As President Obama campaigns for more government spending—aka his jobs plan—new unemployment claims provide fresh evidence the economy is stalling and in danger of slipping into a second recession. Big government could easily take unemployment above 15 percent and create a hole too big to ascend.
New jobless claims for the week of September 10 rose to 428,000, up from 412,000 the previous week. Having slipped below 400,000 last spring, these are trending upward. Generally, weekly jobless claims below 350,000 are associated with a healthy economy and above 450,000 with recession. Recent data indicates the economy is at the precipice of a second Great Recession—perhaps worse.
Recent data on car sales and broader retail sales, personal consumption and consumer attitudes indicates Americans are scared. Other than high income folks in the luxury category, a general lack of confidence in the president to adequately get the U.S. economy going is becoming a self fulfilling prophecy of economic decline.
Bad leadership equals bad outcomes.
Household incomes have sunk to their lowest levels since 2007, and the number of Americans living in poverty is rising.
Unemployment is up, even as the economy has managed a modest recovery since Mr. Obama became president. The Labor Department reported no jobs were added in August. Mass layoffs have been announced at major financial houses and banks, pharmaceutical manufacturers, and telecommunications companies. We will have yet to see the impact of those in jobless claims and monthly unemployment reports.
Finance, drugs and telecom are at the core of U.S. competitiveness and recent growth, and with those sectors announcing layoffs a recession can’t be far away.
President Obama wants an additional $447 billion in new stimulus spending, but skeptical voters should ask: How can more $447 billion solve a problem the stimulus twice that size failed to fix? How does more spending fit into long terms goals to cut the deficit?
The president responds with tax increases and asks Congress to cut spending in other areas—he is disinclined to do any cutting himself. How can extending the payroll tax holiday for the middle class have much impact if paid for with new taxes on wealthy? Both spend money, and taking from Reginald to pay Rachel is more designed to buy votes than create jobs.
And so it goes, Mr. Obama proposes to send money to the states to keep teachers and educational bureaucrats on the payrolls but wants Congress to cut funds sent to the states to employ hospital staff.
One thoughtful proposal is an Infrastructure Bank. It would let U.S. multinationals remit profits parked abroad, tax deferred, if invested in a fund to finance roads, schools and other construction projects. Of course, that's just one idea, we need many more of those kinds of ideas to harness private capital and business development.
If President Obama wants to create jobs he needs to stop telling us more government is the answer—government spending and publically financed health care are just about the only sectors that have grown on his watch and those are bankrupting the country.
If the president wants to create jobs he must tackle the structural issues—beginning with the nation’s sagging infrastructure by unharnessing private capital, However, he must also let oil and gas companies develop domestic reserves instead of the government investing in fraudulent solar energy companies, tackle the trade deficit with China that is destroying millions of American jobs, and finally address rising health care costs and the equity positions of underwater homeowners.
All that is heavy lifting and much less personally uplifting for a president down in the polls, than is campaigning on a platform to soak the rich and bludgeon oil companies.
Yet, it might revive confidence in government and the economy if the president really acted to create jobs for all Americans instead of stumping to merely save his own.
Peter Morici is a professor at the Smith School of Business, University of Maryland and former chief economist at the U.S. International Trade Commission. Follow him on Twitter@pmorici1.
Peter Morici served as Chief Economist at the U.S. International Trade Commission from 1993 to 1995. He is an economist and professor at the Smith School of Business, University of Maryland.