The Obama Recovery

After the last recession Democrats demonized Republicans for laying the foundation for a “jobless” recovery. We were told that tax cuts, the traditional fiscal policy medicine used successfully by presidents as disparate as Kennedy and Reagan to spur growth, were suddenly not valid, skewing incentives toward the wealthy and accelerating income disparity. Democrats would restore fairness and produce better results.

Eight years later the jury is in and they have done neither.

Nine months into his administration, after demanding and receiving from an obeisant Congress a pork laden stimulus package that didn’t stimulate much but was sufficient to feed all the pigs at the party in power’s trough, President Obama owns the current economy. And yet, we are told by the New York Times in a front page article this past Sunday, “Americans now confront a job market that is bleaker than ever in the current recession and employment prospects are still getting worse. Job seekers now outnumber openings six to one, the worst ratio since the government began tracking open positions in 2000.”

That would be worse than the heretofore unprecedentedly “horrid” Bush recovery.

So this is what an Obama recovery looks like.

In fairness economies are self healing if left to their own devices. And indeed the economy has begun showing signs of awakening. Leading indicators have been up at least 5 months in a row. And although it is uneven there are clearly signs of growth.

And we know that unemployment is a lagging indicator. Employers won’t hire until they are more certain that a nascent recovery has staying power. Until then they will drive their current staff as hard as they can, piling on overtime before they dare begin rehiring.

Yet even with this knowledge The Times tells us that “prospects are still getting worse.” Can we identify the reasons that escape the brilliant policy makers in the White House and Congress?

Lost on the Administration and their minions in Congress are the effects their policies or the threat of their policy changes are having on business.

Health care reform will no doubt feature higher insurance costs to be borne by businesses. Even if a public option isn’t part of the package Congress will increase mandates that policies must cover to new levels and that will only mean higher premiums for employers. And for those businesses that can’t or won’t shoulder health benefits there will be a tax, perhaps as much as 8% of payroll, to insure the cost to the taxpayer for their employees’ healthcare will be borne as much as possible by the employer.

Can’t you just imagine how eager employers are to hire more people while these increases, still undefined, are shortly to become a significant part of the cost of employment?

And if this weren’t enough businessmen of all stripes, who take risks with their own capital and create most of the jobs in America, are facing huge tax increases by 2011. The expiration of the Bush cuts will increase capital gains taxes back to 28%. And income taxes will increase to over 39%. But that’s not all. With massive social welfare spending about to become a part of an expanding deficit baseline Democrats have discussed the possibility of even higher taxes. Paired with state income tax increases that have already taken effect in many states across the country the employment producing class could face tax rates of nearly 60%.

Have no doubt that just the threat of these levels is causing capital to become risk averse. And as long as the calculus regarding rates remains open and undefined business owners will err on the side of caution when it comes to expanding employment. Businessmen are less eager to expand when government becomes the majority owner in their ventures.

President Bush cut taxes and got the economy growing again. After lagging early during the heart of the cycle employment expanded at healthy levels.

Now President Obama’s policy to retard business expansion and hiring is in full gear. And the New York Times and their fellow travelers are stunned that the pace of layoffs has yet to bottom even as the economy begins to recover.

Sometime next year we’re certain they’ll start talking about the need for another stimulus. That won’t help matters any but that will be beside the point. The pigs, as always, will line up at the trough.