Posted on 06/02/2012 4:41:04 AM PDT by Kaslin
You would think $1 trillion in spending stimulus and $2.5 trillion of Fed pump-priming would produce an economy a whole lot stronger than 1.9 percent GDP, which was the revised first-quarter number. And youd think all that government spending would deliver a whole lot more jobs than 69,000 in May.
But it hasnt happened.
The Keynesian government-spending model has proven a complete failure. Its the Obama model. And it has produced such an anemic recovery that frankly, at 2 percent growth, were back on the front end of a potential recession. If anything goes wrong -- like another blow-up in Europe -- theres no safety margin to stop a new recession.
And that brings us to the grim May employment report, which generated only 69,000 nonfarm payrolls. Its the third consecutive subpar tally, replete with downward revisions for the two prior months. Its a devastating number for the American economy, and a catastrophic number for Obamas reelection hopes. All momentum on jobs and the economy has evaporated.
Inside the May report, the data is just as bad. The unemployment rate rose slightly from 8.1 to 8.2 percent. The so called U6 unemployment rate, tracking the marginally employed or completely discouraged, increased to 14.8 percent from 14.5 percent. And labor earnings are barely rising at 1.7 percent over the past year, almost in line with the inflation rate. In fact, through April, after-tax, after-inflation income is scarcely rising at 0.6 percent for the past year.
The private workweek also fell in May. So did the manufacturing workweek and aggregate hours worked for all employees. The small-business household survey did rise, but that follows declines in the prior two months.
Barack Obama doesnt get this, but businesses create jobs. And firms have to be profitable in order to hire. Yet the president is on the campaign trail criticizing Mitt Romney by degrading the importance of profits. Huh?
Without profits businesses cant expand. And if they dont expand, they cant hire. And if they dont have profitable rates of return, theyre not going to attract new capital for investment.
Which brings us to a couple of important reasons for the virtual freeze in hiring.
First theres the fiscal tax cliff. If all the Bush tax rates go up, incentives will go down and liquidity will leave the system. You cant pick up a newspaper these days and not find a story about how the fiscal cliff is elevating uncertainty and slowing U.S. growth. House Speaker John Boehner asked Obama for help in extending the Bush tax cuts this summer. But Obama said no. Instead, he wants to raise marginal tax rates on successful upper-income earners, capital gains, dividends, estates, and many successful corporations.
Wheres the corporate tax reform that would lower rates and broaden the base and end the double-taxation of the overseas profits of American companies? A business tax cut would help enormously, but its nowhere in sight. Neither is the Keystone Pipeline, which is a surefire job-creator. Obama is too busy trashing Bain Capital profits and Romneys business career, both of which, by the way, have recently been praised by former president Bill Clinton. (It was Clinton, you might recall, who lowered investment taxes and presided over an economic boom.)
A second uncertainty facing businesses is the Supreme Court decision on Obamacare due in a few weeks. If all those crazy tax-and-regulation mandates are deemed unconstitutional, its Katy bar the door as businesses put profits to work and hire. But theyre not going to move until they see that court decision.
Then theres the whole European mess with the threat of banking contagion from Spain, Greece, and Italy. That could blow up the whole world economy if it goes completely sour. The Europeans should guarantee all bank deposits, interbank loans, and bank debt until this story is straightened out. But theyre not. So the problem festers.
And now European companies are withdrawing money from local banks and investing in dollars (especially through Treasury bonds that are yielding an incredibly low 1.5 percent). But the rapid rise of King Dollar is generating commodity deflation, which is a deterrent to manufacturing production. According to the May ISM report, manufacturing is slowing.
The Fed may yet launch a new quantitative easing to stop commodity deflation and accommodate the gigantic worldwide dollar demand. But the merits of this move are dubious. On the other hand, an extension of the Bush tax cuts right now would stop the economic and job slide and reestablish certainty.
In fact, all the countries around the world should move to the supply side with lower tax rates to spur economic-growth incentives. Europe, China, and Latin America ought to go back and read Ronald Reagans speeches and examine his actions when he faced a similar crisis 30 years ago. It would be an hour or two well spent.
The Bureau of Labor Statistics reported Labor Force Participation Rates remain near 30-year lows.
He could turn those unemployment and stock market numbers around in a few weeks, but he is stuck on stupid, trying to find more federal money for "shovel-ready" public works projects.
He's going to crash and burn, and perhaps even find out that such Lords of the Earth, like Mubarek, and maybe Barak Obama, can go to the slam...
Was it Napoleon who said, "Never interrupt your enemy when he is making a mistake."?
The Keynesian government-spending model has proven a complete failure.
The Kenyan g’mint Prezbo model has proven a complete failure as well.
Time to let a true Reagan supply sider like Romney in there.
yipes.
“The Keynesian government-spending model has proven a complete failure.”
The Kenyan g’mint Prezbo model has proven a complete failure as well.
Time to let a true Reagan supply sider like Romney in there.
yipes.
“A second uncertainty facing businesses is the Supreme Court decision on Obamacare due in a few weeks. If all those crazy tax-and-regulation mandates are deemed unconstitutional, its Katy bar the door as businesses put profits to work and hire. But theyre not going to move until they see that court decision.”
Wouldn’t it be ironic if the Supremes deem Obamacare unconstitutional and it does give rise to boomlet of business investment. Of course. the Obamabots will take credit for the boomlet while screaming that Repubs and the Court want to take your health care away.
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