President Obama’s second try at a “Summer of Recovery” seems to be heading the same direction as his first – towards total embarrassment. Unemployment grew to 8.2% in May thanks to anemic hiring in the private sector. Companies added only 69,000 jobs – far worse than the 150,000 economists had expected – and the chronically jobless rejoining the market to search for work pushed the rate up. What’s more, the unemployment rate doesn’t even tell the full tale of just how bad the economy is – millions of people are not counted as unemployed even though they’re still looking for work.
According to CNNMoney, the slowdown in hiring can be attributed to several factors:
Economists lay the blame for the slow growth at the feet of Europe and Washington D.C. The steady drumbeat of headlines concerning Europe’ financial woes, as well as the looming fiscal cliff in the U.S., is weighing on consumer confidence. Adding to the problems is the slowdown in the Chinese economy.
The “looming fiscal cliff” is important to note. After three years in office, President Obama has seen the unemployment rate decrease from its highest point by about 1%, while adding on about $5 trillion to the national debt. At that rate, to get us back to a pre-recession unemployment level, one could expect the Obama administration to spend an additional $20 trillion – $5 trillion per percentage point decline. This is, of course, ignoring the fact that unemployment was below that high point for the first 6 months of the Obama presidency.
Interestingly, whether or not unemployment and government spending scale linearly is not relevant to the larger point of this discussion. President Obama promised “bold, swift action” at the beginning of his term to hack back unemployment. His continued attempts to use economic stimulus – like those of FDR – have been total failures. A miniscule change in the unemployment rate after 3 and a half years has come to us only with a massive addition to the debt – which is now beginning to have its own effect on growth.
In short, we can’t spend our way out of this. Government expansion is not the solution, it is the problem. I just wish the people in Washington could see that as clearly was we can.
A side note: While DYNAMO was mocked back in March for claiming that first-quarter GDP growth was actually much lower than predicted, the US government just revised the GDP growth figure down from 2.2 to 1.9% – a 14% decrease from previous estimates. I believe an “I told you so” is in order…