Now that the Election Is Over, the Washington Post Admits that the Obama Recovery Has Been Terrible

I agree that Obama inherited a crappy economy, and I think it is silly to assert that he bears any responsibility for the severity of the 2007-2009 recession.

But it is very fair to hold him responsible for what’s happened since the recession ended. I’ve cited data from the Minneapolis Federal Reserve on both employment and gross domestic product to show that Obama has presided over the weakest recovery in the post-World War II period.

And I think it is fair to blame Obama for the economy’s anemic performance during that time, largely because his agenda of faux stimulus and Obamacare exacerbated the statist policies of Bush. In other words, he promised “hope” and “change,” but delivered more of the same.

Well, now that the election is over, even the Washington Post is willing to admit that Obama’s economic performance is dismal. Here’s a remarkable chart showing that growth is far below the average.

There are actually two very important conclusions to draw from this chart.

• First, the economy has not recovered the lost output from the recession, which is a point made by Nobel laureate Robert Lucas. That’s bad news.
• Second, it appears that the economy is now a lower-growth trend line. That’s worse news.

Indeed, I fear permanently lower growth is the legacy of the Bush-Obama years. We now have a substantially bigger burden of government spending, and things will get worse rather than better in the absence of real entitlement reform.

And we have a lot more cronyism and interventionism, which undermines economic efficiency. To make matters worse, Obama wants higher tax rates and more double taxation of saving and investment.

To be blunt, those are not the policies that create jobs and wealth.

Last century, a good rule of thumb was that the United States was about halfway between the high-growth, small-government economics such as Hong Kong and Singapore and the low-growth, big-government economies of Europe.

But as we move closer and closer to European-style economic policy, it should be no surprise that we get anemic European-style economic performance.

We know the recipe for growth and prosperity. But the political elite is oblivious or doesn’t care.

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On the Obama “Recovery,” a Picture Says More than One Thousand Words

If you want a straightforward measure of Obama’s economic performance, look at the comparative business cycle data from the Minneapolis Fed.

If you want to hoist the White House on its own petard, show the Administration’s estimate of what was supposed to happen to unemployment if the so-called stimulus was enacted compared to the real-world results.

And if you want to be mean and snarky, share this image from the good folks at Reason (click to enlarge).

To be fair, I imagine one could dig up quotes even from the Reagan years that make people look foolish after the fact.

Which is why I prefer data rather than quotes. But since I also enjoy mocking politicians, I must admit that this is a great infographic.

For what it’s worth, I gave Obamanomics an F in this CNBC debate. But lest anyone accuse me of partisanship, I’ve repeatedly explained that Bush’s performance was equally dismal.

It doesn’t matter whether you have an R after your name or a D after your name. If you expand the burden of government spending, the economy isn’t going to prosper.

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Big Government Cripples Incentives to Save, Promotes Risky Culture of Immediate Gratification

America’s political elite is nauseating for many reasons, but perhaps most of all when they blame others for problems that are caused by misguided government policies. A stark example is the way they attacked the Facebook billionaire who moved to Singapore because of punitive taxation and class-warfare policy.

Today, let’s look at an example that affects almost everybody rather than just a handful of rich people. Many people in Washington sanctimoniously say that American households and businesses are too focused on the short term and that we don’t save enough.

But as I explain in this CBNC interview, tax and spending policies from Washington have undermined the incentive to save.

Allow me to elaborate on three of my examples.

1. Look at this post comparing the red ink from America’s bankrupt Social Security system with the huge levels of private savings generated by Australia’s system of personal retirement accounts.

Good politicians would respond by copying Australia and reforming Social Security. But good politicians are like unicorns.

2. Or look at this chart showing the extensive double taxation in our tax code, as well as these international comparisons of how America over-taxes dividends and capital gains.

Good politicians would respond by junking the tax code and adopting a flat tax, which has no double taxation of income that is saved and invested. But good politicians are like the Loch Ness Monster.

3. And consider the fact that the Obama Administration has just imposed a regulation that will discourage foreigners from depositing money in American banks, thus driving capital from the U.S. economy.

Good politicians would minimize the damage of anti-savings policies by keeping America a haven for foreign capital. But good politicians are like Bigfoot.

The moral of the story, just in case you haven’t picked up on the theme, is that bad things happen because politicians can’t resist expanding the burden of government when they should be doing the opposite. Which is why this poster is funny, but in a painful way.

