When political leaders and media personalities discuss the economy today, they do so in terms of the “recovery.” Certain indicators “point to a recovery” or show that “the recovery is picking up steam” or that various sectors, industries or people are “sharing in the recovery.”
These spokespersons refer to the recovery as part of a natural cycle, as if recovery always follows recession, and it is only a matter of pinpointing the precise month in which federal financial solvency will return. In fact, both recession and recovery depend upon economic policy and fiscal decisions by political leaders. Our current leaders have not set the stage for a recovery of any sort.
The American economy has steadily eroded since the end of the Bush administration and the fateful decision to fund TARP. The program’s acronym was well-chosen, for it merely threw a cover over the bursting bubble caused by the government encouraging banks to make loans to those who could never pay them back.
While President Bush bears responsibility for employing the bail-out fix, President Obama has taken massive government spending to new heights (or depths, if one considers the red ink seeping from the national economy like oil from a certain hole in the seabed of the Gulf). Government spending on takeovers of banks and auto companies, the stimulus bill, the health care laws and other massive government initiatives has saddled Americans with record deficits and unsustainable debt. This is not the formula for recovery.
The massive spending requires revenue to pay it back. The current administration has floated all sorts of inventive tax-raising schemes, from a national value-added tax on top of income and corporate tax, to fees on every conceivable activity or service an American citizen could possibly engage in. The implication is clear–taxes will inevitably and dramatically rise in the years ahead, putting a greater burden on the private sector and private citizen. This is not the formula for recovery.
President Obama and the Democrats have meanwhile attacked, vilified, fined, investigated and taken over companies for committing the perfectly legal and responsible achievement of making profits. The Democrats have in recent decades railed against big corporations and excessive profits, but until the current administration, they have usually had the good sense not to punish them. Until now, even Democrats have recognized that large, profitable companies provide jobs, goods, services, and the all-important revenue that keeps the government funded. Punishing successful companies is fiscal suicide, yet that is the policy of the current administration. This is not the formula for recovery.
Unemployment hovers around ten percent. President Obama, in last week’s report of jobs created in the last quarter, admitted that the vast majority of workers were hired for the temporary purpose of completing the 2010 Census. Industries concerned about higher taxes, restrictive regulation, adversarial government and uncertain demand for their products in a more cautious economy are reluctant to invest in new employees. As the American economic environment becomes more antagonistic, large corporations will shift their operations to other countries that offer more favorable conditions. Smaller companies will downsize, or go out of business altogether. It all means fewer jobs and opportunities. This is not the formula for recovery.
Yet President Obama, Fed Chairman Ben Bernanke, White House press secretary Robert Gibbs, countless Democrats in Congress and the off-key chorus of their supporters in the media continue to talk about recovery as if it were pre-ordained and inevitable, like the next inadvertent blurt of candor from Joe Biden. In fact the recovery they refer to is illusory, and the economic downturn they claim is nearly over is in fact deeply rooted and persistent.
Economic recovery results from sound economic policy. Cutting taxes, simplifying complex regulations, reducing government interference in the free market, encouraging the economic engines of our nation rather than hobbling them or taking them over are all aspects of economic policy that will spark and sustain recovery. None of these is being considered by the current administration or the Democrat majority party in Congress.
John Steele Gordon, in his excellent and highly readable economic history of the United States, Empire of Wealth, (Harper Collins 2004) points out that during the Great Depression of the 1930's, no one knew how long it would last. And every year or so, when there were minor signs of recovery in one sector or another, the economic experts would breathe sighs of relief and announce, “The worst is over.” Such statements would be followed by even deeper and wider losses throughout the economy, and matters would actually get worse. Despite periodic glimmers of hope, the Depression dragged on for a decade.
Calling the infrequent and minuscule bits of good news that emerge during our economic travails a “recovery” is very much like calling the temporary relief of an anesthetic a “cure.” As long as the fundamentals of our economy are weakened by irresponsible government policy, we will suffer under a chronic fiscal malady. We may find a cure in November by throwing out of office those in Congress who continually vote for more irresponsible spending and debt. But if we let them stay, that American fiscal malady is very likely to be terminal.
