by Dick Morris
Total employment in the United States has declined by twice as much as in the G-7 countries as a whole, three times as much as in Europe, and more than seven times as much as in the United Kingdom. Since Obama took office, we have lost more than 9 million jobs.3
* * *
JOB LOSS IN THE RECESSION
(2007–2010)
United States: –4.6%
G-7 Nations: –2.4%
Euro Zone: –1.7%
United Kingdom: –0.6%
Source: OECD data based on all countries reporting as of September 28, 2010.4
* * *
Not only did the recession and its aftermath bite deeper in the U.S., it has lasted much longer than history would suggest it should. According to former senator and economics professor Phil Gramm, the average recession since World War II was short-lived and the economy regained the ground it had lost in five quarters (a year and three months). The longest was seven quarters. But, now, after eleven quarters—two years and nine months—GDP is still below what it was at the start of the recession.5 And we are not out of the woods yet!
And the very measurement the media use—Gross Domestic Product (GDP)—is an overly optimistic one. The more accurate measure is Gross Domestic Income (GDI). Each measure the size of the economy, but they are calculated differently. Many leading economists believe that our GDP estimates are overstated and that the lower GDI estimates of growth are more likely to be correct.6
Writing in his calculatedriskblog.com, economist Bill McBride notes that while real GDP “is only 1.2% below the prerecession peak…real GDI is still 2.3% below” it.7
He notes that the GDI measurement “suggests the recovery has been more sluggish than the headline GDP report and better explains the weakness in the labor market. Personal income…was revised down for the last two quarters, and now shows essentially no growth…since the bottom of the recession.”8
We are not recovering, because Obama’s programs won’t let us recover.
The very programs that Obama tells us are key to recovery are making it impossible. The bills that he says will stimulate job creation are, in fact, retarding it. The initiatives that he promises will speed up our economic growth are the very ones that are holding it back.
It isn’t that Obama’s programs aren’t working. They are working, but they are moving us in the wrong direction. He is so committed to his socialist agenda that he keeps administering medicine that is destroying us as each pill moves us closer to a European socialist model.
He is like doctors of the Middle Ages, so intent on draining the sick bodies of their patients of the “evil spirits” within that they slit open their patients’ veins and poured out their blood. When their patient neared death from lack of blood, they redoubled the bleedings, convinced that evil spirits still lurked. After their ministrations killed their patients, they cited the deaths as evidence of how deep-seated the evil spirits had been!
Obama’s programs are paralyzing our economy because they have spawned a reign of terror, which is freezing private spending, investment, lending, or borrowing that might stimulate growth and job creation. We are scared to death of his tax, regulatory, and socialistic policies. Upon taking office as president in March 1933, Franklin Delano Roosevelt said, “The only thing we have to fear is…fear itself.” Now our president is not soothing our fear, he is causing it.
Consumers aren’t spending because they are terrified of a continuation of the recession, and specifically, about the tax increases looming in the future. Even after Obama’s deal with the Republicans to extend the Bush tax cuts, he has dozens of tax increase proposals still on the table and consumers know it.
Businesses don’t invest in their own company’s expansion because they worry that the consumer demand won’t be there.
Older entrepreneurs won’t put their money back into their own businesses because they are terrified by the return of the estate tax. They know that they had better keep their assets highly liquid so that when they die, their heirs have enough liquid cash to pay a third of their estate to the government, rather than watch it all be taken away and auctioned off at fire sale prices.
The medical/health care sector, 16% of our economy,9 can’t expand or create new jobs because of the prospect of heavy federal regulation that rears its head as ObamaCare changes take effect during the next few years. Who in their right mind is going to buy a CT-scan machine and open a radiology clinic, or develop a new drug, when the feds may disallow the reimbursement next year?
The manufacturing sector, 11% of the economy,10 is paralyzed by the threat of cap and trade legislation. How can factories expand if their output is about to be taxed at punitive levels? Owners realize that they will be forced to relocate offshore and are loath to invest in the U.S. operations. And, even if cap and trade won’t pass a Republican House, they fear that limits on carbon emissions, imposed by the federal Environmental Protection Agency (EPA) under the Clean Air Act, will so crimp their businesses that they will be forced offshore just the same.
The energy sector, another 9% of our economy,11 is likewise paralyzed, by fear of Obama’s carbon tax proposals, which hit both coal and oil. There is no incentive for new investment, exploration, or drilling. Indeed, Obama’s tight regulation of offshore drilling in the wake of the British Petroleum Gulf oil spill, and the prospect of new regulation on horizontal or shale drilling, make new investment highly risky. No growth there.
