The Anatomy of a Keynesian Recovery

Almost two and a half years since the recession officially ended, we are finally observing a modest recovery in the job market.  Even if we discount the 42,000 new holiday season jobs for “couriers and messengers,” there is clearly some jobs growth in key sectors of the economy.  Unfortunately, aside for the fact that the recovery is languid and underwhelming by historical standards, it is also unwholesome.  Our economic recovery is similar to a computer that is repaired from a serious virus; it functions adequately but is never the same.  In other words, we are reaping the benefits of a government-managed Keynesian recovery.

During 2008-2009, instead of letting the economy settle and enjoy a robust recovery through the perennial business cycle, the Bush and Obama administrations engaged in fiscal stimulus, monetary stimulus, housing stimulus, bailouts, and takeovers of major industries.  Perforce, our economy, as much is it will inevitably recover, will be fundamentally weaker than it was prior to the recession.  Historically, we have always come out of recessions in a stronger position than prior to the economic downturn, but not this time.

Nothing is more emblematic of our permanently damaged economy than the interminable shrinkage of our labor force.  Our labor force is roughly 850,000 smaller than it was when the recession ended in middle of 2009, even though the civilian population of working age people has increased by roughly 4 million.  At this point in the Reagan recovery, the labor force had expanded by 4 million.

The labor force participation rate has steadily declined from 65.7% in mid-2009 to 64.0%, even as unemployment has eased.  During that same period, almost another 200,000 people gave up looking for work.  If the participation rate were back to its recent average, the U3 unemployment rate would be well over 11%.  This is not even accounting for the U6 number of underemployed and part-time workers, which is still astronomically high (15.2%).  Overall, 23.7 million are either out of work or underemployed.

Oh, and what about the fact that the Black unemployment rate has climbed another 0.8% to 15.8% over the past three months?  Is this good news?  Or is it more soft bigotry of low expectations?

How Good are the New Unemployment Numbers?

The much anticipated November jobs number have been posted.  Here is a rundown of some of the highlights:

• Jobs created in November:  The net increase in new jobs this month was 120,000.  There were 140,000 jobs added to the private sector, while the public sector shed 20,000.  The U3 unemployment number dropped from 9.0% to 8.6%.  In more good news, September’s numbers were revised up to 210,000 from 158,000, while October’s jobs numbers were boasted by 20,000 to a total of 100,000.  Also, the U6 number, which counts discouraged workers, dropped to 15.6 percent from 16.2 percent, its lowest level since March 2009.
• Types of Jobs:  The largest share of new jobs came from the retail industry, which saw a 50,000 spike.  On the other hand, manufacturing only gained 2,000, while construction shed another 12,000 jobs.  This might be an indication that a lot of these jobs are temporary increases for the Christmas shopping season.  Another related point is that the sharpest drop in unemployment was amongst those with little or no college education.
• Size of civilian labor force:  So why is this, at best, a mediocre jobs report?  Well, if you shrink the size of the pool, the unemployment rate will actually go down.  While a net-120,000 jobs were added in November, the civilian labor force shrunk by 315,000.  In October, the civilian labor force stood at 154.198 million.  Now, there are only 153.883 in the labor force.  Moreover, the Civilian noninstitutional population grew by 172,000, yet there are now 487,000 more people not in the labor force than there were in October.  Consequently, the labor participation number dropped from 64.2% to 64.0%.  This, along with the upward revisions from the past two months, has caused the U3 rate to drop by .4%.
• Duration of unemployment: The average (mean) duration of unemployment is 40.9 weeks, a record high. By comparison, the average duration was 19.9 weeks in January 2009.
• Comparison to January 2009-Obama’s inauguration date:  In January 2009, the labor force stood at 154.185.  This means that a net 302,000 people have left the labor force since Obama was inaugurated.  Concurrently, the size of the working age population grew over 5.7 million from 234.739 million at the time Obama was sworn in.  Also, in January 2009, 142.201 million were employed, over 1.62 million more than today.   So we have a larger population, a smaller workforce (resulting from discouraged workers), and more unemployed.  As AEI’s James Pethokoukis points out, if the labor force was the same size as when Obama took office, the U3 rate would be 11%.

Obama's Eco-Fascism Will Eliminate 2.6 Million Jobs

While Obama is wrought to fib about the number of jobs he "saved," he fails to disclose the number of jobs lost as a result of his inane environmental policies.  Fortunately, some are keeping score.  Doug Ross has a terrific blog post detailing Obama's jobs record by the numbers.  Here is the tally of jobs lost, or slated to be eliminated, as a result of radical environmentalism:

Description	Jobs Destroyed	Source
Delaying the Keystone XL Pipeline until after the 2012 election	20,000	LA Times
Forcing lignite coal plants in Texas to close (EPA)	14,000	Heritage
Gulf Drilling Moratorium (Interior)	72,000	LA Times
EPA's Cross-State Air Pollution Rule	1,440,000	Daily Caller
EPA's determination that coal ash is a "hazardous waste"	250,000	Western Caucus
EPA's shutdown of AEP plants	5,000	CAPPS Online
EPA's commercial and industrial boiler regulations	800,000	Clatskanie Chief
Interior Department's protection of lizards and smelt fish	75,000	Human Events
Jobs killed by the Obama environmental machine	2,676,000

The Simple Math of Obama's Ponzi Scheme

Well, 32 months into his presidency, Obama has finally released his jobs and deficit reduction plans.  Surprisingly, he is not attempting to obfuscate his true motivation this time.  As Obama said yesterday, it is “simple math.”

