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Townhall...
Yep, It’s Still the
Economy, Stupid
By Donald Lambro
WASHINGTON -- No doubt by now you’ve heard the story on the nightly
news that the Obama economy grew at a weaker pace in the fourth quarter
than was previously expected.
What’s that, you say? You didn’t hear that on the evening news? I
wonder why. Maybe the big three networks in New York didn’t want you to
know that a revised analysis of the last three months of 2010 showed
the economy grew at an anemic 2.8 percent -- well below the 3.2 percent
GDP growth rate the Commerce Department estimated early last month and
that the networks trumpeted with gusto.
According to commerce figures released last Friday, economic growth was
four-tenths of a percentage point lower than previously reported. And
this was in the last three months of the second year of President
Obama’s nearly $1 trillion spending stimulus extravaganza to get the
economy back on track to robust health.
But more than two years into his unprecedented spending binge, GDP
growth remains in the 2 percentage point range; unemployment is still
stuck between 9 and 10 percent; meager private-sector jobs are being
created; gas prices for regular are climbing toward $4 a gallon; and
home mortgage foreclosures are expected to remain high well into 2012.
If all of this were not disturbing enough, the Obama administration is
blaming the weak economic data on Republican efforts among the state
governments to sharply reduce spending. And the news media has begun to
peddle a rash of stories that claim further efforts in Congress and in
the states to cut public payrolls and spending will only lead to deeper
job losses and a weaker economy. The latest decline in GDP growth came
as a shock to the White House and economic analysts, who in recent
weeks have been forecasting exaggerated economic growth rates of
anywhere from 3.5 percent to 4 percent in 2011. Now, their politically
driven, over-the-top growth estimates are being re-evaluated.
“We had every reason to believe the U.S. economy will do extremely well
this year,” Bernard Baumohl, chief global economist for the Economic
Outlook Group, told the Washington Post last week. “Now we have to go
back to the drawing boards.”
But the weak growth we saw in the last three months of 2010 was in
large part a continuation of the sub-par recovery we’ve seen over the
past two years. It is the direct result of Obama’s failed jobs policy
that is based on the misguided Keynesian belief that the government can
spend itself into prosperity. It didn’t happen. Instead, job layoffs
continued and unemployment rose to nearly 10 percent -- 17 percent if
you count workers forced to take temporary jobs and discouraged workers
who have given up looking for a job.
That reduced the number of people actively looking for work, and that
in large measure is why the unemployment rate has fallen.
As for the rash of administration-driven news stories that further
state and local government payroll cuts will worsen the economy,
consider these observations:
1. Government cannot be immune from budget and payroll cuts in a time
of economic adversity. Indeed, beleagured taxpayers and businesses are
the first to be forced to tighten their belts in a down economy while
bearing the heavy tax burdens of government, which further weakens
business and household budgets alike.
Government workers have been virtually immune from job losses in times
of recessions, but that must change and, as we see in states across the
country, is changing.
2. Payroll downsizing is part of the necessary correction to bring
long-uncontrolled, debt-ridden state and local government spending
practices in line with sharply reduced tax revenues. Lessen the tax
burden on businesses and workers and you strengthen the private sector
and hasten its recovery. That’s not only good fiscal policy, but sound
economics, too.
3. America has been through many recessions in its history but it has
always come back stronger than ever. The worst was the Great Depression
of the ‘30s, when the government’s policy was to create temporary jobs
until things got better. It took nearly a decade before the economy did
begin to recover, but only as a result of World War II.
Obama has essentially followed the same policy by thinking that if he
spent enough on “shovel-ready jobs” and other federal spending
programs, he could quickly turn our $14 trillion economy around. Two
years later, the economy is growing again (because of cost-cutting,
profit-boosting decisions by businesses), but weakly, and jobs are
still in short supply.
In the 1981-82 recession, when unemployment hit 10.8 percent, President
Reagan cut taxes across the board for all income levels, and the
economy took off. Monthly new-job numbers rose to 200,000, 300,000 or
more, quarterly GDP rates grew by 4 to 5 percent, and Reagan won
re-election in a landslide, carrying 49 states in 1984.
Flash forward to the Obama economy in January 2011: Nonfarm employment
rose by a pathetic 36,000 jobs, and the minutes of last month’s Federal
Reserve policy meeting said board members expect high unemployment to
continue through 2013.
Read it at Townhall
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