The financial sector, 21% of the economy,12 is frozen in fear because of the new financial regulations passed by Congress in 2010. These rules give the Federal Deposit Insurance Corporation (FDIC) the power to take over any bank, fire its staff, replace its board, sell off its assets, and liquidate its shareholders’ equity if, in its opinion, the institution has made imprudent loans, is at risk of collapse, and would impair the larger economy if it failed. With this sword of Damocles over their heads, no wonder bankers won’t make loans and the financial sector won’t expand or create new jobs.
The Republican House must proceed to lift these fears, one by one, and liberate these industries in order to bring our economy back to life.
We are in a man-made slump, brought on by the policies of the president. We are no longer being held down by the invisible hand of supply and demand or the cyclical oscillations of the marketplace. What man made, man can repeal.
That is the mission of the Republican House majority.
OUT-OF-CONTROL FEDERAL SPENDING
The central mission of the new Congress will be to cut federal spending. All agree that the deficit must come down. But Democrats would use the deficit as an excuse to back higher taxes while Republicans must focus only on cuts in spending.
Voters agree with the Republicans. Asked by Rasmussen Reports which they thought was more important—cutting the deficit or cutting spending—they overwhelmingly backed spending curbs.
* * *
CUTS IN SPENDING VERSUS CUTS IN DEFICIT
Which is more important:
Cutting federal spending: 57%
Cutting the federal deficit: 34%
Source: Rasmussen Reports13
* * *
Federal, state, and local government spending has risen meteorically under Obama. As noted, it now eats up 44% of our GDP. And when the health care changes are fully funded, it will go higher.
* * *
GOVERNMENT SPENDING AS PERCENTAGE OF GDP
Government 2007–2010 (in US$ billions)
Federal: 2,261: 3,204
State: 1,178: 1,431
Local: 1,486: 1,778
Total: 4,925: 6,413
GDP: 14,077: 14,623
Gov’t/GDP: 35%: 44%
Source: U.S. Government14
* * *
In 2007, the United States ranked 16 among the nations of the world in the proportion of the economy that went to government. Now it ranks 7!15
In 2007, the United States had one of the smallest governments relative to its GDP, just slightly larger than
that of Japan. Now the U.S. spends more of its economy on government than such socialist countries as Norway, Germany, and the United Kingdom. Even Greece, in the throes of a massive debt crisis due to overspending, only spends 43% of its economy on government, less than our 44% share.16
This is what Obama has done to America!
The brutal reality is that the very spending that Obama and the Democrats voted for is inhibiting our economic recovery. We cannot have a free market, free enterprise system with the government accounting for 44% of the spending. That elephant—or jackass, if you will—is too big to keep in the living room!
But if Obama raises taxes to cover his spending, he will have permanently increased government revenues to cover his insane spending and we’ll never be able to bring taxes down.
We must defeat Obama’s tax proposals to keep our free market, capitalist system intact.
Obama’s basic solution to the recession was to embrace the ideas of British economist John Maynard Keynes and flood the economy with money. Prime the pump with government-supplied cash and the resulting increase in consumer demand and spending would jump-start the economy and restore economic growth. Like a defibrillator whose electric shock starts a dormant heart beating again, the new government money would send consumers hurrying to the store, which in turn would make businessmen run to the lending windows of their local banks to get capital with which to expand production and hire new workers to meet the new demand. Then, the new workers would spend more money, and the economic heart of the nation would start beating again. That was the theory and Obama followed it like the doctrinaire leftist that he is.
Obama poured new spending into the economy from two spigots: federal spending and the Federal Reserve Board’s monetary policy.
FEDERAL SPENDING GOES WILD
In the 219 years between George Washington’s taking the oath of office and Barack Obama’s, the federal government borrowed a net of $10 trillion. Since Obama took office, we have borrowed $3.8 trillion more!!!17
* * *
INCREASE IN NATIONAL DEBT
1789: $77.2 million
2008: $9,986 billion
2010: $13,788 billion18
* * *
Federal spending grew exponentially, pumping out money for new programs, salaries for teachers, construction projects, tax cuts and rebates, extended unemployment, and health care benefits. The money rained down on consumers.
Obama’s deluge of new spending raised federal outlays from $3 trillion to $3.7 trillion a year, an increase of almost 25%.
* * *
FEDERAL SPENDING
2008–2011
2,98319: Bush’s last budget
3,51920: Obama
3,52421: Obama
3,65022: Obama
Source: U.S. Government
* * *
What did Obama spend the money on? Welfare and other domestic spending:
a. Welfare
Help to poor people. It includes unemployment compensation, food stamps, SSI (Supplemental Security Income), the earned income tax credit, the child tax credit, family support, child nutrition, welfare, and foster care. In two years, it has risen by 54%!
b. Domestic Spending
This is a catch-all that includes everything the government spends other than for entitlements and defense. It includes education, transportation, the bureaucracy, the justice system, Congress, much of agriculture, the government departments, science, NASA, government buildings and so on. Under Obama, in two years, spending in this category has soared by 41%!
