An Economy in Panic

Mike Brownfield
Heritage Foundation

July 8, 2011

There’s no good way to spin the news that came out of today’s monthly U.S. jobs report. The economy generated only 18,000 total new jobs, the unemployment rate increased to 9.2 percent, and the number of unemployed Americans has gone up by 445,000. In other words, the recovery appears to have slowed markedly. President Barack Obama’s stimulus-infused “recovery” refuses to ignite, unsurprisingly to all but him.

And to make matters worse, May’s paltry job growth numbers were revised even farther downward, from the initial estimate of 54,000 to 25,000. Sadly, the record continues—the Obama recovery remains the weakest recovery of the post–World War II era. In past recessions, employment fully recovered within two to three years. Today, U.S. job growth is stopped dead in its tracks. If you want a comparison of what job growth could look like, go back to the 1980s’ Reagan recovery. By the 20-month mark, the unemployment rate had dropped from 10.8 percent to 7.5 percent – a 3.3-point drop. In contrast, under Obama, the unemployment rate has risen a full percentage point to today’s 9.2 percent.

The Heritage Foundation’s James Sherk puts the pace of recovery into perspective, noting that “The economy needs to add between 100,000 and 125,000 jobs per month to keep pace with population growth. Unemployment will rise if employers consistently create fewer jobs than this.” Unfortunately, that’s where we’re at today. And if the economy keeps up this trend, Americans can expect unemployment to remain permanently high.

And the American people have President Obama’s big-spending economic policies to thank for slowing the pace of recovery. House Budget Committee Chairman Paul Ryan (R-WI) explains how the President’s debt-laden reliance on Keynesian interventions in the economy have helped put the U.S. economy in its current state:

Investors and businesses make decisions on a forward-looking basis. They know that today’s large debt levels are simply tomorrow’s tax hikes, interest rate increases, or inflation – and they act accordingly.

It is this “debt overhang,” and the President’s threatened tax hikes, Obamacare, his incessant meddling in business (whether through the EPA or the NLRB) and the uncertainty those actions generate that are weighing on U.S. growth, investment and job creation today.

Against this backdrop, the President and congressional leaders are continuing to meet in secret negotiations over proposals to raise the nation’s $14.3 trillion debt ceiling, proposals to increase taxes by as much as $1 trillion, and calls for even more stimulus spending (as if the $666 billion that has left us in the lurch isn’t quite enough). What is needed for jobs and our budget and debt crisis – besides immediate spending cuts– is a growth agenda. By contrast, hiking taxes is a dearth agenda, and the best way to get more “revenue” is through revenue neutral tax reform. In this weekend’s continuing debt ceiling negotiations, any more discussion of tax hikes should be clearly taken off the table by today’s jobs report.

Rather than spending and taxing more, it’s time to take a different approach.

Congress and the White House must take immediate action to get America’s economic house in order and to foster an environment that encourages job creation. Those measures include repealing Obamacare, its employer mandates and tax increases; preventing the Environmental Protection Agency from regulating carbon dioxide; passing tort reform to reduce the cost of meritless lawsuits; expanding trade agreements; permitting more domestic energy production; and cutting spending to avert massive tax increases.

President Obama habitually refers to the failed economic policies of the past. The pace of America’s economic recovery is unacceptable, and it’s being made worse by the Obama Administration’s adherence to a flawed philosophy of relying on government to do the work of the private sector. Obama should be more concerned with the failed economic policies of the present – his own. A new direction is in order.

Quick Hits:

President Obama and congressional leaders met behind closed doors yesterday and discussed a plan to reduce the federal deficit by $4 trillion over 10 years.
The space shuttle Atlantis is fueled for the final flight of the 30-year program today, though inclement weather may delay the launch.
Tomorrow, South Sudan will become the world’s newest country following an overwhelming vote in January for independence.
For thousands of Egyptians, change isn’t happening fast enough. They have gathered in Cairo’s Tahrir Square to protest of “a slow pace of government reforms.”
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