Peter Morici

The latest polls indicate a weak economy continues to drag down President Obama’s job approval rating, but those hardly guarantee any big changes in Washington. Americans may want more jobs and better wages but they also support many of the president’s specific policies.

Obama’s recovery is hardly better, or worse, than President Bush’s. Both only registered 2.3 percent GDP growth, whereas the economy expanded more than 4 percent annually for Ronald Reagan and Bill Clinton.

Granted Bush’s gains were wiped out by the financial crisis, but that calamity was sewn during Clinton’s last years by Treasury Secretary Larry Summers’ repeal of Glass-Steagall banking regulations, which untethered gambling on Wall Street.

The continuing mess in Manhattan is a joint venture of the Republican and Democratic Parties, as neither seems able to break loose from its campaign contributions. Dodd-Frank reforms have only made borrowing more difficult for small businesses and home buyers. Big bonuses keep flowing, as the banks shift focus from derivatives to hawking soon to fail state and municipal debt, and other schemes. It might be saner to give them a dog track.

Too many young adults are saddled with huge college debt and living with their parents, and one out of six men between ages 25 and 54 are jobless with few prospects of ever finding full time employment again.

The causes are easy to identify: excessive health care subsidies and income support that Democrats now praise for encouraging poorer folks not to work and increase federal, state and local taxes. And entitlements divert funds from investments in road, bridges and basic R&D.

The 2014 Economic Report of the President promises more of the same. It assumes a brief burst of growth above 3 percent—mostly created by young folks now borrowing to obtain graduate degrees in high demand fields like law and museum studies miraculously finding jobs, paying off student debt, buying houses, and having babies. Then, it predicts growth returns to the lethargic 2.3 percent for the foreseeable future.

Over the next several years, pent up demand for houses and cars will give growth a temporary boost, but unacceptably high unemployment will continue because high taxes and overregulation drive away investment, and in a globalized economy American-based business can’t compete when the president won’t level the playing field vis-à-vis foreign competitors or let the American economy play its strength—abundant energy.

Peter Morici

Professor Peter Morici is a recognized expert on economic policy and international economics. He has lectured and offered executive programs at more than 100 institutions including Columbia University, the Harvard Business School and Oxford University.