Thursday, July 12, 2012

Yet Another Warning...

...on Obamanomics:

Even as the White House pats itself on the back for a nonexistent economic recovery, new data suggest things are taking a turn for the worse. Make no mistake: This will be Barack Obama's recession, not George Bush's.

'I think we're in recession already," says Lakshman Achuthan, co-founder of the widely respected Economic Cycle Research Institute, a nonpartisan economic think tank dedicated to timing the global economy's business cycles.

How can it tell? The ECRI looks at factory output, employment, income and sales. "When you look at those four measures," Achuthan told Bloomberg TV this week, "they're rolling over."

And ECRI's isn't the only indicator headed South.

As IBD noted earlier this week, the June Small Business Index, put out by the nation's premier small-business group, the National Federation of Independent Business, fell three points in June to 93 — the biggest drop in two years, and the lowest reading for the index since last October. For the record, the index stood at 94 when the U.S. entered the last recession in 2007.

Even more worrisome, the NFIB's jobs index fell for the first time this year, a truly bad sign since small businesses account for at least two-thirds of all job growth.

Still another key indicator, the Purchasing Managers Index, fell to 49.7 in June, down sharply from the 55.8 a year earlier and signaling economic contraction.

Get the picture? Bit by bit, the economy seems to be slipping back into recession.

In the second quarter, businesses added just 75,000 jobs a month, the worst three-month stretch since 2010. And unemployment of 8.2% is way understated. Even the Labor Department says that once you count discouraged workers, real unemployment is 14.9%.

First-quarter GDP growth was a meager 1.9%. Given the abrupt slowing in job growth, many economists say that might be the high point for GDP growth this year. And some, like ECRI's Achuthan, see recession.

Why is this happening? Obamanomics, with its excessive spending, $16 trillion in debt and crushing regulations, is squeezing the life from the private sector.

Worst of all, Obama's renewed threat to raise taxes on families earning more than $250,000 a year could hit 1.2 million small businesses, a new Heritage Foundation study says, all but ending job growth.

Yet, following last week's dismal jobs report, Democratic National Committee Chair Debbie Wasserman Schultz declared herself "pretty happy," while Obama's top economic adviser Alan Krueger said the economy "is continuing to heal."

It's clear the economy isn't thriving under Obamanomics. Yet Obama doesn't change course. Ideologically, for the left, there's too much at stake.

If the economy goes back in the tank, Democrats will again blame George W. Bush. But if we have another recession, this one will be all Obama's. He's earned it.

This fits in perfectly with yesterday's post on how liberal policies simply don't work in reality.  If Obamanomics isn't discarded and rolled back in this next election cycle, it's hard to say how bad things might get before any genuine improvement occurs.  Even worse, America may slip into a dreaded 'new normal' that is essentially 2012 indefinitely.

Speaking of tax issues, Senator Rob Portman of Ohio put out this press release blowing up a related Obama myth:

"While President Obama calls for higher taxes on jobs creators, two new government reports undercut his class warfare argument and the basis for calls for higher taxes.  While I doubt these new studies will cause President Obama to change his tune, because too often, with this President, politics trumps good policy, yet another of his straw men has fallen flat.  As the nation careens toward a fiscal cliff, real leadership, not more rhetoric and finger pointing, is necessary to reform our tax code and address Washington's out of control spending."

The tax policies enacted a decade ago are responsible for just 16 percent of the swing from surplus to deficit. Furthermore, given that only about one-fourth of the tax cuts went to upper-income earners, just 1/25th of the decline from surpluses to deficits resulted from upper-income tax cuts.  (NOTE:  Given that CBO does not take into account any of the positive impact of tax cuts on investment, savings and economic growth, the percentage was actually even smaller than the 1/25th estimate)

The CBO report has shown that new spending and net interest were three times as responsible for the deficits as the 2001 and 2003 tax cuts – and 12 times as responsible as the upper-income portion of the tax cuts.

In a second report, the CBO said that in both 2008 and 2009, the highest-earning 20 percent of taxpayers paid 94 percent of the total income tax burden – up from 86 percent in 2007, and 81 percent before the 2001 tax cuts.  In other words, higher-income Americans have been paying a bigger and bigger part of the total tax burden under the so-called "Bush tax cuts."

The Bush tax cuts weren't just for 'the rich', nor did they get us into this mess.  Now, I would never accuse Bush of being frugal in terms of government spending, but he could get away with his big spending precisely because of the energy his tax cuts injected into the economy.  During the Bush years, the unemployment rate was around 4.5-5%, GDP growth was around 5-7%, and the deficits were only $100-200 billion.  Once the Democrats took control of Congress (and the government purse strings) in 2006, that all started to shift.  Now, we see unemployment of 8-10% (with real unemployment closer to 14-16%), GDP growth of less than 2%, and deficits in the trillions of dollars as far into the future as anyone cares to project.

Funny how all our problems today are still being blamed on George W. Bush, isn't it?  The next time you hear someone say it's Bush's fault, you might suggest that if Bush was actually responsible for the economy, things would be in much, much better shape.

But he's not, and things aren't.  This isn't how I want my kids to grow up.  When can we start voting?

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