Recession or Real Recovery?

Phil Kerpen

11/2/2012 12:01:00 AM - Phil Kerpen

The economy is limping along at an official 2 percent growth rate - and even that is overstated because it includes a 9.6 percent increase in deficit-financed government spending. The private sector grew at just 1.6 percent last quarter. Employment data remains weak. Household incomes continue to fall. We're already in the recession red zone, and the largest tax hike in American history looms January 1 if Congress fails to reach an agreement to cancel it. In this contest, the presidential election boils down to a remarkably simple choice: recession or real recovery.

An Obama reelection would all but guarantee the economy tips back into recession next year. For one thing, the purported recovery he's presided over is already the weakest on record. Since the recession officially ended and we entered recovery three years ago, household incomes have actually fallen by $3,000.

Labor markets are extraordinarily weak. Even with the surprise decrease in unemployment in September, that report still found over 12 million Americans unemployed - more than when Obama took office. Add to that 8.6 million Americans working part-time for economic reasons and 2.5 million discouraged workers who want a job but temporarily given up even looking for work, and you get a total of 23.2 million Americans unable to find full-time work. (The newly engaged battleground of Pennsylvania has suffered one of the worst jobless recoveries, losing a net of over 90,000 jobs since Obama took office.)

This is a natural consequence of Obama's big government approach, which entails a dramatically expanded federal imprint on the economy from haphazard and contradictory regulations. Businesses will not hire when the rules of the game are constantly changing and they find it impossible to forecast their tax rates and regulatory compliance costs. The president's health care law has made it impossible to gauge health expenses associated with new hires -they are certain to go up, but nobody knows by how much - creating another drag on hiring.

Genuine economic suffering is far greater than meets the eye, as households are squeezed between falling incomes and rising prices. Gasoline prices have doubled from when Obama took office, and have increased in line with Obama's new restrictions on offshore drilling. The invisible bread lines of this "recovery" have been food stamp and disability rolls. Food stamp rolls have jumped a heartbreaking 45 percent to now include a record 46.7 million Americans. More than 6 million people have signed up for disability since Obama became president.

Clearly, the failed policies of the present are causing widespread suffering. Moreover, and contrary to campaign rhetoric, there is a striking resemblance between Obama's core economic agenda of Wall Street bailouts, reckless spending, and weak dollar monetary policy and Bush's failed second term agenda.

Add to this toxic mix an enormous tax hike looming at the end of this year - a tax hike Obama has already promised to use his veto pen to ensure takes effect - and it's clear that an Obama second term means unacceptable economic suffering and a near certain return to official recession.

A Romney victory promises something very different. Congress would almost certainly cancel all the tax hikes. If Obama is intransigent enough to veto a deal before he leaves office, Romney would sign it into effect retroactively early next year, guaranteeing that no one faces a tax hike with the economy reeling.

Romney promises to unlock America's energy resources, including offshore drilling in the Outer Continental Shelf. When Congress lifted the offshore ban on October 1, 2008, prices at the pump collapsed to under two dollars in just three months - and that could happen again.

Romney promises a regulatory overhaul that would focus on ending the uncertainty of ill-designed scattershot rules to micromanage businesses and replacing it with clear rules of the road that protect consumers and otherwise allow markets to function efficiently. That will bring capital off the sidelines and get companies hiring again, with the benefit of being able to project their labor costs. Romney even promises to radically reduce his own presidential power by signing legislation that would require Congress to approve new regulations before they could take effect - a welcome step toward accountability and regulatory sanity.

The bottom line is Obama's economy isn't creating enough jobs or enough economic growth, and his tax hikes will tip us back into recession. The only chance for a real recovery is to elect Mitt Romney.