P.S. I should have mentioned that some politicians think that we can boost savings by imposing a value-added tax! This is not only a perverse example of Mitchell’s law, but it’s also completely illogical.

A VAT does not change the incentive to save since current consumption and future consumption are equally taxed. But it does reduce the amount of money people have, thus reducing both private consumption and private savings.

Statists would argue that a new tax will reduce the budget deficit and thus reduce the amount of private savings that is being used to finance government debt. That’s only true, though, if you’re naive enough to think politicians won’t spend the new revenue. Good luck with that.

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Will the Economy Sink Obama in November?

At the start of the year, I predicted Obama would be reelected, largely because of my assumption that the unemployment rate would drop below 8 percent.

But my prediction on jobs is looking quite shaky, so this discussion about the economy and the election with Fox Business News is very timely.

I argued, unsurprisingly, that the economy is anemic because Obama’s been pursuing an agenda of wasteful spending and class warfare.

So if he loses, he has nobody to blame but himself.

That doesn’t mean Romney would be an improvement, especially if the warning signs are correct and he saddles the country with a value-added tax, so the American people may be tossed from one frying pan to another.

P.S. Hadley Heath may look familiar because she narrated this video about the damaging impact of welfare programs for the Center for Freedom and Prosperity.

P.P.S. On the completely separate topic of the Greek elections, I am more peeved than ever that the idiots in the media are reporting the results as a victory for the pro-bailout parties over the anti-bailout parties. That is nonsense. All the parties favored bailouts. As I wrote earlier this year, the election was a fight between parties that want no-strings bailout money and parties that at least pretend they are willing to implement reforms as a condition of getting bailout money.

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Cartoonists Dismember Obama’s Claim that the “Private Sector Is Doing Fine”

Unemployment is too high and growth is anemic, but President Obama says the “private sector is doing fine.”

This is a gift to political cartoonists, and they’ve taken advantage of Obama’s daft remark.

As best as I can recall, this is my first Glenn Foden cartoon, but it’s a good one.

I wrote the other day about the debate on whether Obama’s a socialist. I concluded that it’s best to describe him as a statist, corporatist, or cronyist, but Chip Bok adds another term that might be most appropriate.

If you like Chip Bok’s work, I recommend this class-warfare cartoon and this gem about union thuggery in Wisconsin.

And Eric Allie makes the very good point that Obama not only screws up the diagnosis, but also offers the wrong prescription.

Eric Allie is relatively new to me, but he’s on the right track as you can see from  this cartoons about Obama’s counting skills.

P.S. If Obama actually wants to fix the economy, I suggest he watch this video tutorial so he can learn that the private sector is suffering because too many resources are being diverted to unproductive uses by the public sector.

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Debating Keynesian Economics with Robert Reich on CNN

It seems that any argument about the economy eventually boils down to the core issue of whether government spending acts as a stimulus or whether it is – in the words of Thomas Sowell – a sedative that undermines prosperity.

So when Robert Reich and I went on Erin Burnett’s CNN show to discuss Obama’s stumbling economic performance, much of our discussion focused on whether to further expand the burden of the public sector.

Here are a couple of observations about the interview.

1. Reich admitted that spending is a problem and in the “long term” needs to be reduced. I suspect “long term” never arrives in Reich’s world, but this is nonetheless a startling concession on his part.
2. Reich claimed World War II was an example of successful Keynesian stimulus, but if he wants to make that argument, then he needs to explain why we didn’t fall back into the Great Depression after the war – which is what all the Keynesians warned would happen.
3. For reasons outlined in my beat-down of Krugman, I’ve become a cheerleader for Estonia and used the interview to promote that country’s fiscal restraint.

If you want to understand more about Keynesian economics and why it doesn’t work, this video will be more instructive than my food fight with Reich.

P.S. Obama is monotonously repetitive in his claim that the economy is facing headwinds. As this Ramirez cartoon illustrates, he’s right, but not in the way he thinks.

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Has Obama Made the Economy Better or Worse?

I’ve been a big critic of Obama’s policies on taxes, spending, regulation, and intervention, so you won’t be surprised that I argued on CNBC that his policies have made the economy worse.

Here are two graphs, which I posted earlier this month, that make my point. The red lines show the economy is finally – and slowly – moving in the right direction, but the blue lines show how the economy boomed under Reaganomics.

