The President’s argument goes like this: since the economy has turned
around and unemployment is dropping, he deserves another term. There
are only three things wrong with his line of reasoning: 1) it hasn’t, 2)
it isn’t, and 3) he doesn’t.
Last year’s economic growth rate was a dismal 1.6%, less than half of the growth forecasted by President Obama in his last budget, and much worse than the 3.2% growth reported in 2010. Inflation was reported by the government at 2.5%, up sharply from 1.4% the year before. And according to the data published by Shadow Government Statistics – the place to go to find unvarnished economic data - real inflation was 11.2% last year, meaning that the true GDP actually declined by 5.6%.
And most people by now have figured out that the recent drop in the unemployment rate was a statistical “improvement” brought about by BLS adjusting the labor force baseline. Most independent analysts put the true rate of unemployment and underemployment at over 15%; and even government statistics show a lower percentage of Americans are working today than at any time in the modern era.
So even using the most favorable numbers to the President, we had less people working, 64% more inflation, and 50% slower economic growth last year than the year before. Where is my Jim Mora voice, “…second term…did you say, second term? Playoffs?”
Coming out of a recession, we would expect growth rates of 5-6%; we need 3.5% growth just to tread water – to create the number of new jobs needed to keep pace with population growth and immigration in this country. 1.6% doesn’t cut it (to say nothing of -5.6%) and blaming Bush or Reagan or Coolidge or Augustus Caesar doesn’t cut it, either.
The problem with the President’s economic policy isn’t what some previous President did; it is that his economic agenda is based on the faulty premise that debt is productive. GDP is basically a measure of spending, not a measure of production or productive effort, as its name might suggest. And all spending is not equal.
If I borrow $10,000 to dig a hole and then go borrow another $10,000 to fill it back up, I will have added $20,000 to GDP, even though nothing productive was accomplished and I am now saddled with $20,000 of debt. If the government does it, of course, that hole will cost ten or twenty times more, but you get the concept.
It is an article of faith to liberals like President Obama that government spending is the key to producing economic growth - I suppose it makes them feel like they are doing something. The difference between Presidents Obama and Clinton is that President Clinton learned from the mistakes of his first term in time to salvage a chance at a second one. President Obama has not been so nimble.
Last year, the federal government’s deficit was nearly 9% of GDP, and yet that enormous amount of fiscal stimulus only produced a 1.7% growth rate. As I said of the previous year’s deficit, we could have gotten a 9% GDP bounce by just giving the $1.3 trillion to a bunch of monkeys and aiming them towards the banana bin at the Pick-N-Save. Spending 9 to get less than 2 is more than 7 worse than doing nothing.
The President said in 2009 that we needed a $1.3 trillion deficit as a fiscal stimulus to revive the economy by 2011. He has just delivered his 2013 budget request, which contains his fourth consecutive $1.3 trillion deficit. Now, wait a minute; either the economy has recovered, in which case we don’t need another stimulus, or deficit spending does not work, in which case we do not need another stimulus.
There are those in government and academia who assure us that government deficits and debt are irrelevant because we enjoy monetary sovereignty, the ability to print as much money as we want. No, these are not Valley Girls, they are grown ups, and many of them have doctorate degrees and tenure.
The argument of the monetarists is that until the market rejects our currency or inflation appears, we can – and should - keep running up debt. The markets, we are told, will signal to us when we have borrowed too much – the dollar will fall, demand for Treasury debt will dry up, interest rates will rise, and so will inflation. Sounds comforting, but then so does every other bedtime story.
The problem with their theory is that there is no market, not in any real sense, for U.S. sovereign debt. The Federal Reserve can print money without repercussion because the Federal Reserve can also buy as much US Treasury debt as necessary to mask said repercussion – the drop in demand for treasuries. And it is the Federal Reserve that sets interest rates and establishes the official inflation rate – the two things that are supposed to impose “market discipline” on the system.
The theory of monetary sovereignty is not a good argument for deficits, but it is very good argument against the Federal Reserve. Yes, I am one of those; and yes, I know we are all wing-nuts. Go back and read the last paragraph again and tell me we are the loopy ones.
Speaking of spending some serious amounts of borrowed money… Last week President Obama and his security detail came to Milwaukee to celebrate a local company bringing 100 jobs back from China. Wisconsin Governor Scott Walker was on hand to greet the President and add a touch of schizophrenia to the occasion – apparently the key to job creation is to get government in and out of the way at the very same time.
But while he was here, I wish someone would have asked the President if his “green” agenda would lead him to support iron mining in Wisconsin. It will take a lot of that new Brazilian deep-water oil to lug ore all the way from Argentina to Korea to make steel which then has to be hauled back over here to make one of those locks in Milwaukee that the President came to see. Those big ships and trains don’t run on Solyndra solar panels, you know. Check that…nothing runs on Solyndra solar panels.
If we drilled here, we mined here, and we made things here, all of that activity would be increasing GDP here, increasing tax revenues here, and adding jobs here – right here in America, instead of in Argentina, Brazil, Korea, China, and anywhere-else-but-here. We need to be our own most-favored nation when it comes to trade.
The key to fixing our economy is to put the “P” back in GDP, and the way to do that is to let our capitalists save us from our politicians. Mr. Obama doesn’t seem to get that, but the next guy just might.
“Moment Of Clarity” is a weekly commentary by Libertarian writer and speaker Tim Nerenz, Ph.D. Visit Tim’s website www.timnerenz.com to find your moment and order Tim’s new book, “BRING IT!”
