OBAMANOMICS RECESSION
By DICK
MORRIS
TheHill.com
The drop in the stock market (now
about 1,000 points on the Dow) is a graphic indication of the stark fact
that we are entering the infamous double dip of the recession, long feared
and predicted. The economy is not in a V after all (down and then up), but
in a W (down, up, down again, and then, finally, up). And the cause of the
second dip is not the recession itself, but the cure administered to it by
President Obama and the Democratic Congress.
Consider the indications (data
provided by the New America Foundation, analysis by Sherle R. Schwanninger
and Samuel Sherraden):
·
GDP growth has been 2.2 percent, 5.6 percent and 3.2 percent for each of the
last three quarters, well below the rebounds typical in past recessions.
·
Total civilian employment has rebounded by only 1 percent since the depth of
the unemployment five months ago. In 1973, at a comparable point, it had
rebounded by 7 percent. In 1981, by 8 percent. In 1990, by 4 percent. And in
2001 by 3 percent. U-6, the broadest measure of unemployment, stands at 17.1
percent, and we need 12.8 million new jobs.
·
Housing prices have dropped by 30 percent since 2006 and "many economists
expect housing prices to decline at least another 10 percent," according to
Schwanninger and Sherraden.
·
While corporate profits are 30.6 percent higher than a year ago, wages are
up by 1.6 percent, less than half their rate of increase two years ago.
·
Financial-sector profits make up 35.7 percent of all domestic corporate
profits. These gains are driven by trading revenue, which does not reflect
real economic growth. Schwanninger and Sherraden report, "In the first
quarter of 2010, Goldman Sachs, Morgan Stanley and Bank of America earned 72
percent, 45 percent and 16 percent of their net revenue [respectively] from
trading profits."
·
Personal savings dropped from a high of almost 6 percent to 2.7 percent in
March 2010, so households have cut their debt by just $300 billion since it
peaked in 2008. Household debt, which rose from 60 percent of GDP in 1990 to
almost 100 percent in 2008, has dropped to 97 percent. It has a long way to
go before it's down enough to free consumers to spend more.
·
Meanwhile, retail sales have averaged only a 1.7 percent increase over the
past three quarters, half of which was to restock inventories. Schwanninger
and Sherraden note "in a typical recovery, the rebound is closer to 3.5
percent." And most of that increase is due to expanding government cash
transfer payments, which now make up 18.3 percent of personal income.
"Excluding transfer payments, personal income increased just 0.3 percent
since the third quarter of 2009."
·
Stimulus spending, which has failed to generate private-sector growth, is
winding down. Only 43 percent of the tax benefits and entitlement spending
remain to be doled out, as does 63 percent of the contracts, grants and
loans in the stimulus package.
·
The strengthening of the dollar due to the collapse of the euro will dry up
U.S. export trade. Exports to EU nations account for 21 percent of American
and 20 percent of Chinese exports. Schwanninger and Sherraden note, "A
European slowdown will reduce demand for the two primary engines of world
economic growth."
But this second downturn in the economy will be
accompanied by inflation, making it worse than the first recession. With
interest rates set to rise (because the Fed is no longer massively
purchasing securities to keep them down), taxes set to go up (because of
Obama's ideology) and global energy use about to increase, sending prices
higher (because the rest of the world is recovering), prices have to go up.
But with no growth in real personal income and household credit close to
all-time highs, there is not enough demand to pay the higher prices, so a
deeper slump will ensue.
The solution? Cut taxes. And bring down the
deficit through massive spending cuts. Reduce our borrowing needs by
slashing our spending. Free up capital to feed job growth.
It should
be evident to all that Obamanomics is a disaster. It reminds one of nothing
so much as the medieval practice of bleeding the patient to make him well by
expelling the evil spirits that dwelt within. When the patient did not
recover, they just bled him more and, when he died, they just said that the
spirits killed him. The practice of spending, borrowing and then taxing to
fuel job growth is the modern analogy.