The gap between the two lines in the charts is a measure of how Obama’s policies have undermined the economy, as I mentioned on the program. However, I also said that this may not matter much this November if Republicans are incapable of making coherent economic arguments.

One last thing to emphasize is that Jared resorted to dishonest Washington math when discussing Obama’s make-believe budget cuts. When you use honest numbers, as i did when analyzing the President’s new budget, you find that the burden of government spending is going to climb by $2 trillion between 2012 and 2022.

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Are Humans Genetically Disposed to Be Statists?

One of the fascinating discussions at the Mont Pelerin Society conference has been about the role of evolutionary psychology and its role in shaping public thinking about economic issues. Paul Rubin of Emory University spoke on this issue at the conference and, coincidentally, also had a column about the topic last week in the Wall Street Journal. As seen in the excerpt below, he discusses Hayek’s insight about our “biological constitution” and then proceeds to discuss the unfortunate tendency of many people to think that the economy is a fixed pie. This point resonates with me. If asked to identify one common characteristic of the leftists I know,  my response would be that they incorrectly think one person must become poor for another person to become rich. Even when I show them data proving that this is false, their brains are hard-wired to think that total wealth is limited and that redistribution is the only way to improve the living standards of the less fortunate.

While Hayek is perhaps best known for his 1944 critique of government economic planning, “The Road to Serfdom,” he also was a pioneer in realizing that the evolutionary history of the human species was a factor for understanding current political and economic beliefs. In “The Fatal Conceit” (1988), Hayek wrote that “man’s instincts . . . were not made for the kinds of surroundings, and for the numbers, in which he now lives. They were adapted to life in the small roving bands or troops in which the human race and its immediate ancestors evolved during the few million years while the biological constitution of homo sapiens was being formed.” His insight anticipated the modern field of study called evolutionary psychology, which explains current belief systems as being based in part on our evolutionary history. …humans tend towards zero-sum thinking. That is, we do not intuitively understand the possibilities of economic growth or the benefits of trade in achieving it. Our ancestors lived in a static world with little intertribal trade and virtually no technological advance. That is the world our minds understand. This doesn’t mean that we can’t grasp the crucial concept that trade benefits both parties to a transaction—but it does mean that we must learn it. Positive-sum thinking doesn’t come naturally. By analogy, we learn to speak with no teaching, but we must be taught to read. Understanding the mutual benefits of exchange is like reading, not speech.

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America’s Economy is Not Poised for another 1932…or another 1982

Ambrose Evans-Pritchard of the UK-based Telegraph has a very dismal outlook for the US economy. I’m more optimistic. While I think Obama’s policies will prevent America from enjoying a Reagan-type boom, I don’t think the current Administration is repeating all the mistakes of Hoover and Roosevelt, so I think a depression or double-dip recession is unlikely.

Roughly a million Americans have dropped out of the jobs market altogether over the past two months. That is the only reason why the headline unemployment rate is not exploding to a post-war high. Let us be honest. The US is still trapped in depression a full 18 months into zero interest rates, quantitative easing (QE), and fiscal stimulus that has pushed the budget deficit above 10pc of GDP. The share of the US working-age population with jobs in June actually fell from 58.7pc to 58.5pc. This is the real stress indicator. The ratio was 63pc three years ago. Eight million jobs have been lost. The average time needed to find a job has risen to a record 35.2 weeks. Nothing like this has been seen before in the post-war era. Jeff Weninger, of Harris Private Bank, said this compares with a peak of 21.2 weeks in the Volcker recession of the early 1980s. “Legions of individuals have been left with stale skills, and little prospect of finding meaningful work, and benefits that are being exhausted. By our math the crop of people who are unemployed but not receiving a check amounts to 9.2m.” …in the first quarter…the economy eked out a growth rate of just 2.7pc. This compares with 5.1pc, 9.3pc, 8.1pc and 8.5pc in the four quarters coming off recession in the early 1980s.

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Another Video for Me to Envy

Nobody would ever want me to sing, so I won’t be appearing in any videos like this very clever production about John Maynard Keynes and Friedrich Hayek.

The video is entertaining, for sure, but it also includes some very good economic analyis.

