Sunday, May 4, 2014

When Will This Slow Economy Ever End?

'Now, if we raise spending here and
taxes there, Coach K,
the economy will really expand!'
Maybe not until 2017 when President Obama leaves office?

Some disturbing news just came out this week that the economy might have contracted in the 1st quarter of 2014, not expanded.

No, not in the Ukraine or Afghanistan or some third world country.

In the United States of America. Right here where we live.

The disturbing news came out in the Washington Post, which, of course, we all know has been a bastion of stark-raving mad lunatics over the past 5 years with all of their harsh and unfair criticisms of the policies of the Obama Administration across-the-board.

Ylan Q. Mui covers the Federal Reserve and the economy for the Washington Post.  She has this to say about the recently released economic numbers:
'Today the Census Bureau released new data on construction spending that were weaker than not only the consensus forecast  but also the government’s estimates in its calculations of the nation’s gross domestic product....
Do the math, and you’ve got an economy that contracted by 0.1 percent in the first quarter -- and that might be the optimistic case. Barclays economist Cooper Howes said his calculations show a 0.2 percent decline.
In either case, it would represent the worst performance for the recovery in three years.'
Immediately after the release of these meager gains, White House officials claimed that it was all due to the bad weather and snowstorms we had this past winter.

That may be true to some extent; when people are holed up in their homes due to blizzards and can't get to work where they can make or build things, economic activity declines.

But look at the gorilla in the living room here: There was no great surge of economic activity overall that could have mitigated such bad weather in parts of the country in the first place!

Think about this: If we had 'normal' and 'typical' robust economic activity coming out of the 2009 Great Recession that usually occurs in almost all economic recoveries in American history, the bad weather may have cut 0.1 or even 0.5% off of a high GDP growth rate, say 4% per year.

However, when you have slow or low economic growth to begin with, any disruption due to weather can, and will, take us into contraction territory for the economy. We have suffered meteorological catastrophes and snowpocalypses in the past that have not driven us into recessionary territory, mainly because our economy was on much more sound footing at the time.

We have made no bones about our disagreement with the economic policies of President Obama. We don't believe he or his advisors have any clue or inclination to unleash the economic engines of American entrepreneurship and job creation through the private sector first.

Instead, the Obama White House stays laser-focused on the failed policies of top-down government management of our economy which has failed many times in the past around the globe. Even China has come to realize that private sector free-market capitalism is the best way to try to get their hundreds of millions of people a job.

Now we have 5 years of empirical proof and evidence that not only have his economic policies failed but there appears to be no economic explosion in the offing even at this late point in his presidency.

The reasons are many:
  • Obamacare has thrown a wet blanket on all business hiring from large corporations on down to small companies
  • His economic stimulus package relied far too much on redistributing income to government workers and not enough incentives to businessmen and women to take more risks and expand their businesses more rapidly
  • President Obama has failed to give the economic engines of our economy, the small businesses and new start-ups, the confidence they need to more rapidly invest and expand their operations which, in turn, would necessitate the hiring of more people who then spend more money etc. in an ever-increasing spiral upwards of economic activity and prosperity for everyone.
You know by now that we are fond of citing otherwise boring government statistics, mainly because we had to bore through them for 12 years on Capitol Hill as a staffer.

Well, here's something to put in your Metamucil this morning to stir things up:

Despite the apparent 'good news' in the 288,000 jobs that were created last month, the Bureau of Labor Statistics has this to say about the current job market, and we quote:
'The civilian labor force dropped by 806,000 in April, following an increase of
503,000 in March.
The labor force participation rate fell by 0.4 percentage points to 62.8 percent in April.
The participation rate has shown no clear trend in recent months and currently is the same as it was this past October.
The employment-population ratio showed no change over the month (58.9 percent) and
has changed little over the year.'

In short, more and more people are dropping out of the workforce, some because they have reached the point where they can retire but most of them because they can't find a job.

806,000 people dropping out of the workforce in one month is a simply stunning number when you consider the whole American workforce is about 143 million people.

.5% of all workers 'just left the building' in the last 30 days alone.

We know there are still many people who love what President Obama is doing and has done in the White House. But that number is steadily diminishing, none more so than in the self-described or actually-registered Independent/Unaffiliated voting bloc of Americans. His approval amongst Independents has crashed down to the mid-30's from his high of 62% on his First Inauguration Day, January 20, 2009.

Here's something else to contemplate: If President Obama was a NBA coach, he would probably be fired by his owners for failure to perform. Other coaches have been fired for having far better records than we have seen economically for the past 5 years, you know.

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1 comment:

  1. The singular thing about US democracy is, it's really not possible to fire much of anyone elected nationally barring egregious circumstances. One effectively has to grit ones teeth and bear it until the next election, or perhaps get the media to haze them out of office.

    Obama, in his remarks to the UN General Assembly recently, made one remark which bothered me an order of magnitude more than his usual preaching. "And I believe that what is true for America is true for virtually all mature democracies." . . . "We can be patriotic without demonizing someone else."

    Looking beyond the fact that the US have demonized all sorts of people as a precursor to overseas adventurism that no other democracy would touch, let's zero in on the 'mature democracies' part of this statement.

    The US is certainly an old democracy, but I wonder just how mature it really is. Other democracies, when faced with impasses such as those the US are experiencing, can submit popular referendums to change the constitution. Votes of no confidence forcing new elections can be held. The executive leadership can be fired. In the US, none of this is possible. America's values do indeed seem to have diverged from other mature democracies. America seems to be suffering from a case of arrested development.

    When I was last in the US, the discontent was so high, there were mutterings about holding a Convention of the States to change the Constitution. I looked and saw that a fair number of states have called for such a convention, though the main reason given was to force the US government to balance the budget and stop the mammoth debt creation.

    If such a convention were to be held, would it not make sense to broaden the scope to fix some of the other structural problems with US government as well?

    If one takes a rigorous view of the Constitution, the US government have long since overstepped their bounds. Many programs the US government have implemented exceed the mandate of Congress by a long shot. If they were defunded, then presumably the deficit spending issue would become moot. But these programs have long since wormed their way into the national fabric, not just Obamacare, but Social Security, Education mandates, you name it.

    Would it not be a good idea to modify the constitutional scope to cover some subset of the status quo, as well as to address the above-mentioned structural issues?


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