It’s $1.57 trillion in comprehensive tax hikes + $1.08 trillion in non-existent war spending + $430 billion in phantom savings on interest payments + $320 billion in savings from cuts to healthcare providers (the inevitable sequestration will already cut DocFix), throwing granny off the cliff with tighter rules from the death panel, and a magical willingness to cut waste and fraud + $250 billion in other mandatory savings, most of which will never materialize – the $447 billion stimulus 2.0 = $3.2 trillion.

OK, simple enough; however, there is one important detail of the ‘Obamaian formula’ that has not been advertised.  As part of the Stimulus half of the plan, Obama will cut payroll tax revenues by $240 billion, or 36%, of the entire annual revenue (projected at $685 billion) of the so-called Social Security trust fund.   Where is that money going to come from?  How will they fill the SS shortfall, which is already projected to be $50 billion?

You guessed it: general fund revenues.

Obama’s Fuzzy Stimulus Math

Obama proposes 36% cut to Social Security revenue

Let’s forget the fact that Obama’s entire Stimulus 10.0 is a counterintuitive proposal that doubles down on the very failures that precipitated this speech.  Let’s also disregard the fact that enshrining unemployment insurance as a permanent handout will perpetuate unemployment.  And more union-induced, short-term money drops on infrastructure will do nothing but stimulate traffic jams.  Let’s focus purely on the very numbers that the administration has offered –numbers that would undoubtedly be revised upward, if the plan is passed.

Total package – $447 billion


- 50% payroll tax cut for every employee, dropping the rate from 6.2% to 3.1%= $175 billion
-Obama also proposed cutting the employer payroll tax in half on the first $5 million of a firm’s payroll in 2012. About 98% of firms have payrolls of $5 million or less.= $70 billion
-National infrastructure bank = $10 billion
- Pork project handouts to unions for roads, rails and bridges= $50 billion
-An unprecedented extension of unemployment insurance benefits to be extended for another year, beyond the 99 weeks= $62 billion.
-Handouts to public school teacher unions, even though we already spend more per capita on education than any other country=$35 billion
-Refurbishing schools, a responsibility of local government=$25 billion
-Handouts to community colleges=$5 billion
-Rehabilitate vacant property=$15 billion


Despite the steep cost, Obama claims that it will all be paid for.  How will he pay for it?

Illegal Aliens Receive $4.2 Billion in Additional Child Tax Credits

What happened to the balanced approach toward revenue?

 

Throughout the entire debt ceiling imbroglio, Democrats incessantly regurgitated the talking point about the need for “a balanced approach.”  They were so uniform and synchronized that they sounded like the sheep in Animal Farm.  Ironically, their idea of a balanced approach was singularly focused upon Oil Company and corporate tax deductions, which are negligible compared to the crushing debt.  The targeted oil tax deductions would have brought in $2 billion in annual revenue, while the cancellation of the corporate jet depreciation deduction would have saved only $3 billion over 10 years!

Well, it turns out that illegal aliens, most of which pay zero in net taxes, enjoyed $4.2 billion from the Additional Child Tax Credit (ACTC) last year.  That’s more than the annual revenue from the selected oil tax deductions and corporate jet deductions combined!

Yesterday, the Treasury Inspector General for Tax Collection released a shocking report detailing how illegal aliens are able to utilize a filing loophole to obtain billions in ACTC funds.  The Earned Income Tax Credit (EITC) and ACTC (unlike the base child tax credit) are totally refundable and can award the recipient with a negative tax balance.  Appropriations for the EITC in FY 2010 were $54.7 billion and $28.3 billion for the ACTC.  While EITC appropriations are protected from illegals (those who don’t engage in identity theft) because they are only awarded to those who provide a valid Social Security number, the same cannot be said for the ACTC.

Here is the punchline of the Inspector’s report:

GOP Must Hold the Line Against Obama’s ATM Politics With Free Trade

Obama imposing his bad luck on job creation and economic growth 

As Obama travels through America’s heartland on his teleprompter tours bus, he is touting a new plan to create jobs.  While he has offered few specifics thus far, Obama is calling for the ratification of the free trade agreements (FTAs) with Columbia, Panama, and South Korea as vehicles for job creation.  The rest of his jobs (killing) plan will be released at some later date, possibly at the time when Huntsman releases his proposal.

