Thursday, October 7, 2010

Is The Slow Recovery The Fault Of The Government?

Reports for job growth in September are expected to be poor and the struggling job market threatens to stall any economic recovery. Professor Peter Morici says we should recognize the role of poor government policy in the slow economic recovery, including the lack of action on the huge trade deficit with China. See the following post from The Street.

On Friday, the Labor Department reports jobs creation for September, and forecasters are predicting the U.S. economy neither added nor lost jobs and that the unemployment rate rose to 9.7%. This indicates the economic recovery is near grinding to a halt.

Over the horizon, most forecasters predict substandard growth, below 3%, for the next several years and chronically high unemployment, much like Britain after the mindless fits of Labor Governments before Thatcher.

President Obama will point to some 75,000 private-sector jobs that were created, but more than 300,000 are needed each month to pull down unemployment to prerecession levels and pay the taxes needed to finance the president's ambitious social agenda and industrial policies.

More troubling is core private-sector jobs growth -- private-sector jobs creation less government subsidized health care and social services, and temporary services. That is likely to come in at about 35,000 for September.

Core private-sector jobs growth tracks taxpaying jobs and is lower than a snake's belly, as the threat of higher taxes, regulation and health care costs have just about exterminated entrepreneurial instincts and the appetite for risk among businesses of any size.

After more than $800 billion in stimulus spending, sweeping health care and bank reforms and reorganization, massive government buyouts at General Motors and Chrysler, this paltry jobs performance is a sweeping indictment against the tax, spend and regulate policies of Barack Obama, but he gets a pass by dint of Republican incompetence.

The loyal opposition wanders clueless in the desert. The GOP keeps chanting tax cuts and indiscriminant deregulation, as if that would cure an economy dependent on Wall Street avarice to accomplish growth. Much like generals in an Armageddon movie screaming we need to build more missiles to avert another nuclear holocaust.

Simply put, businesses can't hire and America cannot grow because businesses lack customers and capital. The huge trade deficit with China is blowing a hole in demand for U.S. goods and services bigger than President Obama can fill with deficit spending, and regional banks were not much helped by the TARP.

Most Main Street financial institutions remain burdened by bad real estate loans and securities backed by such loans and did not get Washington subsidies to rekindle foolish trading and pay big bonuses. Now most small and medium-sized businesses can't get loans to expand.

Add all the uncertainty President Obama has instigated about future taxes, regulations and health care costs, and a second perfect storm is brewing.

Until Democrats and Republicans alike recognize the need to stand up to China, create a Savings and Loan Crisis-era Resolution Trust for Regional Banks, America will not grow.

Sadly, neither the Pledge to America nor President Obama on the campaign trail address these issues.

Learn Mandarin. Other than working on Wall Street, the brightest future may be in serving America's new landlords.

This post by Peter Morici has been republished from The Street.
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