secretary Sebelius, EPA Director Jackson, FCC Chairman Genachowski and his buddy Copps, and NLRB Board member Becker, for abuse of office contrary to the public interest. Such impeachment is not limited to violations of current law.
No, I am not going to call for impeachment of Barack Obama. I will leave that to Democrats who want to save their party, a project I want no part of.