Friday, the Labor Department is expected to report the economy added 150,000 jobs in February. This is less than half the pace needed to lower unemployment to an acceptable level, and President Obama’s budget promises little relief.
Unemployment could slip to 6.5 percent because more adults quit looking for work.
ObamaCare and the Earned Income Tax Credit (EITC) encourage low wage workers and employers to limit hours to less than 30 per week. More part-timers boost the jobs count, but worsen the plight of the working poor.
The economy grew a nonplus 2.6 percent in the fourth quarter, and is slowing this winter. Auto and housing sales suffered, and service businesses such as restaurants and airlines took losses not easily recouped.
Slower commerce cannot be attributed only to cold and snow. Regulatory shifts burden the recovery. For example, the unnecessary jump in required pilot training hours imposes shortages on airlines, canceled flights and lost commerce.
Dodd-Frank has forced smaller banks into mergers with big Wall Street houses, where the drumbeat of criminal investigations continues like a Souza march on the Fourth of July. Homebuyers and businesses can’t get adequate credit and banks lay off workers by the thousands, while top brass gets multi-million dollar bonuses. If federal regulators and their congressional overseers have a learning curve, it’s mighty long.
Chronic slow growth is best illustrated by statistics spanning both the Bush and Obama years. Through two recessions and recoveries, GDP growth has averaged only 1.8 percent, whereas from Reagan through Clinton, the pace averaged 3.4 percent.
America has not changed. Technological progress continues, and global competition was just as tough when Japanese manufacturers invaded U.S. markets as today with the Chinese onslaught.
Today’s leaders don’t value the combination of a vibrant private sector, genuinely competitive markets and personal responsibility as the last generation did. They are best skilled at gaming the system for friends, pacifying the poor and stressed working class with handouts, and collecting big commissions—a.k.a campaign contributions—that permit Wall Street banks, cable companies, large medical insurers, pharmaceuticals companies and the like to gain monopoly power and gouge customers. And they extract similar tribute from smaller players for shelter from an ever more abusive regulatory state and IRS scrutiny.
In emerging markets, Americans would label that corruption, but anyplace it simply breeds inefficiency and stagnant growth and kills good jobs.
Now, Obama’s budget champions even tougher regulation—for example, shoring up the Labor Department bureaucracy—and more entitlements boost the flagging spirits of the working poor—but no relief from IRS political targeting.
In this century, we have seen a substantial benefits expansion through the EITC, abuse of the Social Security disabilities program, Medicare drug benefits, Medicaid, ObamaCare, and student loans that bribe young adults out of the job market.
Thanks to the combination Bush-Obama regulatory reign of terror and welfare state, the economy has created a paltry 30,000 jobs per month since 2001. Four times as many would be needed to keep up with population growth.
Reagan and Clinton accomplished more robust growth and jobs creation with lighter regulations, lower taxes, less emphasis on entitlements and fewer efforts to suppress criticism of their administrations’ policies.
To bolster economic growth, those kinds of policies should be supplemented by greater attention to developing off-shore oil and gas, which could provide absolute independence from foreign oil, and confronting protectionism and currency manipulation to fix the trade deficit with Asia.
Together those could easily boost growth to 4 to 5 percent to catch up for lost progress and create more than 400,000 jobs a month.
Peter Morici is an economist and professor at the Smith School of Business, University of Maryland, and a widely published columnist. He tweets @pmorici1