Here’s a little news to begin your workweek: President Obama’s own Council of Economic Advisors released its Seventh Quarterly Report on the impact of the Stimulus last Friday just as the long holiday weekend was beginning.
There was a reason for the timing of the report’s release: it’s pretty damning for the Obama administration. A quick perusal of the numbers combined with some simple math shows the Stimulus has resulted in the saving or creation of 2.4 million jobs at the cost of a mere $666 Billion dollars so far. Nice number, that last one.
OK, let’s see here, $666 Billion spent, divided by 2.4 Million jobs created equals, hmm, carry the two, divide by the square root of infinity, multiply by the number of Nancy Pelosi’s Botox injections and you get the answer: each job added only cost you $278,000!
Isn’t this math thingy fun?
Oh, wait, my calculator is starting to smoke and there are sparks coming from it. I coulda swore it just said, “Danger, danger Will Robinson!” I swear didn’t know calculators could talk.
Of course, any numbers that come from this administration will be revised soon, and those revisions will be “unexpectedly” worse. It’s almost like they can’t count, or something.
If you are fortunate enough to still have a job, then these numbers may not mean much to you. Perhaps the only thing you’ve noticed is that your paycheck doesn’t go quite as far as it did last year. Gasoline prices have only doubled on Obama’s watch. And actual inflation, measured the old way, has removed about ten percent of your buying power, not the “official” number of 1.5%.
“These things happen” may be your reaction. And you would be right, almost. In the past, our economy has had its ups and downs, as do all economies. But a curious thing has started to happen in the last, oh, twenty years or so. As we’ve seen a reduction in the stable base of our economy, more and more of our economy has become dependent upon disposable income.
Now you may remember what disposable income is, or at least was. It’s that part of your money that’s left over after you pay for the things you have to have in order to live: your mortgage or rent, groceries, clothes, gas, the car payment. Overhead, it’s commonly called. Now these expenses are pretty much fixed, unless you need a home or car repair of some sort. What remains is your “disposable income.” Most families spend that money on things that aren’t essential, like IPods or going out to the movies, or a vacation.
So when your overhead increases, say, it costs more for groceries and gas, it means you have less money left over for the “nice to have” items. So, a larger part of our economy has become dependent on disposable income, which tends to fluctuate a pretty good bit. This is a big reason for the bubbles that have occurred in our economy. Instead of showing gradual and steady growth over the long term, we now see sharp spikes and deep drops as bubbles form and are eventually deflated. And when they do deflate, the results are becoming more destructive.
Those of you who were around at the time might remember the “dot-com” bubble of the ‘90’s. More recently, we’ve seen the “housing bubble” where home prices started to rise well above the four or five percent annual appreciation that we once counted on. New home prices began their sharp upward climb and when that bubble burst, it sent the entire economy into a tailspin that we’re still struggling to pull out of.
Now, what separates the housing bubble from previous downturns is the direct role of Washington and its meddling in the economy. It was a direct result of a little known piece of legislation passed during the Jimmy Carter administration called the Community Reinvestment Act. I’ve touched on this before.
While the basic idea of this act was commendable, its execution was, and is, deeply flawed. Basically, it forced banks to change the formula they previously used to qualify folks seeking home loans. You may remember how easy it was to get a home loan a few years ago. The requirements were relaxed to the point that you didn’t even need to prove you had income, a marked departure from the previous standard that normally required a sample of your blood and some sort of claim by the bank on your firstborn child.
Now, there’s nothing wrong with encouraging Americans to own a home. It’s the bedrock of our economy and way of life. But instead of measures that insure a strong economy with a diversity of job opportunities for everyone, this law forced banks to lower their lending standards to include folks who previously wouldn’t have qualified for a home loan.
But that isn’t what you’ve heard as the reason for the housing market crash. What you’ve heard from Democrats is the myth that deregulation and Wall Street greed is what caused it.
Don’t be fooled. Banks and major lending institutions knew they were now subject to new regulations that defied the laws of economics. So they devised some rather ingenious ways to package these worthless loans in an attempt to recoup some of the money they were forced to lose as a result of the CRA.
So, what we have here is a failure to communicate the truth in order to gain a political advantage over Republicans.
Not content with that, the Obama administration has tried to fix one problem caused by government interference in the economy with even more interference in the form of the failed Stimulus and the Frank-Dodd financial takeover of Wall Street.
The evidence of this failure is all around us. Although we’ve been told that the recession ended some time ago, job creation has been painfully slow to rebound. While our economy is indeed growing, it has yet to reach the level needed to keep up with population growth, around 2.6%. It may be technically correct that we’re no longer in recession, the efforts of this administration have proven to be insufficient to match the normal levels of growth that we’ve seen in previous recoveries.
It’s pretty clear that Obama’s approach to fixing our economy isn’t working as advertised. New laws and the regulations that flow from them are having the opposite effect as companies sit on money that would normally be invested in expansion. One business leader after another says essentially the same thing, “There’s far too much government meddling in our economy for us to expand and hire. We’re waiting for a more stable environment before we start to invest in America again.”
One of these days, when I can find all the information, I intend to present my Backwards Economic chart that shows the clear connection between the rise of government regulations and the fall of economic activity. It’s one of those things I know to be true, and you probably do, too, it just needs some numbers in order to be credible. There’s just no way Washington can create jobs except in Washington. Each new law and regulation that comes from there only serves one purpose: to restrict our economy.
The solution is simple. In order to get our economy back on track, there must be a drastic and immediate reduction in federal interference in the economy. That won’t be easy to do, especially with the prevailing attitude of this administration, summed up recently by Treasury Secretary Tim Geithner is that taxes cannot be cut because then “you have to shrink the overall size of government programs.”
Um, Timmy, that’s exactly what needs to be done.
Maybe it’s time to redefine the real difference between the public and private sector. We could do this by calling them the “productive” and “non-productive” sectors, since this is a much more accurate description of their economic roles.
Or maybe “normal people” and “government leeches.”