This newfound support for free enterprise is quite perplexing, given that he has held the FTAs hostage for a pet welfare program, Trade Adjustment Assistance (TAA), since the day he became president.
Democrats, at the behest of their Big Labor puppet masters, have held up the FTAs with three allied nations for over four years.  Now, amidst growing pressure to create jobs and keep up with other allied nations like Canada, Obama is willing to send the trade pacts to Congress on condition that they reauthorize the TAA.  The TAA is a subsidy program created in 1962, which arbitrarily rewards job training, relocation allowances, loans, grants, and unemployment pay to workers who supposedly lost jobs from FTAs.

So Obama is holding up a free market policy, which he readily admits will create jobs, for a program that indiscriminately throws money at obsolete jobs of special interests that are dubiously connected to FTAs.  What a jobs plan, Mr. President.

Summer of Recovery 2.0

Roundup of the Unemployment Numbers

For those who are interested in the wonky numbers of the unemployment report, here is a brief presentation of some of the more ominous figures.  The latest unemployment report shows that we are living through the quintessential Keynesian economic recovery.  We are not shedding more jobs at a terribly fast pace, but, instead of adding jobs by a pace of 500-800,000, we are stagnating at the bottom of the employment trench created by the recession.

• Jobs created in July:  The net increase in new jobs this month was 117,000.  There were 154,000 jobs added to the private sector, while the public sector shed 37,000.  As such, the number of unemployed declined from 14.087 million in June to 13.931 million, lowering the unemployment rate from 9.2% to 9.1%.
• Size of civilian labor force:  So why is this report such bad news?  Well, if you shrink the size of the pool, the unemployment rate will actually go down.  While a net-117,000 jobs were added in July, 193,000 long-term unemployed persons left the labor force.  In May, the civilian labor force stood at 153.693 million.  Now, there are only 153.228 in the labor force, a shrinkage of 465,000 people.  Of the remaining 153.228 in the labor force, there were 139,296,000 people working in July, down 38,000 from 139,334,000 in June.  There are 490,000 less workers than there were in May.  This is where you get the 9.1% figure.
• Size of working age population:  While the number of people looking for jobs has shrunk, the population continues to grow rapidly.  The size of the civilian noninstitutional population grew from 239.489 million in June to 239.671 in July, an increase of 182,000.  Consequently, the employment-population ratio now stands at 58.1%, the lowest level since 1983.  We need almost 200,000 new jobs just to break even, yet we only gained 117,000 new jobs, and actually lost 193,000 from the labor force.  This is a recipe for disaster.
• Comparison to January 2009-Obama’s inauguration date:  In January 2009, the labor force stood at 154.185.  This means that a net 957,000 people have left the labor force since Obama was inaugurated.  Concurrently, the size of the working age population grew over 4.9 million from 234.739 million at the time Obama was sworn in.  Also, in January 2009, 142.201 million were employed, almost 2.9 million more than today.   So we have a larger population, a smaller workforce (resulting from discouraged workers), and more unemployed.  As a result, there are almost 5.9 million more working age people who are not in the labor force today.  Also, there are 885,000 more people not in the labor force who want a job as compared to January 2009.
• Duration of unemployment: The average (mean) duration of unemployment is 40.4 weeks, a record high. By comparison, the average duration was 19.9 weeks in January 2009.

Consider this your summer of recovery, data crunching open thread.

The Debt Rises, The Economy Sinks

Not even a debt increase cheered by Wall Street can override the debt-induced economic stagnation. 

Despite being dispirited by the one-sided nature of the debt ceiling deal, most of us were looking forward to reaping the rewards from its only ancillary benefit; the impending stock market rally.  Much to our chagrin, the Dow dropped precipitously, losing over 600 points since the opening bell on Monday.  After the initial euphoria from the debt ceiling hangover began to subside, people have been forced to confront an inconvenient reality.  The problem with the economy is not the debt ceiling; it is the debt – and all that it represents; overbearing and job-killing government.

Late Sunday night, Republican leaders forged a bipartisan deal with the president to raise the debt ceiling another $2.4 trillion without any preconditions for the second tranche.  Despite pretentious claims that we were entering a new era of austerity, the debt deal has charted us on a trajectory to incur $7 trillion more in debt, even considering the unrealistic baseline projections of economic growth and revenue.

Well, the Treasury wasted no time utilizing its new credit card and devouring the spoils like the starved beast that it has been for the past few months.  On Tuesday, Treasury Secretary Tim Geithner issued $239 billion in new debt, almost 60% of the entire $400 billion increase in borrowing authority that Congress granted for the first round of the debt limit hike.  To put that in perspective with the “austerity side of the debt deal,” it will take 4.5 years to achieve a commensurate degree of savings from the discretionary caps imposed in the bill.  I guess that is one way of measuring dollar-for-dollar cuts.

Our total cumulative debt (including the intragovernmental share) now stands at $14.58 trillion, approaching 100% of out GDP for the first time.  We have joined the failed socialist experiments of Europe in this ominous distinction.

Nevertheless, at the very least, we should have enjoyed the inevitable market rally that was so eagerly anticipated by the bipartisan cheerleaders on Wall Street.  After all, our borrowing authority is inviolable, as we are slated to borrow trillions more over the next few years.  Hey, a few billion dollars of debt a day keeps the default away – and will forestall the greatest market crash ever.  Won’t it?