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Story on GOP Hypocrisy Illustrates that Sometimes It’s Better to Lose an Election

The Associated Press nails the GOP for budget hypocrisy, pointing out that a majority of Republicans voted for Bush’s reckless Medicare expansion. This story gives me an excuse to pontificate on why fans of limited government and free markets should not blindly link themselves with the Republican Party. And sometimes they should even hope Republicans lose. There is a very strong case to be made, for instance, that big-government RINOs such as Bush (on economic policy issues) are far more dangerous to economic liberty than Democrats. Not only do they expand government while in power, they create a fertile environment for Democrats, with their out-of-the-closet statism, to gain power and impose even more government.

That certainly has happened this decade. Bush’s profligacy slowed the economy and discouraged the GOP base, which (combined with unhappiness about his nation-building exercise in Iraq) helped deliver the House and Senate to Democrats in 2006 and the White House to Obama in 2008. It is quite likely, by contrast, that the GOP would control both ends of Pennsylvania Avenue today if Kerry had won the 2004 election. A Kerry victory almost certainly would have enabled Republicans to hold the House and Senate in 2006. And since Kerry would have followed Bush’s big-government interventionist policies, the bailout would have occurred on his watch, making it quite likely that the GOP would have enjoyed a strong year in 2008. There may have been some damage to liberty caused by a Kerry presidency (above and beyond the damage caused by Bush), but nothing compared to the damage now being imposed by Obama, Pelosi, and Reid. Food for thought. If nothing else, this AP story shows that we’d be better off if politicians of both parties stayed home all year long:

Republican senators attacking the cost of a Democratic health care bill showed far different concerns six years ago, when they approved a major Medicare expansion that has added tens of billions of dollars to federal deficits. The inconsistency — or hypocrisy, as some call it — has irked Democrats, who claim that their plan will pay for itself with higher taxes and spending cuts and cite the nonpartisan Congressional Budget Office for support. By contrast, when Republicans controlled the House, Senate and White House in 2003, they overcame Democratic opposition to add a deficit-financed prescription drug benefit to Medicare. The program will cost a half-trillion dollars over 10 years, or more by some estimates. With no new taxes or spending offsets accompanying the Medicare drug program, the cost has been added to the federal debt. …”As far as I am concerned, any Republican who voted for the Medicare drug benefit has no right to criticize anything the Democrats have done in terms of adding to the national debt,” said Bruce Bartlett, an official in the administrations of Ronald Reagan and George H.W. Bush. He made his comments in a Forbes article titled “Republican Deficit Hypocrisy.” Bartlett said the 2003 Medicare expansion was “a pure giveaway” that cost more than this year’s Senate or House health bills will cost.

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Obama’s Jobs Summit Is a Dud

The White House has gathered together a bunch of union bosses, lapdog business “leaders”, and left-leaning activists for a jobs summit. The only good news is that this is mostly a dog-and-pony show designed to show that the President “cares” about unemployment. Other than that, the policies being discussed are the usual mix of more government spending and gimmicky tax schemes. Here’s what I had to say about a payroll tax credit.

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Many Talented Foreigners No Longer See America as the Place that Rewards Achievement

While there is considerable disagreement regarding the value of low-skilled immigrants (especially with regards to whether illegals deserve amnesty), almost everybody agrees that the United States is a big beneficiary when highly skilled workers, investors, and entrepreneurs from around the world come to America. So it is a bit troubling that USA Today is reporting that many Indians and Chinese are deciding that they can achieve more by going back home. It is too soon to make sweeping pronouncements about the public policy implications of this demographic shift, but this preliminary evidence of a reverse “brain drain” certainly suggests that the big-government policies of Bush and Obama have made the American economy less vibrant and less dynamic:

More skilled immigrants are giving up their American dreams to pursue careers back home, raising concerns that the U.S. may lose its competitive edge in science, technology and other fields. “What was a trickle has become a flood,” says Duke University’s Vivek Wadhwa, who studies reverse immigration. …”For the first time in American history, we are experiencing the brain drain that other countries experienced,” he says. Suren Dutia, CEO of TiE Global, a worldwide network of professionals who promote entrepreneurship, says the U.S. economy will suffer without these skilled workers. “If the country is going to maintain the kind of economic well-being that we’ve enjoyed for many years, that requires having these incredibly gifted individuals who have been educated and trained by us,” he says. …Multinational companies that belong to the American Council on International Personnel tell Executive Director Lynn Shotwell that skilled immigrants are discouraged by the immigration process, she says. Some can wait up to a decade for permanent residency, she says. “They’re frustrated with having an uncertain immigration status,” she says. “They’re giving up.”

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