For the last few weeks, the threat of radical Islamic terrorism and other foreign policy issues have move to the center of the nation's attention. It's important certainly, but let's not forget that there is another critical issue that should not be ignored. That issue, of course, is the limping American economy.
Let's take stock of where we are as a nation. For what seems like the umpteenth year in a row, the USA is going to have growth which does not exceed the low 2% level. Indeed, we may find when the final numbers come in that the economy did not even grow by 2%. Unemployment is down to 5% which is certainly encouraging until you look a bit more carefully at the data. The main reason that unemployment is so low is that millions of people have just stopped looking for work and are no longer counted as unemployed. On top of that, millions more people are working only part time even though they want full time work. These people too are counted as employed despite the fact that they cannot earn enough to get by on their part time wages. Then there are also the millions of people who have gotten jobs, but low paying, low skill jobs which also do not pay enough to let people lead a middle class life. The manufacturing sector of the US economy is already in a recession. Each month, we see manufacturing contracting or stagnant. The good paying factory jobs of the past are disappearing.
The policies that brought us here have not changed much for the seven years of the Obama administration. When Obama took office, interest rates were already near zero and the Federal Reserve has kept them there ever since. The Fed tried pumping cash into the system with repeated efforts at quantitative easing, but that has had little effect. The Fed is likely to actually raise interest rates slightly in the next few days, and that move will have a slight slowing effect on the economy. In other words, it won't help get growth going.
The fiscal policy of the federal government has been expansive since the first day Obama took office. He brought with him the biggest increase in government spending of all time. About ten trillion dollars of debt has been racked up by the nation as more and more cash has been pumped by Obama into government spending. The Republicans stopped growth in government spending when they took the House in 2011, but the major increase of 2009 - 2010 (about $800 billion per year) was never rolled back. We have this massive fiscal stimulus each year from the government, but the economy still limps along.
The problem with the federal spending increase is that it has been targeted more to help the Democrats politically than to encourage the private sector to grow the economy. Hundreds of billions of dollars were funneled to states and localities to pay the salaries of government employees, but that money leave no lasting effect on the economy. Had that same cash gone into investment in the economy, there would have been a lasting increase in production which would pay years and years of benefits. Even today, there is no coherent proposal from Obama or his party for any spending that might help grow the economy. Their policy proposals instead focus on things like universal pre-school (which Obama actually says will help the economy) or raising the minimum wage which will reduce the availability of entry level jobs and make it harder for low income people to find a route out of poverty.
On top of the avalanche of misguided and even counterproductive spending, we have the increased regulatory atmosphere that has further reduced economic growth. The Dodd-Frank law was sold by Obama and his party as a way to prevent future problems in the banking system; supposedly it would end "too big to fail". Instead, the heavy regulations in the law made it impossible for new, smaller banks to compete with the bigger established banks. Since the law passed there have been 3 new banks opened in the USA compared to about 750 that were opened in the same period of time prior to the law. That difference is even more striking when you realize that the prior period included the financial crisis when no new banks were being formed. Dodd-Frank cut off competition and actually guaranteed that "too big to fail" would become a permanent part of the system. Obamacare also threw all sorts of requirements and restrictions on American businesses with a particularly heavy burden placed on small companies with fifty or more employees. That made economic growth slower. On top of that we have a Neanderthal corporate tax structure that protects the huge corporations like GE which pay no taxes but which puts enormous burdens again on small companies that are just starting out. If the goal of the Obama administration has been to tamp down growth by making it harder for American companies to compete and succeed, they have been totally successful.
As we head into the presidential election year, we have Hillary Clinton on the on the one hand telling us that she would continue the Obama policies of slow or no growth. In other words, for all those families across America who seen their real incomes fall over the Obama years, it will be more of the same. To borrow from Game of Thrones, Hillary's economic policy is best describe as "Winter is Coming". On the other hand, we have a myriad of proposals from the Republican candidates. The media likes to portray the GOP proposals as nothing more than tax cuts for the rich, but that is just propaganda pushing the Democrat talking points. The reality is that there are some rather detailed and comprehensive proposals that have been put forward by some of the candidates. Some are simplistic and less clear (like the one from Ben Carson). Others are more detailed. Over the next month or so, I intend to review and summarize these proposals on this blog.
It's important to remember that the proposals for the economy are perhaps the most important policy proposal that each candidate makes. They are even more important than those involving foreign policy. Remember, America will not be able to defend itself if we cannot afford the cost of doing so. Only a vibrant and growing economy will allow that.
