GOP-led Congress a Likely Future

Donald Lambro
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Posted: Oct 05, 2010 9:50 PM
GOP-led Congress a Likely Future

The bleak economic forecast facing Democrats as they head into the final four weeks of the midterm elections is that the so-called recovery has come to a halt.

The Obama administration has no new initiatives to fuel economic growth in the foreseeable future, and Democrats left town last week with the economy adrift, facing a lethal barrage of job-killing tax increases at the end of this year. The Commerce Department will announce the September jobs numbers Friday, and most analysts are forecasting between 75,000 to 77,000 net new jobs, barely up from an anemic 67,000 in August.

But University of Maryland economist Peter Morici says when core private sector job growth is subtracted from federally subsidized health care and temp jobs, the real net private jobs figure "is likely to come in at about 35,000 for September."

"Core private sector jobs growth tracks tax-paying jobs and is lower than a snake's belly, as the threat of higher taxes, regulation and health care costs have just about exterminated entrepreneurial instincts and the appetite for risk among businesses of any size," he writes in his latest forecast.

Consumer spending has stalled, personal incomes barely rose in August by a feeble 0.2 percent when adjusted for inflation, the weak housing market remains at depressed levels, and businesses are sitting on cash, as are workers and families, fearing another long economic slowdown to come.

Increasingly, more of Obama's 2008 supporters are forecasting a long slowdown, too.

In his new book, "Aftershock: The Next Economy and America's Future," former Clinton Labor Secretary Robert Reich writes that "indications are that the so-called recovery will be anemic. A large percentage of Americans will remain jobless, or their wages will drop. American consumers will not be able to spend enough to keep the recovery going."

Reich's darkening doubts about the economy were echoed last week by a string of gloomy forecasts from the Federal Reserve and other economic analysts that additional actions may be needed to breathe some life into the economy. William Dudley, president of the Federal Reserve Bank of New York, said in a speech last week that "further action is likely to be warranted unless the economic outlook evolves in a way that makes me more confident that we will see better outcomes for both employment and inflation before too long."

And in a speech in Rome, Charles Evans, head of the Chicago Fed, said "the size of the unemployment gap ... suggests that it would be desirable to increase monetary policy accommodation to boost aggregate demand."

Though with short-term interest rates at near zero, it is hard to see what more the Fed can do to boost the economy. That's going to require new policies by Congress and the Obama administration to provide pro-growth tax rate cuts to unlock fresh venture capital for entrepreneurial investing -- incentives Obama and the Democrats fiercely oppose.

They remain ideologically locked into their government spending on infrastructure and public works projects that clearly have not worked, because, among other things, they do not provide a fully sustainable investment environment for growth and expansion.

Obama's spending scheme comes to an end this year and, with it, the few unsustainable temp jobs it produced.

Still, many Democrats insist Obama's $800 billion big spending bill was the right medicine to reduce unemployment, but that he just didn't prescribe a large enough dose.

Reich is calling for higher taxes on the wealthy to bankroll further government stimulus schemes. And Ezra Klein, the Washington Post's liberal economic analyst, says Obama should boost his jobs stimulus plan up to another $2 trillion in infrastructure repairs and upgrades. "This is not a time for half-measures," he wrote this week.

But most voters think the government-spending scheme has been a colossal failure and that more spending will end up throwing good money after bad and further plunge our country into irretrievable debt.

A Post poll Tuesday found that nine in 10 Republicans and three-quarters of independents think the stimulus money has been mostly wasted, and four in 10 Democrats think so, too.

Make no mistake about it; this election is a referendum on the past two years of the Obama administration, the Democrat-run Congress, its agenda and the economy -- not on the Bush presidency.

And all of the polls point to a massive rejection of the Democrats based on the nearly 10 percent unemployment, an unpopular government-run health care plan, and a widely perceived hostility toward business that provides most of the jobs in our society.

Republicans are leading in at least eight races among the more than one dozen competitive Democrat-held Senate seats that are up for grabs Nov. 2nd -- West Virginia, Colorado, Arkansas, Wisconsin, Indiana, Pennsylvania, Illinois and North Dakota.

The remaining four competitive Democratic-held Senate seats are dead-heats or toss-ups -- Nevada, California, Washington state and Connecticut. Republicans are leading in all of their Senate seats, and it doesn't look like they will lose, which means the GOP will likely take the House.

The Gallup poll says the GOP has a double-digit advantage over the Democrats in the generic vote, but here's the most stunning turn in this election: The Post poll also found that "a quarter of Democrats say a GOP-led Congress would take the country in a new and better direction."