There’s nothing regular about how the economy has performed during the past three years. That’s when what I have been calling the POR (Pelosi-Obama-Reid) economy, more recently tagged the fear-based economy, began. Nancy Pelosi, Barack Obama, and Harry Reid promised to fundamentally change how the economy operated. To a large extent, they’ve gotten their way, and it’s not very likely that an opposition party controlling only one-half of one branch of government will be able to do much about it in the next seventeen months.
What a horrific change it has been. Until now, as Investor’s Business Daily graphically demonstrated in an August 26 editorial, every recovery since World War II has seen the economy bounce back to where it was before the preceding downturn in one, two, or at most three quarters. Under Obamanomics, we’re currently at eight quarters and counting since the most recent recession ended — and we’re still not there, regardless of whether you believe it began in December 2007, as the National Bureau of Economic Research contends, or in July 2008, as the normal definition of the word would dictate.
Here it is, graphically per IBD, and numerically per yours truly:
The numbers are even worse if you look at what has happened to the private sector, which has shrunk by over 1% since the end of 2007. Warren Buffett, who paradoxically insists that he’s not taxed enough while his firm keeps fighting with the IRS over tax claims going back to 2002, has stated that as far as he’s concerned, the economy won’t fully recover until “real per capita GDP gets back up to where it was before.” By the Buffett benchmark, we’re still in hole by over 3%.
If second-quarter growth stays at an annualized 1.0% in its final revision, and if the third quarter is at or above 0.5%, it will have taken nine quarters for the economy to officially recover, three times longer than any other post-World War II recovery. Keep in mind that those are two very big ifs. Many prognosticators believe that second-quarter growth will take another hit in the government’s late-September revision. Others, including 2001 Nobel Prize winner Michael Spence and lefty Robert Reich, have recently adjusted their odds that we’re either already or about to be in a double-dip recession to 50-50. Pimco’s Bill Gross says that the double-dip odds are “better than 50-50.” Clearly, anything beyond the mildest downturn will push the economy further behind what by historical standards is already an ancient original line of scrimmage.
Keynesian deficit spending in overdrive, while clearly a major contributor to the current malaise, doesn’t deserve all of the blame. The Obama administration’s abuse of Keynes’s theories in its stimulus plan’s energy “investments,” as well as its overall irregular energy policy, deserves dishonorable mention.
The American Recovery and Reinvestment Act directed billions towards solar energy companies and solar projects. During the first five months of 2009, before it could have been influenced by stimulus dollars, solar accounted for 0.132% of all U.S. energy production. Through May of this year, that percentage jumped to, uh, well, 0.145%. That may be the high-water mark. Solar companies are either going bankrupt or getting bought at fire-sale prices. A significant percentage of production is moving to China and elsewhere overseas. Thousands of U.S. jobs have been lost.
Meanwhile, the administration’s clear opposition to meaningfully increasing fossil-fuel production has never been more clear. Rather than speed up its absurdly slow approvals of deepwater drilling permits in the Gulf of Mexico — down from a monthly historical average of 5.8 to its current 1.7, at a cost of thousands of jobs — Obama decided to tap the Strategic Petroleum Reserve. Gas prices still went up. Only as the prospects of his reelection have begun to seriously diminish has Obama moved to appear more fossil fuel-friendly. But, conveniently enough, the administration’s most visible positive move thus far, the State Department’s conclusion that the 1,700-mile TransCanada pipeline won’t harm the environment, will have no immediate effect, and can be reversed later during other regulatory processes if he is reelected.
Never let it be said that the administration is against all pipelines. According to a recent compilation of related statistics by the National Center for Policy Analysis, “The Federal Register notes that more than 4,200 regulations are in the pipeline.” The aggressiveness and innate hostility of Team Obama’s highly irregular regulatory regime is unprecedented in postwar American history.
According to the Heritage Foundation, ObamaCare alone has added over 6,500 pages to the Federal Register. The administration recently trumpeted how it will reduce regulatory costs by $10 billion over five years. Big deal. That $2 billion per year average is only 0.11% of the estimated cost of regulatory compliance to consumers and businesses of $1.75 trillion in 2009 alone. Heaven knows how much higher the annual cost is now. According to Wyoming Senator John Barrasso, the administration largely undid most of its alleged improvement in July alone, as it “proposed over $9.5 billion in new regulatory costs.”
The relatively firm dollar amounts cited don’t include the difficult-to-quantify costs of regulatory uncertainty. One thing which is certain is that these are also going up. Just ask Boeing, Gibson Guitar, the health insurance companies intimidated into silence, and other businesses affected by the federal government’s heavy regulatory hand.
Besides obviously anemic economic growth, the most visible manifestation of uncertainty’s impact can be seen in the government’s two different sets of job statistics, as seen below:
The more inclusive Household Survey, based on phone calls to homes, shows that the economy had almost 700,000 fewer people working in July 2011 than were working twenty-five months earlier when the recession ended in June 2009. But the Establishment Survey, based on contacts with employers, shows that almost 700,000 more Americans were working for private and government employers. The overall effect is that there are almost 1.4 million fewer Americans who are either working on their own or working at entities the Establishment Survey is unable to find or estimate. About the only way to interpret this anomaly is that, on a net basis, many Americans who might in more regular times have considered starting a business simply aren’t doing it. The engine of future economic growth isn’t engaging.
The danger is that we as a nation may come to accept our administration-induced chronic irregularity as the way things will be indefinitely, or as what Obama cheerleaders in the establishment press try to tell us is “the new normal.” If we do, we won’t recognize our country in several years — which is why the irregularity must be stopped in seventeen months.
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