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Wednesday, May 16, 2012

Obama's Debacle

Welcome to the worst economic recovery since the Great Depression.

Obama has already succeeded in fundamentally transforming America, from a prosperous nation that draws people the world over, voting with their feet, to a rapidly declining former superpower on the fast track to a third-world status similar to Argentina or Venezuela. That is effectively what is argued by the new book Debacle: Obama's War on Jobs and Growth and What We Can Do Now to Regain our Future, by leading taxpayer activist Grover Norquist and economist John Lott.

The Worst Economic Recovery Since the Great Depression

Central to the debacle Obama has created is that he has imposed on America the worst economic recovery since the Great Depression. Yes, the country was in recession when Obama was elected. But it was Obama's policies that turned it into the Great Recession and prevented the American economy from recovering -- just like his icon Franklin Roosevelt turned the 1929 stock market collapse into the Great Depression, and prevented America from recovering for more than a decade. As Norquist and Lott explain:

While this recession no doubt has been one of the worst since the Great Depression, the supposed recovery that followed it has clearly been the worst. Unemployment and job growth have been abysmal. As of October, 2011, the unemployment rate was stuck at least at 9.0 percent for 27 out of 29 months. Astoundingly, the unemployment rate during the 29 months of recovery averages three full percentage points higher than the average unemployment rate during the recession. There is no comparable recovery on record since the prolonged period of stagnation during the Great Depression in the 1930s. The Reagan recovery, starting in late 1982, hit a higher unemployment rate, but after the recovery started, it did not take more than nine months for the unemployment rate to dip below 9 percent.

This latest recession started in December, 2007. The National Bureau of Economic Research, the recognized timekeeper of when recessions start and end, declared this one over in June, 2009, which would make it the longest recession since the Great Depression 75 years ago. But the historical precedent in America is that the deeper the recession, the stronger the recovery. Based on that precedent, we should be in the third year of a raging economic recovery boom by now. But instead we have experienced no real recovery at all.

As Norquist and Lott explain the Obama non-recovery:

The recession was painful enough. Between when the recession started in December 2007 and ended in June, 2009, 6.3 million jobs were lost. After the recession ended and this book was written in October, 2011, only 324,000 additional jobs were created—an average of just 11,000 a month over those 29 months. With the working age population growing by 160,000 a month, this meager job growth failed to make a dent in getting the jobs back, let alone find jobs for the ever-growing population.

Unemployment actually rose after the recession supposedly ended in June, 2009, and did not fall back down below that level until 18 months later in December, 2010. Norquist and Lott add, "In the first 29 months during the Reagan recovery, the number of jobs grew by 8 percent. In contrast, over the same time, the number of jobs under Obama has grown by just 0.25 percent."

"But things in America are a lot worse than the simple employment and unemployment numbers indicate," Norquist and Lott continue, "because many people have given up looking for work and have completely left the labor force, and the government no longer counts people as unemployed after they give up looking for a job. Obviously, lowering the unemployment rate through disillusioned job seekers giving up looking is not a good thing."

But that is exactly what the Obama administration is celebrating as the achievement of its economic policies -- working people giving up and dropping out of the labor force. That is the only way the unemployment rate has been falling at all. Norquist and Lott explain further, "People are supposed to start looking for work during recoveries. It is during recessions that Americans give up looking for work. Unfortunately, under the Obama Administration, the reverse has happened…. It was only during the Obama recovery that Americans started dropping out of the labor force in droves. In total, 4.7 million people quit looking for work." Today, it is 7.7 million who have dropped out of the work force under Obama.

Again, the Reagan recovery is the measure. "The contrast with the Reagan recovery is striking," Norquist and Lott write. "After the Reagan recovery started, millions more people wanted to work than even before the recession started. The sharp drop in the unemployment rate during the Reagan recovery is therefore even more impressive…. Despite all those new people looking for work, the unemployment rate fell from 10.8 percent at the end of 1982 to 7.2 percent by the presidential election in 1984."

The Obama non-recovery debacle continues to this day. Last month, while 115,000 new jobs were supposedly created, the labor force shrank by another 342,000 workers, which is the only reason the unemployment rate reportedly declined from 8.2 to 8.1 percent. Without the decline in the labor force, unemployment would have risen last month to 8.3 percent. The labor force is actually 365,000 workers smaller today than it was in June, 2009, when the recession supposedly ended.

As Investor's Business Daily reported on May 7, "That's in stark contrast to every other post-World War II expansion, which saw the labor force climb by the millions at this point in their recoveries, even as unemployment rates were driven down." Indeed, if the labor force participation had stayed the same as it was when the recession supposedly ended in June, 2009, without the millions fleeing Obama's economy since then, the unemployment rate would be 11 percent, Investor's Business Daily calculated.

Moreover, as the Wall Street Journal reported in its weekend edition of May 5-6, "Even as employers added jobs last month, full time employment actually fell by 812,000." The Bureau of Labor Statistics reports that for last month the number of involuntary part-time workers totaled nearly 8 million. The BLS says, "These individuals were working part time because their hours had been cut back or because they were unable to find a full-time job."

The BLS reported that in April, 52 months after the recession started, the total unemployment rate counting the unemployed and involuntarily underemployed was still 14.5 percent. That's already persistent depression level unemployment. But the Shadow Government Statistics website, which includes the long-term discouraged workers the government doesn't count at all anymore since 1994, reports the total unemployment rate at 22.3 percent. That's what the total unemployment rate would be today if it were calculated the same way it was before 1994. Happy days are here again, under Obamanomics.

Reaganomics v. Obamanomics

In a Wall Street Journal article in February, 2009, I noted that the emerging Obamanomics followed the exact opposite of every policy of Reaganomics in great detail. I predicted that it would consequently get the exact opposite results. That is what has happened.

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