It's Time to Unleash the Largest Economy in the World

By Donald Lambro
Tuesday, August 09, 2011

WASHINGTON -- Job creation remains unacceptably weak in the Obama economy, which some Democrats are calling the "new normal." Friday's labor report for July showed there weren't even enough new jobs to keep up with population growth, let alone make a serious dent in the unemployment rate.

The hyperbolic Washington news media played up the 117,000 jobs that were added to our nation's payrolls last month as a turning point in the recovery. But the Labor Department's job numbers were nothing to brag about in a severely lethargic economy that continues to limp along under minimal growth rates at best, and appears to be tilting toward a recession at worst.

Buried in last week's unemployment report was another disturbing fact: The number of Americans who are working is shrinking. But more on that in a moment.

The news media's incomprehensible cheerleading aside, what the July numbers painted was a jobs picture where thousands of discouraged workers are dropping out of the workforce because it is getting harder than ever to find a job.

Let's get realistic: An economy that produced only 117,000 jobs last month, after a scant 46,000 jobs in June, is running at a subpar performance level.

"The economy must add 13.7 million jobs over the next three years -- 382,000 each month -- to bring unemployment down to 6 percent. Considering layoffs at state and local governments and likely federal spending cuts, the private sector jobs must increase at least 400,000 a month to accomplish that goal," reports University of Maryland business economist Peter Morici.

To bring the unemployment rate down to that level, the economy needs to grow "in the range of 4 to 5 percent ... over the next several years," Morici says. The economy in the first half of the third year of Obama's remedial presidency was growing at less than 1 percent.

"Jobs creation remains weak, because temporary tax cuts, stimulus spending and large federal deficits do not address structural problems holding back dynamic growth and jobs," he adds.

Even The Washington Post cautioned that the July job numbers "are nothing to exult over," and were "not enough to push the jobless rate down substantially over time."

While the unemployment rate barely moved from 9.2 percent to 9.1 percent last month, it was largely due to 193,000 Americans who stopped looking for work and dropped out of the job market in frustration. That means they are no longer counted among the unemployed, and thus drive down the overall jobless rate.

The result is that the "proportion of the population working actually fell to 58.1 percent, its lowest level since the early 1980s," writes Washington Post economics reporter Neil Irwin.

So not only have Obama's economic and fiscal policies weakened the economy -- which virtually stopped growing in the first quarter of this year, then barely grew by 1.3 percent between April and June -- he has also shrunk the labor pool. That's quite an achievement.

Let's not overlook the underemployment rate -- the hard-working people forced to take part-time work, if they can find it, because no full-time jobs are available. Their numbers barely budged last week.

Few if any economists expect the nation's unemployment rate will fall significantly this year or next. This is an economy awash in fear and uncertainty, largely created by Obama and his policies.

Will employers large and small face higher tax rates that will cut their bottom line in 2012 and beyond? Obama wants to end the 2001 Bush tax-rate cuts -- raising Bush's 35 percent top rate to nearly 40 percent -- and those cuts will automatically expire at the end of 2012 if he has anything to say about it.

Remember, Obama was pushing higher taxes throughout the first half of this year when, according to his own Commerce Department, the economy was barely growing, businesses were struggling just to keep their heads above water and jobs were in short supply.

Employers won't hire and consumers won't spend when they fear the government is going to take a larger share of their income and hurt the job market in the process.

For the last two and a half years, Obama has tried spending the economy into prosperity with a nearly $1 trillion stimulus bill that was a dismal failure. Then came another spending binge in his cash for clunkers, cash for energy savers, cash for jobs and cash for climate-change businesses, all of which produced few if any jobs, but rewarded his party's special interests and expanded the size and cost of the government.

"Weak jobs data indicate the economic recovery remains in low gear, and policies other than big deficits and printing money are needed to get Americans back to work," says Peter Morici.

What America needs right now is a strong, permanent dose of venture capital investment to unleash the animal spirits of the largest economy in the world. That means cleansing the tax code of special-interest corporate welfare to boost tax revenue, slashing the top tax rate to the 28 percent that existed under President Reagan, and cutting the 15 percent capital gains tax rate in half. Then watch this economy take off.