When the October 8th unemployment report is released, it will likely show that it has now been 17 straight months with unemployment at or above 9.4 percent. That would make this the worst period of sustained high unemployment since the Great Depression.
Many Americans rightly fear that a double-dip recession may be upon us. But it could be even worse than that.
It now becomes valid to ask: Is America in another depression? Growth has slowed to just 1.7 percent in the second quarter from 3.7 percent in the first quarter. And every month that goes by without unemployment returning to normal levels, the more uncertain the American people rightly become.
This all makes Barack Obama’s claim of February 2010 that government “rescued this economy from the worst of this crisis” rather hollow. For the American people, it means that a complete reevaluation of economic policy is in order. Keynesian deficit-spending and printing new money from the Federal Reserve are not the cures for economic downturns once thought.
It’s not from a lack of trying. Nobody can argue that government efforts at “stimulus” have not been vigorous.
Since 2008, there has been a perfect storm of government intervention to prop up the economy in the wake of the government-created housing bubble popping in August 2007. The first $150 billion “stimulus” in early 2008 didn’t work. The Foreclosure Prevention Act then failed to prevent foreclosures.
It goes on. The Federal Reserve’s rescues of Bear Stearns and AIG did not prevent markets from crashing later that year. The government takeover of mortgage giants Fannie Mae and Freddie Mac have cost over $150 billion of taxpayers so far and not prevented home prices from continuing to decline. The Troubled Asset Relief Program was not used to purchase troubled assets and instead was converted into a bank recapitalization fund. GM and Chrysler were seized by government and then redistributed to the UAW.
The Fed took interest rates down to near-zero, purchasing $1.25 trillion of mortgage backed securities, and increasing its shares of treasuries now to $805 billion. Government mortgage modification programs have a projected 40 percent re-default rate.
Obama signed his own $816 billion “stimulus” that still hasn’t worked. The minimum wage was hiked up to $7.25 and then youth unemployment rose to over 26 percent. Unemployment insurance has repeatedly been extended to 99 weeks with no end in sight to the extensions.
Bankrupt states like New York and California have been bailed out repeatedly of their budget troubles, getting over $145 billion in the Obama “stimulus.” That included $87 billion for state Medicaid spending and another $53.6 billion for states and local government to balance their budgets. That was in 2009. In 2010, they got another $26.1 billion bailout from Congress.
Of course, there’s the Environmental Protection Agency’s (EPA) endangerment finding against carbon emissions that gives the agency the power to arbitrarily restrict national energy consumption. If it is not rolled back, the radical EPA is threatening to drastically increase energy prices in an effort to transform the entire economy into a utopian nightmare.
Then there’s ObamaCare, which is already driving up the costs of premiums and will result in the elimination of 69 percent of existing employer plans. The individual mandate goes into effect in 2014, and will eventually completely drive Americans out of private health insurance and into Medicaid — permanently.
Not to mention the Dodd-Frank financial takeover bill, which creates a permanent bailout-government takeover fund, will levy new taxes on the American people via the financial system, and gives the government the authority to seize any company thought to be too systemically “risky” for the economy.
Don’t forget that at the end of year, all of the 2001 and 2003 tax cuts will expire, resulting in automatic tax increases on all Americans, including job creators. This will be the largest tax increase in American history. As reported by Arthur Laffer for the Wall Street Journal, “the highest federal personal income tax rate will go 39.6% from 35%, the highest federal dividend tax rate pops up to 39.6% from 15%, the capital gains tax rate to 20% from 15%, and the estate tax rate to 55% from zero.”
These imminent tax increases will be devastating to America’s job picture in 2011 and beyond. It could just the thing that causes the nation’s economy to fully dip again.
All of this has occurred on Nancy Pelosi and Harry Reid’s watch. Since January, 2007, they have been in charge of Congress. This is their record. Since then the national debt has grown by $4.45 trillion. That represents $4.45 trillion that could have been invested in new business ventures and jobs but instead was poured into a bottomless pit of government treasuries.
Even a double-dip recession may not even be the worst of it all. Moody’s has warned should the U.S. fail to rein in its reckless spending, that when interest owed on the national debt reaches 18 to 20 percent of revenue, that the U.S. could have its Triple-A credit rating downgraded. According the Congressional Budget Office, that level will be reached by 2018, as reported by Investor’s Business Daily, when interest owed rises to $755 billion.
When that happens, Americans will rightly ask if their nation is even an economic superpower any more. Taken together, government interventions have been about as much as the economy can take. It has been the perfect confluence of command-and-control policies, government takeovers, new regulations, taxes, and a mountain of debt as far as the eye can see.
Economic historians will one day tell us if excessive government caused and helped perpetuate a second Great Depression. For now, we will all have to hunker down and weather this perfect storm of interventionism until it passes.
Bill Wilson is the President of Americans for Limited Government.