Let's take stock of where we are as a nation. For what seems like the umpteenth year in a row, the USA is going to have growth which does not exceed the low 2% level. Indeed, we may find when the final numbers come in that the economy did not even grow by 2%. Unemployment is down to 5% which is certainly encouraging until you look a bit more carefully at the data. The main reason that unemployment is so low is that millions of people have just stopped looking for work and are no longer counted as unemployed. On top of that, millions more people are working only part time even though they want full time work. These people too are counted as employed despite the fact that they cannot earn enough to get by on their part time wages. Then there are also the millions of people who have gotten jobs, but low paying, low skill jobs which also do not pay enough to let people lead a middle class life. The manufacturing sector of the US economy is already in a recession. Each month, we see manufacturing contracting or stagnant. The good paying factory jobs of the past are disappearing.
The policies that brought us here have not changed much for the seven years of the Obama administration. When Obama took office, interest rates were already near zero and the Federal Reserve has kept them there ever since. The Fed tried pumping cash into the system with repeated efforts at quantitative easing, but that has had little effect. The Fed is likely to actually raise interest rates slightly in the next few days, and that move will have a slight slowing effect on the economy. In other words, it won't help get growth going.
The fiscal policy of the federal government has been expansive since the first day Obama took office. He brought with him the biggest increase in government spending of all time. About ten trillion dollars of debt has been racked up by the nation as more and more cash has been pumped by Obama into government spending. The Republicans stopped growth in government spending when they took the House in 2011, but the major increase of 2009 - 2010 (about $800 billion per year) was never rolled back. We have this massive fiscal stimulus each year from the government, but the economy still limps along.
The problem with the federal spending increase is that it has been targeted more to help the Democrats politically than to encourage the private sector to grow the economy. Hundreds of billions of dollars were funneled to states and localities to pay the salaries of government employees, but that money leave no lasting effect on the economy. Had that same cash gone into investment in the economy, there would have been a lasting increase in production which would pay years and years of benefits. Even today, there is no coherent proposal from Obama or his party for any spending that might help grow the economy. Their policy proposals instead focus on things like universal pre-school (which Obama actually says will help the economy) or raising the minimum wage which will reduce the availability of entry level jobs and make it harder for low income people to find a route out of poverty.
On top of the avalanche of misguided and even counterproductive spending, we have the increased regulatory atmosphere that has further reduced economic growth. The Dodd-Frank law was sold by Obama and his party as a way to prevent future problems in the banking system; supposedly it would end "too big to fail". Instead, the heavy regulations in the law made it impossible for new, smaller banks to compete with the bigger established banks. Since the law passed there have been 3 new banks opened in the USA compared to about 750 that were opened in the same period of time prior to the law. That difference is even more striking when you realize that the prior period included the financial crisis when no new banks were being formed. Dodd-Frank cut off competition and actually guaranteed that "too big to fail" would become a permanent part of the system. Obamacare also threw all sorts of requirements and restrictions on American businesses with a particularly heavy burden placed on small companies with fifty or more employees. That made economic growth slower. On top of that we have a Neanderthal corporate tax structure that protects the huge corporations like GE which pay no taxes but which puts enormous burdens again on small companies that are just starting out. If the goal of the Obama administration has been to tamp down growth by making it harder for American companies to compete and succeed, they have been totally successful.
As we head into the presidential election year, we have Hillary Clinton on the on the one hand telling us that she would continue the Obama policies of slow or no growth. In other words, for all those families across America who seen their real incomes fall over the Obama years, it will be more of the same. To borrow from Game of Thrones, Hillary's economic policy is best describe as "Winter is Coming". On the other hand, we have a myriad of proposals from the Republican candidates. The media likes to portray the GOP proposals as nothing more than tax cuts for the rich, but that is just propaganda pushing the Democrat talking points. The reality is that there are some rather detailed and comprehensive proposals that have been put forward by some of the candidates. Some are simplistic and less clear (like the one from Ben Carson). Others are more detailed. Over the next month or so, I intend to review and summarize these proposals on this blog.
It's important to remember that the proposals for the economy are perhaps the most important policy proposal that each candidate makes. They are even more important than those involving foreign policy. Remember, America will not be able to defend itself if we cannot afford the cost of doing so. Only a vibrant and growing economy will allow that.
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