Thursday, June 10, 2010

Barack Obama's Total Eclipse for America

Hope that Laffer's predictions are in error, but his observations, comparing Obama's policies with Reagans, makes a lot of sense. If you read the entire article, the author predicts that, through Obama's lack of support for our allies, and the weakness and lack of leadership he is showing to the international community, he is inviting a war, whether it be caused by North Korea or Iran attacking Israel.

Consider exactly what Obama is implying in these words. When he came into office, the economy was in "freefall," "shrinking at an alarming rate." It was only because of the "dramatic and unpopular steps" he took that this was stopped, and reversed. Otherwise, without Obama's miracle Grecian formula elixir, the economy would have continued in freefall, all the way back to the stone age.

This claim is in perfect parallel to the claim by Twain's Connecticut Yankee that he was blocking out the sun during that solar eclipse on June 21, 528, wowing the Dark Ages yahoos. The economy was never going to remain in freefall absent Obama's miracle cure innovation of trillion dollar deficits. For centuries now, we have experienced the business cycle in market economies, where the economy goes down, and then recovers. We just don't remember that anymore because Reaganomics was so successful that it banished the business cycle effectively for a record 25 years, with only 2 short, shallow downturns during that time. Even the official scorekeepers at the National Bureau of Economic Research (NBER) have suggested that the period be considered one continuous, unparalleled expansion.

In fact, since World War II, the U.S. economy has suffered 12 recessions, lasting an average of 10 months. NBER reports 33 business cycles since 1854. The longest during the 75 postwar years, until now, has been 16 months. But here we are today, 30 months since the latest downturn officially began in December 2007, with unemployment still stuck at nearly 10% for months now.

Last Friday's jobs report for May shows that the agony continues, even though President Obama predicted in his Carnegie Mellon speech that "we expect to see strong job growth in Friday's report." Outside the government employment of 411,000 temporary Census workers, Obama's economy 30 months after the recession began created only 20,000 net new jobs.

More than 10 times that many new jobs are needed each month just to keep unemployment from rising over the long run. The unemployment rate dipped in May only because 322,000 potential workers hopelessly fled the flagging work force. The Bureau of Labor Statistics (BLS) reports, "there were 1.1 million discouraged workers in May, up by 291,000 from a year earlier. Discouraged workers are persons not currently looking for work because they believe no jobs are available for them."

The BLS further reported that the army of the unemployed persisted at 15 million Americans in May. Nearly 7 million remained long-term unemployed for more than 6 months, another postwar record. African Americans continued to suffer depression level unemployment under Obama at 15.5%. The teenagers who supported him have similarly been punished with continuing 26.4% unemployment. Ditto Hispanics at 12.4%.

Herbert Obama's Great Depression

The magical economic policies of Obama the Magnificent have served only to delay and slow recovery. Given the severity of the recession, the recovery should exhibit booming growth for at least the first year. But the three quarters of growth President Obama touted have displayed less than half the growth in the first three quarters of the 1983 recovery, from the last recession of similar magnitude. Obama's three growth quarters came after 18 months of decline, which would be a postwar record recession in itself. But in an April, 2010 statement, the NBER concluded that it cannot yet identify the end of the recession.

Now it appears that Obama's policies, hearkening all the way back to FDR's 1930s, may be leading us into another Great Depression, in fact. The economy is wobbling now potentially into another downturn because of the specter of President Obama's sweeping, across the board tax increases set to go into effect next year, raising virtually every tax Federal tax rate, echoed by pending and actual state and local tax increases. On top of that he is feverishly adding to regulatory cost burdens. In his Carnegie Mellon speech, he perversely proclaimed he would lead us into renewed economic growth and prosperity by dumping another multitrillion dollar cost on the economy through his cap and trade tax.

As Art Laffer predicted in Monday's Wall Street Journal, "When we pass the tax boundary of Jan. 1, 2011, my best guess is that the train goes off the tracks and we get our worst nightmare of a severe 'double dip' recession." Laffer recounts how the delay in Reagan's tax cuts to 1983 delayed that recovery, but once they became effective the economy skyrocketed into a 25-year boom. He explains the lesson for today:

Reagan's delayed tax cuts were the mirror image of President Barack Obama's delayed tax rate increases. For 1981 and 1982 people deferred so much economic activity that real GDP was basically flat (i.e., no growth), and the unemployment rate rose to well over 10%. But at the tax boundary of Jan. 1, 1983 the economy took off like a rocket, with average real growth reaching 7.5% in 1983, and 5.5% in 1984. It has always amazed me how tax cuts don't work until they take effect. Mr. Obama's experience with deferred tax rate increases will be the reverse. The economy will collapse in 2011.
Barack Obama's Total Eclipse for America

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