Welcome to the Obama Dependency Economy

Heritage Foundation

Today the Labor Department's Bureau of Labor and Statistics released its monthly jobs report showing that the nation's unemployment is 9.7% for the third month in a row. While the jobs report does indicate that 162,000 net jobs were created in March, almost 50,000 of those jobs were temporary government Census jobs that do not reflect any real economic progress. In total, the U.S. economy has now lost a total of 3.8 million jobs since President Barack Obama signed his $862 billion stimulus plan. We are 8.1 million jobs short of the 138.6 million he promised the American people. It is good to see the American economy finally recovering again. It demonstrates the resilience of the American entrepreneur in the face a punishing job killing agenda from Washington. And don't fall for any White House claims that this belated recovery is due to the stimulus. As the Congressional Budget Office (CBO) admitted last month, its analysis of the stimulus' job creating record was simply "essentially repeating the same exercise" as the initial projections. In other words, the CBO numbers on the stimulus don't take any actual new real world data into account. Working with actual data, Veronique de Rugy of George Mason University's Mercatus Center has found: 1) no statistical correlation between unemployment and how the $862 billion was spent; 2) that Democratic districts received one-and-a-half times as many awards as Republican ones; and 3) an average cost of $286,000 was awarded per job created. $286,000 per job created. That is simply a bad investment.

And President Obama's future agenda is full bad investments. His recently released budget would raise taxes on all Americans by nearly $3 trillion over the next decade; borrow 42 cents for each dollar spent in 2010; and double the publicly held national debt to more than $18 trillion. This is simply unsustainable. As Thomas Edsall writes in The Atlantic: "Net annual interest on the debt will more than triple during the next ten years, according to the CBO, shooting from $207 billion in 2010, to $723 billion in 2020, more than doubling as a share of GDP, from 1.4 percent to 3.2 percent." The cause of these exploding deficits is spending and that spending is making the American public more and more dependent on the federal government Edsall continues: "According to the Federal Bureau of Economic Analysis (BEA), the share of total personal income in the United States that comes from government transfer programs – Social Security, Medicare, veterans’ benefits, unemployment compensation, etc. – has grown rapidly over the past six decades, from 5.9 cents of every dollar in 1950 ... to 17.3 cents in 2009. In addition, according to BEA, another 9.8 cents of every dollar went, in 2009, to salaries for state, local and federal government employees, a figure that does not include costs of fringe benefits. In other words, more than a quarter of all personal income in the United States is paid for with tax dollars."

Heritage's own Index of Dependence on Government shows a steep rise in American reliance on government: "The burgeoning of flagship entitlement programs and the shrinking number of taxpayers who have any financial stake in the government threaten to bankrupt the government--which has led to an increasing interest across the political spectrum in the growth of dependency-creating initiatives." And one of the strongest dependency-creating special interests, government unions, reached a key tipping this year. As Heritage's own James Sherk was the first to document, government union workers now out number those in the private sector. Edsall explains what this means for the American people: "The consequences of this shift are profound. A majority of the American labor movement is now directly dependent on tax dollars. In terms of political orientation, these workers can now be described as tax consumers as well as tax payers. For these workers, a tax increase may result in a slightly smaller paycheck but, more importantly, the hike means more money is available to pay for raises and new benefits."

There is an alternative to the Obama dependency economy. We do not have to subject ourselves to chronically high unemployment and an ever-increasing government workforce. As bad as the media makes this recession seem, job losses were actually far worse in the 2001 recession. The difference this time around is that the private sector has not created new jobs to replace the lost ones as fast as it did the last time around. Reduced hiring is particularly acute among small businesses: they account for 36% of the net job losses in this recession compared to just 12% in 2001.

What small businesses need to start hiring is less government intervention in the economy, not more. To promote entrepreneurship Congress could: Freeze all proposed tax hikes and costly regula­tions until unemployment falls below 7 percent; Freeze spending and rescind unspent stimulus funds; Reform business regulations, such as repealing Section 404 of the Sarbanes–Oxley Act in order to reduce excessive auditing costs; Reform the tort system to lower costs and uncer­tainty facing businesses; Remove barriers to domestic energy production in Alaska and the Outer Continental Shelf; Repeal the job-killing Davis–Bacon Act; Pass pending free-trade agreements; and Reduce taxes on companies’ foreign earnings if they repatriate those earnings to the United States.
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