If the U. S economy is recovering from the financial crash and housing bubble of the past several years, it is at best a subpar performance, given the employment data that was released last Friday. Although 431,000 new jobs were created in May, the vast majority were temporary census positions (411,000). The private sector increased the number of jobs by 41,000, and the unemployment rate declined slightly to 9.7%.
In other words, the U.S. economy’s recovery is weak at best, because the so-called federal stimulus and the Federal Reserve’s super low interest rate are not having the desired effect, namely, rapidly reducing the number of unemployed.
And when employers begin to factor in the cost of Obama’s healthcare “reforms” and probable higher taxes next year and beyond, employers do not appear to be in a hiring frame of mind.
What’s crystal clear is that last Friday’s employment report, which was touted by both the president and vice president on Wednesday as evidence that job growth is indeed robust under the Obama-Biden administration, was further proof that the economic polices of the past decade under both Republican and Democrat administrations are virtually identical.
Both Bush and Obama have given us a 21st century version of LBJ’s guns (the Vietnam War) and butter policies (another great leap forward in enlarging the welfare state) of the 1960s. And we know how that worked out—the collapse of the U.S. dollar by 1971, when President Nixon reneged on the federal government’s obligation to redeem dollars held by foreign central banks for gold, and accelerating inflation which prompted Nixon to impose wage and price controls at the same time and then the deepest economic downturn since the 1930s.
Helping Nixon fund his guns and butter policies, the chairman of the Federal Reserve at the time, Arthur Burns, gunned the money supply in 1971 and 1972 so the economy would be robust for Nixon’s 1972 reelection campaign.
Another recession began in 1973 as the distortions of the easy money policies came home to roost as evidenced by the spike in oil prices during the OPEC embargo in the midst of the Yom Kippur War that began in October of that year. In 1974 the U.S. economy was experiencing the worst recession since the Great Depression and double digit inflation. The stock market dropped by nearly 50% in almost two years; the bear market finally ended in December, 1974.
History repeated itself in the late 1970s and early 1980s as the Federal Reserve’s easy money policies gave us another oil price spike, in 1979, double digit inflation and double digit unemployment by the end of the Carter administration.
History keeps repeating itself and repeating itself. The dot com boom and bust occurred under Alan Greenspan’s watch at the Federal Reserve. Incoming president George W. Bush met with Greenspan in late 2000 and early 2001 and gave him his marching orders, keep rates low to “stimulate the economy.” And the economy was indeed ‘stimulated.” An unprecedented housing bubble the likes of which has never been seen in America ended in the greatest housing bust of all time is one of the “Maestro’s” legacies.
(In addition, federal spending nearly doubled under Bush in eight years, and Obama’s spending is projected to “hold the line” by the end of his term to $3.915 trillion from his first budget of $3.721 trillion.)
Greenspan’s successor as legal counterfeiter in chief at the Federal Reserve, Ben Bernanke, has made the Maestro look like Scrooge. Bernanke has flooded the banking system with so much money, short-term interest rates have been effectively zero percent for about two years, thus robbing Americans of any return on the their savings. But more importantly, Bernanke has laid the foundation for another huge recession (depression?) in the future, if we ever get out of the current Great Recession.
When all the costs of war, welfare state expenditures and easy money are added up, the U.S. economy is in the worst shape it has been in since the Great Depression. Keeping the economy afloat are the heroic efforts by entrepreneurs to bring to the marketplace the goods and services that the public actually wants to consume.
So where are we headed? As foreign affairs journalist Eric Margolis wrote earlier this year:
‘One of history’s most important lessons is that politicians should never be given a free hand to borrow money to cover the costs of wars, overseas adventures, or military spending.
“More empires have been brought down by reckless spending than by invaders. The late Soviet Union, which wrecked its economy by buying too many tanks, is the most recent example. Now, the United States appears headed in the same direction.
“Military and intelligence spending relentlessly increase as the official unemployment figure hovers near 10% and the economy bleeds red ink. Some estimates put real unemployment at over 20%.
“America has become the Sick Man of the Western World, an economic cripple like the defunct Ottoman Empire whose inept financial management was legendary.”
When will the U.S. economy have sustainable growth, high employment, a foreign policy based on protecting America and not maintaining a global empire that is draining the people’s income and wealth, and a dollar that is good as gold once again? When the Jeffersonian vision of limited government replaces the ideology of the welfare-warfare that dominates the thinking in the White House and the Congress, and not a minute sooner.