Right now, the American economy ought to be soaring. Just think about it for a second. Here are three factors that would be pushing economic growth into the stratosphere in normal times:
1. Since 2008, the number of homes built is much lower than the number needed just to provide shelter for the increase in the population. All those children who have moved back into their parents' house are potential customers for new houses and apartments. People who wanted to buy bigger homes but who waited are another group of potential buyers. And with each new purchase of a home, there will be corresponding purchases of furniture, appliances, and other items needed for the home.
2. The average age of the cars on American roads is at the oldest level in recent years. In other words, there is a pent up demand for millions of cars, vehicles that were not sold during the recession and its aftermath.
3. The oil and gas fields of the United States are producing more than they have in decades. While this is not true of the fields on federal land where president Obama has managed to cut production, the increase is still enough to reduce the balance of payments deficit, increase employment and spread royalty income around to a large number of families.
When you put all these three factors together, you find that we ought to be in the midst of a boom in the housing, auto and energy industries. That covers nearly a half of the American economy. If these industries boom, then the rest of the economy should follow along as a result.
So, one may ask, how can it be that with these factors in place for years now, the American economy is just limping along?
Let's start by discussing what is NOT the problem. There are no high interest rates that might price homes or cars beyond the reach of most buyers. The Federal Reserve has pumped so much money into the economy that interest rates are still at historic lows even after the recent rise. Nor are there any structural impediments to growth of the housing or auto markets. America is not short of lumber or copper or steel. We could easily increase the production of homes and cars.
So what's the problem? Two words actually suffice as an answer: Obama's policies. President Obama has managed to tie both businesses and consumers in knots, making both fearful of the future. Businesses are still worried about what the impact of Obamacare will be. At the same time, these businesses are spending billions of dollars and focusing their attention on making the changes required to comply with the law. Remember if a company spends money on costs to comply with Obamacare, that is money that cannot be spent to increase production or to hire new workers. Nothing gets produced as a result of that expenditure, the money just goes down the drain. Businesses are also engaged in responding and complying with an avalanche of new regulations, be they environmental orders from the EPA, financial orders that come out of the new Dodd Frank legislation, or labor orders that issue from the newly activist NLRB. Obama has acted repeatedly to increase these regulations, moves which further undermine the ability of the economy to grow. Obama has also moved repeatedly to increase taxes on both business and consumers. Here too, every dollar taken out of the private economy is a dollar that will not be spent on buying new homes or cars.
Obama's policies have also hit the consumers of America hard. A law like Obamacare that penalizes companies with more than 50 employees pushes many firms to fire enough people so that they can get below the 50 worker limits. New restrictions on lending make it hard for small businesses (which produce the majority of new jobs) to get the capital needed for operations.
If nothing is done soon, America will be facing a potentially permanent problem. The wealth of the people will be depleted to a point that there will be no ability to grow quickly even after the current idiotic policies are terminated. We cannot wait; action is required. That is what makes the 2014 election even more important that the usual off year election.
1. Since 2008, the number of homes built is much lower than the number needed just to provide shelter for the increase in the population. All those children who have moved back into their parents' house are potential customers for new houses and apartments. People who wanted to buy bigger homes but who waited are another group of potential buyers. And with each new purchase of a home, there will be corresponding purchases of furniture, appliances, and other items needed for the home.
2. The average age of the cars on American roads is at the oldest level in recent years. In other words, there is a pent up demand for millions of cars, vehicles that were not sold during the recession and its aftermath.
3. The oil and gas fields of the United States are producing more than they have in decades. While this is not true of the fields on federal land where president Obama has managed to cut production, the increase is still enough to reduce the balance of payments deficit, increase employment and spread royalty income around to a large number of families.
When you put all these three factors together, you find that we ought to be in the midst of a boom in the housing, auto and energy industries. That covers nearly a half of the American economy. If these industries boom, then the rest of the economy should follow along as a result.
So, one may ask, how can it be that with these factors in place for years now, the American economy is just limping along?
Let's start by discussing what is NOT the problem. There are no high interest rates that might price homes or cars beyond the reach of most buyers. The Federal Reserve has pumped so much money into the economy that interest rates are still at historic lows even after the recent rise. Nor are there any structural impediments to growth of the housing or auto markets. America is not short of lumber or copper or steel. We could easily increase the production of homes and cars.
So what's the problem? Two words actually suffice as an answer: Obama's policies. President Obama has managed to tie both businesses and consumers in knots, making both fearful of the future. Businesses are still worried about what the impact of Obamacare will be. At the same time, these businesses are spending billions of dollars and focusing their attention on making the changes required to comply with the law. Remember if a company spends money on costs to comply with Obamacare, that is money that cannot be spent to increase production or to hire new workers. Nothing gets produced as a result of that expenditure, the money just goes down the drain. Businesses are also engaged in responding and complying with an avalanche of new regulations, be they environmental orders from the EPA, financial orders that come out of the new Dodd Frank legislation, or labor orders that issue from the newly activist NLRB. Obama has acted repeatedly to increase these regulations, moves which further undermine the ability of the economy to grow. Obama has also moved repeatedly to increase taxes on both business and consumers. Here too, every dollar taken out of the private economy is a dollar that will not be spent on buying new homes or cars.
Obama's policies have also hit the consumers of America hard. A law like Obamacare that penalizes companies with more than 50 employees pushes many firms to fire enough people so that they can get below the 50 worker limits. New restrictions on lending make it hard for small businesses (which produce the majority of new jobs) to get the capital needed for operations.
If nothing is done soon, America will be facing a potentially permanent problem. The wealth of the people will be depleted to a point that there will be no ability to grow quickly even after the current idiotic policies are terminated. We cannot wait; action is required. That is what makes the 2014 election even more important that the usual off year election.
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