...usually with an attempt at historical and economic context
Sunday, October 4, 2009
Unemployment Continues To Increase Despite Stimulus
“THE EMPLOYMENT SITUATION SEPTEMBER 2009
“Nonfarm payroll employment continued to decline in September (-263,000), and the unemployment rate (9.8 percent) continued to trend up, the U.S. Bureau of Labor Statistics reported today. The largest job losses were in construction, manufacturing, retail trade, and government.
“Household Survey Data
“Since the start of the recession in December 2007, the number of unemployed persons has increased by 7.6 million to 15.1 million, and the unemployment rate has doubled to 9.8 percent….”
(Source: Bureau of Labor Statistics, 10/02/09)
Forecasts: Joblessness To Increase Unemployment continues to worsen in the U.S., with increasing unemployment expected through 2010 and beyond.
Former Federal Reserve Chairman Alan Greenspan, appearing on the ABC-TV program This Week, said the United States is likely to see 10% employment levels “for a while.” 
“The [BLS] report shows that the worst recession since the 1930s is still inflicting widespread pain and underscores one of the biggest threats to the nascent economic recovery: that consumers, worried about job losses and stagnant wages, will restrain spending. Consumer spending accounts for about 70 percent of the nation's economy.” 
“The uncertainty that surrounds the recovery has made employers reluctant to hire. The Business Roundtable, a group of CEOs from large corporations, said earlier this week that only 13 percent of its members expect to increase hiring over the next six months.” 
Even top presidential adviser Larry Summers has predicted that we are facing years of “unacceptably high” rates of unemployment. 
Political Problems for Mr. Obama It is widely agreed that continued high unemployment will not help President Obama’s political situation. For example: “Persistent joblessness could pose political problems for President Barack Obama, who pushed through an ambitious $787 billion stimulus package in February intended to "save or create" 3.5 million jobs by the end of 2010.” 
Robert Kuttner noted the political difficulty that President Obama may experience as a result of the unemployment situation: “If the unemployment numbers keep rising into 2010, the Republicans are primed to pick up dozens of seats in the House, crippling the Obama administration's capacity to recoup in the second half of the president's first term.” 
The $787 billion stimulus is not showing job-creation results. It is mainly a political pork program designed to reward Obama’s political allies. Only a small percentage has been spent thus far, with the rest to be spread over several years, with most spending to be in the out years. While the stimulus may be of some benefit to direct recipients, it cannot stimulate the economy in general, and will contribute significantly to the federal deficit.
Liberal Prescriptions Won’t Solve the Problems Robert Kuttner’s liberal suggestion: “The president should be making the case for increased deficit spending on job-creation in 2010 and 2011, followed by a program of deficit reduction financed by progressive taxation.” 
Liberals rely on a Keynesian approach of deficit spending, while conservatives recognize that such a program would only put us into a deeper hole. The solution to unemployment is to encourage economic activity in the private sector. This should be done by cutting taxes and increasing tax deductions for those who are paying income taxes. Liberals would have us believe that “progressive” tax increases affecting the “rich” would not affect those who aren’t “rich,” but in fact such increases would cause even greater suffering. Workers would feel the most pain, and the “rich,” i.e., those who could create jobs if the economic environment was encouraging, would refrain from doing so, seeing no opportunity for a good return on investment in the current economic climate.
Experience has shown, in the Kennedy, Reagan, and Bush tax cuts, that reduced tax rates will yield increased revenues to the government, which will reduce deficits if spending isn’t increased.
More Trouble Looms If Obamacare and/or Cap and Trade Are Passed The outlook at present is rather bleak, since deficits would likely increase if Obamacare or cap and trade is passed, Passage of both will assure us of years of double-digit unemployment.
It should be acknowledged that the current government program is not going to help the unemployment rate, and that increasing taxes and deficits won’t either. Perhaps some actual constructive steps will be taken before we see Great Depression II.
Still, There Is Some Hope for Improvement A hopeful aspect of the current situation is that the market is strong and resilient and self correcting, if its mechanisms aren’t destroyed or stopped by government. Also, Americans have always found ways to work around bad laws to some extent. And, the 2010 elections could very well take away Obama’s Democratic majority in Congress. People are more inclined, I think, to vote for prosperity rather than a program of increased government controls that might fit some liberal-socialist theory, but not citizens’ real life needs.
We are now seeing something of the results of a comprehensive government program: increasing unemployment and continued economic stagnation, when we should have already been in a strong recovery mode. It doesn’t look very promising through 2010. But maybe after that ….
I have sworn upon the altar of God eternal hostility against every form of tyranny over the mind of man.