Is it Jimmy Carter All Over Again?
By Bill Wilson
It feels like we’ve been here before.
The malaise-filled economic train wreck of the Carter years has risen zombie-like from the ash heap of history to inflict its special brand of pain and suffering.
On May 6, the Bureau of Labor Statistics (BLS) reported that unemployment rose from 8.8 percent to 9 percent in April. That includes a 205,000 increase in joblessness in the household survey.
Coupled with slowing growth, increasing inflation, and a continued recession in housing, not to mention the spiraling $14.333 trillion national debt, the economic storm clouds emerging on the horizon for 2012 are dark indeed.
Specifically, growth has slowed down to 1.8 percent in the first quarter, and inflation is up over the past year, with producer prices up 5.8 percent and consumer prices up 2.7 percent. Making matters worse, home prices are again on the decline as foreclosures rose 6.53 percent in March.
Fiscally, when Obama’s first budget was enacted, the national debt stood at $11.909 trillion, and it has already increased by $2.4 trillion. By November 2012, the gross debt will be over $16.627 trillion according to the Office of Management and Budget, meaning he will have been directly responsible for a gargantuan $4.718 trillion increase. That’s a 39 percent run-up in just four years!
Obama’s biggest problem is that none of this was supposed to happen. The federal government has seen fit to spend, borrow, and print more than $2.4 trillion to prop up the economy and save government ‘jobs’ that, in the end, could not be saved. In the past three months, the public sector has shed 60,000 jobs as the so-called ‘stimulus’ and QE2 runs out this year.
He promised to keep unemployment below 8 percent, to cut the deficit in half, to lay the groundwork for a robust, stable recovery, to prop up home values, and to stop the foreclosures. None of that has happened.
The best the Obama Administration could muster in response to the April jobs’ report was that it was “pleasantly surprised” by the news, as top economic advisor Austan Goolsbee said. Huh? Pleasantly surprised? What was he talking about?
Goolsbee disregarded the 205,000 increase in unemployment, saying it was probably because of an increase in job seekers. The only problem there is that those not in the labor force (i.e. those who gave up looking for a job) increased by 131,000 in April, while the civilian labor force measure only increased by a mere 15,000. So, there’s not a tremendous increase of those seeking jobs. If anything, there’s been a big decrease.
Really, the only source for Goolsbee’s optimism was the Bureau’s establishment survey, which measured an increase of 244,000 jobs in its survey of employers. However, the household survey, which is a broader measure of all Americans, shows a decrease of the employed by 190,000. It’s hard to be optimistic based on that.
Also, U-6 unemployment rose again to 15.9 percent, a total of 24.39 million people who want full-time work and can’t find it. That number in particular is why Obama will be in big trouble come 2012, because it’s one that is not likely to decrease significantly between now and next year, when folks will be making up their minds.
The fact is, $2.4 trillion of government “stimulus” later, if the recession had simply been allowed to run its course to begin with, the economy would have naturally found its bottom, and resources would have necessarily been reallocated out of the public sector with greater speed. We’d already be in recovery.
The Keynesian “stimulus” that was pursued was a very specific set of policies around a theoretical framework. If borrowing, printing, and spending trillions of dollars were a valid theory to prosperity, then it should have worked — Obama got everything he wanted.
Sadly, it did not work. The economy is in troubled waters, and slow growth, Jimmy Carter-like stagflation is once again here. Until the government gets its spending under control, and removes unnecessary obstacles to capital formation, it will be impossible to conclude that Obama “stimulus” has been anything but a complete failure.
It’s déjà vu all over again.
Bill Wilson is the President of Americans for Limited Government.