I read the following on a post in the weekly Standard today…
“Of 47 economists responding to a survey by the Wall Street Journal, 27 say the recession has ended, and 11 say the trough has been reached or will be by next month. They expect the economy to grow at an annual rate of 2.4 percent in the current quarter, and many are looking forward to a 2.75 percent to 3 percent growth rate by year end.”
Remember this. The current quarter ends on September 30. How does an economy grow when it doesn’t hire back the workers it originally laid off. What bothers me about this is that these guys are just flat wrong, and when none of this comes to pass no one will point it out so that when they make this same absurd prediction next quarter they will once again get away with it. Back in 1981 and 1982 when the Reagan administration attempted to pull this country out of the Jimmy Carter/Democrat Congress Recession, they had the Fed jack up interest rates to 18% to get all of the inflationary cash out of the economy. They then got the Congress to pass a massive tax cut with tax simplification in order to jump start the economy. After that they convinced the Saudis to increase oil production that caused the price of a barrel of crude to drop from $40 bbl to below $10 bbl. Finally they started a program to build a 600 ship navy that saw tens of thousands of people going back to work in high paid high skilled jobs in the shipyards and high tech support firms.
Even with all this it took the economy nearly two years to fully recover. In August of 1982 the Dow Jones Industrial average sat at just under 800 and began its meteoric rise that did not see its peak until November of 2007, 25 years later.
In 1932 FDR also inherited a Recession, and also tried government intervention to end it, but his efforts had just the opposite effect that Reagan’s had. Instead of cutting taxes Roosevelt raised taxes, he devalued the dollar after forcing all American citizens to sell their gold to the government at confiscatory rates. He instituted wage and price controls, threatened businesses with the full force of the government, and ultimately wasted billions of the people’s hard earned money on stimulus projects that for the most part were utter failures. During this time other governments around the world did pretty much nothing and allowed the recessions in their countries to run their course, and they did in about 2 to 3 years. By 1939 here in the US unemployment was still at 15% and we were still in the throes of the Great depression due primarily to government obstruction of a recovery.
So here we are in the third quarter of 2009, and we have 10% unemployment, the economy has been in recession since the end of 2007, even though helicopter Ben didn’t know we were in a recession until 9 months after the fact. What has the Obama administration done to turn things around? First they authorized $800 billion in the non-stimulus bill to be spent on pure pork, only not much has actually been spent so far. They have raised taxes on cigarettes, raised taxes on energy through “Cap and Tax”, and raised taxes through inflation by monetizing the debt. They have threatened banks and insurance companies, taken over two automobile companies, and accused doctors of amputating feet in order to pad their pockets. In other words this administration has declared war on American business. Who’s next?
If you are an American businessman what do you see in the future that would encourage you to hire more employees or take the huge risk of expanding your business. Why would anyone want to take a risk like that when none of us know what this administration is going to do next that will adversely affect your business vis-à-vis taxes and regulation. The fact of the matter is that this economy will not turn around as long as this administration and this Congress continue to declare war on American businesses. A real and meaningful recovery will not begin until the following occurs. First Congress must pass significant and permanent across the board tax cuts, to put more money in peoples pockets to spend as they see fit not the government. Second, the Fed must raise interest rates to soak up all the money that they have flooded the market with, and to encourage saving and investment instead of consumption. Third, the Congress must cease its reckless campaign of excessive spending and cut the size of the federal government in order to free up even more capital for the private market. Until you see these reforms occurring I would rule out any sort of recovery anytime soon.