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Archive for February 1st, 2013

First, some good news.

The United States is in much better shape than most other developed nations, particularly if you look at broad measures of prosperity and living standards.

And our economy is growing and the private sector is creating jobs.

That’s the glass-half-full way of looking at things.

But if you’re a glass-half-empty person, the news is not so cheerful. The economy is expanding and jobs are being created, but both at a slow rate.

In this interview, I share this dour perspective as I grouse about how Obama’s policies of higher taxes and bigger government are somewhat responsible for the weak job market. And I also explain that the anemic employment situation is partially to blame for low levels of saving for many households.

On the topic of the low savings rate, I should have explained that government policies undermine savings, both because of the tax code’s pro-consumption bias and because reasons to save are diminished thanks to government-provided subsidies for things such as housing, education, retirement, and health care.

In my second soundbite, I jump to a different topic. I assert that it’s a good thing that we’re going to have gridlock for the next couple of years – particularly if the alternative is the kind of damaging legislation such as the faux stimulus and Obamacare that we got in the President’s first two years.

But I do warn that permanent gridlock is not a good idea. We need genuine entitlement reform at some point in the not-so-distant future if we want to avoid becoming another Greece.

And don’t delude yourself. If policy is left on auto-pilot, the burden of government spending is going to skyrocket. Indeed, both the Bank for International Settlements and the Organization for Economic Cooperation and Development estimate that America’s long-run fiscal problems are more severe than those is most European welfare states.

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I almost feel sorry for the Obama Administration’s spin doctors. Every month, they probably wait for the unemployment numbers from the Bureau of Labor Statistics with the same level of excitement that people on death row wait for their execution date.

This has been going on for a while and today’s new data is another good example.

As this chart indicates, the White House promised that the unemployment rate today would be almost down to 5 percent if we enacted the so-called stimulus back in 2009. Instead, the new numbers show that the jobless rate is 7.9 – almost 3.0 percentage points higher.

Obama Unemployment

I enjoy using this chart to indict Obamanomics, in part because it’s a two-fer. I get to criticize the Administration’s overall record, and I simultaneously get to take a jab at Keynesian spending schemes.

What’s not to love?

That being said, I don’t think the above chart is completely persuasive. The White House argues, with some justification, that this data simply shows that they underestimated the initial severity of the recession. There’s some truth to that, and I’ll be the first to admit that it wouldn’t be fair to blame Obama for a bleak trendline that existed when he took office (but I will blame him for continuing Bush’s policies of excessive spending and costly intervention).

That’s why I think the data from the Minneapolis Federal Reserve is more damning. It looks at all the recessions and recoveries in the post-World War II era, and presumably provides a more neutral benchmark.

As you can see from this chart of job creation during all post-World War II recoveries, there’s one period that stands out for having the worst performance. Take a wild guess which line includes the Obama years.

Feb 2013 Minn Fed Employment Recession Data

An Obama defender will argue that this chart is unfair because the recession began during the Bush years.

Since there’s no significant difference between Bush’s policies and Obama’s policies, I don’t think that’s a strong defense, but let’s bend over backwards and instead look at job creation during recovery periods.

Feb 2013 Minn Fed Employment Recovery Data

These numbers are a bit more favorable (or less damning) to Obama, but you can see that job creation for this recovery has been far below the average. Indeed, it only surpasses Bush’s job numbers coming out of the 2001 recession.

But I’m not surprised that the job numbers for Bush and Obama are both dismal. As stated above, they both pursued a statist agenda (though a Bush defender doubtlessly will point out that unemployment didn’t drop that much in 2001, so it would have been impossible to have a strong post-recession bounce).

The real lesson to be learned is that we live in an era of higher taxes on productive activity, a heavier burden of government spending, and more costly government regulation and intervention. And since we’re now more like Europe, the “new normal” is to have weak European-style economic numbers.

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