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 you’d think all that government spending would deliver a whole lot more jobs than 69,000 in May.
But it hasn’t happened.
The Keynesian government-spending model has proven a complete failure. It’s the Obama model. And it has produced such an anemic recovery that frankly, at 2 percent growth, we’re back on the front end of a potential recession. If anything goes wrong — like another blow-up in Europe — there’s 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. It’s the third consecutive subpar tally, replete with downward revisions for the two prior months. It’s a devastating number for the American economy, and a catastrophic number for Obama’s reelection hopes. All momentum on jobs and the economy has evaporated.
Barack Obama doesn’t 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 can’t expand. And if they don’t expand, they can’t hire. And if they don’t have profitable rates of return, they’re not going to attract new capital for investment.
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 Reagan’s speeches and examine his actions when he faced a similar crisis 30 years ago. It would be an hour or two well spent.
Last summer, I had lunch with some business folks at a company perceived as being pro-Obama. Big global company. The executives all felt as if Obama has sold them a false bill of goods. They thought they were getting Bill Clinton 2.0. Indeed, Obama surrounded himself with plenty of centrist, Clintonian advisers: Larry Summers, Austan Goolsbee, Jason Furman.
But the chief economist of the Obama administration is Obama.
And whereas Clinton mostly built upon the “neoliberal” ideas of the Reagan Revolution — pro-markets, pro-trade, pro-growth, pro-profit, pro-wealth creation, pro-private sector — Obama wants to lay a new foundation based on greater income equality, government intervention, regulation, and redistribution. (Surprise, surprise, Clinton this week praised Mitt Romney’s private-equity record.)
Again, I think this anecdote about the book The Escape Artists: How Obama’s Team Fumbled the Recovery is telling:
Energy was a particular obsession of the president-elect’s, and therefore a particular source of frustration. Week after week, [White House economic adviser Christina] Romer would march in with an estimate of the jobs all the investments in clean energy would produce; week after week, Obama would send her back to check the numbers. “I don’t get it,” he’d say. “We make these large-scale investments in infrastructure. What do you mean, there are no jobs?” But the numbers rarely budged.
“I don’t get it?” Tell me about it.