Obama and the liberals like to say we need to cut Social Security and Medicare to balance the budget. Obama pushed to slice Medicare spending by $500 billion to finance his health care changes.
But they are not the culprits. The real culprits are domestic spending and welfare!
Don’t believe Obama’s and the liberals’ myth that it is Social Security and Medicare that are bankrupting us! Nonsense. Social Security has risen by only 14% in the past two years, while Medicare has only gone up by 16%. It is domestic spending and welfare that is driving us to bankruptcy.
* * *
U.S. GOVERNMENT SPENDING BY FUNCTION
Category: Welfare
2008: $260
2010: $400
% Increase: 54%
Category: Domestic
2008: $485
2010: $682
% Increase: 41%
Category: Medicare
2008: $456
2010: $528
% Increase: 16%
Category: Social Security
2008: $612
2010: $700
% Increase: 14%
Category: Defense
2008: $612
2010: $690
% Increase: 11%
Source: U.S. Government23
* * *
The new Republican House of Representatives must roll back this insane spending. You don’t need to cut Social Security or Medicare to do so. All you need to do is to cut back the massive increases in spending that Obama and the Congress have engineered over the past two years.
Obama couldn’t wait to get his massive new spending under way and demanded that Congress hike it up even before he took office. He clamored for passage of his stimulus package that, he said, would solve the problem of unemployment. First he said it would create 3 million jobs.24 Then, he amended his prediction to say that it would create or save the 3 million jobs.25 It did neither. Under Obama, our economy has lost 9,432,000 jobs.26
The stimulus spending was a monstrosity. Challenged to spend money, Congress acted like an alcoholic asked to taste wines. It appropriated funds for every lawmaker’s pet project. The point of this kind of spending was not to do anything, but to spend money for the sake of spending money. President Obama, his cabinet, and his advisors believed that the very act of spending would inject money into the economy and would trigger growth.
With such a low threshold to justify the spending, much of the money has been wasted. It might as well have been thrown out the window for any passing pedestrian to scoop up. Consider these allocations of federal resources:27
$30 million for a spring training baseball complex for the Arizona Diamondbacks and the Colorado Rockies
$11 million for Microsoft to build a bridge connecting its two headquarters campuses in Redmond, Washington, which are separated by a highway
$219,000 for Syracuse University to study the sex lives of freshman women
$3.4 million for a thirteen-foot tunnel for turtles and other wildlife attempting to cross US 27 in Lake Jackson, Florida
$2.3 million for the U.S. Forest Service to rear large numbers of arthropods, including the Asian long-horned beetle, the nun moth, and the woolly adelgid
$2.5 million in stimulus checks sent to dead people
$380,000 to spay and neuter pets in Wichita, Kansas
$148,438 for Washington State University to analyze the use of marijuana in conjunction with medications like morphine
$3.1 million to transform a canal barge into a floating museum that will travel the Erie Canal in New York State
$6 million for a snowmaking facility in Duluth, Minnesota
But it’s one thing to appropriate the money and another to actually spend it. Obama found that he could spend only a small portion of the stimulus money right away. The only thing Washington could do well was to pass out money. Fully 85% of the tax rebates went out the door in the first year, as did 73% of the new entitlement spending.28
But the heralded construction projects that were supposed to jump-start the economy took a long time to get going. By the end of 2010, in fact, only half of the stimulus money allocated to contracts, construction, grants, and loans had actually been spent. It took time to select projects, design buildings, let contracts, and start the money flowing.
It turned out that Obama’s urgency to get his hands on the stimulus money was not motivated by any immediate need to spend it to get the economy moving, it was t
o expand the size of government and use the recession as an excuse to jam his big-spending agenda through quickly in the first hours of his presidency.
While this orgy of spending was going on, the Federal Reserve Board fulfilled its part of the Keynesian design by a dramatic lowering of interest rates and massive creation of new money.
THE FEDERAL RESERVE’S MONETARY MAYHEM
The Federal Reserve Board matched Obama’s massive spending by slashing interest rates, functionally, to zero and almost tripling the money supply. The theory was that these measures would keep business well lubricated with credit, stop bankruptcies, cut layoffs, and give companies the resources they needed to grow and expand.
When the recession first hit, the Fed rapidly lowered interest rates as far as it could—to one-quarter of 1%. The steep fall in interest rates demonstrated the panic that had seized Washington’s economic and political establishment. In the space of a few months, short-term rates tumbled to almost zero and ten-year bond interest was cut in half.
* * *
THE FED SLASHES INTEREST RATES
Date
Interest Rate
Date: July 23, 2007
One Month: 4.88
Ten Year: 4.97
Date: March 17, 2008
One Month: 1.16
Ten Year: 3.34
Date: Sept 15, 2008
One Month: 0.36
Ten Year: 3.47
Date: Dec 10, 2008
One Month: 0.00
Ten Year: 2.64