Last year’s economic growth rate was a dismal 1.6%, less than half of the growth forecasted by President Obama in his last budget, and much worse than the 3.2% growth reported in 2010. Inflation was reported by the government at 2.5%, up sharply from 1.4% the year before. And according to the data published by Shadow Government Statistics – the place to go to find unvarnished economic data - real inflation was 11.2% last year, meaning that the true GDP actually declined by 5.6%.
And most people by now have figured out that the recent drop in the unemployment rate was a statistical “improvement” brought about by BLS adjusting the labor force baseline. Most independent analysts put the true rate of unemployment and underemployment at over 15%; and even government statistics show a lower percentage of Americans are working today than at any time in the modern era.
So even using the most favorable numbers to the President, we had less people working, 64% more inflation, and 50% slower economic growth last year than the year before. Where is my Jim Mora voice, “…second term…did you say, second term? Playoffs?”
Coming out of a recession, we would expect growth rates of 5-6%; we need 3.5% growth just to tread water – to create the number of new jobs needed to keep pace with population growth and immigration in this country. 1.6% doesn’t cut it (to say nothing of -5.6%) and blaming Bush or Reagan or Coolidge or Augustus Caesar doesn’t cut it, either.
The problem with the President’s economic policy isn’t what some previous President did; it is that his economic agenda is based on the faulty premise that debt is productive. GDP is basically a measure of spending, not a measure of production or productive effort, as its name might suggest. And all spending is not equal.
If I borrow $10,000 to dig a hole and then go borrow another $10,000 to fill it back up, I will have added $20,000 to GDP, even though nothing productive was accomplished and I am now saddled with $20,000 of debt. If the government does it, of course, that hole will cost ten or twenty times more, but you get the concept.
It is an article of faith to liberals like President Obama that government spending is the key to producing economic growth - I suppose it makes them feel like they are doing something. The difference between Presidents Obama and Clinton is that President Clinton learned from the mistakes of his first term in time to salvage a chance at a second one. President Obama has not been so nimble.
Last year, the federal government’s deficit was nearly 9% of GDP, and yet that enormous amount of fiscal stimulus only produced a 1.7% growth rate. As I said of the previous year’s deficit, we could have gotten a 9% GDP bounce by just giving the $1.3 trillion to a bunch of monkeys and aiming them towards the banana bin at the Pick-N-Save. Spending 9 to get less than 2 is more than 7 worse than doing nothing.
The President said in 2009 that we needed a $1.3 trillion deficit as a fiscal stimulus to revive the economy by 2011. He has just delivered his 2013 budget request, which contains his fourth consecutive $1.3 trillion deficit. Now, wait a minute; either the economy has recovered, in which case we don’t need another stimulus, or deficit spending does not work, in which case we do not need another stimulus.
There are those in government and academia who assure us that government deficits and debt are irrelevant because we enjoy monetary sovereignty, the ability to print as much money as we want. No, these are not Valley Girls, they are grown ups, and many of them have doctorate degrees and tenure.
The argument of the monetarists is that until the market rejects our currency or inflation appears, we can – and should - keep running up debt. The markets, we are told, will signal to us when we have borrowed too much – the dollar will fall, demand for Treasury debt will dry up, interest rates will rise, and so will inflation. Sounds comforting, but then so does every other bedtime story.
The problem with their theory is that there is no market, not in any real sense, for U.S. sovereign debt. The Federal Reserve can print money without repercussion because the Federal Reserve can also buy as much US Treasury debt as necessary to mask said repercussion – the drop in demand for treasuries. And it is the Federal Reserve that sets interest rates and establishes the official inflation rate – the two things that are supposed to impose “market discipline” on the system.
The theory of monetary sovereignty is not a good argument for deficits, but it is very good argument against the Federal Reserve. Yes, I am one of those; and yes, I know we are all wing-nuts. Go back and read the last paragraph again and tell me we are the loopy ones.
Speaking of spending some serious amounts of borrowed money… Last week President Obama and his security detail came to Milwaukee to celebrate a local company bringing 100 jobs back from China. Wisconsin Governor Scott Walker was on hand to greet the President and add a touch of schizophrenia to the occasion – apparently the key to job creation is to get government in and out of the way at the very same time.
But while he was here, I wish someone would have asked the President if his “green” agenda would lead him to support iron mining in Wisconsin. It will take a lot of that new Brazilian deep-water oil to lug ore all the way from Argentina to Korea to make steel which then has to be hauled back over here to make one of those locks in Milwaukee that the President came to see. Those big ships and trains don’t run on Solyndra solar panels, you know. Check that…nothing runs on Solyndra solar panels.
If we drilled here, we mined here, and we made things here, all of that activity would be increasing GDP here, increasing tax revenues here, and adding jobs here – right here in America, instead of in Argentina, Brazil, Korea, China, and anywhere-else-but-here. We need to be our own most-favored nation when it comes to trade.
The key to fixing our economy is to put the “P” back in GDP, and the way to do that is to let our capitalists save us from our politicians. Mr. Obama doesn’t seem to get that, but the next guy just might.
“Moment Of Clarity” is a weekly commentary by Libertarian writer and speaker Tim Nerenz, Ph.D. Visit Tim’s website www.timnerenz.com to find your moment and order Tim’s new book, “BRING IT!”
