Congress Must Resolve to Build on Tax Cuts in 2011

Donald Lambro

12/23/2010 12:30:29 PM - Donald Lambro

WASHINGTON -- Christmastime is the season of hope, optimism and goodwill, and there are good reasons for Americans to believe we will eventually emerge from the Great Recession stronger and more prosperous than ever.

We are a resilient, hard-working and persistent people who have endured many hard times over the course of our history, but we've always overcome them and climbed up to higher ground. I have no doubt we'll do that again in the dismal economic circumstances that have engulfed our country over the past three years.

Readers of this column know that I have devoted much of it to the economy's troubles -- weak growth rates, staggering unemployment and big government disincentives that have severely stunted capital investment, new business expansion and job creation. I have done so because it is unarguably the paramount issue of our time.

Two years into the Obama presidency, after the expenditure of trillions of tax dollars for so-called stimulus spending that has driven our country deeper into debt, those problems are still with us.

The White House has maintained that we are moving in the right direction, that the recession is over, the economy is growing and we are now in recovery.

But the recovery remains tepid by every measurement, and for many millions of Americans who are unemployed, underemployed, in foreclosure or just struggling to make ends meet, it still feels like a recession.

Earlier this month, the Federal Reserve Board held its final meeting of the year and pronounced the Obama recovery "disappointingly slow." Indeed, too slow to make a dent in the near-10 percent jobless rate.

The government released a batch of economic numbers this past week, and they reinforced the Fed's characterization of the troubled health of the Obama economy.

It grew at a painfully anemic 2.6 percent annual rate in the July through September third quarter, the Commerce Department said Wednesday in a revised estimate that was little changed from the 2.5 percent reported a month ago.

Forecasters were previously predicting the economy would grow by closer to 3 percent, but the immoveable reality is that the growth rate remained weak, and that means there will be little improvement in the national jobless rate.

It will be recalled that economic forecasters were also predicting that the monthly employment rate would jump by nearly 200,000 jobs in November. In fact, the private sector produced only 39,000 jobs. Discounting the number of jobs created in health and social service sectors, which are heavily funded by the government, the private sector created virtually no new jobs at all last month.

The third-quarter gross domestic product -- the measurement of all the goods and services we produce -- was up slightly from the feeble 1.7 percent growth rate in the April to June quarter. But it was only further evidence of the economy's shallow growth range under Obama's impotent spending policies.

Still, the compliant national news media was trying to put the best spin it could on the dismal numbers, even to the point of saying the 2.6 percent GDP rate was growing at "a moderate pace" when the Fed sees it as "disappointingly slow," too slow to create any jobs.

Many economists say the economy will need to grow by 4 to 5 percent to bring unemployment down by 1 percent, and that kind of growth isn't in the cards for the remaining two years in Obama's term under his remedial, anti-growth policies. Moratoriums on drilling have pushed oil prices to their highest point in years, shoving gas prices into record territory. Home values remain flat. And health care costs are rising faster under government-run Obamacare.

The Associated Press reports that economic growth is expected to come in at "3.5 percent pace or better" in the fourth quarter on the basis of higher retail sales, but "job insecurity remains a problem." A problem? The underemployment rate, which has hit 17 percent, is a crisis, and claims that growth rose more than 3.5 percent in the last three months should be taken with a large grain of salt.

The tax cut-extension package Congress passed, extending the Bush tax reductions on incomes, capital gains and business write-offs for two more years will help to some extent; so will the one-year, two-percentage point payroll tax cut for all workers. But these remain temporary, creating the same uncertainty that kept businesses from making long-term expansion investments in the past two years.

It will be up to the new Congress to build upon this stop-gap tax bill with broader, permanent, more far-reaching tax cut incentives for entrepreneurial investment that can and will create new businesses, jobs and faster growth.

President Obama did a lot of bragging Wednesday, even for him, about the thousands of pages of new laws the lame-duck Democrats passed in recent weeks. But he had little to say about the poor state of the economy.